California Attorney General Edmund G. Brown Jr. has filed a $60 million lawsuit against a pair of Sacramento, Calif.-based companies that lured desperate homeowners with a deceptive marketing scheme that promised to obtain mortgage modifications through the use of computer-generated "forensic loan audits."
"These defendants dangled the term ‘forensic loan audit' as a sure-fire remedy for the mortgage problems of homeowners in distress," Attorney General Brown said. "In fact, it was no remedy at all, and hundreds of desperate California homeowners took the bait and lost their money—and sometimes their homes."
Brown filed the $60 million lawsuit against U.S. Loan Auditors, My U.S. Legal Services, and five individuals, including two attorneys, who operate a fraudulent mortgage audit scheme that prey on desperate homeowners anxious to save their homes. The suit demands civil penalties, restitution for victims, and permanent injunctions to keep the companies and other defendants from fraudulently marketing forensic loan audits and legal services of little value.
The companies, based in Rancho Cordova, Calif., work together to market and sell "forensic loan audits" to homeowners, who pay thousands of dollars in upfront fees for a dubious computer-generated review of their mortgages. The audits purport to show violations of law by lenders, which sales agents cite to convince homeowners they have a strong legal case. Sales agents use these findings to encourage homeowners to stop making their mortgage payments and instead pay additional fees to bring "predatory lending" lawsuits against their lenders.
Both companies deceive homeowners by assuring them that filing these lawsuits will give them "legal leverage" to obtain a loan modification and prevent lenders from foreclosing or collecting monthly mortgage payments. Homeowners who filed these lawsuits have lost thousands of dollars and placed themselves in greater danger of losing their homes.
My U.S. Legal Services bilks clients for months, filing cookie-cutter complaints with little or no merit, billing unjustified monthly fees, and then dodging clients' phone calls or stringing them along with false assurances that a settlement is in progress. Hundreds of California homeowners, many of them facing possible loss of their homes, have been duped into paying thousands of dollars to the two companies—one homeowner paid more than $55,000—but received little or no relief.
Meanwhile, the litigation mill run by My U.S. Legal Services has littered courts with hundreds of lawsuits that have scant chance of success. Two federal judges have expressed concern about the legitimacy of these lawsuits and have several times sanctioned attorneys involved.
In addition to the companies, Brown is suing the three owners: Attorney and real estate broker James Sandison, Jeffrey Pulvino, and Shane Barker, as well as two California attorneys, Sharon L. Lapin and Jonathan G. Stein. The State Bar has filed disciplinary charges against Sandison for alleged misappropriation of clients' funds and aiding the unauthorized practice of law.
The Attorney General's investigation, assisted by the State Bar and the Department of Real Estate, located victims throughout California cities hit hard by the foreclosure crisis: Corning, Fresno, Hayward, Irvine, Manteca, Richmond, Sacramento, Salinas, Sanger, Santa Ana, Stockton, Tracy, Vacaville and West Sacramento, Calif.
In February, Brown, along with the Bar and the California Department of Real Estate, issued an alert warning consumers to be wary of forensic loan audits that require homeowners to pay upfront fees. There is no evidence or statistical data to support claims that forensic loan audits of a lenders' mortgage practices—even if performed by a licensed mortgage professional or a lawyer—help homeowners obtain loan modifications or any other foreclosure relief.
Attorney General Brown has led the fight against fraudulent mortgage rescue and loan modification companies. He has obtained court orders to shut down several companies and has brought criminal charges against deceptive loan modification consultants.
For more information, visit www.ag.ca.gov.