The Lawyers’ Committee and counsel Davis Polk & Wardwell filed a lawsuit this week in New York Supreme Court in Nassau County on behalf of 18 homeowners claiming that a network of for-profit loan modification companies are conducting a fraudulent scam.
The lawsuit, Masheyeva v. Law Offices of David M. Green, alleges that vulnerable homeowners were defrauded out of tens of thousands of dollars by the defendants who promised to obtain modifications on behalf of the distressed homeowners but then failed to deliver results.
Defendants in this lawsuit consist of a network of loan modification companies, all of which are owned or affiliated with Green, as well as individual attorneys who supposedly worked with Green to execute this alleged scam.
According to the complaint, borrowers paid advance fees of up to $5,000 to the defendants who would work directly with the plaintiffs’ lenders to renegotiate their home loans and to secure lower monthly payments and interest rates. In some cases, the defendants’ services were used to avoid impending foreclosure, the lawsuit said.
However, New York state law prohibits loan modification companies from charging borrowers any upfront fees.
Borrowers were lured to use the defendants’ services by marketing slogans such as “stop your foreclosure now! Consultations are free and there is no obligation,” which was seen on the American Home Crisis Center website. A second technique used to attract consumers to work with the defendants said, “the major banks and lenders are routinely exploiting the lack of awareness of the average homeowner. We have decades of mortgage loss and mitigation experience, which make us experts at negotiating with lenders on behalf of homeowners.”
Another defendant in the lawsuit is Lincoln First Credit Services, which advertised that they have personal connection with key employees of plaintiffs’ lenders and “work closely with you to complete the loan modification and submit it to the attorney. Once he reviews the application and details of your situation he will determine if loan modification is your right option.”
Ultimately, defendants performed little to no work on plaintiffs’ loan modification applications, typically failing to make any substantial contact with their lenders, the lawsuit claims.
“The impact of this type of scam activity on financially distressed homeowners has proven devastating,” said Jon Greenbaum, chief counsel and senior deputy director for the Lawyers’ Committee. “Not only are homeowners being defrauded out of thousands of dollars, but they ultimately sustain a variety of other losses, including late fees and damage to credit scores and, in the worst cases, are brought closer to the brink of foreclosure as a direct result of the scam.”
Plaintiffs are seeking to recover monetary damages, including the illegal upfront fees paid by them, and injunctive relief to put an end to the deceptive practices of the named defendants, as a result of this lawsuit.
An attorney for Green said that the defendant is looking forward to “vigorously representing himself in defending these actions.”
“It would be inappropriate for us to comment on pending litigation,” the attorney, who asked to remain anonymous, said. “It would also be inappropriate for us to comment on the personal details of these financially distressed borrowers who are seeking loan modification work. Their information is private and Mr. Green will not violate that privacy.”
