Federal regulators are going all out to put a halt to firms that collect hefty fees while their clients still lose their homes. States including California, Florida and Illinois have also been busy eradicating companies that collect up-front fees in return for promises that foreclosures will be halted. Many of the schemes purport to provide an investor who will buy a distressed homeowner’s property then instead use straw buyers and mortgage fraud to strip the equity.
The Office of the Special Inspector General for the Troubled Asset Relief Program, which oversaw huge capital investments by the federal government in struggling and healthy banks in 2008, joined with the Consumer Financial Protection Bureau and the Department of the Treasury early last month to announce the launch of a joint task force to combat scams targeted at borrowers seeking modifications under the Home Affordable Modification Program.
SIGTARP is responsible for overseeing HAMP investments from the TARP fund.
SIGTARP Deputy Special Inspector General Christy Romero explained in the statement that a new consumer fraud alert will enable borrowers to recognize scams, while then CFPB chief of enforcement, Richard Cordray, added that legitimate businesses are hurt along with homeowners. Cordray has since gone on to be appointed by President Obama to head the CFPB.
John Marcus Desenberg was arrested on Nov. 21 on charges he lied to distressed borrowers about monitoring investor payments on their mortgages, the U.S. Attorney for the Eastern District of California. Through Creative Lending Solutions, Desenberg purported to help delinquent borrowers and allegedly failed to monitor payments, and homeowners lost $300,000 in equity.
A conviction for Desenberg could cost him up to 20 years in prison.
Lisa Wright, Cathy Saffer and Barrington Coombs were charged by a federal grand jury for operating a foreclosure-rescue scheme, according to the U.S. Attorney for the Southern District of Florida. Both banks and borrowers were allegedly defrauded in the scheme, which was run through Foreclosure Solutions Specialists from 2006 to 2009.
The Justice Department claims that distressed borrowers were deceived about being able to remain in their houses through the sale of the properties to investors. Borrowers believed they would subsequently be able to repurchase their homes.
But the government alleges that the properties were actually sold to straw purchasers, and mortgage fraud was used to obtain loan financing that stripped the properties of equity. All of the loans eventually went into foreclosure.
Borrowers were charged up to $4,250 by U.S. Homeowners Relief Inc. to reduce their payments, interest rates and loan balances through the “Obama Act,” according to the Federal Trade Commission. So the agency filed a lawsuit in September 2010 against the company and its principals in U.S. District Court for the Central District of California.
In December, the FTC announced a settlement with U.S. Homeowners. The agreement imposes a $3.9 million judgment against Aminullah Sarpas and New Life Solutions Inc.; a $2.1 million judgment against Damon Grant Carriger, DLD Consulting LLC and D.G.C. Consulting Inc.; and a $3.6 million judgment against Macie Majeco Bain. All six defendants are banned from providing debt-relief and mortgage-assistance services. They are also prohibited from making misrepresentations about other products and services, required to back up any claims they make and required to comply with the Telemarketing Sales Rule.
Litigation in the case is continuing against Paul Bain and defaulting corporate defendants U.S. Homeowners Relief Inc., Waypoint Law Group Inc. and American Lending Review Inc.
In Sacramento, Calif., the U.S. Attorney’s Office announced on Dec. 2 the indictment of five defendants in connection with a foreclosure-rescue scheme operated through Horizon Property Holdings LC. In addition to Horizon founder and general manager Jewel L. Hinkles who is also known as Cydney Sanchez, defendants include Bernadette Guidry, Jesse Wheeler, Cynthia Corn and Brent Medearis.
Horizon promoted a program that required a “substantial” up-front payment and monthly fees in return for preventing foreclosures on delinquent mortgages. Investors were supposed to purchase the mortgages at a discount or negotiate lower payments with the lenders. More than $5 million was allegedly collected from more than a thousand borrowers.
But that never happened, and the defendants allegedly stalled foreclosure by filing fraudulent deeds and transferring the borrower’s property interest to a fictitious entity called Pacifica Group 49/II, the government claims. Fraudulent bankruptcy petitions were also allegedly filed to halt the foreclosure process.
Acceptance Financial Corp. was among three “mortgage rescue consultants” sued by Illinois Attorney General Lisa Madigan last month. The complaint was filed in Cook County Circuit Court as was another complaint against Elite Outsourcing Services Inc. Including the third firm, International Embassy Realty Inc. which was sued in Kane County Circuit Court, the trio collected more than $44,000 in up-front fees for loan modification services even though no work was actually performed.
The cases bring to 50 the number of lawsuits filed by Madigan against such firms.
“The schemes are run by con artists who promise phantom help,” the news release stated. “They claim that, for a hefty fee, they can save a distressed borrower’s home by negotiating deals with a homeowner’s lender, when in reality, these ‘consultants’ do nothing they promised.”
Anatoly Nirshberg, owner of Acceptance Financial, reportedly told Patch.com that Madigan’s office is on a witch hunt and his firm did nothing wrong. But he acknowledged to the publication that up-front payments were collected and kept in escrow.
MGD Management LLC and CRS Marketing LLC marketed strategic-default services that promised borrowers they could stay in their houses at no cost for three years, according to Florida Attorney General Pam Bondi. So Bondi announced on Jan. 5 that she obtained a temporary injunction and limited asset freeze from the Broward Country Circuit Court against the pair of foreclosure-rescue management companies. Mark Dalen, owner of the two firms, was hit with a temporary injunction barring him from marketing, advertising or providing foreclosure-related rescue services until further court order.
The state claims MGD and CRS preyed on distressed borrowers by promising to help defend them. They also allegedly represented that the fees paid included all legal fees other than bankruptcy filings, advised borrowers to ignore servicer communications unless it was registered mail and failed to provide legal services.
A consent order was obtained last month by Minnesota Commerce Commissioner Mike Rothman against Mortgage Connection Inc. requiring the Bloomington, Minn.-based firm to return an average of $2,000 in illegal fees collected from 36 consumers. The order includes a $40,000 civil penalty.
The state claims that the advance fees for loan modification services were illegal. The company’s license was revoked and its owner, Augustus Odoom, is banned from originating or servicing in the state.
Mortgage Connection, which allegedly didn’t meet state surety bond requirements, is additionally accused of using white out to alter documents before sending them on to lenders.
California’s Department of Real Estate issued a news release in December warning consumers about of promises of loan modification, mortgage relief and foreclosure rescue from scammers who are just preying on distressed borrowers. The department commended California’s attorney general for the arrest of Green Credit Solutions Inc. operators Christopher Fox and Curtis Melone. The company reportedly collected millions of dollars in up-front fees without performing promised modification services.
A third defendant, King Harris III, was reportedly arrested in St. Louis and is expected to be extradited to California.
The DRE also praised the FTC for imposing the multi-million dollar judgments against Aminullah Sarpas, Damon Carriger and Macie Bain.
Ryan Visda of Brooklyn, N.Y., was arrested last month over allegedly stealing $11,000 from a woman in a loan modification scam, according to published reports. Visda, who operated National Recovery Processing, was scheduled to appear in First District Court in Hempstead.
After pleading no contest to two felony counts tied to a foreclosure-rescue scam on Oct. 31, Alan David Tikal expected to face a 16-month sentence — time he already served. But a report from Tikal’s probation officer indicating he was earning as much as $7,500 a month in the real estate business combined with new evidence form prosecutors indicating that more fraudulent real estate documents might have been filed by him in Riverside and Stanislaus counties, Calif., prompted Judge Cecelia Carrillos to order Tikal back to jail, KGO reported. He might now face up to 44 months in prison.
A lawsuit filed last year against Philip Kramer, the Law Offices of Kramer & Kaslow, two other law firms, three other lawyers, and 14 other defendants in the Superior Court of the State of California, County of Los Angeles, by California’s attorney general alleged they filed mass joinder lawsuits naming hundreds of defendants to stop foreclosures. The California Supreme Court has since said it would not hear an appeal filed by Philip Kramer, who claimed that the state illegally shut down his firm, the San Diego Union-Tribune reported.
