Legal actions against loan modification firms continued at a fast and furious pace, impacting dozens of firms and attorneys in California, Nevada and Pennsylvania. A national crackdown on crooked loan modification firms was recently launched in Los Angeles.
The Nevada Division of Mortgage Lending announced on Nov. 2 that it shut down 30 loan modification firms who failed to obtain a required $75,000 surety bond. The bond — as well as other background checks, a credit check and meeting specific educational requirements — were required under AB 152 of the 2009 Nevada Legislature. The new law became effective on Oct. 1.
The 30 companies had 10 days to close down and cancel their contracts with borrowers or face possible cease-and-desist orders. They were required to issue refunds and transfer the files to approved modification firms or counselors.
Nevada had issued in September its third reminder warning about the new requirements.
The State Bar of California announced that action has been taken against five lawyers for loan modification misconduct. The five include Gary Davidson, Eric Douglas Johnson, Paul Lucas, Sean Rutledge and Timothy Thurman.
Since creating the Loan Modification Task Force in April, 14 attorneys have resigned or been placed on involuntary inactive enrollment. The State Bar said California’s SB94 took effect last month and prohibits attorneys and modification firms from taking upfront fees for loan modification work.
A cease-and-desist order was announced by the California Department of Real Estate on Nov. 17 against United States Homeowners Relief and Greenleaf Legal Services LLC. The companies did business as GreenLeaf Modify and Greenleaf in Santa Ana and Mission Viejo, Calif.
Also named in the order were Paul Bain, Amin Sarpas, Simon Yarandi, Damon Carriger, Sue Mehta, May Choury, Christine Ormond and David Sarpass.
NBC News in Los Angeles reported that Greenleaf has apparently shut down.
California AB 764 was approved by California’s legislature, the Los Angeles Times reported. The bill prohibits modification firms from collecting up-front fees.
Shirley Gail Matthews was found guilty by a Monroe County Court, Pa., jury of deceptive business practices, theft by deception and theft by failure to make required disposition of funds, the Pocono Record reported. One borrower reportedly paid Matthews $10,842, including $2,710 for her fee and the rest for payments on his loan to the servicer. But Matthews, who faces two to five years in prison, allegedly kept all of the money.
In Florida, the state’s attorney general received around 16,127 calls or complaints about loan modifications between March and August, the Sun Sentinel reported.
HOPE NOW issued a statement this month indicating it supports the crackdown by the U.S. Department of Justice on “fraudulent activities of unscrupulous actors posing as legitimate professionals or companies that have taken advantage of desperate homeowners.” The group said it has been working with the Justice Department as well as the Federal Bureau of Investigation, the Federal Trade Commission and state attorneys general to eliminate bad actors.
Freddie Mac issued an Oct. 26 statement supporting the Los Angeles launch of the “Loan Modification Scam Alert” campaign by a coalition that includes federal agencies, non-profit organizations and Freddie.
“Attacking loan modification fraud has been a top priority at Freddie Mac long before the current housing crisis began,” Freddie Senior Vice President of External Relations Hollis McLoughlin said in the statement. “That’s why we launched Don’t Borrow Trouble anti-fraud campaigns in dozens of cities across the nation, produced one of the Internet’s first viral videos dramatizing how loan modification scams work, and assist the FBI and law enforcement as they investigate and prosecute fraud artists.”
The same day, Fannie Mae announced a partnership with NeighborWorks America for a national public education and enforcement campaign to educate borrowers about loan modification scams and to encourage victims to report fraud. In its own statement, NeighborWorks said the Los Angeles event was the first of several kickoff events where the “Loan Modification Scam Alert” campaign will be rolled out in major cities.
NeighborWorks noted that the mayor of Los Angeles — which is among several California areas to “consistently rank among cities with the highest foreclosure rates” — passed an ordinance in April to prevent fraudulent mortgage loan modifications.
