Law Firms in Los Angeles were taking advantage of distressed homeowners.
In 2011, California broke up a network of law firms in Los Angeles that have fraudulently forced distressed homeowners nationally to pay thousands of dollars each to file mass litigation against their mortgage lenders.
Kamala Harris, who was the state's attorney general back in 2011, sued several Los Angeles law firms, California attorneys, and 14 other businesses and individuals on who preyed on desperate borrowers to get mortgage relief.
She stated at the time that the defendants took advantage of the dissatisfaction of borrowers with lenders and servicers in a housing crisis that hit California hard after the mortgage crisis of 2009.
"The state said in its complaint filed in the Los Angeles County superior court, "With the industry's increasing reputation for fraud and the legislative prohibition on advance payments for loan modification services, defendants saw a more lucrative opportunity to market litigation rather than loan modifications.
According to officials at the time, the defendants asked homeowners to engage in "mass joinder" litigation in 17 U.S. states of at least 2 million pieces of mail and extracted retainer fees of up to $10,000 from each of approximately 2,500 families.
Harris explained back then that these law firms in Los Angeles would mislead borrowers into thinking that their involvement would help them escape foreclosures, minimize their loan balances or interest rates, or even give their homes a clear title.
Instead, she stated that poor legal advice was frequently given to borrowers or that they were unable to get answers to basic queries, like whether they were actually associated to litigation. A disproportionate amount, officials said, were African-American and Hispanic families.
During a news conference, Harris said that victims were led to believe that the litigation "would be the way they could get justice." "Those homeowners were the only people who paid."
The California State Bar disciplined several lawyers and Los Angeles law firms for ethical misconduct, fraud and for violating professional standards. The lawsuit charged with violations of many laws, as well as damages and other remedies, and was aimed to deter unlawful activities.