A bogus California law firm scammed hundreds of desperate homeowners into signing on to a sham lawsuit against their mortgage lenders, according to the Federal Trade Commission, which issued a nationwide consumer alert Thursday.
Now, the Precision Law Center has real legal trouble to deal with.
The FTC persuaded a U.S. district court to halt the operation and seize its assets. Authorities are still investigating and say they also plan to seek refunds for consumers.
Homeowners in high-foreclosure areas across the country were solicited. Many who say they were scammed live in the Tampa area and Florida, according to the FTC and the Better Business Bureau of Central Florida.
"Homeowners were told foreclosure proceedings will be halted and that they're going to maybe get over $20,000 in damages and another $50,000 in punitive damages," said John Zajac, spokesman for the Better Business Bureau. "None of that is happening."
The firm raked in more than $1 million in fees from homeowners, the FTC said.
The firm convinced homeowners they were potential victims of the foreclosure housing bust and should join a class-action lawsuit against their mortgage lenders, the FTC said. Homeowners were promised up $70,000 in damages and the chance to avoid foreclosure.
Homeowners had to pay up to $10,000 just to join the suit. Suits were either never filed or dismissed, and homeowners didn't get their money back.
The firm also sold a "forensic loan audit," purported to turn up lender violations 90 percent of the time. These violations would provide "legal leverage," the firm said, to force lenders to work something out with homeowners.
Once again, the FTC said, nothing happened.
This case is part of a nationwide crackdown on mortgage-related fraud. After the foreclosure crisis hit in late 2007, scammers saw an opportunity to bilk cash-strapped homeowners. Federal authorities coined the term "foreclosure rescue scams."
The FTC says this new scam is a twist on the crime.
One homeowner indentified as a victim is Teresa Hayes of Tampa. She said she paid Precision Law Center $795 for help persuading her lender to give her a loan modification. The firm, she said, promised a loan audit that would reveal problems with her loan and help her case.
She said she learned nothing useful.
"They just took my money and said they were working with my lender," Hayes said. "But when I called my lender later to check it out, the lender said they had never heard of this company."
The FTC says the law firm was run by Sameer Lakhany of Santa Ana, who is accused of using several companies to conduct the scams. Authorities say Lakhany set up the law firm for the sole purpose of scamming homeowners by selling them one last chance to save their homes from foreclosure.
The firm sent mass mailings to homeowners and used these websites: HouseHoldRelief.org, FreeFedLoanMod.org and MyHomeSupport.org.
Zajac, of the Better Business Bureau, said consumers should be leery of any company seeking money upfront to help with a mortgage problem.
"You want to look into any business or law firm you're going to be giving your money to," he said. "You want to find out how long they've been in business. What kind of complaints they have and how did they get resolved."
Zajac said Precision Law Center had an F rating with the Better Business Bureau.