Loan Modification: Scamming from the Top Down

As the following Press Release for California AG’s office describes, it is the type of scam that happens in medical practice — offering relief, life or forgiveness — in exchange for money. I don’t agree with all the tips that Brown has published because he still has yet to absorb the fact that most foreclosures are a scam worse than the loan mod companies are perpetrating. But there is a lot of good information in here. One of them is the application of the grand theft statute but I would change the target to those pretender lenders (servicers, “lenders”, trustees etc.) who seek to collect on an obligation that is not owed to them, to steal title from a homeowner when the real party in interest has nothing to do with the action, and to evict people from homes they still own and have every right to remain. Key points to remember:

1. It’s good advice not to pay anyone other than your lender or servicer but that assumes you know who the real lender is and that the servicer actually has authority to collect your payments. In a world of securitized mortgages, you should challenge the pretender lender and the pretender servicer to identify and verify your debt and to whom you owe it.

2. It is not a good idea to call your lender or servicer and ask for modification for the same reason expressed in paragraph 1. They will play the game to satisfy government regulators that they are trying to settle these cases but the fact remains that in most cases they don’t own the loan, they don’t have the authority to modify the loan and they are getting sued by the investors who DO own the loan. In the end, after assuring you that they own the loan and that they have the note they will most often tell you that the “investor” did not approve the modification. When you ask for the name and address of the investor Countrywide says “that’s confidential.” Confidential? How can it be confidential who your lender is? If you owe money you have an absolute right under Federal and State law and even common law to know who is the proper recipient of your payments, how much money they have received from insurance or the Federal government in bailouts, what the balance is now, if any, and to whom you should be directing payments.

3. Loan modification is the easy way out for lawyers and businessmen that seek easy profits because people are intimidating by the real process of challenging the legal right of anyone to issue a notice of default, a notice of sale or to sue in foreclosure. It generally leads to nothing but heartbreak. Either they do nothing or they get a “modification” that within 6 months lands you right back where you were before — in foreclosure. A loan modification that does not include a very substantial principal reduction — 40%-60% — along with very favorable terms on FIXED interest rates is in my opinion, worthless.

4. Ethically, lawyers are in a hot spot when a real modification with principal reduction takes place. They know the party making the offer has no right to offer it. They know that when the papers are signed, the title to your property will be clouded and probably unmarketable. BUT it is also true that for the time being your payments will be vastly reduced, usually missed payments are completely eradicated, and the appearance of satisfaction of the old mortgage and the creation of the new mortgage with substitution of parties gives you a leg up on any future litigation with yet another party in the securitization chain who is claiming a right to enforce the obligation, the note or the mortgage. So the ethical obligation of the lawyer is to advise his client of the risks and then propose some factors that might make the title problem less of a problem — like new title policies, or a friendly quiet title action.

News Release

July 15, 2009
For Immediate Release
Contact: (916) 324-5500

Brown Sues 21 Individuals and 14 Companies Who Ripped Off Homeowners Desperate for Mortgage Relief

Los Angeles – As part of a massive federal-state crackdown on loan modification scams, Attorney General Edmund G. Brown Jr. at a press conference today announced the filing of legal action against 21 individuals and 14 companies who ripped off thousands of homeowners desperately seeking mortgage relief.

Brown is demanding millions in civil penalties, restitution for victims and permanent injunctions to keep the companies and defendants from offering mortgage-relief services.

“The loan modification industry is teeming with confidence men and charlatans, who rip off desperate homeowners facing foreclosure,” Brown said. “Despite firm promises and money-back guarantees, these scam artists pocketed thousands of dollars from each victim and didn’t provide an ounce of relief.”

Brown filed five lawsuits as part of “Operation Loan Lies,” a nationwide sweep of sham loan modification consultants, which he conducted with the Federal Trade Commission, the U.S. Attorney’s office and 22 other federal and state agencies. In total, 189 suits and orders to stop doing business were filed across the country.

Following the housing collapse, hundreds of loan modification and foreclosure-prevention companies have cropped up, charging thousands of dollars in upfront fees and claiming that they can reduce mortgage payments. Yet, loan modifications are rarely, if ever, obtained. Less than 1 percent of homeowners nationwide have received principal reductions of any kind.

Brown has been leading the fight against fraudulent loan modification companies. He has sought court orders to shut down several companies including First Gov and Foreclosure Freedom and has brought criminal charges and obtained lengthy prison sentences for deceptive loan modification consultants.

Brown’s office filed the following lawsuits in Orange County and U.S. District Court for the Central District (Los Angeles):

– U.S. Homeowners Assistance, based in Irvine;
– U.S. Foreclosure Relief Corp and its legal affiliate Adrian Pomery, based in the City of Orange;
– Home Relief Services, LLC, with offices in Irvine, Newport Beach and Anaheim, and its legal affiliate, the Diener Law Firm;
– RMR Group Loss Mitigation, LLC and its legal affiliates Shippey & Associates and Arthur Aldridge. RMR Group has offices in Newport Beach, City of Orange, Huntington Beach, Corona, and Fresno;
– and
– United First, Inc, and its lawyer affiliate Mitchell Roth, based in Los Angeles.

U.S. Homeowners Assistance
Brown on Monday sued U.S. Homeowners Assistance, and its executives — Hakimullah “Sean” Sarpas and Zulmai Nazarzai — for bilking dozens of homeowners out of thousands of dollars each.

U.S. Homeowners Assistance claimed to be a government agency with a 98 percent success rate in aiding homeowners. In reality, the company was not a government agency and was never certified as an approved housing counselor by the U.S. Department of Housing and Urban Development. None of U.S. Homeowners Assistance’s known victims received loan modifications despite paying upfront fees ranging from $1,200 to $3,500.

For example, in January 2008, one victim received a letter from her lender indicating that her monthly mortgage payment would increase from $2,300 to $3,500. Days later, she received an unsolicited phone call from U.S. Homeowners Assistance promising a 40 percent reduction in principal and a $2,000 reduction in her monthly payment. She paid $3500 upfront for U.S. Homeowners Assistance’s services.

At the end of April 2008, her lender informed her that her loan modification request had been denied and sent her the documents that U.S. Homeowners Assistance had filed on her behalf. After reviewing those documents, she discovered that U.S. Homeowners Assistance had forged her signature and falsified her financial information – including fabricating a lease agreement with a fictitious tenant.

When she confronted U.S. Homeowners Assistance, she was immediately disconnected and has not been able to reach the company.

Brown’s suit contends that U.S. Homeowners Assistance violated:
– California Business and Professions Code section 17500 by falsely stating they were a government agency and misleading homeowners by claiming a 98 percent success rate in obtaining loan modifications;

– California Business and Professions Code section 17200 by failing to perform services made in exchange for upfront fees;

– California Civil Code section 2945.4 for unlawfully collecting upfront fees for loan modification services;

– California Civil Code section 2945.45 for failing to register with the California Attorney General’s Office as foreclosure consultants; and

– California Penal Code section 487 for grand theft.

Brown is seeking $7.5 million in civil penalties, full restitution for victims, and a permanent injunction to keep the company and the defendants from offering foreclosure consultant services.

US Homeowners Assistance also did business as Statewide Financial Group, Inc., We Beat All Rates, and US Homeowners Preservation Center.

US Foreclosure Relief Corporation
Brown last week sued US Foreclosure Relief Corporation, H.E. Service Company, their executives — George Escalante and Cesar Lopez — as well as their legal affiliate Adrian Pomery for running a scam promising homeowners reductions in their principal and interest rates as low as 4 percent. Brown was joined in this suit by the Federal Trade Commission and the State of Missouri.

Using aggressive telemarketing tactics, the defendants solicited desperate homeowners and charged an upfront fee ranging from $1,800 to $2,800 for loan modification services. During one nine-month period alone, consumers paid defendants in excess of $4.4 million. Yet, in most instances, defendants failed to provide the mortgage-relief services. Once consumers paid the fee, the defendants avoided responding to consumers’ inquiries.

In response to a large number of consumer complaints, several government agencies directed the defendants to stop their illegal practices. Instead, they changed their business name and continued their operations – using six different business aliases in the past eight months alone.

Brown’s lawsuit alleges the companies and individuals violated:
– The National Do Not Call Registry, 16 C.F.R. section 310.4 and California Business and Professions Code section 17200 by telemarketing their services to persons on the registry;

– The National Do Not Call Registry, 16 C.F.R. section 310.8 and California Business and Professions Code section 17200 by telemarketing their services without paying the mandatory annual fee for access to telephone numbers within the area codes included in the registry;

– California Civil Code section 2945 et seq. and California Business and Professions Code section 17200 by demanding and collecting up-front fees prior to performing any services, failing to include statutory notices in their contracts, and failing to comply with other requirements imposed on mortgage foreclosure consultants;

– California Business and Professions Code sections 17200 and 17500 by representing that they would obtain home loan modifications for consumers but failing to do so in most instances; by representing that consumers must make further payments even though they had not performed any of the promised services; by representing that they have a high success rate and that they can obtain loan modification within no more than 60 days when in fact these representations were false; and by directing consumers to avoid contact with their lenders and to stop making loan payments causing some lenders to initiate foreclosure proceedings and causing damage to consumers’ credit records.

Victims of this scam include a father of four battling cancer, a small business owner, an elderly disabled couple, a sheriff whose income dropped due to city budget cuts and an Iraq-war veteran. None of these victims received the loan modification promised.

Brown is seeking unspecified civil penalties, full restitution for victims, and a permanent injunction to keep the company and the defendants from offering foreclosure consultant services.

The defendants also did business under other names including Lighthouse Services and California Foreclosure Specialists.

Home Relief Services, LLC
Brown Monday sued Home Relief Services, LLC., its executives Terence Green Sr. and Stefano Marrero, the Diener Law Firm and its principal attorney Christopher L. Diener for bilking thousands of homeowners out of thousands of dollars each.

Home Relief Services charged homeowners over $4,000 in upfront fees, promised to lower interest rates to 4 percent, convert adjustable-rate mortgages to low fixed-rate loans and reduce principal up to 50 percent within 30 to 60 days. None of the known victims received a modification with the assistance of the defendants.

In some cases, these companies also sought to be the lenders’ agent in the short-sale of their clients’ homes. In doing so, the defendants attempted to use their customers’ personal financial information for their own benefit.

Home Relief Services and the Diener Law Firm directed homeowners to stop contacting their lender because the defendants would act as their sole agent and negotiator.

Brown’s lawsuit contends that the defendants violated:
– California Business and Professions Code section 17500 by claiming a 95 percent success rate and promising consumers significant reductions in the principal balance of their mortgages;

– California Business and Professions Code section 17200 by failing to perform on promises made in exchange for upfront fees;

– California Civil Code section 2945.4 for unlawfully collecting upfront fees for loan modification services;

– California Business and Professions Code section 2945.3 by failing to include cancellation notices in their contracts;

– California Civil Code section 2945.45 by not registering with the Attorney General’s office as foreclosure consultants; and

– California Penal Code section 487 for grand theft.

Brown is seeking $10 million in civil penalties, full restitution for victims, and a permanent injunction to keep the company and the defendants from offering foreclosure consultant services.

Two other companies with the same management were also involved in the effort to deceive homeowners: Payment Relief Services, Inc. and Golden State Funding, Inc.

RMR Group Loss Mitigation Group
Brown Monday sued RMR Group Loss Mitigation and its executives Michael Scott Armendariz of Huntington Beach, Ruben Curiel of Lancaster, and Ricardo Haag of Corona; Living Water Lending, Inc.; and attorney Arthur Steven Aldridge of Westlake Village as well as the law firm of Shippey & Associates and its principal attorney Karla C. Shippey of Yorba Linda – for bilking over 500 victims out of nearly $1 million.

The company solicited homeowners through telephone calls and in-person home visits. Employees claimed a 98 percent success rate and a money-back guarantee. None of the known victims received any refunds or modifications with the assistance of defendants.

For example, in July 2008, a 71-year old victim learned his monthly mortgage payments would increase from $2,470 to $3,295. He paid $2,995, yet received no loan modification and no refund.

Additionally, RMR insisted that homeowners refrain from contacting their lenders because the defendants would act as their agents.

Brown’s suit contends that the defendants violated:

– California Business and Professions Code section 17500 by claiming a 98 percent success rate and promising consumers significant reductions in the principal balance of their mortgages;

– California Business and Professions Code section 17200 by failing to perform on promises made in exchange for upfront fees;

– California Civil Code section 2945.4 for unlawfully collecting upfront fees for loan modification services;

– California Business and Professions Code section 2945.3 by failing to include cancellation notices in their contracts;

– California Civil Code section 2945.45 by not registering with the Attorney General’s office as foreclosure consultants; and

– California Penal Code section 487 for grand theft.

Brown is seeking $7.5 million in civil penalties, full restitution for victims, and a permanent injunction to keep the company and the defendants from offering foreclosure consultant services.

United First, Inc.
On July 6, 2009, Brown sued a foreclosure consultant and an attorney — Paul Noe Jr. and Mitchell Roth – who conned 2,000 desperate homeowners into paying exorbitant fees for “phony lawsuits” to forestall foreclosure proceedings.

These lawsuits were filed and abandoned, even though homeowners were charged $1,800 in upfront fees, at least $1,200 per month and contingency fees of up to 80 percent of their home’s value.

Noe convinced more than 2,000 homeowners to sign “joint venture” agreements with his company, United First, and hire Roth to file suits claiming that the borrower’s loan was invalid because the mortgages had been sold so many times on Wall Street that the lender could not demonstrate who owned it. Similar suits in other states have never resulted in the elimination of the borrower’s mortgage debt.

After filing the lawsuits, Roth did virtually nothing to advance the cases. He often failed to make required court filings, respond to legal motions, comply with court deadlines, or appear at court hearings. Instead, Roth’s firm simply tried to extend the lawsuits as long as possible in order to collect additional monthly fees.

United First charged homeowners approximately $1,800 in upfront fees, plus at least $1,200 per month. If the case was settled, homeowners were required to pay 50 percent of the cash value of the settlement. For example, if United First won a $100,000 reduction of the mortgage debt, the homeowner would have to pay United First a fee of $50,000. If United First completely eliminated the homeowner’s debt, the homeowner would be required to pay the company 80 percent of the value of the home.

Brown’s lawsuit contends that Noe, Roth and United First:

– Violated California’s credit counseling and foreclosure consultant laws, Civil Code sections 1789 and 2945

– Inserted unconscionable terms in contracts;

– Engaged in improper running and capping, meaning that Roth improperly partnered with United First, Inc. and Noe, who were not lawyers, to generate business for his law firm violating California Business and Professions Code 6150; and

– Violated 17500 of the California Business and Professions Code.

Brown’s office is seeking $2 million in civil penalties, full restitution for victims, and a permanent injunction to keep the company and the defendants from offering foreclosure consultant services.

Tips for Homeowners
Brown’s office issued these tips for homeowners to avoid becoming a victim:

DON’T pay money to people who promise to work with your lender to modify your loan. It is unlawful for foreclosure consultants to collect money before (1) they give you a written contract describing the services they promise to provide and (2) they actually perform all the services described in the contract, such as negotiating new monthly payments or a new mortgage loan. However, an advance fee may be charged by an attorney, or by a real estate broker who has submitted the advance fee agreement to the Department of Real Estate, for review.

DO call your lender yourself. Your lender wants to hear from you, and will likely be much more willing to work directly with you than with a foreclosure consultant.

DON’T ignore letters from your lender. Consider contacting your lender yourself, many lenders are willing to work with homeowners who are behind on their payments.

DON’T transfer title or sell your house to a “foreclosure rescuer.” Fraudulent foreclosure consultants often promise that if homeowners transfer title, they may stay in the home as renters and buy their home back later. The foreclosure consultants claim that transfer is necessary so that someone with a better credit rating can obtain a new loan to prevent foreclosure. BEWARE! This is a common scheme so-called “rescuers” use to evict homeowners and steal all or most of the home’s equity.

DON’T pay your mortgage payments to someone other than your lender or loan servicer, even if he or she promises to pass the payment on. Fraudulent foreclosure consultants often keep the money for themselves.

DON’T sign any documents without reading them first. Many homeowners think that they are signing documents for a new loan to pay off the mortgage they are behind on. Later, they discover that they actually transferred ownership to the “rescuer.”

DO contact housing counselors approved by the U.S. Department of Housing and Urban Development (HUD), who may be able to help you for free. For a referral to a housing counselor near you, contact HUD at 1-800-569-4287 (TTY: 1-800-877-8339) or www.hud.gov.

If you believe you have been the victim of a mortgage-relief scam in California, please contact the Attorney General’s Public Inquiry Unit at http://ag.ca.gov/consumers/general.php.

13 Responses

  1. nice site, keep blogging bro…
    may i bokmrk this site!
    GBU

  2. That A. mortgage to B and C didn’t record but D did came out the California Real Estate Principals Exam I remember that question. It wasn’t exactly worded like that but yes D recorded the note, made the payments, and paid the property taxes so D had more proof of ownership than B or C for just living there. It was something along those lines. I didn’t care to take the Master Exam after learning I would have to create white lies in order to sell and become sucessful. I have a conscience you know. The guilt just doesn’t allow me to screw people.

  3. pro se
    please , if you didnt write “that crap” add a link from whence it came so all the fellow “dirters” may reply in kind to the talking head or is that tail of MERS..
    its almost hard to say MERS out load without laughing…
    how pathetic .

  4. Neil, I didn’t write that crap about Mers. I found it in another blog.

  5. Dear Mr. Bentley,

    in order to understand MERS and all of this mess we have to review several years of lender and securitization lobbying in Washington.

    As well exposed in this blog all of these entities colluded in some fashion either by omission , aggregation or subjugation or their fiduciary duties. MERS is all but a tracking system for servicing agents and foreclosure attorneys. The only document they really track is the deed of trust. If they did track the note and who owns it the securitization process, or in other words, the illegal pyramid scheme these crooks created could not have survived for so long.

    They realized that as soon as they issued those bonds or certificates out of commingled notes, they had no way of tracing the factual and real ownership of the rights to the promissory note. That is why the lenders and foreclosure attorneys lobbied to a great degree of success most state legislatures to change the judicial foreclosure processes in their states for no judicial proceedings.

    The only document that was going to be easily taced was going to be the one that was recorded in the land records, the deed of trust. But they created MERS, to enable them to transfer that document without the proper notice to the local tax collector and the borrower, who sat in the living room , without the actual knowledge of who the real note holder was.

    I am surprised that there are no class actions that I know of against MERS, and all the lenders and servicers who are its stock holders.

    I still have an issue with the judges that are not willing to see beyond the notice of default by the pretender lender, specially in Maryland. These judges do not seem to grasp the chages that occurred in the way the documents were handled and how the public was cheated.

  6. PRO SE: If you are pro se, why is your email at a law office? Nice try at justifying MERS and the use of forged instruments. If that is your best shot go ahead and take it. I’d like to be there when you tell the judge that it doesn’t matter that your client paid nothing, it doesn’t matter that the assignment and transmittal documents were fabricated for the express purpose of litigation, and it doesn’t matter that those documents were forged and notarized by a notary who wasn’t even in the same state. I’d like to hear the response of even the most neo-con judge. I suspect that you would meet the same fate as those in Massachusetts where BOTH the lawyer and the client were bashed with $750,000 in fines.

  7. If you lied about your debts, then that’s your problem. But how did you lie about your income? The first requirement to obtaing a loan is to bring in 2 years prior taxes. So now you lied to the IRS for years and inflated your income by three times just to pay more in taxes. And then you went out and bought a home you never could afford.
    CHAPTER 29–HOME MORTGAGE DISCLOSURE
    Sec. 2803. Maintenance of records and public disclosure.

    The loan application register I believe is suppose to be on file three years after the 1st year of closing. I’d love to see where this imaginary income came from after you had my taxes.

    Check this out…

    CHAPTER 49–HOMEOWNERS PROTECTION

    Sec. 4905. Disclosure requirements for lender paid mortgage insurance

    (c) Notices to mortgagor In the case of lender paid mortgage insurance that is required in connection with a residential mortgage transaction– (1) not later than the date on which a loan commitment is made for the residential mortgage transaction, the prospective mortgagee shall provide to the prospective mortgagor a written notice– (A) that lender paid mortgage insurance differs from borrower paid mortgage insurance, in that lender paid mortgage insurance may not be canceled by the mortgagor, while borrower paid mortgage insurance could be cancelable by the mortgagor in accordance with section 4902(a) of this title, and could automatically terminate on the termination date in accordance with section 4902(b) of this title; (B) that lender paid mortgage insurance– (i) usually results in a residential mortgage having a higher interest rate than it would in the case of borrower paid mortgage insurance;

    I put down over 20% so I wouldn’t have to pay the P.M.I. My broker said I couldn’t get a fix since I was using stated income and that I had to go with an Option-Arm. Now behind in payments an insurance company calls to find out if I’m still here. She says my lender has a policy out on me since they decided I was a high risk borrower. Thanks for letting me in on the scam. I don’t think I would have invested everything if you just would have told me I was gambling being such a high risk.

  8. When will the government put a stop to the blood letting, put a stop to all foreclosures and give back the homes, the banksters have stolen. Do you know That Deutsche Bank got 6 billion tax dollars, when the congress intended that no foreign bank get our tax money? AIG gave this money to them.

  9. Fellow Dirters,

    Connecticut does not require an assignment of mortgage to be valid
    between the Mortgagor and the holder of the debt evidence (the note).
    We still believe that a mortgage can only secure an obligation, and
    thus there are two instruments with which to be concerned – the
    evidence of the obligation, and the security for it. The mortgage is
    “mere” security. If The Mortgagor wants to pay the Note Holder, he
    may, and most will merely upon a letter from the Note Holder that the
    note has been transferred.

    I think this is what MERS tries to do – track the transfers of the
    note. In Connecticut, only the record holder of the Note is entitled
    to the Judgment of Foreclosure, although the foreclosure action may
    be commenced by another pending the actual recording. Nominees cannot
    foreclose because they don’t own the note.

    All this discussion is fruitful, especially as recording costs soar
    ($53 here for an assignment or release), and states try to tax
    anything imaginable. The best reason to require assignments of
    mortgages is to protect innocent purchasers from buying the note with
    no notice that the mortgage had been assigned. This was the case from
    about 75 years ago:

    A mortgaged property to B. Later, B having fallen on hard times,
    assigned for value the note and mortgage to C, and delivered to C an
    assignment of the mortgage which was the responsibility of C to
    record in the land records. C neglected to do this for some reason,
    but A began making note payments to C. B, still on hard times
    discovered that the mortgage assignment had never been recorded. B
    was leaving town for good reason. He created a forged note, and for
    value assigned it and the mortgage to D, and delivered yet another
    assignment of mortgage. D promptly recorded the assignment, and
    requested A to make future payments to D. A didn’t know to whom
    payments should be paid, and requested the court to decide.
    Eventually, our Supreme Court (our highest court, unlike NY where
    Supreme means the lowest !) decided that D was entitled to the note
    payments. What, the holder of the real note loses? Yup. The holder of
    the forged note wins. In order to protect the sanctity of our
    recording statutes so bona fide purchasers are protected by what is
    shown in the land records, the person (C) who created the problem
    suffers the loss.

    So isn’t this reason enough to record mortgage assignments, and why
    MERS has a proper function in tracking note ownership.

    Dean Montgomery
    Greenwich, Ct
    203-629-2424
    203-629-2545 fax
    d.montgomery@@attysbentley.com

  10. I cannot tolerate the fact that the banksters are getting away I want them on their knees. We must make them pay for what they have done to millions of families,our economy and our lives.

  11. so what about the bloody banksters?

  12. Are there any solid loan modificators that do deliver?

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