Owners and the managing attorney of a California-based law firm were arrested Thursday for loan modification fraud, California Attorney General Kamala D. Harris announced in a release.[IMAGE]
""Flahive Law Corporation"":http://flahivelawcorporation.com/ charged thousands of dollars in up-front modification fees for services that were never performed for homeowners, many of whom ended up losing their homes, the release stated.
In one example noted in the release, the firm convinced a homeowner to reject his servicer's modification offer and advised that the law office could secure a better interest rate and reduce his principal. After following the firm's advice, the victim lost his home to foreclosure four months later.
Gregory Flahive, 39; Cynthia Flahive, 41; and Mike Johnson, 42, were arrested on 19 felony counts, including grand theft by false pretense, conspiracy and false advertising. Their bail is set at $50,000 each.[COLUMN_BREAK]
Gregory and Cynthia Flahive, ex-spouses and owners of the firm, and Johnson, the firm's managing attorney, took fees without performing modification services of up to $2,500 from homeowners in Placer, Sacramento, Butte, and Yuba counties. In California, it is illegal to collect money for foreclosure-related services before performing them.
The firm advertised their services on flyers, radio and televised infomercials, and in a 2010 infomercial, the Flahives said that, as a law firm, they had extra leverage with the banks, according to the release.
The defendants claimed that through a mortgage violation audit, they could find bank violations in loan documents and use that as leverage to get a loan modified.
The investigation revealed that in some cases, the client's lender had no record of contact with the law firm.
California ranked number one for the most mortgage loan fraud (MLF) suspicious activity reports (SARs) per capita, and also ranked number one for the most mortgage loan fraud subjects, according to the ""Financial Crimes Enforcement Network"":http://www.fincen.gov/ report of MLF SARs for the third quarter of 2011.
California metropolitan statistical areas also topped the rankings for most MLF SAR subjects per capita, leading with San Jose-Sunnyvale-Santa Clara; Riverside-San Bernardino-Ontario; and Los Angeles-Long Beach-Santa Ana, according to the fraud ""report"":http://www.fincen.gov/news_room/rp/files/MLF_Update_Q3_2011_508.pdf.