TEXT OF STORY

Kai Ryssdal: Every crisis brings with it new business opportunities. Not all of those businesses, unfortunately, are on the up and up.

21st Century: You have reached 21st Century Legal Services. If you know your parties' extension, you may enter it at any time.

21st Century Legal Services is what's called a mortgage-modification company. It promises to help homeowners who are in over their heads renegotiate their loans. After they pay big fees, upfront.

21st Century: It's a wonderful day at 21st Century. How may I help you?

Joanna Williams: Yes, good afternoon. My name is Joanna Williams. And I saw your site on the Internet.

That woman's name isn't really Joanna Williams. She's an undercover investigator at the North Carolina attorney general's office. And the tape you're hearing is part of a sting they were running. They were looking into companies that are ripping off desperate homeowners and then disappearing.

Paul Kiel at ProPublica, the investigative newsroom, got the tape for us as part of our joint investigation into mortgage-modification scams.

From Washington, Marketplace's Steve Henn picks up the story.

STEVE HENN: Federal, state and local law enforcement have filed more than 150 suits against mortgage-modification firms. But the companies keep popping up. As the story of 21st Century shows, anything short of forcibly shutting them down can be ineffective.

Williams: Hello?

Mr. Parker: Are you a homeowner?

Williams: Yes. I'm a home owner.

Mr. Parker: Are you interested in cutting your payment down?

Williams: Yes.

Salesmen here live on commission.

Mr. Parker: This is 21st Century Legal Services. Our attorney can get you 3.5-4 percent, 30-year fix. Does that sound good?

Williams: Of course, it... Wait a minute, 3.5 to 4 percent fixed?

Mr. Parker: Yes, 30-year-fixed or whatever kind of fix you need.

Three-and-a-half percent? That's a too-good-to-be-true interest rate. And the salesman hadn't even asked her name. But at 21st Century, promises like this are routine. The only catch is a big fee -- upfront.

When Williams said she couldn't afford that, the salesman suggested she stop paying her mortgage. After all, it would make it easier to pay him.

Mr. Parker: But it looks better. Because when they see that you're behind, you're falling behind. You understand what I'm saying?

Williams:Yeah.

Mr. Parker:That looks better on you.

That advice -- stop paying your mortgage -- has ended with many of 21st Centuries' clients facing foreclosure. And because of that many states, including California, ban these kinds of upfront fees. But that hasn't stopped 21st Century Legal Services from collecting them.

Mr. Parker: We're in Rancho Cucamonga, Calif. We have four offices out here, we're opening up a fifth. We have been doing this for years.

Actually, 21st Century was founded less than a year ago by Andrea Ramirez. She's a former mortgage broker with a record of selling exotic loans her clients can't afford.

But she's moved on. Ramirez now generates fees by promising to fix the kinds of mortgage nightmares she helped create.

TOM MCNAMARA: It's the flip side of the mortgage-brokerage business.

Tom McNamara is an attorney in San Diego. He worked as a court appointed receiver with the Federal Trade Commission, and helped shut down a similar firm.

MCNAMARA: What I found, which was relatively interesting, is that most of the folks who were doing these were mortgage brokers.

McNamara says they're boiler room operations.

MCNAMARA: As soon as the caller called in, it was a really hard sell. It was to scare the daylights out of the homeowner, and they were pretty good about it.

And this industry is booming. In the past year more than 800 mortgage-modification firms have set up shop in Southern California alone.

Law-enforcement officials believe most of these are violating the law.

JERRY Brown: This is a very big scam.

California Attorney General Jerry Brown.

Brown: In terms of overt violation of the criminal and civil law, these so-called loan-modification companies, they take the prize.

But Brown compares enforcement efforts to playing whack-a-mole.

Brown: We are shutting them down, and they open up.

Firms change names, change locations and get back in businesses. But 21st Century Legal Services stands out.

Its founder, Ramirez, was convicted in 2008 of forging prescriptions for OxyContin. And that could soon cost her her real-estate license.

Customers have filed more complaints against this company with the Better Business Bureau than any other similar firm in Southern California. More than 150 complaints from at least 30 states.

State officials in Arkansas, Indiana, Ohio, and North Carolina have sued the firm, barring it from doing business within their borders. Other states have open investigations.

But the company hasn't stopped making calls like this one...

Mr. Parker: All that stuff on the news about fraudulent companies asking for money upfront is a bunch of garbage. OK. We ask for a percentage upfront because it's a retainer fee for our attorney for representation.

Company officials didn't respond to Marketplace's calls. And 21st Century's attorney hasn't responded to suits or letters from legal authorities from at least six states. Instead the company changed its name to Fidelity National Legal Services. And it's still in business.

In Washington, I'm Steve Henn for Marketplace.

RYSSDAL: Thanks to Paul Kiel at ProPublica for his help with that story.