Lawsuits of mass reduction?

The FTC has filed another action against defendants who allegedly attempted to squeeze the last drop from homeowners already under water.  This case, however, involves a disturbing new variation on foreclosure "rescue" operations.

According to the FTC, the defendants used two related schemes to prey on people in financial distress.  In the first one, defendants Sameer “Sammy” Lakhany, The Credit Shop, Fidelity Legal, and Titanium Realty deceptively claimed to be nonprofit groups that offer free loan modification and foreclosure relief services. 

Their webpage sometimes included a picture of the President with the headline “Speak With a Counselor and Receive a FREE Loan Modification Under the Obama Loan Modification Programs."  The logos of major mortgage lenders were also featured.

So what was really going on?  The complaint alleges that after gaining people’s confidence, the defendants persuaded them to spend between $795 and $1595 on a “forensic loan audit” that would make lenders agree to a loan modification.  What did the defendants actually achieve for most of their clients?  According to the FTC, pretty much bupkis. (OK, we’re paraphrasing, but you get the picture.)

Which brings us to the second part of the alleged scheme.  The FTC’s complaint charges that Mr. Lakhany and defendants Precision Law Center, Inc., and Precision Law Center LLC masqueraded as a specialty law firm and sent out direct mail resembling a class action notice. The FTC says they falsely claimed they could get people relief by suing their lenders along with other homeowners in so-called “mass joinder” lawsuits.  To convince people to hire the defendants, the FTC says telemarketers followed up by mailing material to homeowners promising the mass joinder suits would “halt and reverse foreclosure proceedings,” restore their credit, and possibly get them thousands of dollars in compensatory and punitive damages.

But the FTC says the “law firm” is a sham.  According to the agency’s suit, Precision Law Center doesn’t have appropriately-licensed attorneys on its staff and did little to move things through legally.  One case they filed was removed to federal court and then dismissed when they failed to oppose any motions.  A handful of cases in state court were filed but never served, resulting in dismissals for failure to prosecute.  Illustrating the devastating one-two punch faced by homeowners in financial distress, the complaint alleges that the defendants pitched the mass joinder scam to — among others — people who hadn’t been able to get relief through the “forensic loan audit” operation.  And what did it cost them to join the mass joinder suits?  An additional fee of between $6,000 and $10,000.

The FTC's complaint charges the defendants with violating Section 5 of the FTC Act and the Mortgage Assistance Relief Services (MARS) Rule.  After granting a temporary restraining order and asset freeze, a federal judge in California entered a stipulated preliminary injunction in the pending case.  The FTC has filed an amended complaint, adding three other defendants the agency says also were involved.

Do you have clients who might need a MARS refresher?  Make sure they're familiar with Mortgage Assistance Relief Services Rule:  A Compliance Guide for Business and Mortgage Assistance Relief Services Rule: A Compliance Guide for Lawyers.

If you know people struggling to hold onto their homes, warn them about pitches like this.  Share a new consumer alert from the FTC, Mass Joinder Lawsuits: A New Twist on Foreclosure Rescue Scams.
 

2 Comments

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Unfair Max. and not really the cause of problems in all cases. Example: Buy a Home, Job Changes location and pay, struggle, keep pymts current - Int. Rates drop, plead w/Lender for reduction in interest to reduce pymt - Told to not pay mortgage for 3 months then you'll qualify for a "program" to lower that interest. Yes, you'll lose some gain on principal, blah, blah - End of 3 mos. sorry, you don't qualify - Pay the 3 mos. time goes on, Int. Rates drop, again ask for reduction on high int and told to make half a pymt. twice a month for 6 months to prove you're worthy of reduction - while loan is Current. Told loss to credit, foreclosure notices, increase to principal minor compared to what you'll save over the life of your loan - months of receiving Foreclosure Threats, with calls to lender being told not to worry, the computer just automatically spits those out each month to protect them, we know you're not really delinquent, blah, blah - 7th Month receive Notice of Foreclosure from New Owner, claiming loan in default while all payments for loan made in full each month. Cost Thousands in Principal Gain plus additional fees from new owner.
This is just a starter of the kind of Crap, Lies and Deceit the mortgage companies/servicers have been playing on homeowners nationwide. Feel privileged that you've not experienced such Fraud in your dealings ~ You're very Naive or uninformed if you think this R.E. fiasco is because people bought houses they couldn't afford. I could continue with other violations we've endured, but who really cares ~ As far as the Government is concerned - they've decided we can afford 31%-38% of our gross wages just for a mortgage payment. How anyone can arrive at such an outrageous blanket conclusion as that - We don't all have the same costs to get to work, maintain our job, home,family size, health - Too Many Variables to Allow the Gov't to make a Plan that Allows the Lenders to Increase your Payment to 31% of Gross Wages if you want or need to reduce the cost of your home - Wait no, it's not to Make Your Home Affordable in this tough economy, it's to stop the lender from foreclosing on your home. As with all Gov't Programs the basic descriptive outline of goals is far more appealing than what the actual program ends up providing or accomplishing.
I'm assuming at this Point that Hiring/Retaining an Attorney to Sue your latest alleged Lender does Not fall under M.A.R.S. compliance guide. Played the Loan Modification Game for 2 yrs, now it's time for an Attorney.

The biggest issue I see is that many people who were buying houses were irresponsible, and simply put over-reached. Yes, mortgage companies are at fault, but I don't think people are much better for not thinking wisely....

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