(CN) - Two foreclosure-assistance companies in Orange County, Calif., agreed to pay $1 million to settle charges that they pressured homeowners to pay upfront fees of $1,800 to $2,800 and then failed to help clients stay in their homes. The settlement stems from the government's "Operation Loan Lies," a federal-state crackdown on loan-modification fraud.
The Federal Trade Commission and the states of California and Missouri accused U.S. Foreclosure Relief Corp. and H.E. Servicing Inc. of charging customers upfront for nonexistent loan-modification services, promising an 85 percent success rate.
The companies boasted a "proven track record" and the "highest standards of business ethics," promising that they could reduce homeowners' principal and lower interest rates, the FTC claimed.
H.E. Servicing told potential customers that it had negotiated 10,000 loan modifications, when it had only opened 2,900 files and completed 311 agreements, the government claimed.
Under the terms of the settlement, the companies, executives George Escalante and Cesar Lopez, and attorney Adrian Pomery agreed to pay $1 million to allegedly victimized homeowners. U.S. Foreclosure Relief and H.E. Servicing will be dissolved, and Escalante, Lopez and Pomery will be banned from working in the real estate and loan modification industries, according to the deal reached in federal court.
Escalante, Lopez and Pomery "used their loan-modification companies to sell false hope to hundreds of Californians facing foreclosure," California Attorney General Edmund Brown Jr. said in a statement. "This judgment shuts their companies down, locks them out of the real estate industry and pays back more than $1 million to the victims."
The defendants agreed to the settlement without admitting fraud.
The initial judgment, issued by U.S. District Judge James Selna, called for $8.6 million from Escalante and his two companies, $3.3 million from Lopez and $3.4 million from Pomery, but the judge suspended judgment due to their inability to pay.
The $1 million payment will come from frozen company funds and the sale of Escalante's jewelry and vehicles, including a 2007 Mercedes SUV and sedan, the FTC says. Lopez declared bankruptcy in June 2009 and handed over a 2008 BMW sedan.
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