VIDEOS/PHOTOS: Mortgage modification businesses ordered to cease and desist

Lake Walton on loan modification regulation

Some Naples mortgage modification businesses ordered to ...

Stopping illegal loan modification companies

Flora Beal discusses financial regulations

They promised to help.

But four men and one woman from several local companies now stand accused of exploiting the very people whose homes they pledged to save.

The Florida Office of Financial Regulation shut down the companies Wednesday, as part of a move to crack down on businesses believed to be preying upon desperate homeowners.

Juan Jimenez and Lake M. Walton III, both of Naples, and Abby Jelley, of Cape Coral, were issued a cease and desist order this morning, and told to stop offering loan modification services through two Naples businesses: Modification Consulting Services LLC, and SWFL Consulting & Marketing LLC. Both businesses are run out of an office at 4760 U.S. 41 N., Suite 27.

Authorities also served Michael Poka of Estero and Steven Itwaru of Naples with a similar order in Bonita Springs for Elite Financial Management Group, Home Protection Agency and Capital Group and Associates, all located at 9200 Bonita Beach Road, Suite 210.

They are the first such orders issued in the Naples and Bonita areas by the Florida Office of Financial Regulation.

Florida legislation passed in the wake of the foreclosure crisis prevents firms from collecting up-front fees to modify a loan, which investigators say was regular practice at Modification Consulting Services and at Elite Financial Management. The emergency orders issued to all of the businesses Wednesday morning also accuse them of “misleading and deceptive advertising” and of acting as unlicensed loan originators, mortgage brokers and mortgage brokerage businesses.

The orders instruct the companies to stop performing, advertising, executing agreements for or collecting fees for modifications. It also instructs them to return any fees collected after Jan. 1, 2010, regardless of whether a loan was modified successfully.

“They’re acting in an unlicensed capacity,” said Michael Moore, an attorney for the Office of Financial Regulation. “They’re not legally entitled to those monies.”

According to the order, Walton’s businesses placed ads on craigslist.org and used the company Web site, www.lowfeeloanmod.com, to solicit clients who were behind on mortgage payments. They touted mortgage balances refinanced by as much as 60 percent. On Wednesday, the Web site was no longer functioning, though it had been available as of Tuesday evening.

At his office on U.S. 41, Walton, owner of Modification Consulting Services, said Wednesday he welcomed the process, especially because it gives him the opportunity to set the record straight about his business. He helps people, he said, and at a lower cost than other firms in the area.

He also said his office has successfully modified loans for 75 percent of its clients.

However, according to the order released by the Office of Financial Regulation, the company’s success rate was much lower.

In 2009, according to the state, Walton’s companies closed 52 loan modifications, but only 25 of those were successfully modified. The rest were either “pending, denied, abandoned or refused.”

The order further states that the companies broke Florida law by demanding up-front payment before completing the modifications. Two initial payments of $550 were required, followed by a final payment of $850 after a successful modification.

Free, reliable services still exist for troubled homeowners though, said Sandra O’Leary, a specialist with the Office of Financial Regulation. Nonprofit services offered through the U.S. government can be found at www.HUD.gov, the Web site for the Department of Housing and Urban Development.

Walton said his company has rectified the problems cited in January by partnering with the law firm of Resnick and Schwartzman, a nationally-practicing law firm. Under the umbrella of a law firm, Walton said his company plans to go national, continuing to offer loan modification services in Arizona, California and West Virginia, other states hard-hit by the housing crisis.

Personally, though, Collier County records show Walton’s own home is in foreclosure proceedings. Wells Fargo Bank issued a default notice on Walton’s Olde Cypress home in July 2009, according to the Coller County Clerk of Courts.

When investigators O’Leary and Nelson Herold walked into Walton’s office Wednesday with cease and desist orders, Walton told them he had fixed everything following their January office visit. No attorneys will actually work in his office, though Walton said one of the attorneys for Resnick and Schwartzman “lives here in town.”

“We just became a law firm,” he told Herold. “We did everything you said to do.”

By Florida law, attorneys may collect up-front payments for mortgage modifications from existing clients. But the only way an attorney can modify a home loan is if the person is an existing client, said Flora Beal, a spokeswoman for the Office of Financial Regulation.

If someone comes to an attorney’s office for help with a divorce case, and later seeks help with a loan modification, the attorney can act in that capacity, Beal said.

“The Florida Bar has very specific criteria they have given the attorneys in Florida that they cannot recruit new clients for loan modifications,” Beal said. “They cannot recruit new clients and charge a fee to do a loan modification.”

According to Wednesday’s order, investigators with the Office of Financial Regulation first visited Walton’s business Jan. 15 and told the employees to stop offering loan modifications without a license. Undercover officers posing as homeowners found as recently as two weeks ago that modifications were still being offered by Walton’s business, Beal said. Elite Financial Management Group continued advertising mortgage modifications in February, too, after investigators visited that company.

The order to Walton’s business reads: “As a result of Respondents’ illegal self-serving behavior, when ... the borrower’s loan modification request is denied by the borrower’s mortgage lender, the borrower’s already constrained financial condition is exacerbated and made worse by the very amount of fees paid in vain to Respondents in advance.”

Similar language was used in the cease and desist order given to Elite Financial Management Wednesday. Neither Poka nor Itwaru were at their business to receive the orders, according to an administrative assistant who met O’Leary and Herold at the door.

A letter sent to the office in late January, after a visit by investigators, contends the firm was “not a loan modification service, but a loan assistance service.”

The order states those services “are in fact unlicensed ‘loan modification’ and mortgage brokering.”

Records provided by the Bonita company to investigators, cited in the 36-page order, indicate that the company was getting paid in double installments of $625 from some clients and $525 from others.

According to state law, the charges laid out in the orders are third-degree felonies, carrying a maximum $5,000 fine and five-year prison sentence. The orders issued to the companies and individuals Wednesday call for them to pay back all fees collected from homeowners since Jan. 1.

No one was officially charged with a crime Wednesday, though they could be if the state finds they did not comply with the orders to repay their clients. In that case, each client the company collected fees from, in violation of state law, would represent an individual felony charge.

Connect with reporter Leslie Williams Hale at naplesnews.com/staff/leslie_hale

© 2010 marconews.com. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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