Mission Viejo Loan Mod Scammer Sentenced

Michael Phalen, 26, of Mission Viejo, has been sentenced for sending out phony loan modification letters to hundreds of Americans at risk of losing their homes.

Phalen was sentenced to one year in jail and five years formal probation, during which he is prohibited from engaging in loan modification or loan consulting practices, and ordered to pay restitution in an amount to be determined at a later hearing.

County prosecutors have traced $200,000 in losses from the scam.

Phalen's four accomplices have also been sentenced: Jacob John Cunningham, 26, Irvine; John D. Silva, 28, Irvine; Justin Dennis Koelle, 23, Costa Mesa, and; Dominic Adam Nolan, 32, Irvine.

Here's more on the crime, courtesy of the Orange County District Attorney's Office:

Between January 2009 and March 2012, Cunningham, Koelle, Phalen, Nolan, and Silva created numerous fraudulent loan modification businesses including CSFA Home Solutions, Mortgage Solution Specialists, Inc., CS & Associates, National Mortgage Relief Center, NMRC, NMRC Inc., N.M.R.C. Inc., Allied Home Servicing, Allied Loan Servicing, U.S. Consulting Corp., and Accredited Processing Solutions for home loan modification assistance. 

Cunningham, Koelle, Phalen, Nolan and Silva sent a promotional letter to people throughout the United States with an offer to restructure their home loans, in which the defendants referred to the homeowner’s specific lender and principal balance, and charged the homeowner upfront fees for loan modification services. The letter was fraudulently designed to appear as if it came from the victims’ lenders.

California Senate Bill 94, enacted into law on Oct. 11, 2009, makes it illegal in California for any person or business to demand, charge, or collect any advance or upfront fee for loan modification work or services.

When victims called the number on the letter, the defendants falsely told the victims that they could get a complete refund of the fee their company charged if their loan was not modified and that the company had over a 95 percent success rate. After the victims gave Cunningham, Koelle, Phalen, Nolan, or Silva their money, the defendants kept that money without securing loan modifications for the distressed victims. They did not return or refund the victims the fees they paid for a loan modification.

In order to avoid having their theft discovered, Cunningham, Koelle, Phalen, Nolan, and Silva regularly changed the names, phone numbers, and addresses of the companies they operated.

In late December 2011, after over a hundred victims from California and other states submitted complaints to various law enforcement agencies and the Better Business Bureau regarding the defendants’ loan modification activities, Cunningham, Nolan, and Silva started a new fraudulent scheme, in which they would send out forged “Conditional Approval” letters to victims with a CitiFinancial or CitiMortgage logo in the letterhead.

They stated in the forged “Conditional Approval” letters that they could offer the homeowner a low interest rate of 2.8 percent or less to refinance their home loan. Cunningham, Nolan and Silva also attached “Escrow Instructions” with the letter, directing the homeowner to deposit between $3,500 and $4,600 directly into the defendants’ bank accounts.

Cunningham, Nolan and Silva had no affiliation to CitiFinancial or CitiMortgage or any authorization to offer a loan on behalf of CitiFinancial or CitiMortgage. They made no efforts to qualify the victims for loans with CitiFinancial or CitiMortgage.

There are presently hundreds of known victims and others that are unknown both in California and out of state.