Better Business Bureau Warns of Mortgage Scam Lawsuit Mailings

Mortgage scamIf you receive an official-looking letter from an out-of-state law firm asking you to fork over a hefty upfront fee to join a "mass joinder" lawsuit to force your mortgage lender to reduce your monthly payments, chances are good, you've been targeted by a new nationwide mortgage scam.

The Better Business Bureau and others are warning homeowners to beware of these solicitations, which Michelle Corey, BBB CEO and president, says represent the latest twist on a scheme -- the advance fee mortgage scam -- to con homeowners struggling to make their mortgage payments out of upfront payments of $5,000 or more.

"Complaints from homeowners who paid thousands of dollars for mortgage assistance are a familiar story at the BBB," Corey said in a statement. "Few, if any, of these people got help. Many ended up worse off than before the mortgage modification companies entered their lives."Several homeowners in Boone County, Mo., recently received letters saying that their loans "may be eligible for national litigation aimed at fraudulent lender actions." The letters listed no company name or return address. A similar notice sent to a homeowner in Long Beach, Calif., was mailed from the Litigation Settlement Department at 3829 Veterans Memorial Parkway, St. Peters, Mo.

The bogus notification sent to the Long Beach woman was marked "Personal and Confidential Legal Notice – Joinder Action Suit," and includes the name of the bank that holds her mortgage, her loan amount and her address.

"Your loan may be eligible for a national litigation settlement aimed at fraudulent lender actions," the notice read. "The goal is to make your illegal and fraudulent mortgage go away, seek monetary relief up to $75,000, stop foreclosures, and/or seek compensation for damages."

A Boone County homeowner was alarmed by a solicitation inviting him to join a lawsuit against the Columbia, Mo., bank holding his mortgage. "I'm in the title business, and I knew immediately this was someone trying to take advantage of the current mortgage situation," the homeowner told the BBB, adding he had no idea how the company obtained his name or address.

When he phoned the firm, a representative identified it as Mass Litigation Alliance of St. Louis, Mo., and said he was eligible to join the suit -- provided he first shell out a $5,000 retainer. The representative said if he acted immediately, the suit could slash his loan principal by up to 80 percent, reduce the interest rate to 2 percent or win him $75,000 in punitive damages. The homeowner wisely declined.

Missouri secretary of state records list the St. Peters, Mo., address as home to Diversified Financial Protection Agency and Capital Debt Management. The records list John Jacob Ehlinger as president of Capital Debt Management; Ehlinger is also the registered agent and the only incorporator of Diversified Financial Protection Agency.

The BBB has issued two warnings on Ehlinger and Capital Debt Management, which received a grade of "F" with the BBB. Consumers complained to the BBB that they paid Capital Debt Management for mortgage help but received little or nothing in return.

A BBB investigator who visited the firm discovered that previous signage referring to Capital Debt Management had been replaced with signage for Diversified Financial Protection Agency on the front door and in the reception area. Ehlinger and other officials of the companies never responded to a BBB request for information.

Officials of Diversified Financial Protection Agency, Capital Debt Management or both firms, the BBB says, are now partnering with Mass Litigation Alliance of Hawthorne, Calif. Both the bogus Boone County and California letters list the same toll-free phone number, which is also one of several listed on a website for Mass Litigation Alliance.

Mass Litigation Alliance filed corporate papers with the California secretary of state on February 14, 2011, listing Philip A. Kramer of Calabasas, Calif., as the company's agent. The BBB says Mass Litigation Alliance's website described Kramer as a senior partner of Kramer & Kaslow, a Calabasas, Calif., law firm.

But Mass Litigation's site now consists of nothing but a single notice from president Matthew Davis, who says his firm was hired by Kramer "to facilitate intake consultations to prospective clients for mass joinder litigation." He also said that as of March 31, 2011, "Contracts between Mass Litigation Alliance and Philip Kramer have expired."

Kramer & Kaslow earned an "F" from the Los Angeles BBB, thanks to more than 30 consumer complaints against, most accusing the firm of failing to fulfill contracts for loan modification or foreclosure-related services, misrepresenting its ability to provide these services, and an inability to obtain refunds of advance fees.

Kramer and Kaslow, which also racked up 41 complaints from consumers on Complaints Board, disputed the allegations, the BBB said, arguing that its contracts are based on hourly rates or flat fees, rather than performance.

The BBB found more than 50 website addresses linked to Mass Litigation Alliance. Each site is virtually identical to the others except for phone numbers, and have domain names such as thetruthaboutyourmortgage.com and paybackthebanks.com.

The Federal Trade Commission recently issued rules banning the collection of upfront fees by mortgage-relief firms, a rule that exempts attorneys under certain conditions. And the California Department of Real Estate warned last month that some businesses were trying to take advantage of the lawyer exemption loophole to charge consumers advance fees for mortgage assistance suits.

"Those who continue to prey on and victimize vulnerable homeowners have not given up," the California agency said. "They just change their tactics and modify their sales pitches to keep taking advantage of those who are desperate to save their homes."

The district attorney in Denver, Colo., last month denounced mass joinder solicitations received by consumers in that state, and Washington's Attorney General recently warned residents about similar scams.

The BBB offers the following tips for homeowners seeking mortgage assistance:
  • Call your bank or mortgage company before turning to a third party.
  • Beware of marketing companies, lawyers or other groups asking for fees to join a class action or "mass joinder" lawsuit against a mortgage holder. The chances of actually getting mortgage relief from such suits is slim at best.
  • Beware of any company that promises to help you modify your mortgage in return for an advance fee. As of January 31, 2011, this business practice is illegal, except under certain circumstances.
  • Beware of any company asking you to pay for a forensic loan audit. These audits may not help you reduce your loan rates or mortgage payments.
  • Before sending any money or signing a contract, check BBB Business Reviews at www.bbb.org or by calling (314) 645-3300.

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