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California Shuts Down Mortgage Scam Artists

'Utterly brazen' tactics used to fleece homeowners, state charges

March 19, 2008

“As the mortgage crisis worsens, a growing number of fly-by-night companies are employing utterly brazen tactics to push homeowners into illegal and unconscionable loans,” Attorney General Edmund G. Brown Jr. said. “The illegal sales practices of these companies, run by Eric Pony and his family, included psychological pressure, forgery, and outright lies,” Brown added.

The companies ran a complex predatory lending scheme using bait and switch tactics to victimize thousands of consumers in California, many of whom have lost their homes.

The Los Angeles Superior Court, at the request of the attorney general, froze all the companies’ real estate and bank accounts and enjoined them from engaging in further predatory practices. The freeze order also included expensive cars and millions of dollars in private real estate owned by Eric Pony. Brown also seeks an estimated $20 million in penalties and restitution.

In the coming weeks, Brown intends to bring additional legal actions, both civil and criminal, against other mortgage lenders and foreclosure consultants who are taking advantage of homeowners across California.

San Bernardino District Attorney Michael A. Ramos also announced that several individuals affiliated with Lifetime Financial were arrested on charges including conspiracy, grand theft, forgery and elder abuse.

“These predatory lenders have taken advantage of people who placed their trust, as well as their homes, in the hands of these unscrupulous business people,” San Bernardino District Attorney Ramos said.

'Preapproved'

Lifetime Financial, Nations Mortgage and Greenleaf Lending operate predatory lending schemes to cheat homeowners by promising unrealistically low mortgage payments and then switching them to loans that do not match the original agreement. Telemarketers lure consumers by telling them that they are preapproved for a fixed rate loan of 5% to 6% that could lower monthly payments by hundreds of dollars.

Although the exact number of victims is unknown at this time, Eric Pony, the President of Lifetime Financial, claims to have arranged thousands of loans. During the investigation that led to the lawsuit, the California Attorney General’s Office took declarations from more than twenty individuals who had been scammed by these companies.

Lifetime Financial arranged loans with hidden fees of up to $20,000. In addition to these fees, consumers end up with loans that have worse financial terms than their original mortgage.

In some cases, consumers were saddled with monthly payments that exceeded their entire monthly income. Many consumers have either lost their homes to foreclosure or are facing foreclosure as a result of engaging in these transactions.

Telemarketers initially request only a nominal payment for a home appraisal. Appraisers then inflate home values to qualify the homeowners for much higher loans than are appropriate. The companies never provide copies of theses appraisal reports to consumers.

Next, a salesperson shows up at the victim’s house, sometimes as late as 11:45 at night, with documents that are incomplete or contain terms that are vastly different from those originally promised. If consumers complain about the terms, the salespeople tell them that there is a mistake but they should just sign the paperwork to “keep this great deal.”

If a consumer refuses to sign the documents, company employees forge the customer’s signature, prosecutors charged. In some instances, the forgeries are so blatant that the victims’ names are misspelled.

As a result of these tactics, the final mortgage documents contain extremely unfavorable terms that are substantially worse than originally promised by the telemarketers. Other fraudulent and unlawful practices include the following:

• Offering thousands of dollars in cash back without disclosing that the money would be used to cover high fees

• Falsely promising to reimburse prepayment penalties from the victim’s current lender

• Pressuring victims to sign inaccurate loan documents by promising to correct excessive fees

• Failing to provide copies of signed documents

• Forging victims names and signatures on loan documents

• Falsifying income information on loan applications and creating fake references

• Refusing to honor written demands to cancel loans

If a consumer tries to back out of the transaction, the companies promise to waive thousands of dollars in various processing, application, origination and underwriting fees. If the consumers agree, sales representatives provide a new statement but then resubmit the original forms, ultimately charging the same excessive fees.

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