TRENTON
- Continuing the State’s effort to combat
mortgage-related fraud, Attorney General Anne
Milgram announced today the filing of two
new lawsuits charging a total of 10 individual
and corporate defendants with selling bogus
loan modification services to distressed homeowners.
Defendants in the two unrelated cases are
charged with collecting unlawful “up-front”
fees for loan modification services that either
never materialized or made homeowners’
situations worse. The defendants also are
charged with misleading consumers through
false advertising and deceptive solicitations,
and engaging in debt adjustment activity without
a license.
In
one of the two lawsuits, the defendants also
are accused of violating federal law governing
credit repair activity, and with founding
a non-profit “financial advocacy council”
solely to legitimize their fraudulent enterprises.
The state has identified 42 homeowners victimized
by the latest schemes.
“The
conduct charged in these two cases is outrageous.
It epitomizes the kind of callous, greedy
and opportunistic fraud we are committed to
halting,” said Attorney General Milgram.
“In both cases, the defendants took
advantage of desperate people who looked to
them for help. They gained the trust of their
victims through deceptive advertising and
misleading sales pitches, then collected thousands
of dollars in unlawful fees and provided nothing
in return but empty promises and added financial
misery. We intend to hold these defendants
accountable.”
"Loan
modification services are supposed to serve
as a lifeline to homeowners facing foreclosure,
but instead the unscrupulous operators in
these cases used these programs to cheat struggling
families and make a profit," said New
Jersey Department of Banking and Insurance
Commissioner Steven M. Goldman. "This
type of activity is particularly reprehensible
when it occurs in tough economic times when
people are fighting to stay in their homes
and are especially vulnerable."
With the lawsuits announced today, the state
has filed a total of 11 civil mortgage fraud
complaints since June 2008 naming 102 individual
and corporate defendants, affecting more than
950 victims and property worth more than $29.1
million. The state has also obtained indictments
or guilty pleas in seven criminal mortgage
fraud cases involving a total of 10 defendants
who were charged with victimizing close to
60 individuals and banks in connection with
loans worth nearly $11 million.
The
conduct charged in the state’s civil
and criminal cases has included fraud that
victimized people seeking to obtain loans
through a broker, or seeking to own investment
properties. Victims have also included those
hopeful of improving their living situations
via “rent-to-own” opportunities,
as well as financially-desperate homeowners
in need of loan modification help.
Named
as defendants in one of the State’s
new lawsuits are Ejike N. Uzor, a licensed
attorney who lists offices in Linden and Newark,
and Stephen Pasch of Green Brook Township,
Somerset County. Charged in the same lawsuit
are corporate defendants New Day Financial
Solutions, a Newark-based company owned and
operated by Pasch, and three other Pasch companies:
NDROA, Inc., which operates from Pasch’s
home in Green Brook Township, American Credit
Repair and Settlement, LLC, and Paramount
Debt Settlement USA, LLC, both of which operate
from the same address as Pasch’s New
Day Financial at 701 McCarter Highway, Suite
303, Newark.
Also named as corporate defendants are two
Uzor companies: Uzor Financial Solutions,
LLC and Ejike N. Uzor and Associates. Both
companies list the same corporate address
on McCarter Highway in Newark as the multiple
companies run by Pasch. The American Financial
Advocacy Council, a registered non-profit
which lists both Pasch and Uzor as officers,
is also named as a defendant. The complaint
charges that American Financial functions
as nothing more than a tool to further the
fraudulent activities of Pasch and Uzor.
The State’s other new lawsuit names
as a defendant Best Interest Rate Mortgage
Company (BIRMCO), located on Haddon Avenue
in the Westmont section of Haddon Township,
Camden County.
Although the approach used by BIRMCO to defraud
customers was different - the company used
direct mail solicitations while defendants
in the New Day lawsuit used Web-based advertising,
radio ads and telephone outreach -- the outcome
was the same: homeowners seeking loan modification
help were induced, through misleading promotional
materials and deceptive sales pitches, to
pay BIRMCO thousands of dollars in advance
fees and got either nothing in return, or
ultimately saw their financial situations
become worse.
Details
of the State’s two complaints are as
follows:
Milgram v. New Day Financial Solutions,
etc: Filed in New Jersey Superior
Court in Essex County, the State’s seven-count
complaint charges individual defendants Pasch
and Uzor -- along with seven corporations
operated by Pasch, Uzor or both -- with violating
New Jersey’s Consumer Fraud Act. The
complaint also charges violation of state
advertising regulations, the New Jersey Debt
Adjustment and Credit Counseling Act and the
federal Credit Repair Organizations Act.
The suit also charges that the American Financial
Advocacy Council was essentially a ploy to
encourage consumer confidence in the services
of Pasch and Uzor and their companies, through
bogus “independent” recommendations
made by the “non-profit.”
According to the State’s complaint,
Pasch’s New Day Financial operated from
at least September 2008 through March 2009,
charging customers thousands of dollars -
payable in advance - for loan modification
services, and offering a “100 percent
money-back guarantee” if the company
failed to deliver. New Day representatives
urged customers to stop making mortgage payments
while the company sought loan modification
on their behalf. The complaint charges that,
typically, New Day failed to obtain loan modification
for its customers, and in many instances put
them in worse financial standing by instructing
them to stop paying their mortgages.
The experiences of four different New Day
victims, including three from New Jersey,
are described in the complaint. In one case,
a Sayreville woman paid New Day $2,500 for
loan modification help and later learned her
lender had no record of any contact with New
Day. The woman, who had coincidentally received
a loan modification offer from her lender,
asked New Day for a refund after learning
the company had done nothing for her, but
never received one.
In another case, a woman from Howell paid
$4,200 for New Day’s services in September
2008. She was instructed to make her check
payable to Pasch’s company, NDROA. In
early 2009, the woman received a letter from
her mortgage company indicating that no loan
modification review could begin because required
documentation had not been provided. The woman
tried repeatedly to contact New Day, but was
unable to reach a representative except for
one time, when she was instructed to be patient.
Ultimately, the woman worked directly with
her lender to modify her loan, but New Day
never refunded her $4,200.
According to the State’s lawsuit, New
Day posted notice on its Web site in March
2009 that it would no longer be soliciting
loan modification clients. It was around that
time, the lawsuit asserts, that the other
defendant corporations belonging to Pasch
and Uzor - including the non-profit American
Financial Advocacy Council -- formed and began
soliciting loan modification and other debt-adjustment-related
business.
According to the complaint, Pasch’s
American Credit Repair and Debt Settlement,
and his company Paramount Debt Settlement
USA, as well as Uzor and Associates, jointly
began operating a Web site called www.creditrepair199.com
. The Web site offers credit repair and debt
adjustment services, and provides a phone
number to call to obtain such services. The
same Web site advises consumers that they
will be charged an “application/enrollment
fee” of $199 per individual and $319
per couple, plus a $79-a-month service fee.
(It is illegal in New Jersey to charge for
credit repair services not yet rendered.)
The lawsuit also charges that the Pasch/Uzor
“non-profit” American Financial
Advocacy Council -- through its Web site at
www.lordsavemyhome.com
-- has sought to instill consumer confidence
in the defendants’ bogus, for-profit
operations. The complaint quotes the Web site
as saying American Financial works “with
a select group of Christian-owned companies
that are able to assist consumers who are
experiencing financial hardships.” The
same Web site provides links to the Web sites
of Pasch’s companies American Credit
Repair and Debt Settlement and Paramount Debt
Settlement USA, as well as the Uzor companies
Uzor Financial Solutions, LLC and Uzor and
Associates. None of the companies are licensed
debt adjusters.
Among
other things, the State’s lawsuit against
Pasch, Uzor and the other defendants seeks
to dissolve the non-profit American Financial,
and asks the court to order a halt to the
defendants’ unlawful business practices.
It also seeks restitution for consumers and
the imposition of maximum civil penalties.
Milgram v. Best Interest Rate Mortgage
Company (BIRMCO): Filed in Superior
Court in Mercer County, the State’s
four-count complaint charges BIRMCO with violating
the Consumer Fraud Act, state advertising
regulations and the New Jersey Debt Adjustment
and Credit Counseling Act. According to the
complaint, BIRMCO is a state-licensed mortgage
lender, but has no state license to conduct
debt adjustment activity.
Despite
having no license, BIRMCO has solicited loan
modification customers since at least November
2008, typically by sending distressed homeowners
direct mail solicitations that appear to have
been sent by a government agency. The mailings
describe the targeted homeowner’s specific
mortgage information, discuss the availability
of various government programs to help financially-strapped
mortgage holders, and include a telephone
number to call for further information. The
telephone number is actually for BIRMCO, although
the company’s name appears nowhere on
the original mailing.
Once
a consumer calls the number, he or she is
promised that BIRMCO can negotiate a loan
modification resulting in a lower interest
rate and lower monthly payments. Consumers
who accept the offer are charged an up-front
fee of several thousand dollars and must sign
a contract, but they are promised a refund
if BIRMCO fails to obtain a loan modification.
They are also told to stop making mortgage
payments and to avoid contacting their lenders,
purportedly to strengthen their position in
seeking loan modification.
In fact, the State’s lawsuit charges,
BIRMCO often does little or no work toward
obtaining loan modification for its clients.
The suit contends that clients who hire BIRMCO
and heed the company’s advice to stop
making mortgage payments end up learning -
typically through a call from their lenders
- that they are not only delinquent on their
mortgages, but that nothing has been done
to modify their loans. Ultimately, the suit
charges, customers end up working directly
with their lenders and obtaining loan modifications
that would have been available in the first
place.
Nonetheless,
BIRMCO typically forwards a letter to the
consumer afterward claiming credit for negotiating
a beneficial modification. Customers who seek
a refund after negotiating their own loan
modifications or realizing BIRMCO did nothing
for them usually either get nothing, or only
a partial refund, the suit charges.
The
State’s complaint describes the experience
of several BIRMCO victims, including a Belleville
woman who paid the company $2,900 up front
and ended up with a loan modification that
actually increased her mortgage payment by
$70 a month because she followed the company’s
advice to stop making mortgage payments. BIRMCO
ultimately returned only half of her up-front
fee.
As with the New Day complaint, the State’s
lawsuit against BIRMCO asks the court to order
a halt to the defendants’ unlawful business
practices, seeks restitution for consumers
and the imposition of maximum civil penalties.
The Attorney General urged any member of the
public who has been a victim of mortgage-related
fraud to report it by calling the Division
of Consumer Affairs. New Jersey residents
can call the toll-free hotline at
1-800-242-5846. Consumers from out
of state can call 973-504-6200.
Those seeking to file a complaint can also
visit the Division’s Web site at www.njconsumeraffairs.gov
.
Milgram
also reminded homeowners facing foreclosure
that free help may be available to them through
the state’s foreclosure mediation program.
She urged distressed homeowners to explore
what help is available through the program
by calling the toll-free hotline number at
1-800-989-5277 or visiting
the Web site at www.NJForeclosureMediation.org
. Through the foreclosure mediation program,
qualified homeowners who are in danger of
losing their homes can receive help from housing
counselors, attorneys and a neutral mediator
to resolve loan delinquencies.
Attorney
General Milgram thanked Deputy Attorney General
Megan Lewis, Chief of the Division of Law’s
Affirmative Litigation Section, Deputy Attorney
General Jim Michael of the Affirmative Litigation
Section; Deputy Attorney General Janine Matton
of the Affirmative Litigation Section; Assistant
Attorney General James J. Savage of the Division
of Law; Deputy Attorney General Raymond Chance,
Chief of the Division of Law’s Banking
and Insurance Section; Deputy Attorney General
Gregory McHugh of the Banking and Insurance
Section; Supervising Investigator Jennifer
Micco, Investigator Jared O’Cone and
Investigator Kevin Noland of the Division
of Consumer Affairs, for their work on the
loan modification cases announced today.
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