Subprime brokers resurface as loan adjusters

By Soussana’s own account, his customers fared less happily. He specialized in the exotic mortgages that have proved most prone to sliding into foreclosure.

Yet the dangers assailing Soussana’s clients have yielded fresh business for him: Late last year, he and his team - ensconced in the same office where they used to broker mortgages - began working for a loan modification company. For fees reaching $3,495, with most of the money collected up front, they promised to negotiate with lenders to lower payments on the now-delinquent mortgages they and their counterparts had sprinkled liberally across Southern California.

“We just changed the script and changed the product we were selling,’’ said Soussana, who ran the Los Angeles sales office of Federal Loan Modification Law Center. “You know, ‘You got screwed. Now, we’re able to help you out because we understand your lender.’ ’’

Soussana’s partners at FedMod, as the company is known, were also products of the formerly lucrative world of high-risk lending. The managing partner, Nabile Anz, previously co-owned Mortgage Link, a California subprime lender, now defunct.

Jeffrey Broughton, one of FedMod’s initial partners, served as director of business development at Pacific First Mortgage, a lender that extended so-called Alt-A mortgages for borrowers with tarnished credit for Countrywide Financial, which lost billions of dollars on bad mortgages before being rescued in an acquisition.

FedMod is but one example of how many of the same people who dispensed risky mortgages during the real estate bubble have reconstituted themselves into a new industry focused on selling loan modifications.

FedMod and other profit-making loan-modification firms often fail to deliver, according to a New York Times investigation based on interviews with scores of former employees and customers, more than 650 complaints filed with the Better Business Bureau, and documents filed by the Federal Trade Commission in a lawsuit against the company.

The suit asserts FedMod frequently exaggerated its rates of success, advised clients to stop making their mortgage payments, did little or nothing to modify loans, and failed to promptly refund fees.

Anz, who is challenging the FTC lawsuit, acknowledged FedMod’s business went “horribly wrong’’ but maintains it made genuine efforts to help. He said FedMod has refunded fees to 3,000 dissatisfied customers, while modifying 1,500 mortgages.

FedMod is among dozens of similar companies that have been accused by state and federal authorities of fraudulent practices.

Many of the companies formerly operated as mortgage brokers. Since October, California has ordered 210 businesses and individuals to stop offering loan modification or foreclosure prevention services, because they lacked a real estate license, as required by the state.

The California Department of Real Estate warns consumers that many dubious loan modification companies have organized themselves as law firms solely to allow them to collect upfront fees, even though the lawyers have little, if anything, to do with the services provided.

The department cautions consumers against hiring such companies.