Mortgage lender uses fear as a sales pitch

Network Capital Funding is sending out a 'second notice' to homeowners, claiming their loan has been flagged for review. There was no first notice.

State and federal authorities may have cracked down on unscrupulous mortgage lenders to avoid a repeat of the housing market meltdown, but there are still plenty of companies that are eager to dupe people into taking out bad loans.

Exhibit A: Companies sending official-looking letters that seem to say you have to take action or else your home loan will be in trouble. The letters, of course, aren't from a government agency. They're from some business trying to get you to refinance.

And now an Irvine company called Network Capital Funding is taking the questionable sales pitch up a notch. It's sending out a letter that claims to be the "second notice" a homeowner is receiving, even though there never was a first notice, and it's doing its best to masquerade as a money-saving federal program.

"Due to recent revisions of the Home Affordable Refinance Program, your Fannie Mae loan has been flagged for internal review," the letter warns. "Prior attempts to notify you have not been successful."

The letter includes a "case reference number" and instructions for recipients to go to a website where they'll be able to "confirm eligibility" for a new loan with an annual percentage rate of just 2.6%.

You have to find your way to the fine print on the back of the letter to find out that Network Capital Funding isn't affiliated with Fannie Mae or any other government agency.

That's also where you'll discover that securing a low-interest loan is contingent on having a credit score of at least 740, which would allow you to refinance at a competitive rate with any reputable financial institution, although probably not below 3%.

"The actual APR, interest rate and payments may be higher based on your actual situation," the fine print admits. Oh, and you'll have to pony up $2,333 in "lender's fees."

Quiz: How much do you know about mortgages?

Paul Myers, 60, of Los Angeles, recently received one of Network Capital Funding's letters.

"At first I was scared when I looked at it," he told me. "I didn't want any bad news about my home. Then I realized that it was really an ad for a screwy loan."

This particular racket preys on people who don't pay close attention to their correspondence. Their first reaction might be to contact the company, and before they know it, they're on the phone with a salesperson.

I spoke briefly with Jim Pate, Network Capital Funding's director of sales. If anyone was in a position to explain the company's sales efforts, it was him.

However, Pate declined to discuss the contents or format of the letter.

I asked how Network Capital Funding knows that a homeowner's Fannie Mae mortgage has been flagged for internal review.

"I'm not quite sure how they determine that," Pate answered.

I asked for the name of the privately held company's chief executive. Pate declined to say.

For the record, the CEO is Tri Nguyen, who didn't return my calls.

Also for the record, the Better Business Bureau of the Southland gives Network Capital Funding a rating of "A+," even though the company has been the subject of 29 complaints to the bureau over the last three years.

Network Capital Funding is an accredited member of the bureau, which means it pays hundreds of dollars to the organization in annual fees.