AG shuts down large foreclosure relief operation

(Photo by the Office of the California Attorney General)

August 18, 2011 5:17:27 PM PDT
California's Attorney General has taken down a large mortgage operation that's spread through 17 states.

Thousands of homeowners were led to believe lawyers would help them get out of foreclosure, but according to State Attorney General Kamala Harris, they were instead misled and cheated out of thousands of dollars. Homeowners in foreclosure were so resentful and angry at the banks that when they were approached by the attorneys, they signed on almost immediately.

They were promised by the lawyers that, not only would they get them out of foreclosure, but the banks would have to pay for their unfair practices. However, the only ones who ended up paying were the homeowners.

Homeowners in foreclosure gave between $4,000 and $10,000 to three law firms and four other lawyers in Southern California. Their main objective: To get some kind of loan modification.

The lawyers promised homeowners relief from an imminent foreclosure, interest rates as low as two percent, monetary damages and a reduction of their principal.

"After paying this money, these homeowners then, of course, believed that they had legal representation and would call their lawyer to ask, 'How is my case coming along?'" Harris said. "And those calls went unreturned."

The three firms are Kramer and Kaslow, Mitchell Stein & Associates and Mesa Law Group, all based out of Southern California. All three law firms have been shut down and their assets have been frozen.

Kramer and Kaslow claims to have an office in a building in San Francisco's Mission District. Instead, what was found was another firm called 'Loss Mitigations,' meant to help with foreclosures. Nobody answered when ABC7 called; instead, the phone went to an answering service.

"Based on what we know so far, approximately 2,500 people were potentially impacted," said Harris.

That's just in California. Investigators say there are other victims in at least 16 states.

There is, however, some hope for those swindled homeowners. The State Bar of California will now make an assessment and refer them to other lawyers.

"We'll get their files and we'll notify them," said Bill Herbert with the State Bar. "We'll try to make some kind of determination as to whether or not they ought to stay in the case or wehther they out to find another lawyer to prosecute their case."

Some homeowners paid the firms that were shut down, but their names do not appear on any kind of document, so the State Bar is asking anyone who had any contact with the firms to call them. Homeowners can also call HUD, the federal housing administration, where counselors can help and offer a program called 'Know it, Avoid it and Report it' to help stop these types of scams.

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