US Loan Auditors and My US Legal Services billed themselves as companies that can help homeowners who are victims of predatory lending, but they're now being sued for defrauding the same people they claimed to want to help.
In a $60 million lawsuit filed by California's attorney general, the two companies and five individuals reportedly marketed and sold "forensic loan audits" that convinced homeowners their lenders had violated the law. The companies charged homeowners upfront fees for the audits, told them to stop making mortgage payments and to file lawsuits against their lenders instead. Many of them ended up losing thousands of dollars and in some cases, their homes.
"They had a computerized review of loan documents and they would try to come up with things to show that the lender had practiced predatory lending practices," Jim Finefrock, director of communications for California's attorney general, told Consumer Ally. "Usually the failures would be tiny technical things if they existed at all."
The state alleges the companies convinced homeowners the lawsuits would give them leverage to change their loan terms and prevent foreclosure. But often the lawsuits "would just sit there," Finefrock said.
Neither company responded to requests from Consumer Ally to comment on the state's action.
Consumers who signed up say they support the state's efforts.
"We are thrilled that somebody is finally going after these guys," Carolyn Durbin, who lost her home to foreclosure a year ago, told Consumer Ally.
Durbin said she and her husband had already begun the process to file a lawsuit against their lender when they received a letter from US Loan Auditors saying it had begun an investigation into the lending practices of the same bank. Durbin said the letter resonated with them, so they agreed to let the company take over their case. What they didn't know is that the person they ended up dealing with was not a lawyer but a sales person, Durbin said.
The couple paid $4,600 for a loan audit and had $1,000 automatically deducted from their bank account each month after that. They began to get suspicious when, for instance, the audit didn't find problems with their loan they already knew of. They weren't kept updated about a pending court date. When they requested certain paperwork, they were told the paperwork wasn't in the company's possession, only to be told later it was. Finally, a lawyer working as a consultant for the company advised the couple to file for bankruptcy, Durbin said.
The couple tried to stop the pending lawsuit against their lender but it was too late. The court had already ruled and notified them they'd lost the case.
Durbin said they sent a certified letter to US Loan Auditors explaining they no longer needed their services and to stop billing them. The request, however, fell on deaf ears. The couple had to close their bank account as a last resort. In the end, they lost nearly $8,500 and their home.
Durbin, now renting a home, said consumers should beware of companies like these. Earlier this year, officials in several states, including California, warned consumers about "forensic loan audits," explaining that claims about them are often inflated, misleading and provide no relief. The Federal Trade Commission also issued an alert about these audits this year.
"I had a bad feeling about it," Durbin said. "We should have gone with my gut and not chase pipe dreams because all we got was $8,500 less and bankruptcy."
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