Federal Court Closes Deceptive Mortgage 'Rescue' Program

At the Federal Trade Commission’s request, a U.S. district court has shut down two companies that allegedly failed to provide promised debt relief services and jeopardized their clients’ privacy by tossing their personal information into unsecured dumpsters.

In addition, one of the operations allegedly charged consumers a $1,495 up-front fee based on phony promises that they would get mortgage relief assistance.

The settlements with Residential Relief Foundation, LLC; Silver Lining Services, LLC; Mitigation America, LLC; and their principal owners are part of the FTC’s ongoing crackdown on scams that target consumers in financial distress.

The settlements ban the defendants from working in the mortgage assistance and debt relief business, prohibit them from the alleged privacy violations, and impose judgments totaling more than $11 million – the amount of consumer harm they caused.

In its November 2010 complaint, the FTC alleged the defendants behind Residential Relief Foundation violated federal law by falsely claiming their loan modification program could lead to the waiver of late mortgage payments, late fees, and legal fees; the conversion of adjustable mortgage rates to fixed rates as low as one percent; the reduction of consumers’ principal balance; and up to 40 percent lower mortgage payments.

Residential Relief

According to the FTC, the Residential Relief defendants used a logo similar to the Great Seal of the United States to market their products. Claiming quick results and a high success rate, the defendants charged a $1,495 up-front fee, advised consumers to stop making mortgage payments, and falsely claimed that reports they created would enable homeowners get the promised results.

The defendants engaged in their conduct amid the publicity surrounding the availability of free mortgage loan assistance and modification programs, including the Home Affordable Modification Program (HAMP) implemented by the federal government under the Troubled Asset Relief Program (TARP).

HAMP encourages loan servicers and investors to modify mortgages to reduce the monthly payments of homeowners who are at risk of default. There is no fee to homeowners to apply for a modification under HAMP.

The Residential Relief defendants allegedly also improperly disposed of consumers’ information in unsecured dumpsters in violation of their own privacy policies.

Finally, the FTC charged that in marketing credit card debt relief services, the defendants falsely told people they could become debt-free in 12 to 36 months, could eliminate late fees and penalties, and could reduce their debts by up to 50 percent.

The first settlement bans Residential Relief Foundation, Silver Lining Services, and their owners, James Holderness, Bryan Melanson, Michael Valenti, and Jillian Melanson, from participating in both the mortgage assistance relief and debt relief industries. It imposes a judgment of more than $10.5 million, which is the total amount the defendants made through their deceptive conduct.