Tim and Jenny Lawson say they were three months behind on their $390,000 mortgage when they received a letter from a company called U.S. Loan Auditors offering help.
"Your lender ... is currently under investigation for predatory lending. Based on our information you may be a victim, and may qualify to participate in a lawsuit against them," the letter said.
The couple paid U.S. Loan Auditors $8,900 over five months, and on the company's advice, stopped making their mortgage payments, Jenny Lawson says. A lawsuit was filed on their behalf, but only after their home was foreclosed, she added.
They were evicted from their three-bedroom home in September. Today, they live in a 29-foot-long recreational vehicle in a trailer park an hour south of Sacramento in Isleton, Calif.
"What they promised ... that's not what happened," Jenny Lawson says. "Now this is where we ended up."
California's attorney general says the Lawsons are the victims of a new type of scam sweeping across the country, one that preys on desperate Americans caught up in the foreclosure crisis.
U.S. Loan Auditors and similar outfits are promising to conduct "forensic audits" of mortgage transactions to find evidence of "predatory lending" and fraud, and use that evidence to haul lenders into court and obtain new mortgages at far more favorable interest rates, officials say.
The companies make "very bold claims" but "in most cases forensic loan audits cannot help homeowners to cancel their mortgages," said James Reilly Dolan, assistant director for financial practices at the Federal Trade Commission.
In October, California Attorney General Jerry Brown sued U.S. Loan Auditors, its legal arm My U.S. Legal Services and the companies' owners for $60 million, accusing them of scamming hundreds of homeowners out of anywhere from several thousand dollars to, in one case, $55,000.
The suit demands civil penalties, restitution for victims and injunctions to block the company from making false claims.
In legal papers, Brown's office alleged that "every step of the way, the defendants lie" to clients and provide "nothing of value and put them in even greater danger of losing their homes."
"They lie about the results they have obtained for their clients, claiming they have never lost a case, when in fact their cases have been routinely dismissed," Brown's office charged.
"They lie about the legal effect and benefit of filing a predatory lending case, falsely telling consumers, for example, that lenders cannot foreclose once a predatory lending case has been filed against them, that their mortgage payments will either be reduced or frozen entirely during litigation and that banks will settle quickly."
Brown's office also charged that the "predatory lending" lawsuits generated by the company "are cranked out by non-lawyers ... using a fill-in-the-blanks 'Hot Docs' template. The complaints are virtually identical from client to client and in the vast majority of cases are drafted and filed without any review or approval by any attorney."
A hearing is scheduled for Dec. 2 on Brown's request for a restraining order and a freeze of the company's assets.
U.S. Loan Auditors issued a brief written statement after the attorney general's lawsuit, promising to "vigorously defend ourselves against these allegations."