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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.


Modification Litigation Explodes

Recent modification-related litigation

Dec. 31, 2009

By SAM GARCIA


State and federal regulators continued to crackdown on loan modification firms -- filing more than 50 lawsuits since November. Ohio has sued a servicer it claims gave unfair modifications to its borrowers, while Nevada is slapping two firms with criminal indictments.

The Federal Trade Commission has added April Botton Krawiecki, her father, Samy Botton and Attorney Aid LLC to a lawsuit against Kirkland Young LLC and David Botton. The company allegedly charged up-front fees of between $299 to $699 and falsely claimed it would obtain modifications -- even though most offers obtained didn't leave the borrowers any better off. The action is part of Operation Stolen Hope, a joint federal and state effort announced on Nov. 24.

Ohio Attorney General Richard Cordray filed a lawsuit on Dec. 16 in the Court of Common Pleas in Mongtomery County, Ohio, against Barclays Capital Real Estate dba HomEq Servicing, according to court documents. The New York-based servicer is accused of issuing unfair loan modification agreements and providing inadequate, incompetent customer service to delinquent borrowers.

The action seeks a permanent injunction, restitution and civil penalties against HomeEq -- which services 10,000 subprime mortgages. The company was approved as a participant in the Home Affordable Modification Program in August -- though it has been among the worst performers.

"Ohio homeowners in need of loan modifications through HomEq to save their homes from foreclosure were forced to enter into one-sided agreements," according to a statement. "The unfair and deceptive agreements released HomEq of all liabilities and required borrowers to waive their rights to defenses and agree to pay additional fees."

In Pennsylvania, a lawsuit was filed on Nov. 23 against Foreclosure Awareness Inc. and owner Michael Squillace by state Attorney General Tom Corbett, according to an announcement. The company allegedly used deceptive and misleading advertisements and failed to provide promised services.

Similar charges were lodged by Corbett in a Nov. 23 lawsuit against Nationwide Foreclosure Prevention Center. Another lawsuit by Pennsylvania against Best Interest Rate Mortgage Co. alleges the use of direct-mail ads that appeared to be from a government agency and operation of the business without a license. A fourth firm sued by the state, U.S. Mortgage Mod, allegedly used misleading mailers, overstated its results and charged up-front fees without obtaining a required bond.

All four lawsuits were filed in Commonwealth Court, Harrisburg, Pa.

A lawsuit was filed in Cook County Circuit Court on Nov. 24 against Loan Mod One LLC by Illinois Attorney General Lisa Madigan, a news release indicated. The firm, which has an office in West Dundee, allegedly targeted at-risk borrowers for up-front fees on modification services that were never performed. Illinois claims Loan Mod One violated its Mortgage Rescue Fraud Act, which prohibits up-front fees before completing all the terms of a mortgage rescue contract.

Illinois seeks restitution, a civil penalty of $50,000, additional penalties and a permanent injunction barring the defendants from engaging in mortgage rescue operations.

In addition to Loan Mod One, Madigan filed lawsuits against Chicago-based Freedom Mortgage Team Inc. and Living Modifications Corp. in Schaumburg, Ill.

A criminal complaint was filed against Global Financial Consulting Services of Dearborn Heights, Mich., by Michigan Attorney General Mike Cox, a Nov. 24 news release said. The company allegedly charged up-front fees, didn't deliver the services it promised and failed to provide requested refunds. The up-front charges are a violation of the Credit Services Protection Act.

Michigan also made similar allegations in separate criminal complaints filed against Advanced Mediation Services and James Klein, both of Midland.

A November announcement indicated that Connecticut Attorney General Richard Blumenthal was suing FHAAllDay.com Inc. for allegedly charging Connecticut borrowers between $2,500 and $4,500 then failing to deliver on promises to help them avoid foreclosure. Up-front fees have been illegal in Connecticut since Oct. 1.

Missouri Attorney General Chris Koster announced that a lawsuit is being filed against Palm Beach Gardens, Fla.-based First Universal Lending LLC. The company charges illegal up-front fees, advised some borrowers to stop making payments and "appears to do little or nothing for most of its customers," the state said. Restitution, monetary penalties and permanent injunctions are sought.

A summary cease-and-desist was obtained by the Maryland Department of Labor, Licensing and Regulation's Office of the Commissioner of Financial Regulation against The Shmuckler Group LLC, Nova Key LLC, Howard R. Shmuckler, Alon Fisch, and Ted Dubin, according to a news release. The defendants, operating from Northern Virginia, are accused of collecting more than $1.2 million in up-front fees on 372 loans in exchange for promised modification services and operating without a Maryland credit services business license. Although modifications were obtained in only one-quarter of the cases handled, no refunds were given.

The state claims the defendants violated of the Maryland Credit Services Businesses Act and the Protection of Homeowners in Foreclosure Act.

Kansas Attorney General Steve Six announced that two lawsuits were filed in Shawnee County District Court on Nov. 19 against modification firms alleging that they did nothing for the customers despite promises to the contrary. The firms are California-based Home Loan Modification Advisors and New York-based Infinity Funding Group,

Separate lawsuits were filed in Kennebec County Superior Court by Maine Attorney General Janet Mills on Nov. 24 against three separate firms. The unlicensed companies failed to register as debt management services as required under state law and obtain required bonds. Illegal fees charged up front were as high as $4,300, and the state limits debt-management service providers to a $75 setup fee and 15 percent of the amount of reduced debt.

The defendants in the first case are Elect Group LLC, Anthony Ferlanti and Emmanuele Zuccarelli. In the second case, Help Modify Now Debt Solutions Inc., Help Modify Now Inc. and Chas Bain are named as defendants, while the third case was filed against US Advocate Law Group P.C. and Jeff Nemerofsky. The state hopes to recover fees for impacted borrowers.

After being tipped off about an advertisement that appeared to be from the government, Idaho's attorney general phoned the toll-free number and wound up talking to Best Interest Rate Mortgage Co. The state also found that the company was charging advance fees of between $1,000 and $1,800 -- in violation of Idaho law -- and that it was not licensed to offer modifications in the state.

Best Interest Rate, which didn't admit to any wrongdoing, agreed to settle the charges with the state. As part of the agreement, 12 borrowers will receive $19,710 in refunds. The company also agreed to cease operating in Idaho or soliciting Idaho consumers.

Idaho said it previously sued another firm, APS Northwest Idaho LLC, over similar allegations.

Colorado Attorney General John Suthers said on Nov. 24 that 10 loan modification firms have voluntarily agreed to stop operating in the state until they comply with state laws requiring that only licensed mortgage brokers or attorneys perform modifications. Nine of the firms were located outside Colorado.


The FTC reported that it took the following actions as part of Operation Stolen Hope.

Case Title Date Filed Court Case No. Date of Last action Last Action
FTC v. 1st Guaranty Mortgage Corp., Spectrum Title, Inc., Crossland Credit Consulting Corp., Scoreleaper, LLC, Stephen Lalonde, Amy Lalonde, and Michael Petroskim Nov. 17 U.S. District Court for the Southern District of Florida na Nov, 19 Temporary Restraining Order entered.
FTC v. Washington Data Resources, Inc., Optimum Business Solutions, LLC, Crowder Law Group, P.A., Richard A. Bishop, Brent McDaniel, Tyna Caldwell, Douglas A. Crowder, and Kathleen Lewis Nov. 12 U.S. District Court for the Middle District of Florida 8:09-cv-2309-T-23 TMB Nov. 18 Stipulated Preliminary Injunction entered.
FTC v. The Debt Advocacy Center, LLC, Smith, Gromann & Davidson, P.A., Edward J. Davidson, John W. Smith, Glen E. Gromann, and Kevin McCormick Nov. 19 U.S. District Court for the Northern District of Ohio 1:09-cv-2712 Nov. 19 Temporary Restraining Order entered.
FTC v. First Universal Lending, LLC, Sean Zausner, David Zausner, and David J. Feingold Nov. 18 U.S. District Court for the Southern District of Florida 09-82322-CIVZLOCH Nov. 19 Temporary Restraining Order entered.
FTC v. Kirkland Young, LLC and Michael Botton Nov. 18 U.S. District Court for the Southern District of Florida 09-23507-CIVGOLD/MCALILEY Nov. 19 Temporary Restraining Order entered.
FTC v. Truman Foreclosure Assistance, LLC, Truman Mitigation Services, LLC, Franklin Financial Group US LLC, Eli Hertz, Benzion Jack Itzkowitz, and Richard Zafrani Nov. 23 U.S. District Court for the Southern District of Florida na Nov. 23 Complaint filed.
FTC v. Bay Area Business Council, Inc., et al.; FTC v. Safe Harbour Foundation of Florida, Inc., Silverstone Financial LLC, Keystone Financial, LLC, Southeast Advertising, Inc., MT25 LLC, Peter Porcelli II, Bonnie A. Harris, and Christopher Tomasulo Feb. 27 U.S. District Court for the District of Illinois 02 C 5762, 08 C 1185 Nov. 19 Stipulated Permanent Injunction entered
FTC v. Thomas Ryan March 20 U.S. District Court for the District of Columbia 1:09-CV-00535 Nov. 20 Stipulated Permanent Injunction entered
FTC v. Home Assure, LLC, B Home Associates, LLC (d/b/a Expert Foreclosures), Brian Blanchard, Michael Grieco, Michael Trimarco, and Nicholas Molina March 20 U.S. District Court for the Middle District of Florida 8:09-CV-00547-T-23 Nov. 23 Stipulated Permanent Injunction entered.
FTC v. Freedom Foreclosure Prevention Services, LLC, Loss Mitigation Training Centers of America, LLC, Jeffrey C. Segal, and Michael R. Workmanolina June 1 U.S. District Court for the District of Arizona CV-09-1167-PHX-FJM Nov. 23 Stipulated Permanent Injunction entered.

The FTC also reported the following state actions were taken as part of Operation Stolen Hope.

Case Title Date Filed Court Case No. Date of Last action Last Action
State of Colorado v. Peter A. Johnson and American Summit Financial Services, Inc.-fla Nov. 19 Boulder County District Court 2009CV1193 Nov. 19 Complaint and consent judgment filed.
State of Florda v. National Payment Modification Company; The Bostonian Group, LLC, f/k/a The Bostonian Group, Inc. d/b/a People's First; and William R. Rodriguez, Sr. Oct. 9 Circuit Court in Orange County, Fla. na Oct. 9 Complaint filed.
Office of the Attorney General, Department of Legal Affairs, State of Florida v. Xolutex, Inc., Ceasar Taveras, George Ibanez, Paola Pino, Laura Ibanez, and Guillermo Gomez. Oct. 21 Miami-Dade County, Florida District Court 09-77640 CA 30 Oct. 21 Complaint filed.
State of Idaho v. APS Northwest Idaho, LLC; Randy Allen; Clint Paulsen; Travis Smithla Nov. 2 Cootenai County CV09-9069712 Nov. 2 Complaint filed.
State of Illinois v. Freedom Mortgage Team and Nevrus Mehmeti Nov. 2009 Cook County Circuit Court na Nov. 2009 Complaint filed.
State of Illinois v. Living Modification Corporation and Tomasz Tomczyk Nov. 2009 Cook County Circuit Court na Nov. 2009 Complaint filed.
State of Illinois v. Loan Mod One, LLC Nov. 2009 Cook County Circuit Court na Nov. 2009 Complaint filed.
State of Indiana v. IMC Financial Services, LLC Nov. 16 Dearborn County, Ind. na Nov. 16 Complaint filed.
State of Indiana v. Foreclosure Assistance, LLC April 9 Grant County, Indiana 27C01-0904-PL-3393162 Nov. 16 Settlement agreement and Assurance of Voluntary Compliance enteredmczyk.
State of Kansas v. Home Loan Modification Advisors Nov. 19 Shawnee County, Kansas District Court 09 C 1815 Nov. 19 Complaint filed.
State of Kansas v. Infinity Funding Group Nov. 19 Shawnee County, Kansas District Court 09 C 1814 Nov. 19 Complaint filed.
State of Kansas v. Helping Hands Support Services, Inc.. na na na Oct. 5 Default Judgment of $75,000 entered.
State of Kansas v. Kirkland Young, LLC na na na na Consent judgment.
Help Modify Now Debt Solutions, Inc. and Help Modify Now, Inc. and Chas Bains Nov. 18 Kennebec County Circuit Court na Nov. 18 Complaint filed.
US Advocate Law Group, P.C. and Jeff Nemerofsky Nov. 23 Kennebec County Circuit Court na Nov. 23 Complaint filed.
Elect Group, LLC, Anthony Ferlanti and Emmanuele Zuccarellinc. Nov. 18 Kennebec County Circuit Court na Nov. 18 Complaint filed.
State of Missouri, ex rel. Chris Koster v. First Universal Lending Nov. 2009 na na Nov. 2009 Complaint filed.
State of Nevada v. Justin Sabo, Thomas Gentile, and Julio Martinez Oct. 23 na na Oct. 23 Indictment issued.
State of Nevada v. Jack Ferm d/b/a US Justice Foundation Oct. 2 na na Oct. 2 Indictment issued.
State of North Carolina ex rel. Roy Cooper, Attorney General v. Campbell Law Firm, P.A. and Rudolph C. Campbell Nov. 23 Wake County Superior Court na Nov. 23 Complaint filed.
State of North Carolina ex rel. Roy Cooper, Attorney General v. Geoffrey L. Lamb, d/b/a The Lamb Group and U.S. Consumer Solutions Nov. 23 Wake County Superior Court na Nov. 23 Complaint filed.
State of Ohio v. Kirkland Young Nov. 2009 Franklin County Common Pleas Court LLC na Nov. 2009 Complaint filed.
State of Ohio v. Debt Advocacy Center Nov. 2009 Cuyahoga County Common Pleas Court na Nov. 2009 Complaint filed.
Angol, LLC and Alexis Gonzales, Individually Nov. 23 District Court, Dallas County, Texas na Nov. 23 Petition filed.
Tyrone Bailey, d/b/a Behind on Mortgage, and Markus Bailey, d/b/a Behind On Mortgage USA Nov. 2 134th Judicial District, Dallas County, Texas 09-18246 Nov. 2 Complaint filed.
State of Wisconsin v. 21st Century Legal Services (d/b/a 21st Century Real Estate & Investment Corporation, 21st Century Transitional, Twenty First century Legal Services, Transitional Corporation of America, and 21st Century Remod.) Oct. 13 Dane County Circuit Court 09-CX-20 Oct. 13 Complaint filed.
State of Wisconsin v. Federal Loan Modification Law Center, LLP Nov. 19 Dane County Circuit Court 09- CX-24 Nov. 19 Complaint filed.

Finally, Irvine, Calif.-based United Law Group issued a Dec. 8 statement indicating it is filing lawsuits and class actions against mortgage lenders and servicers. It has reportedly already filed cases against Countrywide Home Loans Inc. and parent Bank of America Corp. (case number 30-2009 00121999) as well as Washington Mutual Inc. and parent JPMorgan Chase & Co. (case number 30-2009 00122403). More complaints are being reviewed.


Federal Trade Commission v. Kirkland Young, LLC, a limited liability company, David Botton, individually and as a manager of Kirkland Young, LLC.
Civil Action No. 09-CV-23507, FTC File No. 092 3162, Nov. 18, 2009 (United States District Court for the Southern District of Florida).

State of Ohio, ex rel. Richard Cordray, Attorney General of Ohio, 30 East Broad Street, 17th Floor Columbus, Ohio 43215, Plaintiff, v. Barclays Capital Real Estate Inc. dba HomEq Servicing, c/o Statutory Agent, CT Corporation System, 1300 East 9th Street, Cleveland, Ohio 44114, Defendant.
Case 09 10136, Dec. 16, 2009 (Court of Common Pleas in Mongtomery County, Ohio).


Sam Garcia worked in mortgage lending for twenty years prior to becoming publisher of MortgageDaily.com in 2000.

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