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Mortgage Reduction Scam Duped Mostly Hispanics

City Mortgage accused of cheating Texans out of $300,000

November 29, 2004


The Texas attorney general has gone to court to try and stop the owners of a mortgage firm accused of ripping off more than 100 mostly poor Hispanic homeowners.

Attorney General Greg Abbott has already received a temporary restraining order that prevents City Mortgage Services -- which had offices in Dallas, Fort Worth, Houston and Austin -- from conducting any more mortgage business.

But Abbott is also seeking heavy fines and wants the company's assets frozen has an investigation by Texas authorities continues.

"Brazen schemes like this will be not tolerated in Texas," Abbott said in a written statement. "City Mortgage systematically victimized these Hispanic families by exploiting their dreams of home ownership."

Named in the suit are the owners of City Mortgage, Gustavo Duarte and Alfredo Mendez. Through their Houston-based company, which is not affiliated with CitiBank or CitiMortgage, the pair allegedly cheated home owners out of more than $300,000, court papers show.

They did so by using a "debt-reduction service" that was little more than a scam that victimized more than 150 Hispanic homeowners in the Dallas area alone.

Abbott said City Mortgage dispatched teams of door-to-door sales people throughout Hispanic neighborhoods. Homeowners were promised they could save thousands of dollars by increasing their mortgage payments.

Doing so, homeowners were told, would allow them to pay off their mortgage more quickly.

Families were charged $700 to $1,000, Abbott said, for City Mortgage to set up the new payment plan.

But according to the lawsuit City Mortgage at first made payments late, which caused homeowners to get behind on their payments and face late fees. And then the company stopped making the payments altogether.

City Mortgage shut down abruptly earlier this year, he said.

Duarte and Mendez apparently "simply shut down and...pocketed thousands of dollars that should have been forwarded to the mortgage companies financing the consumers' homes," Abbott said.

"Many consumers did not learn about City Mortgage's failure to pay until they received noticed from their mortgage companies, informing them that they had accrued considerable debts," he said.

Abbott said in court papers the injunction was necessary to put a stop to the pair's illegal practices.

"Defendants will continue to use false, misleading or deceptive trade practices to market and enter into contracts for their mortgage replacement plan and fail to remit the mortgage payments deducted from consumer's bank accounts to the mortgage lender," Abbott said in the suit.

He also warns that if Duarte and Mendez are not brought to justice more Hispanics will continue to be targeted.

"Consumers in the Spanish speaking communities remain vulnerable," according to the suit.

Abbott wants the pair fined $20,000 for each violation of state law and forced to pay restitution to their victims.

Patrick Crowley is a political reporter and columnist and former business writer for The Cincinnati Enquirer. Email Patrick at: [email protected]
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