Feds Score Wins In Civil Suits Shutting Down Scams Peddling Mass Joinder Lawsuit Participations, Forensic Loan Audits

In Santa Ana, California, the Los Angeles Times reports:

• The offers of help arrive at a particularly vulnerable time for troubled homeowners, promising legal tactics that can fend off foreclosures or slash mortgage balances and rates. But the so-called mass joinder lawsuits against lenders often are only the latest foreclosure-rescue frauds designed to extract payments from financially strapped borrowers, the Federal Trade Commission warns.



• "The firms involved in this scam promise relief but generally don't deliver," the FTC said in a consumer alert posted on its website Thursday. "In fact, many of the firms fail to use qualified attorneys or pursue homeowners' cases, and often leave their clients in worse financial shape than before."



• The FTC said that at its request a judge this week shut down one of the alleged scams, a Santa Ana mortgage-relief operation headed by Sameer "Sammy" Lakhany, 31, of Chino Hills. The operation — five companies and three websites controlled by Lakhany — took in more than $1 million from hundreds of consumers, according to an FTC lawsuit filed in U.S. District Court in Santa Ana. Gerald Werkman, an Irvine attorney representing Lakhany, declined to comment, saying his firm had "just been retained in this matter."



• The FTC suit identified Lakhany's companies as Credit Shop, Fidelity Legal, Titanium Realty, Precision Law Center Inc. and Precision Law Center LLC.(1) His websites — HouseHoldRelief.org, FreeFedLoanMod.org and MyHomeSupport.org — were shut down on orders from U.S. District Judge Cormac J. Carney, who issued a temporary restraining order against the companies and froze their assets.



• The websites, featuring republished news stories describing the mortgage industry's legal troubles, suggested that the operation was a nonprofit effort to help right wrongs suffered by borrowers, said FTC consumer protection attorney Mark L. Glassman.



• "They wrapped themselves in the cloak of good deeds that others are actually doing on behalf of consumers," Glassman said.



• The FTC lawsuit is the second high-profile legal attack in California on lawsuits in which numerous plaintiffs team up to sue mortgage companies. State Atty. Gen. Kamala D. Harris in August sued several law firms and individual attorneys who allegedly operated a nationwide scam by deceptively marketing mass joinder suits. That litigation, including counterclaims against the state by the defendants, is pending, Harris spokesman Shum Preston said.



• Mass-joinder lawsuits are similar to class-action suits in pitting many plaintiffs against a common defendant. But whereas class actions allege that all victims were harmed in the same way, the allegations and damages in mass joinder suits vary from plaintiff to plaintiff.



• The FTC's lawsuit, its first targeting mass-joinder cases, said Lakhany's operation charged homeowners $6,000 to $10,000 each to join lawsuits against lenders. The pressure created by the suits was supposed to result in pretrial settlements that could stop foreclosures or produce major concessions, such as cutting the homeowners' interest rate in half or reducing their principal to 70% of the home's value. The lawsuits were filed but allowed to languish or dismissed, the FTC said.



• In another alleged scam, the operation charged homeowners $795 to $1,595 for a "forensic loan audit" that borrowers were told would find violations by a lender at least 90% of the time, the FTC said.



• The violations would supposedly give a homeowner leverage to get his or her mortgage modified. If the audit did not turn up any violations, the homeowner got the promise of a 70% refund while still getting a mortgage modification, the FTC said.



• The companies also falsely described themselves as nonprofit, free, accredited or as housing counselors certified by the federal Housing and Urban Development Department, the FTC said.

Source: FTC cracks down on foreclosure-rescue scheme (The agency wins a court order shutting down a Santa Ana operation that charged struggling homeowners as much as $10,000 each to jointly sue mortgage firms).

For the FTC press release and links to relevant court documents, see FTC Legal Action Halts Alleged Mortgage Relief Scammers Who Lured Homeowners with Bogus Claims (Defendants Falsely Promised They Could Help Desperate Consumers Who Joined Group Lawsuits Against Their Lenders).

For more information from the FTC, see Mass Joinder Lawsuits: A New Twist on Foreclosure Rescue Scams.

(1) According to the FTC press release, to convince consumers that they should hire Precision Law Center, telemarketers working for the alleged racket followed up by mailing material to them promising that the mass joinder suit would result in:

• “Forgiveness of all delinquent payments, fees and penalties,”
• “Halt and reverse (sic) foreclosure proceedings,”
• “Credit restoration,”
• “Possible compensatory damages in the amount of $22,500.00,” and
• “Possible punitive damages in the amount of $52,500.”