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BBB Warns Homeowners: 'Mass Joinder' Lawsuit Mailings May Be Latest Advance Fee Mortgage Modification Scheme

4/19/2011

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St. Louis, Mo., April 19, 2011 – The Better Business Bureau (BBB) warns homeowners to steer clear of mailings asking them to join national “mass joinder” lawsuits to force their mortgage companies to cut their loan payments.

Michelle Corey, BBB president and CEO, says the mailings are a new twist on schemes to obtain up-front payments of $5,000 or more from homeowners struggling to pay their mortgages. Some mailings are tied to businesses in St. Charles County.

“Complaints from homeowners who paid thousands of dollars for mortgage assistance are a familiar story at the BBB,” Corey said.  “Few, if any, of these people got help. Many ended up worse off than before the mortgage modification companies entered their lives.”

Several property owners in Boone County, Mo., recently got 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 nearly identical notice sent to a homeowner in Long Beach, Calif., came from the Litigation Settlement Department at 3829 Veterans Memorial Parkway, St. Peters, Mo.

Missouri secretary of state records list the St. Peters address as home to Diversified Financial Protection Agency and Capital Debt Management. The records list John Jacob Ehlinger as president of Capital Debt Management. John J. Ehlinger is registered agent and the only incorporator of Diversified Financial Protection Agency. Capital Debt Management filed for incorporation in October 2009; Diversified Financial Protection Agency filed on Feb. 16, 2011. 

The BBB has issued two warnings on Ehlinger and Capital Debt Management since last summer. The company has an “F” grade with the BBB, the lowest grade possible.

Consumers told the BBB they paid the company for mortgage help, but received little or nothing in return. Company officials have blamed problems on partners—first in St. Louis County and later in California—who did not complete mortgage modification work.

A BBB investigator visited the address on Veterans Memorial Parkway. He found that previous references to Capital Debt Management had been replaced with the Diversified Financial Protection Agency name on the front door and in the reception area. Ehlinger and other officials of the companies did not respond to a BBB request for information.

Officials of Diversified Financial Protection Agency, Capital Debt Management, or both firms, apparently are now partnering with Mass Litigation Alliance of Hawthorne, Calif. The same toll-free phone number is on the Boone County and California solicitations and is one of several listed on a website for Mass Litigation Alliance. Mass Litigation Alliance filed corporate papers with the California secretary of state on Feb. 14, listing Philip A. Kramer of Calabasas, Calif., as the company’s agent.

Mass Litigation Alliance’s website describes Kramer as senior partner of Kramer & Kaslow, a Calabasas law firm with an “F” grade from the Los Angeles BBB.  Consumers have filed more than 30 complaints about the firm. Most allege the firm didn’t fulfill contracts for loan modification or foreclosure related services, that the firm misrepresented its ability to provide service, or that the complainant was unable to obtain refunds of advance fees.

The company has disputed the allegations and said contracts are based on hourly rates or flat fees, not on performance. 

The Federal Trade Commission issued rules that prohibit anyone except attorneys from collecting advance fees for mortgage modification, and then only under specific conditions.

The California Department of Real Estate warned last month that some businesses were trying to use the lawyer exemption to collect 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.

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. They have names such as thetruthaboutyourmortgage.com and paybackthebanks.com.

In video clips on the sites, Kramer says that mass joinder suits are different from mortgage modifications.  “A loan modification is going to your bank with your hat in your hand and asking them to do something for you,” Kramer said. “We go in with a club; we now make demands on the bank. It’s time for the banks to start answering our questions.”

The solicitation from St. Peters sent to the Long Beach, Calif., woman is marked “Personal and Confidential Legal Notice – Joinder Action Suit.” It 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 says. “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.” It urges her to call a toll-free number.

A Boone County homeowner said he was alarmed when he got a solicitation inviting him to join a lawsuit against the Columbia, Mo., area bank that held his mortgage.

“I’m in the title business and I knew immediately this was someone trying to take advantage of the current mortgage situation,” he said. He has no idea how the company got his name or address. He hadn’t sought help with his mortgage.

When he phoned the firm, a representative identified it as Mass Litigation Alliance of St. Louis, Mo. The representative asked the man several questions about his loan and told him that he was qualified to join the suit, but that he would first have to pay a $5,000 retainer.

The representative said the suit could reduce his loan principal up to 80 percent, cut the interest rate to 2 percent or get him  $75,000 in punitive damages. The representative told the man he would have to act immediately.  He turned down the offer.

The BBB offers the following tips for homeowners seeking mortgage assistance:
  • Call your bank or mortgage company before going to a third party.
  • Be wary of marketing companies, lawyers or other groups asking for fees to join a class action or “mass joinder” lawsuit against a mortgage holder. Consumer advocates say the chance of actually getting mortgage relief from such suits is slim. 
  • Beware of any company that promises to help you modify your mortgage in return for an advance fee. As of Jan. 31, 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 atwww.bbb.org or by calling 314-645-3300.   

Contacts: Michelle Corey, President & CEO, 314-645-3300, mcorey@stlouisbbb.org, or Bill Smith, Trade Practice Investigator, 314-645-3300, tpc1@stlouisbbb.org

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