Nonprofit Wins $1.5M Deal for Homeowners

(CN) - A consumer advocacy group says it has started refunding more than 500 homeowners who were bilked of thousands of dollars for worthless mortgage-modification services.

The Neighborhood Assistance Corp. of America (NACA) says its $1.5 million deal with First One Lending will allow it to return 100 cents on the dollar to deceived homeowners.

"The consent decree also effectively puts First One out of the mortgage modification business," NACA's attorney Christopher McNamara said.

NACA is Massachusetts-based nonprofit that provides mortgage assistance to low- and moderate-income families in 25 states and the District of Columbia.

It claimed in March 2012 that First One and its president, John Vescera, had made numerous false and misleading representations designed to convince vulnerable homeowners it was affiliated with NACA.

First One also allegedly misrepresented itself as a nonprofit public benefit corporation working to expand affordable housing opportunities to the public. Lastly, it falsely claimed that the U.S. Department of Housing and Urban Development had approved it as housing counseling agency, according to the complaint.

"The purpose of defendants' numerous misrepresentations, including misrepresentations about First One's affiliation with NACA, is to gain the confidence of consumers so that defendants can accomplish their goal: taking hard-earned money from vulnerable homeowners who can ill afford to squander the $1,450 to $1,850 typically charged by First One for its purported services," NACA claimed.

NACA said the services First One did provide were worthless. After charging $1,450 to $1,850, First One typically did nothing more than provide NACA with the financial information that the homeowner sent, "which homeowners can do free of charge through NACA's website," according to the complaint.

"Not only are First One's Services worthless, First One's practice of collecting the fees in advance of a successful loan modification is illegal under California law, which prohibits charging advanced fees for mortgage modification service and requires that the service provider provide a specific notice regarding the availability of the services for free from other sources prior to entering into a fee agreement," NACA claimed.

Over the past year, a federal judge enjoined the assets of First One and Vescara, and it forbade the company from misleading consumers about its affiliation with NACA.

First One, Vescera and a newly added defendant, Randa El-Ferra, agreed on April 30 to abide by an injunction and pay NACA damages.

U.S. District Judge David Carter in Santa Ana, Calif., signed the order on May 1.

In addition to forbidding lies about First One's supposed affiliation with NACA, the injunction restricts First One from insinuating that it provides loan-modification services.

The defendants are also now enjoined from using the slogans "Home Save," "Home Save Program," "Save the Dream," "Neighborhood Assistance," or similar slogans in any advertising, promotional materials or other materials, whether written or oral, provided to customers or potential customers.

NACA said it began distributing funds recovered through its lawsuit to aggrieved homeowners on July 11.

It described the settlement as "an unprecedented victory" that gives full refunds to victims of a loan-modification scam.

The settlement also established a benchmark for prosecutors to take action against those who have profited from the foreclosure crisis, NACA said.

"NACA has shown that it is possible and necessary to both put these predators out of business and compensate the homeowners for every penny they have paid these predators," NACA founder and CEO Bruce Marks said in a statement. "No one should ever have to pay to try and save their home. It's a disgrace that companies like First One engages in such deceitful practices, preying on people desperate to save their homes."

Christopher McNamara, of Kasowitz, Benson, Torres & Friedman in San Francisco, represented the nonprofit.

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