ftc-building

FTC Halts California Based Brookstone Law Mortgage Relief Scam

The Federal Trade Commission has charged the operators of a mortgage relief scam with bilking millions of dollars from homeowners by falsely telling them they could join a so-called “mass joinder” lawsuit that would save them from foreclosure and provide additional financial awards.

“Preying on homeowners who already are financially distressed and struggling to pay their mortgages is appalling,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “That’s why stopping phony mortgage relief operations, like this one, is a priority at the FTC.”

At the FTC’s request, a federal court temporarily halted the scheme, and the agency seeks to permanently stop the alleged illegal practices and obtain refunds for consumers.

According to the FTC’s complaint, Damian Kutzner and four attorneys using a set of law firms under the names Brookstone Law and Advantis Law, claimed they would bring lawsuits against lenders for mortgage fraud and void consumers’ mortgage notes “to give you your home free and clear, and/or to award you relief and monetary damages.”

According to the FTC, the promise of a mass joinder lawsuit is a ruse used by some mortgage relief scams. Unlike class-action lawsuits, in the event of trial each plaintiff would have to prove his or her case separately. Although the defendant attorneys have sued several well-known banks, the FTC has alleged that they have not won any cases and that most were dismissed because they never pursued them. According to the FTC’s complaint, the defendants’ operation did not have attorneys who could litigate hundreds or thousands of cases.

According to the complaint, the defendants mailed marketing materials to consumers with the homeowner’s name, loan amount and property identification number, with statements such as, “Your home will be sold at Auction unless you take immediate action.” People who responded to the advertising were told they could join a lawsuit by paying $895 or more in advance for a “legal analysis,” and that they were likely or certain to prevail in a lawsuit against their lender; some consumers were told they would recover at least $75,000. After claiming the analysis showed that a consumer had a good case, the defendants charged thousands of dollars in recurring monthly fees through the law firms and failed to deposit the fees in client trust accounts as required by law.

The defendants falsely promised some clients that they would add them as plaintiffs in lawsuits; they told others they would add them soon but did so only months later. Clients’ requests for information were ignored. In addition, the defendants did not tell people when their lawsuits had been dismissed and kept collecting fees from those clients. Clients’ requests for refunds were refused.

One of the defendants, Vito Torchia, was disbarred by the California bar for misconduct. During his ethics trial, he conceded that Brookstone failed to provide the most basic elements of legal representation

The defendants are Damian Kutzner; Vito Torchia, Jr.; Jonathan Tarkowski; R. Geoffrey Broderick; Charles T. Marshall; Brookstone Law P.C., doing business as Brookstone Law Group, a California corporation; Brookstone Law P.C., doing business as Brookstone Law Group, a Nevada corporation; Advantis Law P.C.; and Advantis Law Group P.C. They are charged with violating the FTC Act and the FTC’s Mortgage Assistance Relief Services Rule (MARS Rule) and Regulation O.

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California Foreclosure Timeline

What is a foreclosure?

A foreclosure is the process by which a bank is allowed to force the sale of a home at a public auction after a borrower defaults on a home loan. The borrower’s home loan is secured by the home, and if the borrower fails to pay the home loan as agreed, the bank has the right to sell the home in an effort to pay off the outstanding balance of the loan.

Types of foreclosures

The bank can foreclose on the property in one of two ways: Either through a judicial foreclosure (through court action) or a non-judicial foreclosure (without court involvement at all). Judicial foreclosure is expensive and time consuming, but it allows the bank to seek damages (in the form of a deficiency judgment) against the borrower/homeowner for the amount left unpaid on the home loan. Non-judicial foreclosure is quicker, less expensive and can be concluded without involving the courts. However, banks are not allowed to seek a deficiency judgment against the borrower after a non-judicial foreclosure.

In California, almost all residential foreclosures are non-judicial. The process operates through a series of notices which are delivered to the property owner/borrower and recorded in the County records (as further described below). These non-judicial foreclosures conclude with a public foreclosure auction, usually in front of the local courthouse or civic center. Note that the sale does not occur INSIDE the court because this is a non-judicial foreclosure and not a legal court action.

Non-Judicial Foreclosure Process

Here is a brief description of the non-judicial foreclosure process:

1.     INITIAL CONTACT FROM LENDER (Foreclosure Avoidance): The lender MUST contact you and anyone else on the home loan to assess your financial situation and explore your options to avoid foreclosure. The lender:

  • Cannot start the foreclosure process until at least 30 days after contacting you to make this assessment (or after they have completed certain ‘due diligence’ steps to contact you); and
  • Must advise you during the first contact that you have the right to request another meeting about how to avoid foreclosure. That meeting must be scheduled to take place within 14 days.

2.     NOTICE OF DEFAULT AND ELECTION TO SELL: If you and the lender have not agreed on a plan to avoid foreclosure, the lender can record a “Notice of Default and Election to Sell” in the county where your home is located. This marks the beginning of the formal foreclosure process and puts the world on notice that the bank intends to sell the property at auction. The lender sends you a copy of this notice by regular AND certified mail within 10 business days of recording it.

PLEASE NOTE: Since the Notice of Default is recorded as a public document, it can be viewed by anyone and everyone. This can lead to an avalanche of letters, postcards and solicitations from unprincipled loan modification companies, unskilled brokers, unsavory investors and even unscrupulous lawyers all pitching you the “silver bullet” to cure your mortgage problems, for a price of course. Many of these people are violating the law and simply have no intention of helping the homeowner. Be very cautious about loan modifications, loan audits, class action and mass joinder scams. Contact us with questions or concerns.

3.     NOTICE OF TRUSTEE SALE: Once 90 days have passed since the recording of the Notice of Default, the bank can take the next step by recording the “Notice of Trustee’s Sale,” which sets the actual date for the public foreclosure auction. That date can be no SOONER than the 20th day after the Notice of Trustee’s Sale is recorded.

The Notice of Sale must:

  • Be sent to you by certified mail.
  • Be published weekly in a newspaper of general circulation in the county where your home is located for 3 consecutive weeks before the sale date.
  • Be posted on your property, as well as in a public place, usually at your local courthouse.
  • Have the date, time, and location of the foreclosure sale; the property address; the trustee’s name, address, and phone number; and a statement that the property will be sold at a public auction.

4.     PUBLIC FORECLOSURE AUCTION: On the date set forth in the Notice of Trustee Sale, the property can be sold at the public foreclosure auction. Potential purchasers at the auction (typically investor-buyers) must have cash or cashier’s checks for the amount they wish to bid. The high bidder becomes the owner of the property, and the amount paid at the auction goes to the bank that held the mortgage. If the high bid is MORE than the amount of the outstanding mortgage, the overage goes to any other mortgages or other liens on the property. If there is still money left over, it would go to the prior owner. If there is no bidder or if the bank is not willing to accept less than the full mortgage amount at the auction, the bank would be considered the high bidder (i.e. the bank gets to ‘bid’ the amount it is owed on the mortgage without having to bring cash to the auction). If that occurs, the bank takes ownership of the property itself and the property becomes an “REO” (real estate owned by the bank). This entire non-judicial process can take as little as 111 days – that’s less than four months from beginning to end. Please note, however, that this formal process doesn’t commence until after the borrower has been in default for at least a few months.

Non-Judicial Foreclosure Timeline

Mortgage Default Days 1 – 90 The borrower stops paying the mortgage. The bank sends letters, makes phone calls and tries to collect payments BEFORE initiating foreclosure.
Notice of Default; Redemption Period Days 91 – 180 A Notice of Default is filed, recorded and mailed by the bank, giving the borrower statutory notice that foreclosure has commenced. The borrower has the right to cure the default and pay all past due amounts. This would stop the foreclosure immediately.
Notice of Trustee Sale Day 181 – 201 After 90 days have passed since recording the Notice of Default above, the bank can issue (and record) a Notice of Trustee Sale, setting a date for the public auction of the property (sale must be on or after the 20th day following the recording of the Notice of Trustee Sale). The bank can delay issuance and recordation of the Notice of Trustee Sale for as long as they wish and they can set the sale date for any day they desire as long as it is 20 or more days after they record that notice, but they typically move forward as soon as possible.
Trustee Sale On or after Day 201 On the date set in the Notice of Trustee Sale, the bank will conduct A Public Auction to sell the property to the highest bidder. If no one bids or if the bids do not exceed the bank’s demand, then the bank will become the new owner.

Although this is the typical timeline for a non-judicial foreclosure, the actual process can take significantly longer. In some cases, homeowners may request a loan modification from the bank (typically not granted) or they may seek some other foreclosure alternatives (such as a short sale or deed-in-lieu).

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What is a Short Sale?

A short sale is basically the sale of your property for an amount that doesn’t pay of the outstanding mortgages or other liens. That means you will need lender approval to do a short sale. They would allow a short sale because they don’t want to foreclose on the property and become the owner of the property. When the lender takes ownership of your property they have to maintain the property, insure it, and evict you. This all costs the bank money in an effort to sell the property to a new buyer. However, if you are able to bring a buyer to the table and complete a short sale, they will cooperate to avoid the hassle.

You should consider a short sale because you can avoid a public foreclosure and the eviction process. You don’t want to see those things on your credit. You will also be able to purchase a home again sooner.

fraud

Husband and Wife Charged with Short Sale Fraud – Violation of the Arm’s Length Affidavit

fraudCynthia Hosbrook, 41, currently a licensed real estate agent, and Robert Hosbrook, 51, formerly a licensed real estate agent, have been charged in U.S. District Court with conspiracy and fraud for making false statements to Wells Fargo Bank in order to get it to approve a short sale on their home. 

 

The defendants are charged in a criminal indictment dated June 12, 2013, with one count of conspiracy to commit bank fraud and one count of bank fraud. 

 

According to the indictment, the Hosbrooks solicited a friend to act as a buyer for their home which was listed as a short sale. In a short sale contract dated March 2, 2010, and in other paperwork submitted to Wells Fargo Bank, the Hosbrooks falsely represented that the sale of their home would be an “arms-length” transaction, that it was between two unrelated parties, that no party to the contract was a family member or business associate, that there were no agreements that the seller would remain in the property as a renter, and that the short sale did not constitute straw buying, when they allegedly knew that they were selling the residence to a known party/straw buyer. 

 

The Hosbrooks also allegedly caused the straw buyer to falsely sign a title company form on July 9, 2010, stating that the buyer would be residing at the property, which the Hosbrooks knew was a false and fraudulent representation. 

 

Cynthia Hosbrook and Robert Hosbrook have been summoned to appear before U.S. Magistrate Judge Carl W. Hoffman. If convicted, they face up to 30 years in prison and fines of up to $1 million on each count.

advanced fees

California Lawyer Disbarred for Accepting Advanced Fees and running a Loan Modification Scam

advanced feesTimothy Clarence Bryson, 61, San Diego, California, State Bar #140798, was disbarred for accepting advance frees (and/or monthly fees) for a loan modification matter and running a false “Attorney Backed” loan modification scam.

Bryson was charged with accepting advance fees for loan modification matters in violation of Civil Code § 2944.7(a), failing to deposit and maintain client funds in trust, failing to competently perform legal services improperly withdrawing disputed funds from a trust account, misappropriating funds, failing to render proper accounts, and failing to cooperate in a disciplinary investigation.

alonzo

California Attorney Disbarred for Accepting Advance Fees and running an “Attorney Backed” Loan Modification Scam

alonzoJerry Alonzo Stevenson, 43, San Diego, California, State Bar #262798, was disbarred for accepting advance fees for loan modification matters in violation of Civil Code § 2944.7(a), failing to competently perform legal services, and failing to promptly refund advanced fees.

Between March and September 2011 several individuals hired Stevenson to negotiate plans with their mortgage lenders or creditors to restructure their home loan payments. All of the clients learned about Stevenson’s services from unsolicited direct mail sent to their homes. The letters contained personal information regarding the clients and their lender or bank, and they appeared to be generated with the lender’s authorization. Stevenson’s representative told the clients that their loan modifications would be personally handled by him and guaranteed that he would successfully complete the restructuring. However, after the clients paid advance attorney’s fees, Stevenson did not complete the loan modification services. 

In addition, Stevenson engaged in a business partnership with his office manager, a non-attorney with whom he shared legal fees. Stevenson delegated to the manager the tasks of accepting legal services, providing legal advice, supervising non-attorneys, and depositing client fees into joint accounts. Furthermore, Stevenson did not properly supervise his non-attorney staff and was only occasionally present at any of the law firm offices. 

In each of the cases, Stevenson’s staff falsely told the clients that the loan modifications were in the process of being approved. In addition, Stevenson failed to respond to the clients’ reasonable status inquiries. All of the clients tried to obtain refunds, but Stevenson failed to return the advanced fees. 

In aggravation, Stevenson had a record of prior discipline. Furthermore, his clients were seriously harmed, and he engaged in multiple acts of wrongdoing that demonstrated a pattern of misconduct.

orange county

Four Orange County defendants sentenced in loan modification scam

orange countyFour Orange County men were sentenced Monday for their participation in a real estate investment scam that took an estimated $130,000 from hundreds of victims, prosecutors said.

Justin Dennis Koelle, 23, of Costa Mesa, was sentenced to nine months in jail and five years of formal probation, according to the Orange County district attorney’s office. 

Dominic Adam Nolan, 32, of Irvine, was sentenced to six months in jail and five years of formal probation. Jacob John Cunningham, 26, and John D. Silva, 28, both of Irvine, each received sentences of eight months in jail and five years formal probation. 

All four men are required to pay restitution. They pleaded guilty in May to charges that include conspiracy to collect illegal upfront fees. 

A fifth man, Andrew Michael Phalen, 26, of Mission Viejo, pleaded guilty in June 2012. He was sentenced to a year in jail and five years of formal probation.

 All five men are prohibited from engaging in loan modification or loan consulting practices.

Prosecutors said that from January 2009 to March 2012, the men created fraudulent loan modification businesses that were used to steal money without completing any services.

The men sent letters offering to restructure home loans. The notices looked as if they came from the recipients’ lenders, prosecutors said. 

The five regularly changed the names of their fake businesses, as well as their phone numbers and addresses. 

In December 2011, Cunningham, Nolan and Silva started another scheme that distributed letters that were forged with a CitiFinancial or CitiMortgage logo. The letters offered a low interest rate to refinance a home and instructed the recipient to deposit $3,500 to $4,600 directly into bank accounts.