$100M Class Action Suit Filed Against L.I.-Based Loan Modification Company; Described As More Of A Sales Operation Than Professional Services Firm

In downstate New York, Crain's New York Business recently ran a story about American Modification Agency (AMA), a Long Island-based loan modification firm that, allegedly, has been the target of numerous complaints from homeowners claiming the company clipped them for thousands in upfront fees in exchange for failed promises of adjustments to the terms of their home loans to make their house payments affordable.

As part of the arrangement, the firm is accused of instructing the homeowners to cease making payments to, and ignore all communication from, their lender. White Plains, NY attorney Jeffrey Greene reportedly filed a $100 million class-action suit(1) against AMA last month and descibed the deal as, “It's like taking somebody's money and telling them to jump off a bridge.”

• [C]ourt papers and interviews with customers and former employees reveal a company that pulled out all the stops to bring customers in, but did little or nothing for them once it had their money. Phone calls went unanswered; untrained agents dissatisfied with paltry commissions resigned, leaving customers in the lurch; and homeowners received foreclosure notices despite guarantees that their homes would be saved.

• AMA claims to be the largest of a growing collection of mortgage modification firms that have sprouted up nationwide in the past two years as homeowners have battled to keep up with unaffordable subprime loans. The burgeoning industry has caught the eye of the FBI's New York office and the state attorney general's office, which are reviewing complaints.

• Former sales agents say working for AMA was a nightmare. They received no training or salary and relied on commissions of 15% to 25%. Many of the clients they brought in never had their loans modified by the firm's processors, with whom they were not allowed to speak. “We've had clients in for well over 150 days that aren't done,” says an agent who was hired off a Craigslist ad and worked at AMA for six months.

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• Former employees say the company grew too fast, too soon and describe a frenetic, almost circus-like atmosphere in the office. They recall President Sal Pane riding around the office on a Segway scooter drinking Red Bull and exhorting agents to bring in customers.

• “Each time we'd turn in a file, we'd go out on the floor and hit a gigantic brass gong hanging from the ceiling,” says one former employee. “Everybody cheered one another, "yeah, yeah, yeah.'"

For the story, see No helping hand (Struggling families sue mortgage fixer AMA; paid but got nothing in return).

(1) Presumably, any evidence of possible wrongdoing coming out of this civil suit will come in handy for federal and state prosecutors (both in New York and in other states in which AMA operates) in deciding whether to bring their own cases (either civil or criminal) against the firm.