MortgageReal Estate

FTC shuts down “appalling” multi-million dollar mortgage relief scam

Law firms accused of falsely promising rescue from foreclosure

The Federal Trade Commission halted a massive mortgage relief scheme perpetrated by a series of law firms, which falsely promised to help struggling homeowners save their homes in exchange for hundreds or thousands of dollars in legal fees.

According to the FTC, the California-based law firms bilked millions of dollars out of homeowners who were facing foreclosure by telling them that they could join a “mass joinder” lawsuit against their respective mortgage note holders that could discharge their mortgage entirely, provide monetary relief, or both.

But no such relief came, the FTC said.

According to the FTC, Damian Kutzner, Vito Torchia, Jr., Jonathan Tarkowski, R. Geoffrey Broderick, and Charles Marshall operated as Brookstone Law, doing business as Brookstone Law Group, a California corporation; Brookstone Law, doing business as Brookstone Law Group, a Nevada corporation; Advantis Law; and Advantis Law Group.

Per the FTC’s complaint, Kutzner and the four attorneys using a set of law firms claimed they would bring lawsuits against lenders for mortgage fraud and void consumers’ mortgage notes “to give you your home free and clear, and/or to award you relief and monetary damages.”

To accomplish this supposed relief, Kutzner and the others promised the struggling borrowers that they could join a “mass joinder” lawsuit, which according to the FTC, is a commonly used ruse among mortgage relief scammers.

Mass joinder lawsuits differ from class action lawsuits because each defendant is required to prove their case separately, and while Kutzner and the others actually sued several large, “well-known” banks, the FTC alleges that they have not won any cases and that most were dismissed because they never pursued them.

According to the FTC’s complaint, the operation did not have attorneys who could litigate hundreds or thousands of cases, as promised.

According to the complaint, Kutzner and the others mailed marketing materials to consumers with the homeowner’s name, loan amount and property identification number, with statements such as, “Your home will be sold at Auction unless you take immediate action.”

People who responded to the advertising were told they could join a lawsuit by paying $895 or more in advance for a “legal analysis,” and that they were “likely or certain” to win in a lawsuit against their lender.

Some consumers were told they would recover at least $75,000. After claiming the analysis showed that a consumer had a good case, the law firms charged thousands of dollars in recurring monthly fees and failed to deposit the fees in client trust accounts as required by law.

The law firms falsely promised some clients that they would add them as plaintiffs in lawsuits and told others they would add them soon but did so only months later.

According to the FTC, clients’ requests for information went ignored. In addition, the law firms did not tell their “clients” when their lawsuits had been dismissed and kept collecting fees from those clients.

Clients’ requests for refunds were allegedly refused as well.

In total, the scheme netted the law firms at least $15 million in ill-gotten funds.

According to the FTC, a federal court temporarily halted the scheme, and the agency seeks to permanently stop the alleged illegal practices and obtain refunds for consumers.

One of the accused, Vito Torchia, was recently disbarred by the California bar for misconduct. According to the FTC, during his ethics trial, Torchia conceded that Brookstone failed to provide the “most basic elements” of legal representation.

“Preying on homeowners who already are financially distressed and struggling to pay their mortgages is appalling,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection. “That’s why stopping phony mortgage relief operations, like this one, is a priority at the FTC.

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