Seven Lenders Shut in Fraud Probe

State prosecutors shut down seven mortgage companies Tuesday in a growing campaign against predatory lenders suspected of tricking thousands of struggling homeowners into mortgage refinancing deals that led many to lose their homes.
Los Angeles Business Journal Online
the Associated Press reports.

Attorney General Jerry Brown said his office had filed a lawsuit seeking penalties and restitution of more than $20 million in the bait-and-switch scam by the companies, including Lifetime Financial, led by 25-year-old real estate agent Eric Pony, his mother and sister.

"As the mortgage crisis worsens, a growing number of fly-by-night companies are employing increasingly brazen tactics to push desperate homeowners into illegal and unconscionable loans," Brown said.

California has been ground zero for many of the potentially risky adjustable-rate mortgages that U.S. borrowers took on in recent years.

As a result, the state had the second-highest foreclosure rate in the nation last month, with one in every 242 households receiving a foreclosure-related notice.

The illegal sales practices outlined in the lawsuit included psychological pressure, forgery and outright lies, Brown said.

"This is among the worst we've ever seen," Brown said. "This is not just exaggeration and puffing. This is straight-out, deliberate stealing and fraud."