500+ Hawaii Residents Possible Victims of Alleged Mortgage Fraud Scheme

HONOLULU —Hundreds of distressed homeowners facing foreclosure in Hawaii were likely misled by a loan modification program operated by the Homeowner Legal Assistance Association (HLAA), a Florida corporation, for approximately 17 months in 2009 and 2010, according to an investigation conducted by the Hawaii Department of Commerce and Consumer Affairs’ (DCCA) Office of Consumer Protection (OCP).

OCP believes more than 500 Hawaii homeowners may have claims against their New York-based attorneys and urges victims to file claims for reimbursement.

According to OCP, the victims were offered loan modification services through HLAA, Inc. The alleged scheme operated nationally, but was widespread locally, and is believed to have taken in more than $1.5 million from Hawaii consumers.

The HLAA loan modification program was marketed and sold to Hawaii homeowners by local agents affiliated with companies such as 1st Choice Family Solutions, Inc. and Family 1st Solutions, Inc., both Nevada corporations. The local agents were responsible for arranging to have residents retain and pay the HLAA attorneys based in New York. The attorneys would then outsource the work back to Florida companies, such as Justice Paper Processing, Inc. and E3 Finance, LLC, who in turn would outsource the work back to the local agents.

From January through sometime in September 2009, HLAA referred all of its Hawaii cases to Marc Zirogiannis, a New York lawyer, who charged a standard retainer fee of $2,750. For roughly nine months following that, through approximately July 2010, HLAA referred all of its Hawaii cases to David Galanter, another New York attorney, who charged Hawaii homeowners a standard retainer fee of $2,950.

OCP pursued enforcement actions against the two lawyers and related entities both here in Hawaii and through New York’s legal disciplinary agencies. Zirogiannis has since been disbarred by the State of New York. Galanter is the subject of a pending disciplinary action before the New York Departmental Disciplinary Committee (NYDDC).

NYDCC has invited all Hawaii residents who were clients of Galanter and who sustained losses to submit claims for recovery of their money from the Lawyers’ Fund for Client Protection of the State of New York. Anyone interested in making such a claim should contact OCP as soon as possible for instructions on how to make a claim.

In addition to laying the groundwork for consumers to recover from New York’s Lawyers’ Fund, OCP obtained a permanent injunction prohibiting Galanter, HLAA, and other targets of OCP’s investigation from engaging in the home mortgage finance industry in the State of Hawaii, and fines and penalties totaling $87,000.

“All of the money that was paid by Hawaii consumers was paid under retainer agreements with these New York attorneys for legal services, and yet it does not appear as though the lawyers provided any legal services. Neither of these out of state lawyers could legally provide the promised services here in Hawaii since both attorneys were not licensed to practice law in our state,” according to OCP Executive Director Bruce Kim. “The HLAA loan modification program was specifically structured to circumvent our laws, and hundreds of consumers were affected.”

OCP advises homeowners who are facing foreclosure that you may be targeted by a mortgage rescue scam. These mortgage rescue “professionals” frequently use half-truths and deceptive tactics to sell services that promise relief to homeowners in distress.

If you are looking for foreclosure prevention help, avoid any business that:

·        Promises they can stop the foreclosure process, no matter your circumstances
·        Instructs you not to contact your lender, lawyer or U.S. Department of Housing and Urban Development (HUD) approved credit or housing counselor
·        Collects a fee before providing any services
·        Recommends that you stop making your mortgage payments
·        Recommends that you make your mortgage payments directly to it, rather than your lender
·        Pressures you to sign papers you haven’t had a chance to read thoroughly or that you don’t understand
·        Recommends that you hire an out of state lawyer who isn’t licensed to practice law in Hawaii

Violations of Hawaii’s Mortgage Rescue Fraud Prevention Act and the laws prohibiting unfair and deceptive trade practices subject offending parties to fines ranging from $500 to $10,000 per violation per day.

Anyone who believes they may have been the victim of a mortgage rescue scam and have not filed a complaint with the State of Hawaii’s Office of Consumer Protection may contact the Consumer Resource Center at (808) 587-4272 or go online to the OCP website at https://cca.hawaii.gov/ocp/ for more information about filing a complaint.

HUD-approved housing counseling agencies in Hawaii can provide free advice on buying a home, renting, defaults, foreclosures, and credit issues. If you are facing foreclosure, you can contact the Hawaii Foreclosure Information Center (HFIC) at (808) 587-3222 or toll-free at (800) 394-1902 to get free information on HUD-certified housing counselors. You may also visit HFIC’s website at HFIC.hawaii.gov. HFIC is operated by the DCCA as a free service to homeowners facing foreclosure.

The Office of Consumer Protection was represented in this case by staff attorneys Landon Murata and James Evers.

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