The FTC alleged that since early 2011, the defendants claimed a phony affiliation with the U.S. government, pretended to be attorneys, and promised to substantially lower monthly mortgage payments in exchange for an up-front fee ranging from $1,495 to $4,495. Along with two companies he controls – American Mortgage Consulting Group, LLC and Home Guardian Management Solutions, LLC – defendant Mark Nagy Atalla allegedly violated “nearly every provision of the Mortgage Assistance Relief Services Rule.”
The defendants telemarketed mortgage relief services to consumers nationwide, often stating that they were paid by the federal government to assist homeowners and obtain so-called “Home Saver” grants from the government to reduce consumers’ up-front fees, according to the FTC’s complaint. They also allegedly proclaimed themselves to be “a California Professional Legal Team,” sent documents to consumers from their so-called “Legal Department,” and referred to their operation in e-mails as a “law office.”
The defendants claimed they were virtually certain they could obtain loan modifications for their clients, and that the clients would receive a full refund if that did not happen, even though they did little or nothing to help consumers and they failed to provide refunds, according to the FTC.
Also, in violation of the MARS Rule, the defendants allegedly told consumers to stop communicating with their lenders, and failed to disclose that:
- consumers would only have to pay the defendants if they accepted the terms of the mortgage assistance the defendants obtained from their lenders;
- the defendants are not associated with the government and their services are not approved by the government or the consumer’s lender; and
- even if a consumer used the defendants’ services, the lender may not agree to change the terms of the consumer’s loan.
By their actions, the defendants, American Mortgage Consulting, American Mortgage Group, American Mortgage Consulting Group, Home Guardian Management Solutions, Home Guardian Solutions, Mark Atalla, Mark Nagy Atalla, Home G Solutions Firm, and Home G Solutions Group, diverted consumers in danger of losing their homes from pursuing authentic, government-affiliated programs, and duped them into paying thousands of dollars based on false promises and misrepresentations, according to the complaint.
A federal judge granted the FTC’s request for a temporary restraining order and preliminary injunction, froze the defendants’ assets, and appointed a receiver.
From the FTC Complaint
Defendant American Mortgage Consulting Group, LLC (“American Mortgage”), is a California limited liability company. Its registered address is 1000 Bristol Street North, Suite 17-135, Newport Beach, California 92660. It also uses the addresses 1280 Bison Avenue Suite B-930, Newport Beach, California 92660, 3857 Birch Street, Suite 313, Newport Beach, California 92660, and 2967 Michelson Drive # G620, Irvine, California 92612. Defendant American Mortgage does business as American Mortgage Consulting and American Mortgage Group and transacts or has transacted business in this district and throughout the United States.
Defendant Home Guardian Management Solutions, LLC (“Home Guardian”), is a California limited liability company. Its registered address is 1280 Bison Avenue, Suite B-9, Newport Beach, California, 92660. It also uses Suite B-930 at the same street address, as well as the address 1000 Bristol Street North, Suite 17-135, Newport Beach, California 92660. Defendant Home Guardian does business as Home Guardian Solutions and transacts or has transacted business in this district and throughout the United States.
Defendant Mark Nagy Atalla (“Atalla”), acting alone or in concert with others, has formulated, directed, controlled, had the authority to control, or participated in the acts or practices set forth in this Complaint. Defendant Atalla is an officer, owner, and/or principal of Defendants American Mortgage and Home Guardian. He is or has been the signatory on bank accounts in the names of the corporate Defendants, into which consumer funds are deposited. He also does business as Home Guardian Solutions, Home G Solutions Firm, and Home G Solutions Group, and has been the signatory on a bank account under the name Mark N. Atalla d.b.a. Home G Solutions Firm. Defendant Atalla pays for telephone service to numbers used by Defendants American Mortgage and Home Guardian to market and sell mortgage assistance relief services to consumers. Defendant Atalla resides in and transacts or has transacted business in this District and throughout the United States.
From at least March 2011 until approximately January 2012, Defendants Home Guardian and Atalla have marketed and sold mortgage assistance relief services to consumers nationwide. Since approximately January 2012, Defendants American Mortgage and Atalla have marketed and sold mortgage assistance relief services to consumers nationwide.
Defendants American Mortgage and Home Guardian have operated as a common enterprise while engaging in the unlawful acts and practices alleged below.
Defendants American Mortgage and Home Guardian have had common ownership, business functions, and employees, and have commingled corporate funds. Defendant Atalla is a signatory on all bank accounts in either corporate name. When accounts in the name of Defendant Home Guardian were closed, Defendant American Mortgage continued making monthly payments to many of the same payees who had received monthly payments from Defendant Home Guardian. Both companies have used the same address on Bristol Street North in Newport Beach, California. Both companies received telephone service under the same account. Because Home Guardian and American Mortgage have operated as a common enterprise, each of them is jointly and severally liable for the acts and practices alleged below. Defendant Atalla has formulated, directed, controlled, had authority to control, or participated in the acts and practices of American Mortgage and Home Guardian.
SUMMARY OF COMPLAINT
Since at least early 2011, Atalla and his companies, American Mortgage and Home Guardian, have engaged in an ongoing, unlawful mortgage relief scheme that preys on financially distressed homeowners nationwide by falsely promising loan modification in exchange for an advance fee. Defendants attract distressed homeowners via phone calls, deceptively promising substantial relief from unaffordable mortgages and foreclosures. Defendants promise a substantial reduction in the homeowners’ mortgage payments in exchange for an advance fee ranging from $1,495 to $4,495.
Rather than helping homeowners modify their mortgage loans or avoid foreclosure, Defendants dupe distressed homeowners into paying thousands of dollars based on false promises and misrepresentations. Indeed, Defendants provide little, if any, meaningful assistance to modify homeowners’ mortgage loans or prevent foreclosure.
During the initial calls and interactions with homeowners, Defendants promise homeowners substantial reductions in mortgage payments and interest rates in exchange for an upfront fee. Defendants send contract documents to the homeowners from which it appears that their savings from just a few reduced monthly payments will exceed the amount of the Defendants’ fee. Further, Defendants make the amount of the fee seem attractive by claiming that it has been reduced by a federal government grant.
Defendants also say that the vast majority of Defendants’ clients obtain the modification described in the contract documents, that Defendants’ prequahfication procedure ensures they will receive the modification, and that if it does not come through, Defendants will fully refund the fee.
Defendants also claim to be a “legal team” or “law office” that “will provide legal services” to the consumer.
In reality, Defendants do little or nothing to assist consumers. They do not make consumers’ mortgage payments more affordable or help them escape foreclosure.
Instead, Defendants direct consumers to avoid interactions with their lender. Consumers who have paid Defendants’ fees have suffered significant economic injury.
DEFENDANTS’ BUSINESS ACTIVITIES
Defendants have diverted consumers from authentic, government-affiliated programs by engaging in a course of conduct to advertise, market, promote, offer to sell, and sell to consumers purported mortgage assistance relief services.
Defendants have marketed and sold their mortgage assistance relief services to homeowners who are in financial distress, behind on their mortgage loans, or in danger of losing their homes to foreclosure.
DEFENDANTS’ REPRESENTATIONS
Typically, Defendants’ representatives contact consumers by telephone and inquire whether the consumers have a home mortgage that they would like to modify to reduce the monthly payment. If a consumer indicates interest, the caller solicits information about the consumer’s financial situation, telling the consumer that if he or she qualifies for a loan modification, Defendants will contact the consumer’s lender and negotiate a loan modification that will reduce the interest rate significantly and reduce the monthly payment by hundreds of dollars.
Within a few days after taking the consumer’s “prequalification” information, Defendants typically contact the consumer again by telephone or email to congratulate the consumer on being approved for a loan modification, representing that the loan modification is virtually certain or very likely.
In numerous instances, Defendants’ email notifying consumers that they are “approved” also states that the forms attached to the email will “complete your modification.” These forms typically consist of (a) two authorization forms by which the consumers authorize Defendants to negotiate with their lender and debit their bank account; and (b) two contractual documents that Defendants require consumers to sign, a “Loan Approval Disclosure & Agreement” (“Loan Agreement”) and a “Legal Team-Client Fee Agreement” (“Fee Agreement”). The Loan Agreement sets forth the specific terms of the consumer’s new loan, including interest rate and monthly payment. In numerous instances, Defendants also discuss these terms with consumers by phone.
Defendants tell consumers that they must pay the up-front service fee in the amount specified in both the Loan Agreement and the Fee Agreement. In numerous instances, Defendants represent that the amount of this fee has been, or will be, reduced by the amount of a government grant that Defendants will obtain or have obtained for them, typically called a “Home Saver” grant. Defendants create the impression that Defendants are associated with the federal government by stating that the federal government pays Defendants to help homeowners or by stating that Defendants obtain these grants from the government on consumers’ behalf. Defendants solicit a net amount from consumers (after deduction of any purported government grant) ranging from $1,495 to $4,495 per mortgage to be modified. In some instances, Defendants contract to modify more than one mortgage and collect more than one fee.
Both the Loan Agreement and the Fee Agreement refer to the consumers’ fees as “Legal Fees.” In the Fee Agreement, Defendants proclaim themselves to be “a California Professional Legal Team” that “will provide legal services to” the consumer and “use its’ [sic] best efforts to negotiate and counsel Client in Real Estate matters related to a Loan Modification of residential property.” The Fee Agreement also says that the “Legal Team” reserves the “right to associate or bring in an additional [sic] Attorneys/Legal Teams.” These documents are sent to consumers with a transmittal sheet stating that they are from the “Legal Department.” Emails from Defendants to consumers also refer to Home Guardian or American Mortgage as a “law office.” In fact, neither Home Guardian nor American Mortgage is a law office, and Defendants typically do not provide legal representation to consumers.
In a variety of ways, Defendants assure consumers of the virtual certainty that consumers will obtain the loan modification described in the Loan Agreement. For example, in the Loan Agreement, Defendants state, “The vast majority of our clients obtain the solutions they contract for.” In the same document, Defendants assure consumers that:
Because we pre-qualify you for a program BEFORE we accept your money we both avoid loss of precious time and resources. You can be sure that when we take you on as a client we are convinced that we can get your lender to offer you a solution to your problem.
Defendants augment these claims by telephone, telling consumers, for example, that Defendants have a “track record” of successfully modifying mortgage loans or that the new mortgage loan is “100% guaranteed.” These representations are bolstered by Defendants’ claim that they have experience and “past histories” with the consumer’s lender. In some instances, Defendants’ telemarketers also make oral claims that Defendants are affiliated with or otherwise associated with the consumer’s lender.
Defendants also represent that consumers will receive a full refund if Defendants are unable to obtain the modified loan. Consumers rely on such statements made by telephone and in the contractual documents they receive before paying Defendants’ fee. For example, the Loan Agreement includes an underlined statement, “The service fee is refundable in the event” that Defendants are “not able to perform as listed above or perform any services that are beneficial to borrower.” The same document also contains what is headed a “MONEY BACK GUARANTEE,” which states that when “things do not work out as all intend,” Defendants will “promptly provide a refund.”
In numerous instances, Defendants instruct consumers, orally and/or in writing, not to communicate with their lender while Defendants are in the process of negotiating the loan modification. Defendants tell consumers to forward all communications from the lender to Defendants and otherwise to ignore them.
CONSUMER EXPERIENCE
In numerous instances, consumers who pay fees to Defendants do not 28 obtain loan modifications or have their mortgage payments substantially reduced.
In numerous instances, when consumers contact Defendants for status updates, Defendants fail to answer or return consumers’ telephone calls or emails. When consumers are able to reach Defendants, Defendants’ salespersons generally assure consumers that their files are being handled.
In numerous instances, consumers learn from their lenders that they have never been contacted by Defendants. In other instances, consumers learn from their lenders that Defendants did contact the lender, but failed to follow up.
In numerous instances in which consumers do not obtain loan modifications, Defendants do not provide any refunds to consumers. Typically, Defendants provide no explanation for the failure to provide either the loan modification or a refund.
DEFENDANTS FAIL TO MAKE THE REQUIRED DISCLOSURES
Nowhere in Defendants’ consumer-specific commercial communications, including telephone calls, and email messages and their attachments, do Defendants make the following disclaimers:
- That the consumer may stop doing business with the Defendants at any time. Further, that the consumer may accept or reject the offer of mortgage assistance Defendants obtain from the consumers’ lender and that, if the consumer rejects the offer, the consumer does not have to pay the Defendants. If the consumer accepts the offer, the consumer will have to pay the Defendants for their services;
- That Defendants are not associated with the government, and their services are not approved by the government or the consumers’ lender; and
- That, even if a consumer accepts the Defendants’ offer and uses the Defendants’ service, the consumer’s lender may not agree to change the consumer’s loan. – Source
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