New York State AG Sues Two Law Firms for Loan Mod Scam
New York State Attorney General Eric T. Schneiderman has filed a lawsuit in New York County Supreme Court against two law firms and their lead attorney accusing them of participating in a fraudulent mortgage rescue scheme. The lawsuit targets Litvin Law Firm; Litvin, Torrens & Associates, PLLC; and the firms’ principal attorney Gennady Litvin. Litvin and the two firms allegedly preyed upon financially vulnerable consumers by claiming they would provide them with a comprehensive legal services plan that would allow consumers to avoid foreclosure or obtain a mortgage modification. The firms, directly and through their marketers, collected hundreds of dollars in monthly fees from consumers and routinely failed to deliver on their promises. The lawsuit seeks to halt the illegal business practices, provide restitution to consumers, and seeks penalties and costs.
“Consumers facing foreclosure place a special trust in attorneys hired to help them navigate the myriad of legal issues they are facing, and our office will hold those accountable who perpetrate scams that prey upon families at risk of losing their home,” said AG Schneiderman. “Coupled with our Homeowner Protection Program that has served over 30,000 New York families seeking help with their mortgage, we will continue to fight for those still struggling in the aftermath of the housing crisis.”
The lawsuit alleges that the firms and Gennady Litvin engaged in fraudulent and illegal practices in offering legal services and other foreclosure assistance to consumers in New York and other states. Through repeated television and radio ads, the Litvin Law Firm induced consumers to call its offices by falsely implying that they had a connection to “State Attorneys Generals and the Federal Government” and that homeowners could have their mortgages satisfied in full, a most unlikely result.
Through the use of third-party marketers, many of which used the term “legal” in their names, the firms solicited homeowners nationwide, representing that the homeowners would have a “custom made attorney defense team” that provided “a level of service that usually is only enjoyed by large corporate clients.” The marketers also purported to provide homeowners with “forensic loan audits” that were “vitally important” to identify errors in their mortgage loan documents, defend against foreclosure, and win concessions from lenders. On its website, the Litvin Law Firm led consumers to believe that it was a law firm with a nationwide presence, located in 31 states, and that the firm had the ability to provide foreclosure defense nationwide.
As described in court papers, based on these representations, struggling homeowners paid the firm and its marketers a monthly fee, typically $595 or $750, to obtain legal services. However, many consumers did not receive the legal representation they were promised. The Litvin Law Firm and Litvin, Torrens & Associates, which have offices only in New York and Florida, cannot provide nationwide foreclosure defense. Moreover, the forensic audits typically had very little value in saving consumers’ homes. In many cases, homeowners never spoke to an attorney in their state, never obtained a loan modification or other foreclosure relief, and wound up having to negotiate with lenders on their own.
The Federal Trade Commission (FTC) recently reached a settlement with the marketers in which they agreed to, among other things, a permanent ban from the mortgage and debt relief services field and to pay close to $3.6 million in consumer redress.
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