Attorneys general in several states have waged a war against foreclosure-rescue firms that collect up-front fees but don’t deliver on their promises. While much of the activity is occurring in states located in the Midwest, several of the firms named in the lawsuits operate from Florida and California.
In San Bernardino, Calif., Stephen Andrew Easterly and Emanuel Percival allegedly collected between $3,500 and $7,000 from distressed borrowers in return for promising to save them from foreclosure, according to the San Bernardino County District Attorney. But the pair, through their company Fidelity Group Realty and Legal Services, recorded fraudulent documents on more than $17 million in mortgages and mailed bogus payoff checks. They claimed to be authorized representatives of the mortgage servicers.
Easterly and Percival were taken into custody and booked.
Peter James Porcelli II was indicted in 2009 and pled guilty without a plea agreement. His alleged crimes included preying on distressed homeowners and stripping their equity. Among the companies he operated the scheme through was The Safe Harbour Foundation of Florida Inc.
He was previously sentenced to a decade in prison, ordered to forfeit $1,838,500 and ordered to pay $669,042 in restitution. While Porcelli appealed his sentence to the U.S. Court of Appeals, Eleventh Circuit, the court affirmed the sentence.
Christopher Mallett deceived consumers through one of his Web sites, FHA-HomeLoan.info, by claiming a fictitious government agency, the U.S. Mortgage Relief Counsel, would have counsel on staff to direct consumers to “officials licensed with the National Mortgage Licensing Service (NMLS), persuant [sic] to the SAFE act of 2008,” according to the Federal Trade Commission. Mallett allegedly operated several Web sites that gave the impression of a U.S. government connection or endorsement.
The FTC said it filed a complaint against Mallett on Sept. 14 in U.S. District Court for the District of Columbia.
In another case, against U.S. Mortgage Funding, Louis Gendason was added as a defendant. The FTC alleges that the defendants falsely promised loan modifications and collected as much as $2,600, with half of the fee paid up front. Refunds were promised if no modification was obtained.
A temporary restraining order was extended on July 5 against Express Home Solutions and Home Preserve Law Group by Justice Thomas A. Adams of the Nassau County Supreme Court in New York, the Lawyers’ Committee for Civil Rights Under Law announced. It’s the second lawsuit filed by the group against Express. Violations of New York’s Deceptive Practices Act are alleged. The plaintiffs, 30 borrowers, are looking to collect $3 million in punitive damages and stop the company from operating.
A similar order was issued the prior month by Justice John M. Galasso, also of the Nassau County Supreme Court, enjoining a group of individuals operating a separate business under the name Homesafe America, the news release indicated. Through a network of Web sites, Homesafe and successor corporation United Legal Solutions falsely implied that they were affiliated with government agencies or large financial institutions. Last year’s revenues at Homesafe exceeded $2 million.
A lawsuit was filed last month in the Superior Court of the State of California, County of Los Angeles, by California Attorney General Kamala D. Harris against Philip Kramer, the Law Offices of Kramer & Kaslow, two other law firms, three other lawyers, and 14 other defendants. The defendants allegedly operated a scheme where they filed mass joinder lawsuits, which name hundreds of defendants, in order to stop foreclosures.
As part of the scheme, they collected millions of dollars, Harris said. Borrowers were given legal advice by sales agents who were not attorneys. Customers were solicited through a mail campaign involving at least 2 million pieces of mail.
Kramer’s firm and other defendants were placed into receivership on Aug. 15.
A lawsuit was filed during July in Cook County Circuit Court by Illinois Attorney General Lisa Madigan against Avatar Realty Group Inc. and its president Arthur Monroe. The company, formerly known as Monroe Realty & Financial Enterprises Inc. and Monroe Realty Corp., targeted the Polish community for loan modifications through radio and newspapers. Monroe allegedly collected more than $37,000 in up-front fees.
“Monroe repeatedly lied to consumers on his ability to negotiate with their lenders while instructing homeowners to stop paying their monthly mortgage payment in order to give him better negotiating leverage,” Madigan stated in a news release.
A second lawsuit was filed in Cook County Circuit Court by Illinois against Skyline Capital Inc. and its president, Rahul Shah. In addition to collecting restitution, the attorney general wants to shut down the business. Skyline allegedly refused to refund more than $23,000 in up-front fees even though it failed to obtain promised loan modifications.
“Both lawsuits allege the defendants’ fraudulent tactics violate Illinois’ Consumer Fraud Act and the Mortgage Rescue Fraud Act, the latter of which prohibits companies from requiring upfront payment from consumers prior to completing all the terms of a mortgage rescue contract,” Madigan said.
Ohio Attorney General Mike DeWine filed a complaint in the Cuyahoga County Common Pleas Court against Florida-based Diversified Real Estate Consultants LLC and owner Daniel J. DePasquale. Also named as defendants are DREAM Management USA and Precision Processing Solutions International LLC, which provided Diversified with research, analysis and documentation processing services for its foreclosure-rescue operation.
Diversified is accused of charging between $500 and $3,495 per customer in return for promised modifications — though it never provided any help or gave refunds. DeWine claims that 37 complaints have been made with his office about Diversified since 2009, and 18 of those complaints alleging losses in excess of $36,000 are unresolved.
“It charged substantial upfront fees for services and results that it promised but never delivered,” DeWine said of Diversified. “It also encouraged homeowners to default on their mortgage loans, falsely stating that defaulting on their loans would help them get a loan modification.”
In Indiana, Attorney General Greg Zoeller announced that a lawsuit was filed on Aug. 24 against Florida-based Community One Law Center and National Law Partners based in Florida and California. The firms allegedly collected up-front fees ranging from $499 to $2,699 and failed to provide promised refunds.
The two firms are accused of violating Indiana’s consumer protection laws by not registering $25,000 surety bonds with the attorney general’s office. While they operate as separate entities, they worked together on files and shared employees.
Earlier in the month, Zoeller filed a lawsuit against Florida-based Legal Home Loan Solutions. Also named as defendants were Federal Home Loan Solutions, Matevia Law Firm and Thomas C. Matevia. The defendants allegedly operated illegally in 15 Indiana counties because they lacked the required bond and didn’t provide refunds.
In July, Zoeller announced that a lawsuit was filed in Shelby County Court against California-based Premier Legal Advocates and owner Brian Pascal. The company allegedly collected $1,000 in up-front fees and failed to register the required surety bond. The state claims that borrowers, lured by claims made in advertising and on its Web site, signed contracts with the company believing they would get help preventing foreclosures.
“The company also committed other violations of the Credit Services Organization Act, the Mortgage Rescue Protection Act and Deceptive Consumer Sales Act, by failing to provide the homeowner with notice of various legal rights or of the availability of nonprofit credit counseling, the complaint stated,” Zoeller stated.
Idaho’s attorney general, Lawrence G. Wasden, issued a consumer alert on Aug. 24 warning about Corvus Law Group and its solicitations to join lawsuits against their lenders. The firm mailed advertisements that looked like government forms and promised large principal reductions by joining the lawsuit. Unlawful, up-front fees of $5,000 are required of distressed borrowers.
A petition was filed in Kanawha County Circuit Court by West Virginia Attorney General Darrell McGraw against National Relief Group, a July 14 statement said. The state claims that the California-based company charged illegal advance fees and misrepresented that it would obtain loan modifications. The state cited one case where the borrower paid an up-front fee, didn’t get a modification and ultimately lost the home to foreclosure.
Jack Ferm, head of Las Vegas-based U.S. Justice Foundation, pleaded no contest to one count of felony theft and agreed to repay 80 customers $192,000, 8 News Now reported. Ferm allegedly claimed he was an attorney and could file lawsuits to stop the foreclosures, though neither claim was true.
A 90-day sentence in a California county jail was handed down last month to Cary Jay Silberman and Robert Francis Childs after they were convicted of foreclosure consultant fraud in a case prosecuted by the Santa Clara County District Attorney’s Office, the San Jose Mercury News reported. Silberman is also accused of marketing himself as a lawyer even though he resigned from the California State Bar in 1997.
UNITED STATES OF AMERICA, Plaintiff-Appellee, v. PETER JAMES PORCELLI, II, a.k.a. Peter James, Defendant-Appellant.
Case No. 10-14777, Non-Argument Calendar, decided Sept. 21, 2011 (U.S. Court of Appeals, Eleventh Circuit).
Federal Trade Commission, Plaintiff, v. Christopher Mallett, also doing business as Department of Consumer Services Protection Commission, U.S. Debt Care, World Law Debt, U.S. Mortgage Relief Counsel, gov-usdebtreform.net, Worldlawdebt.org, and fha-homeloan.info, Defendant.
Case No.1:11-cv-01664-CKK, FTC File No. 1123105 (United States District Court for the District of Columbia).
Federal Trade Commission, Plaintiff v. U.S. Mortgage Funding, Inc., Debt Remedy Partners, Inc., Lower my Debts.com, LLC, David Mahler, individually and as an officer of Debt Remedy Partners, Inc. and a former officer of U.S. Mortgage Funding, Inc., and John Incandela, Jr., aka Jonathan Incandela, Jr., individually and as a former officer of U.S. Mortgage Funding, Inc. and a manager of Lower My Debts.com, LLC, and Jamen Lachs, individually and as an officer of U.S. Mortgage Funding, Inc., Defendants.
Case No. 11-Civ-80155, FTC File No. 102 3146 (U.S. District Court for the Southern District of Florida).
The People of the State of California, Plaintiff, v. the Law Offices of Kramer & Kaslow, et al., Defendants.
Case No. LC 094571, Aug. 15, 2011 (Superior Court of the State of California, County of Los Angeles – Northwest District).