Homeowners fight foreclosure fraud with class action

GREENBELT, MD -- In what has become a sadly familiar story, a homeowner in trouble responds to a company that promises to help them avoid foreclosure. The solution turns into another problem, and the homeowner is now part of a class action lawsuit against the company.

"They say the money was going to go in an escrow account and help you get back on your feet so you can go ahead and keep your home and whatnot after a year....I thought it was a good program!"

So good, that this Suitland woman-- who didn't want to be named-- recommended the financial service she was using to a neighbor. Now, she's one of hundreds of homeowners from Maryland, D.C., and Virginia in a class action lawsuit filed in federal court.

Attorney Phillip Robinson with Civil Justice Incorporated says most homeowners were looking to refinance.

"They were trying refinance from an exploding unaffordable loan to a loan they could afford," said Robinson. "Instead, they got placed in a foreclosure reversal program. And the homeowners are left with nothing and they're facing a second foreclosure in someone else's name on a fraudulent loan."

In federal court on Friday, an attorney for one of the title companies named in the civil suit told federal Judge Roger Titus that the victims were guilty of contributory negligence -- that they in essence, were also to blame. This infuriated Angele Reid of Oxon Hill, who sat in on the motions hearing.

"I was really ready to strangle him," Reid said. "Because if you look at the documents, even a real estate attorney would have difficulty figuring out that something was going wrong."

Judge Titus seemed to agree, pointing out that the federal forms known as HUD-1's were indecipherable. At one point, Titus said only a mathematician could understand them.

One of those named in the class action suit--Joy Jackson of the Lanham-based Metropolitan Money Store--has also been indicted on criminal charges. According to the criminal indictment, Jackson allegedly took money from clients and spent it on fur coats, fancy cars, a limo to take her son to his private school, and an $800,000 wedding at the Mayflower Hotel.

But even as attorneys go to bat for victimized homeowners, cleaning up after the mortgage mess won't be easy.

Many consumer advocates say homeowners tell them they are in an endless game of phone tag with lenders as they try to forestall foreclosure. Attorney Peter Holland, who represents some of the hundreds of homeowners from Herndon to Hyattsville in a class action lawsuit in federal court, hears that too.

"The lenders are giving instructions, I'm told, to foreclose. And so, it's like a battlefield every day," said Holland.

But some in the housing market say another victim in the mortgage crisis are the reputable companies who do act in good faith. One thing everyone agrees from homeowners, to consumer advocates, to mortgage firms is that the process of cleaning up the market will be a long, hard slog.

(Copyright 2008 by WTOP Radio. All rights reserved.)