Firms sued, accused of home equity scams

A host of South Florida ''foreclosure prevention'' companies and individuals were sued by the attorney general, who accused them of scamming dozens of homeowners out of home equity.

Florida's attorney general sued seven South Florida companies and 12 individuals who allegedly peddled programs offering to help struggling homeowners avert foreclosure but instead left residents deeper in debt and, often, still fighting for their homes.

Attorney General Bill McCollum also announced proposed legislation aimed at stamping out ''foreclosure prevention'' scams. The law seeks to make sure homeowners are making fully informed decisions and allows them to change their minds within five days of signing.

''We are tackling this growing problem from several directions to help keep families in the homes they've worked so hard to achieve,'' said McCollum in a statement.

The lawsuit filed Tuesday in Broward Circuit Court alleges Wyman Roberts and Bernard Williams led a mortgage fraud ring that scammed at least 80 homeowners out of $1.7 million in home equity.

Starting in 2004, Roberts and Williams led a company named National Foreclosure Management in Miami Lakes. Then, Williams led American Home Rescue in north Miami-Dade County, which operated until last year.

Consumer advocates say the fraud -- also called ''equity stripping'' -- is running rampant in Florida. Various kinds of home loan fraud has prompted a host of initiatives, at the county, state and federal levels.

McCollum's lawsuit against National Foreclosure Management and American Home Rescue may come too late for homeowners already caught up in the scheme, said a Legal Aid attorney representing clients the companies allegedly defrauded. George Castrataro, a lawyer with Legal Aid Service of Broward County, said many victims have already lost their homes and probably can't get them back.

''We wanted the attorney general to move more quickly and aggressively,'' said Castrataro, who said he's prodded the state office to take action for nearly 10 months.

Sandi Copes, Attorney General spokeswoman, responded:

``It is a complicated matter when building a lawsuit of this kind. We have to ensure we have a solid case that will deliver the greatest possible benefit to the most victims involved.''

Pamela Simmons, who lost her three-bedroom Pompano Beach home last year after signing up with NFM in 2005, said her lender has already foreclosed on the house and sold it.

''I am glad they sued them, but I lost my house already,'' said Simmons, who now rents a two-bedroom apartment in Boynton Beach.

Here's how the firms' foreclosure programs allegedly worked:

They approached homeowners who had fallen behind on mortgage payments but had substantial equity in their homes.

The company would offer to take title for a year, refinance the mortgage, offer credit counseling and provide some cash. The homeowner would stay in their residence (while paying rent) with the assurance they would get title back in 12 months.

But the lawsuit says the firms actually sold the homes to a new buyer, in many cases artificially inflating the homes' value to get more money out of the deal. And they tacked on outsized fees and costs that erased much of the equity. The Miami Herald, which wrote about NFM and AHR in August, found one case where a $237,000 sale came with a $66,331.80 ''servicing fee'' -- paid to American Home Rescue.

As a result of such fees, the house is saddled with a much bigger mortgage the resident cannot pay.

And, according to the suit, the two companies often didn't pay the mortgage. So buyers would move to evict the homeowner and sell the home in order to avoid their own foreclosure.

The lawsuit, jointly brought by Florida's Office of Financial Regulation, claims deceptive and unfair trade practices. It seeks to stop the defendants, which include Southeast Capital Mortgage in Hollywood and Barrister Title Services in Plantation, from operating in real estate again. It also aims to freeze defendants' assets and recoup all damages lost by victims.

Neither Williams nor Roberts could be reached for comment.