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New York AG Sues Law Firms for Mortgage Loan Relief Scam

fraud [1]New York Attorney General Eric Schneiderman [2] has sued two law firms and their principal attorney in a New York County Supreme Court, accusing them of participating in a fraudulent mortgage rescue scam, Schneiderman's office announced earlier in the week.

Schneiderman filed a suit against Litvin Law Firm, Litvin, Torrens and Associates, and the principal attorney of the firms, Gennady Litvin, for the alleged scam. Scheiderman claims the firms promised financially vulnerable and struggling homeowners that the firms would provide them with comprehensive legal services to obtain a mortgage loan modification or avoid foreclosure. The firms allegedly collected hundreds of dollars in monthly fees from the borrowers they targeted but did not deliver on any of their promises.

"Consumers facing foreclosure place a special trust in attorneys hired to help them navigate the myriad of legal issues they are facing, and our office will hold those accountable who perpetrate scams that prey upon families at risk of losing their home," Schneiderman said. "Coupled with our Homeowner Protection Program that has served over 30,000 New York families seeking help with their mortgage, we will continue to fight for those still struggling in the aftermath of the housing crisis."

The law firms perpetrated the scam by advertising through radio, television, and its website that they were located in 31 states and were equipped to provide nationwide foreclosure defense, which was not possible because they firms had offices only in New York and Florida, Scheiderman said. The lawsuit alleges that through these ads, the firms lured struggling homeowners into calling them and paying $595 or $750 for legal services.

Through third party lenders, the firms promised struggling homeowners nationwide that they would receive a "custom made attorney defense team" that gave them "a level of service that usually is only enjoyed by large corporate clients," according to Schneiderman. The marketers also promised "forensic loan audits" that were "vitally important" to identifying errors in mortgage documents, winning concessions from lenders, and avoiding foreclosure, according to the lawsuit. Instead, despite paying fees, many homeowners never spoke with an attorney in their state or received any kind of mortgage loan relief such as a modification, and the forensic loan audits had little value in saving consumers' homes.

The marketers reached a settlement with the Federal Trade Commission (FTC) in which they agreed to pay nearly $3.6 million in compensation to victims of the scam. Marketers also agreed to a permanent ban from the mortgage and debt relief services field.