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Mortgage Lawsuits News | Mortgage Litigation Index
Mortgage industry lawsuit news and mortgage litigation coverage. Stories about legal settlements, judgments and mortgage class actions.

Government Lawsuits Target Foreclosure Rescue Firms

Recent activity in foreclosure rescue cases

Oct. 15, 2012

By SAM GARCIA Mortgage Daily

portrait of Sam Garcia

Attorneys general in several states, along with federal regulators, have commenced litigation to stop dozens of foreclosure firms from collecting illegal fees and deceiving distressed borrowers about the likely outcome from promised loan modification services. Judgments were obtained against several of the defendants.

Among the defendants in three lawsuits announced by the Federal Trade Commission on Oct. 9 was Prime Legal Plans/Reaching U Network, which is accused of marketing itself since at least 2010 as a private charity that provides forensic audits to find noncompliance by mortgage lenders and help keep borrowers in their homes. But the up-front fees and $750 in monthly fees charged by Prime Legal resulted in little or nothing being done on behalf of borrowers. The FTC alleges violations of the Telemarketing Sales Rule, the FTC Act and the Mortgage Assistance Relief Services, or MARS, rule. A federal judge granted the FTC's request for a temporary restraining order and ordered a freeze of Prime Legal's assets and the appointment of a receiver. A preliminary injunction hearing was scheduled for Oct. 11.

The second was filed against American Mortgage Consulting Group, which the FTC alleges has, since early last year, deceived customers about its affiliation with the U.S. government, pretended to be attorneys and promised to significantly lower monthly mortgage payments in exchange for an up-front fee of as much as $4,495. Mark Nagy Atalla, which controls American Mortgage Consulting and two other related firms, allegedly violated "nearly every provision" of the MARS rule. But despite promises of virtually guaranteed loan modifications, the defendants did little or nothing for customers and failed to provide promised refunds. A federal judge granted a request for a temporary restraining order and preliminary injunction, froze the defendants' assets and appointed a receiver.

The third company that was sued, Expense Management America, allegedly charged as much as $10,000 in up-front fees that was supposed to go towards paying off debts -- though that didn't happen. As was the case with one of the other defendants, the FTC claims that the company called people who were registered on the no-call list in violation of the Telemarketing Sales Rule, and advised borrowers to cease contact with lenders. Violations of the FTC act and the MARS rule are also alleged.

In August, the FTC announced that it mailed more than 13,000 refund checks for more than $723,000 to former clients of First Universal Lending. Victims were allegedly deceived by First Universal that it would negotiate modifications with their lenders. The Palm Beach Gardens, Fla.-based company settled in June 2011 with the FTC for $18.8 million.

Another government agency, the Consumer Financial Protection Bureau, filed a federal lawsuit in California against Chance Edward Gordon, his law firm and related companies for allegedly collecting fees of between $2,500 and $4,500 but failing to deliver promised loan modification services. On July 18, a temporary restraining order was issued against the Los Angeles-based company and a receiver was appointed.

An Aug. 15 news release from Arizona's attorney general indicated that a lawsuit was filed against Making All Homes Affordable LLC and owner Albert Figueroa. The defendants allegedly violated the Consumer Fraud Act when marketing exclusively in Spanish by collecting up-front fees of nearly $1,950 each and promising loan modifications -- though all that was done was to provide borrowers with forms available for free for the Home Affordable Modification Program. Fake consumer testimonials were plastered on the company's website, and clients were charged 9.5 percent in fake sales taxes.

The state of Arizona also said it sued La Paz Source LLC, Maria Beltran and her husband Francisco Ramos over similar allegations. La Paz was dissolved in November 2011, though Beltran and Ramos started La Placita to continue the scheme, which also targeted Spanish speaking customers.

A $5 million payment for civil penalties will resolve a June 2011 lawsuit filed by the U.S. Department of Justice for the Central District of California against Terrill Meisinger, according to a July 31 order announced by the government. Meisinger, who is prohibited from participating in the home finance or real estate industries for a decade, allegedly paid distressed borrowers between $500 to $1,000 to transfer title to their homes and move out with the expectation of receiving as much as $10,000 when their houses eventually sold. Once title was transferred, Meisinger allegedly used fraudulent bankruptcy filings to stall foreclosures and rented the properties out. He earned more than $1.5 million in illicit rental income from more than a hundred properties by filing 300 bogus bankruptcy petitions. Meisinger didn't admit to doing anything wrong.

More than $4 million being paid by Statewide Financial Group Inc. includes $2 million in restitution to over a thousand borrowers who were falsely promised modifications of their mortgage loans, California's attorney general announced on July 24. The firm, which did business as US Homeowners Assistance and, is accused of falsely promising loan modifications. The business' owners -- Zulmai Nazarzai, Hakimullah Sarpas and Fasela Sheren -- were all found liable for violating the state's
Unfair Competition Law and False Advertising Law.

Hundreds of distressed borrowers were targeted by a group of Florida companies that charged $3,500 in up-front fees and falsely guaranteed that negative-equity mortgages would be voided, a news release last month from the Florida attorney general said. A temporary injunction and asset freeze was obtained by state.

William Timothy O'Toole was disbarred from the Florida Bar in July as a result of a May 22 court order (Case No. SC11-1815). He allegedly allowed non-lawyers to improperly solicit clients on his behalf for loan modifications and foreclosure defense on a nationwide basis even though he could only practice law in Florida. He also split fees with non-lawyers in violation of bar rules.

H&R Financial Services Inc. and its owners, William John Heckler and Richard Ruegsegger, were sued by Indiana's attorney general, a June 13 statement said. The New Mexico company is accused of collecting $1,683 in up-front fees and failing to obtain the promised home-loan modification or provide a refund. H&R is accused of violating the Credit Services Organization Act, the Mortgage Rescue Protection Fraud Act and Deceptive Consumer Sales Act.

An appeal of a $414,000 judgment in favor of Lisa Reed against Loan Modification Group Inc. was denied and the judgment affirmed by the U.S. Court of Appeals, First Circuit, on Sept. 21. The parties had operated a partnership together before Reed was pushed out and started a competing business. Loan Modification filed and lost a copyright infringement lawsuit, while Reed was successful in a counterclaim that sought her share of the profits.

North Carolina's attorney general announced that it filed three lawsuits on Sept. 21 against Community Mortgage Assistance Program, Lender Exchange and Tidewater Financial. The companies are each accused of collecting illegal fees and failing to provide promised modification services. The state wants to shut down each of the firms, ban their owners from offering foreclosure rescue and modification services and have the court order the defendants to pay refunds and civil penalties.

Forty statements of charges were filed by the Consumer Services Division of the Washington State Department of Financial Institutions against foreclosure rescue firms, an Oct. 9 news release indicated. The companies are charged with unfair or deceptive practices, obtaining property by fraud or misrepresentation and unlicensed activity. Advance fees charged by the firms sometimes reached $5,000. So far this year, 69 actions have been issued, more than the 45 for all of 2011.

Federal Trade Commission, Plaintiff, v. Prime Legal Plans, LLC, a Delaware limited liability company; Consumer Legal Plans LLC, a Nevada limited liability company; Consumer Legal Plans, LLC, also doing business as CLP Associates, a Wyoming limited liability company; Freedom Legal Plans LLC, a Delaware limited liability company; Frontier Legal Plans LLC, a Delaware limited liability company; Reaching U Network, Inc., also doing business as Legal Billing Services, Legal Servicing Partners, Forensic Auditor Services, 123 Save Our Home, Save Our Home Plan, Home Savers, Legal Network Association, and Homeowners Rescue Mission, a Florida corporation; 123 Save A Home, Inc., a Nevada corporation; American Hardship LLC, a Florida limited liability company; Back Office Support Systems, LLC, a Florida limited liability company; Consumer Acquisition Network, LLC, also doing business as Consumer Legal Network, Legal Servicing & Billing Partners, Forensic Auditor Services, Telefunding Services,, First Capital Land Trust, and Florida Land Trust Consultants, a Florida limited liability company; Legal Servicing and Billing Partners LLC, a Delaware limited liability company; Lazaro Dinh, also known as Mario Lazaro Sopena also known as Lazaro Sopena, an individual; Kim E. Landolfi, an individual; Derek B. Radzikowski, an individual; Andrew Primavera, an individual; Christopher N. Edwards, an individual; and Jason C. Desmond, an individual, Defendants, and The 2007 San Lazaro Irrevocable Life Insurance Trust, a trust, and Maria Soltura, in her capacity as Trustee of the trust, Relief Defendants.
Case No. 0:12-cv-61872-RNS, FTC File No. 112 3205 (U.S. District Court For the Southern District of Florida).

Federal Trade Commission, Plaintiff, v. American Mortgage Consulting Group, LLC, a California Limited Liability Company, also doing business as American Mortgage Group and American Mortgage Consulting; Home Guardian Management Solutions, LLC, a California Limited Liability Company, also doing business as Home Guardian Solutions; and Mark Nagy Atalla, doing business as Home Guardian Solutions, Home G Solutions Firm, and Home G Solutions Group, Defendants.
Case No. SACV12-01561 DOC (JPRx), FTC File No. 122 3054 (U.S. District Court For the Central District of California, Southern Division).

Federal Trade Commission, Plaintiff, v. E.M.A. Nationwide, Inc., a Florida corporation, also doing business as EMA and Expense Management America; New Life Financial Solutions, Inc., a Florida corporation, also doing business as New Life Financial, and New Life Financial Services; 1UC Inc., a Wyoming corporation, also doing business as 1st United Consultants, and First United Consultants; 7242701 Canada Inc., a Canadian corporation; 7242697, Canada Inc., a Canadian corporation; 7246293, Canada Inc., a Canadian corporation; 7246421, Canada Inc., a Canadian corporation; James Benhaim, also known as Jimmy Benhaim, individually and as an officer or director of E.M.A. Nationwide, Inc., New Life Financial Solutions, Inc., 1UC Inc., 7246293 Canada Inc., 7246421 Canada Inc., and 7242697 Canada Inc.; Daniel Michaels, also known as Dan Michaels, also known as Dan Michles, individually and as an officer or director of E.M.A. Nationwide, Inc., New Life Financial Solutions, Inc., 1UC Inc., and 7242701 Canada Inc.; Phillip Hee Min Kwon, also known as Phillip H. Kwon, individually and as an officer or director of E.M.A. Nationwide, Inc. and New Life Financial Solutions, Inc.; Joseph Shamolian, individually and as an officer or director of E.M.A. Nationwide, Inc. and New Life Financial Solutions, Inc.; and Nissim N. Ohayon, individually and as an officer or director of E.M.A. Nationwide, Inc., New Life Financial Solutions, Inc., and 1UC Inc., Defendants.
Case No. 1:12-CV-2394, FTC File No. 122 3069 District Court For the Northern District of Ohio, Eastern Division).

Federal Trade Commission v. First Universal Lending, LLC, a limited liability company, Sean Zausner, individually and as owner, officer, or manager of First Universal Lending, LLC, David Zausner, individually and as owner, officer, or manager of First Universal Lending, LLC, and David J. Feingold, individually and as officer or manager of First Universal Lending, LLC.
Civil Action No. 09-CV-82322, FTC File No. 092 3130, November 2009 (U.S. District Court Southern District of Florida).

Consumer Financial Protection Bureau, Plaintiff, v. Chance Edward Gordon, an individual, and also d/b/a Gordon & Associates, The Law Offices of Chance E. Gordon, The Law Offices of C. Edward Gordon, The C.E.G. Law Firm, National Legal Source, Resource Law Center, Resource Law Group, and Resource Legal Group; The Gordoan Law Firm, P.C., a professional corporation; Abraham Michael Pessar, an individual; Division One Investment and Loan, Inc., a corporation, and also d/b/a Division One Business Solutions, D1 Companies; Division One, Division 1, Home Savers National, D1 Marketing Solutions and Relief Council; and Processing Division, L.L.C., a limited liability company, and also d/b/a Qualification Intake Department, Division One, The Relief Network, and Relief Network; Defendants.
Case No. 12CV 06147-RSWL, restraining order dated July 18, 2012 (U.S. District Court for the Central District of California).

THE PEOPLE OF THE STATE OF CALIFORNIA, Plaintiff, v. STATEWIDE FINANCIAL GROUP, INC., a California corporation doing business as US Homeowners Assistance; US Homeowners PRESERVATION CENTER, INC., a California corporation; HAKIMULLAH SARPAS, an individual; ZU MA AZARZAI, an individual; SHARON FASELA, an individual; Rasha Yehia Melek: an individual; and Does 1 through 100, inclusive, Defendants.
Case No. 30-2009-00125950, judgment entered July 23, 2012 (Superior court of the State of California County of Orange).

Office of the Attorney General, Department of Legal Affairs, State of Florida, Plaintiff, vs. Edward Cherry, Lawrence Diodato, Paul Gellenbeck, Shane Frankovic, Anthony C. Pintsopoulos, The Fidelity Land Trust Company, LLC, The Sunshine State Land Trust Company, LLC, Florida Land Trust Service, LLC, Growth Capital Funding, LLC, Zion Partners Irrevocable Trust, LLC, Zion Partners Irrv Trust, L.L.C., August Belmont and Company, LLC, Esquire Litigation Support, LLC,, LLC, Click Media Consulting, LLC doing business as Florida Home Rescue Mission, and American Federal Trust, LLC, Defendants.
Case 12-26987 12, Sept. 25, 2012 (In the Circuit Court of the Seventeenth Judicial Circuit, in and for Broward County, Florida).

LOAN MODIFICATION GROUP, INC., Plaintiff, Appellant, v. LISA REED, Defendant, Appellee.
Case No. 11-1947, decision on Sept. 21, 2012 (U.S. Court of Appeals, First Circuit).

State of North Carolina, ex rel. Roy Cooper, Attorney General, Plaintiff, v. The Community Mortgage Assistance Program, and Koy Lyn Chiu, Defendants.
Case No. 23CV013286, Sept. 21, 2012 (In the General Court of Justice, Superior Court Division).

State of North Carolina, ex rel. Roy Cooper, Attorney General, Plaintiff, v. Kenneth Carl McCurd and Tanya Louisa Wilson, individually, and doing business as Lender Exchange, Defendants.
Case No. 23CV013285, Sept. 21, 2012 (In the General Court of Justice, Superior Court Division).

State of North Carolina, ex rel. Roy Cooper, Attorney General, Plaintiff, v. Tidewater Financial Solutions, LLC, and Elaine M. Madej, individually and in her capacity as Manager of tidewater Financial Solutions, LLC, Defendants.
Case No. 23CV013284, Sept. 21, 2012 (In the General Court of Justice, Superior Court Division).

Sam Garcia founded Mortgage Daily in 1998 and became its full-time publisher in 2000. Prior to his news career he worked in mortgage lending for two decades.

[email protected]

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