United States Attorney Laura E. Duffy
Southern District of California
June 10, 2011
Owner of Fraudulent Mortgage Loan Modification Scheme Sentenced in California
SAN DIEGO – Michael Trap was sentenced today to serve 30 months in custody based upon his guilty pleas to one count of conspiracy to commit wire fraud and money laundering and one count of money laundering, announced U.S. Attorney Laura E. Duffy for the Southern District of California. U.S. District Court Judge Roger T. Benitez also ordered Trap to pay $460,249 in restitution to the victims of the Nations Housing Modification Center (NHMC). Judge Benitez also ordered Trap to serve three years of supervised release following his release from prison. These criminal charges stemmed from Trap’s operation of a fraudulent telemarketing operation in San Marcos, Calif.
According to court documents, Trap admitted that in approximately April 2009, he and Glenn Steven Rosofsky – who previously pleaded guilty and has been sentenced to serve 63 months in prison for his role in this scheme and for tax offenses – began operating a loan modification business using the names “Nations Housing Modification Center” and “Federal Housing Modification Department,” in an effort to fraudulently sell loan modification services to homeowners who were delinquent on their monthly mortgage payments.
Trap admitted that he, Rosofsky and others used false and fraudulent statements and representations to induce customers to purchase loan modification services from NHMC. Among the misrepresentations made to customers were claims that NHMC had “attorneys” and “forensic accountants” on staff to deal with the loss mitigation departments of banks on behalf of NHMC’s customers, that NHMC had achieved an “extremely high success rate for homeowners that met the Nations Home Affordable Modification Program guidelines,” and that NHMC was located on “Capitol Hill” in Washington, D.C. In fact, as Trap admitted, NHMC did not have attorneys or forensic accountants on staff, it did not have a high success rate of modifying loans, it had no connection with the U.S. Treasury Department’s “Making Home Affordable” program, and its only presence in Washington, D.C., was a rented post office box. These false claims were made in solicitation letters that were mailed throughout the country to individuals behind on their mortgage payments and encouraged struggling homeowners to call a toll-free number to purchase NHMC’s loan modification services. The staff of telemarketers at NHMC’s offices in San Marcos used a script provided by Rosofsky and others to make similar false and misleading statements to potential customers. Relying on such misrepresentations, over 300 homeowners paid between $2,500 and $3,000 to NHMC between April and July 2009, resulting in over $900,000 in customer funds to be transferred to NHMC’s bank accounts in the Southern District of California.
Trap admitted that he and Rosofsky then conducted financial transactions with the customer funds transferred to NHMC’s bank accounts in order to pay expenses of the business and to compensate themselves. Trap acknowledged in his plea agreement that at his sentencing he would be ordered to pay restitution to victims of the NHMC scheme.
U.S. Attorney Duffy praised the coordinated efforts of investigators, prosecutors, and regulators to combat the problem of loan modification fraud. The San Diego District Attorney’s Office conducted a search of NHMC’s offices in July 2009 and provided valuable assistance to the Internal Revenue Service – Criminal Investigation (IRS-CI), and the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), during their federal investigation of NHMC. Additionally, in September 2009, the Federal Trade Commission filed a civil suit against Trap and Rosofsky in the U.S. District Court for the District of Columbia, alleging that their operation of NHMC constituted unfair and deceptive trade practices.
This case is the product of an investigation by agents of the IRS-CI and the Office of SIGTARP and is being prosecuted in San Diego federal court by Assistant U.S. Attorneys Eric J. Beste and Jonathan I. Shapiro.
This case was brought in coordination with the Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement working together to launch a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. The Special Inspector General for the Troubled Asset Relief Program co-chairs the task force’s Rescue Fraud Working Group. For more information on the task force, visit www.StopFraud.gov.