AGs join forces to fight alleged mortgage fraud

Ashley Stinnett Jul. 16, 2009, 3:13pm


PHOENIX (Legal Newsline) - A group of state attorneys general says it is leading the fight against an increasing epidemic of mortgage fraud throughout the country.

Attorneys general from 18 states are participating in "Operation Loan Lies," a national mortgage fraud crackdown involving over 180 law enforcement actions against mortgage loan lenders and rescue scheme operators.

The group is also joined by the Federal Trade Commission and the U.S. Department of Justice.

Arizona Attorney General Terry Goddard, spokesman for the operation, said state laws passed this year have already resulted in a decrease in scandals and consumer complaints.

"Too often, those who claim to offer help to homeowners modify their loans are wolves in sheep's clothing -- con-men looking to collect thousands in upfront fees but doing little to help families struggling with job losses or medical crises stay in their homes," Goddard said.

New Jersey Attorney General Anne Milgram on Wednesday filed two new lawsuits targeting 10 individual and corporation defendants over allegations of collecting unlawful upfront fees for loan modification services that never materialized.

The lawsuit goes on to allege the defendants violated federal law governing credit repair, as well as forming a non-profit entity to market their deceptive practices, she said.

"The conduct charged in these two cases is outrageous. It epitomizes the kind of callous, greedy and opportunistic fraud we are committed to halting," Milgram said.

She said loan modifications are supposed to help homeowners who are facing foreclosure, but instead the defendants used this bogus services to make a profit off of struggling families.

In conjunction with the national mortgage fraud task force, Illinois Attorney General Lisa Madigan filed four lawsuits targeting mortgage rescue operators.

The complaint states the companies violated Illinois' Mortgage Rescue Fraud Act by charging at risk homeowners upfront fees to negotiate with mortgage lenders but failing to actually render a deal, resulting in the companies being paid thousands of dollars by the consumers.

The defendants in that suit are: Capital Foreclosure Solutions of Chicago, Ill., the company's president, Katen (Keith) Pabley, SGM Mortgage, Inc., of Lyons, Ill., the company's president, Scott Kotalik, United Home Solutions, Inc. of Happy Valley, Ore., and The Mack Financial Group, Inc., a corporation based in Henderson, Nev.; Midwest Foreclosure Solutions of , Norridge, Ill., the president of the company, Judel James Robert, and Maria C. Scardicchio; People's First Financial, of San Diego, Calif.; and Loan Modification Inc., of Lombard, Ill., and the company's owner Edward J. Galowitch.

To date, Madigan has brought lawsuits against 28 alleged rescue fraud schemes.

Other states participating in the operation are: Arizona, California, Colorado, Idaho, Iowa, Kansas, Maine, Maryland, Massachusetts, Michigan, Missouri, New Jersey, New Mexico, North Carolina, Ohio, Oregon and Texas.

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