Recent foreclosure-rescue lawsuits filed by states and the federal government involve millions-of-dollars in claims and judgments. One current scam has delinquent borrowers selling their homes to rescue firms with the intention of buying them back -- though that rarely happens. Mortgage fraud is often involved in these schemes. A California firm is being sued by the state because it tried to fraudulently use claims of predatory lending.
The Federal Trade Commission issued in November the "Mortgage Assistance Relief Services Rule" to protect distressed borrowers from foreclosure-relief scams. The rule prohibits providers of mortgage foreclosure rescue and loan modification services from collecting fees until borrowers have an acceptable written offer from their lender or servicer.
The FTC said it has brought more than 30 cases against foreclosure-rescue operations, while state and federal law enforcement officials have brought hundreds more.
Among those cases was a lawsuit filed in U.S. District Court for the Central District of California against National Foreclosure Relief Inc. and its owners David Ealy and Hugo Tapia. The defendants allegedly claimed to be able to stop foreclosures for an advance fee of $1,000. But many delinquent borrowers still ultimately lost their homes.
A $12 million settlement will be suspended as long as the defendants surrender all of their funds in bank accounts that have been frozen by the court -- though the full amount of the judgments will become immediately due if the defendants are found to have misrepresented their financial condition.
Another FTC lawsuit, also filed last year, in federal court in Los Angeles, named Dinamica Financiera LLC as defendants. The complaint alleged that Spanish-speaking borrowers were promised foreclosure relief or loan modifications in exchange for an up-front fee. But many borrowers lost their homes anyway.
The FTC said it obtained a $3.7 million summary judgment against Dinamica, Valentin Benitez and Jose Mario Esquer, while $1,694,000 in judgments were entered against other defendants.
Lastly, the FTC filed a civil contempt action in U.S. District Court for the Eastern District of Texas against Everard Taylor, Elias Taylor, Ebony Taylor, and National Financial Assistance LLC. The government alleges that they misled delinquent borrowers with foreclosure rescue claims in violation of previous court orders.
In Virginia, Mark H. Simmons and his ex-wife Cecilia Contreras recently pled guilty to conspiracy and aggravated identity theft for conducting a foreclosure rescue scheme, the Department of Justice announced. Through their business, RETE Funding LLC, the pair allegedly operated a sale-leaseback scheme where they filed fraudulent mortgage liens which were paid upon the sale of the homes. The also stripped equity from the properties through mortgage fraud.
Borrowers and lenders reportedly lost more than $1 million in the scheme.
A $60 million lawsuit was filed in October by California's attorney general against US Loan Auditors. Hundreds of delinquent borrowers were allegedly deceived through advertising and marketing that the firm could use claims of predatory lending to stop foreclosures or get a modification. Borrowers paid thousands of dollars in up-front fees plus monthly recurring fees of $1000 -- with most only seeing their cases dismissed. One consumer ended up paying a total of $56,000.
In Florida, the U.S. Department of Justice announced that Peter James Porcelli II was sentenced to 10 years in prison. A judgment was entered against him for $1.8 million.
Porecelli pled guilty in April to preying on distressed borrowers and providing them with high-rate, high-fee, short-term, balloon-payment loans through is company, Silverstone Lending. The government claims that average fees on the loans were 60 percent with annual percentage rates up to 260 percent. Many of the borrowers lost their homes.
Last month, the Arizona Attorney General's Office filed a lawsuit in state superior court on behalf of the Office and the Arizona Department of Financial Institutions against Lee Brent Shaw, Mark Tallman and limited liability companies owned by the two men, Better Choice Investments LLC and Better Solutions LLC. The two men were police officers.
Shaw and Tallman allegedly duped 148 delinquent borrowers between 2003 and 2007 in sale-leaseback transactions where the selling prices were "far less than the market value," according to a government news release. They recruited a pool of investors willing to co-own the properties, refinance and take a 50 percent share of the profits. But fine print in the contracts enabled almost all of the lease options to be voided.
On Wednesday, Arizona announced it obtained a $458,000 judgment against the two defendants for civil penalties and restitution.
The Philadelphia law firm of Goldbeck, McCafferty & McKeever is accused in a lawsuit filed in November by Patrick Loughren of fraudulently collecting attorney fees and using non-lawyers to file Pennsylvania foreclosures, the Associated Press reported. In addition, a U.S. Bankruptcy Court judge reportedly determined that an attorney at the firm knowingly gave the court fraudulent lender documents to help its foreclosure claim and was quoted as saying, "the evidence that [the attorney] lied was considerable."
Barbara Ann Coleman Jackson of the "social ministry corporation" Law & Grace issued a statement calling for an investigation into foreclosure lawyers to determine "whether improper and illegal foreclosure proceedings are linked to any self-dealing conduct disadvantaging lenders, investors, homeowners and city governments," according to a statement.
"Although increasing numbers of courts are continuing to reject improper and fraudulent foreclosures, the Congressional Foreclosure Panel examination of mortgage services and foreclosure practices did not include foreclosure lawyers," Jackson stated. "Lawyers are officers of the court; knowledge of applicable laws and civil procedure is not required from mortgage lenders. In states that require judicial foreclosures, lawyers are the ones who file lawsuits to seize and sell property; and lawyers are responsible for filing and recording foreclosure property deeds."
Indiana Attorney General Greg Zoeller reported in October that the following foreclosure-rescue firms were sued over allegations they illegally promised to save homes from foreclosure or provide a 100 percent guarantee.
Indiana Attorney General Lawsuits
| County of filing
||Colonial Financial Solutions
||Pierce, Taylor, & Budrow
||American Lending Review
||National Future Mortgage
||Oceanview Investment Services
||US Homeowners Relief
||Integrated Financial Solutions
||Meridian Law Center
||Fair Lending Review
Federal Trade Commission, Plaintiff, v. National Foreclosure Relief Inc., a corporation; David Ealy, an individual; Chele Stone, a/k/a/ Chele Medina, and individual; and Hugo Tapia, an individual, Defendants.
Case No. SACV09-117 DIC (NKGx), Feb. 2, 2009 (U.S. District Court for the Central District of California).
Federal Trade Commission Plaintiff, v. Dinamica Financiera LLC, A California limited liability company, Soluciones Dinamicas, Inc., a California corporation, Oficinas Legales de Eric-Douglas Johnson, Inc., Eric Douglas Johnson, Valentin Benitez, Jose Mario Esquer, and Rosa Esquer, Defendants.
Civil Action No.: 09-CV-03554, FTC File No. 082 3103 May 19, 2009 (U.S. District Court Central District of California).
Federal Trade Commission, Plaintiff, v. National Hometeam Solutions, LLC; National Financial Solutions, LLC; United Financial Solutions, LLC; Nationwide Foreclosure Services, LLC; Evalan Services, LLC; Elant, LLC; Elias H. Taylor, aka Eli Taylor; Everard Taylor, aka Everardo Taylor; Emanuel Taylor; and Edwin P. Taylor, Sr., aka Ed Taylor, Defendants.
Civil Action No. 4:08-cv-067, FTC File No. 082-3076, Feb. 29, 2008 (U.S. District Court for the Eastern District of Texas, Sherman Division).
THE PEOPLE OF THE STATE OF CALIFORNIA, Plaintiff, v. US LOAN AUDITORS, INC., a California .corporation; MY US LEGAL SERVICES, INC., a California corporation; JAMES DONALD SANDISON, an individual; SHANE BARKER, an individual; JEFFREY ALLEN PULVINO, an individual; SHARON .L. LAPIN, an individual; JONATHAN GREGG STEIN, an individual;. and DOES 1 through 100, inclusive, Defendants.
Oct. 6, 2010 (Superior Court of the State of California, County of Sacramento).
State of Arizona, ex rel., Terry Goddard, Attorney General, and Lauren W. Kingry, Superintendent, Department of Financial Institutions, Plaintiffs, -vs- Lee Brent Shaw and Tracey D. Shaw, husband and wife, Mark P. Tallman, Better Choice Investments LLC and Better Solutions LLC, Defendants.
Case No. CV2010-032698, Nov. 24, 2010 (Superior Court for the State of Arizona in and for the County of Maricopa).