Officials: New Foreclosure Scam Preys on Desperate Homeowners
Calif. AG files $60M suit against company offering "predatory lending" help.
Nov. 28, 2010— -- 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.