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Don't bank on loan modifications or debt aid that can't be promised

A couple finds that turning to a law firm with an F rating from the Better Business Bureau and a 'debt management' firm for help can be costly and disappointing.

April 11, 2011|David Lazarus
  • Faith and Gary Hunt turned to a law firm in hopes of halving their mortgage payment and signed on with a company to erase credit card debt.
Faith and Gary Hunt turned to a law firm in hopes of halving their mortgage… (Gina Ferazzi, Los Angeles…)

Like a lot of homeowners, Mar Vista residents Faith and Gary Hunt found money a little tight during the recession and hoped they could work out some more accommodating terms with their lender, Chase bank.

To improve their odds, they said they turned to a law firm that said it could possibly cut their mortgage payment in half. They also signed on with a "debt management" company that, according to the Hunts, said it could eliminate their credit card debt.

After making thousands of dollars in payments, the Hunts said, neither business would return their calls or emails, and the couple received no assistance with their mortgage or their plastic.

"I don't think they ever did anything to help us," Faith, 47, told me.

With millions of people facing foreclosure, the Hunts' experience highlights the potential perils of seeking assistance from businesses that claim they can ease your financial obligations.

Some may indeed be legit. But many others will be happy to accept your money and do little if anything to get you off the hook.

The Hunts own a four-bedroom house in the San Gabriel Valley. It's an investment property that they rent out to tenants. They pay Chase about $1,700 a month on their mortgage.

In late 2009, the couple received a solicitation in the mail from Mesa Law Group in Costa Mesa saying it might be able to reduce their mortgage balance and payments as much as 50%. Intrigued, the Hunts set up an appointment to speak with a representative of the firm.

"We had talked to the bank about refinancing, but it seemed like it would be very hard," Faith recalled. "But Mesa said they could lower our monthly payment to around $700."

"They were very confident," added Gary, 49. "They said it was almost 100% that they could do it."

It would cost the Hunts $3,500 in legal fees, to be paid in two installments of $1,750. It's illegal in California for upfront fees to be charged for loan modification assistance. But Mesa said it would tap the cash only as work was completed.

Meanwhile, the couple mentioned that they were carrying about $35,000 in credit card debt. They said the Mesa representative offered to sign them up with a company called National Debt Management Group that supposedly could eliminate their obligations within three years.

The Hunts said they were subsequently instructed by a National Debt Management representative to pay about $500 a month into an escrow account managed by the company that would be used to negotiate with their creditors.

Flash forward to February of this year. By that point, the Hunts said, Chase had turned them down for a loan modification not once, not twice, but three times. They also said about $2,000 was withdrawn from their escrow account, although National Debt Management apparently hadn't done anything to reduce their credit card debt.

The Hunts asked Mesa Law Group for their money back and said they were thinking about reporting the firm to the State Bar of California for having charged an upfront fee.

In response, a Mesa representative sent an aggressive letter defending the firm's actions.

"We consider this extortion," the representative, Denny Lake, wrote. "Your letter is filled with lies and inaccuracies, and Mesa Law Group will aggressively defend ourselves against any false and fraudulent claims."

He added that the Hunts would be "liable for any legal fees that we may accrue defending ourselves" and that "we will use every resource at our disposal to collect this from you."

Not long after, the couple decided to contact me.

I did some nosing around and quickly discovered that Mesa Law Group and National Debt Management share the same address in an office building near John Wayne Airport, as well as the same phone number.

When I called the number, the woman who answered said National Debt Management was "a different department" of the law firm.

The Better Business Bureau gives Mesa a grade of F because the firm fails to respond to complaints and because of "grossly misleading" ads.

Paul Petersen, the head of Mesa Law Group, told me he couldn't comment on the Hunts' case because the dispute was ongoing.

But he said complaints are all too common from clients who didn't see the outcome they'd hoped for. "Unfortunately, when people are not approved for a loan modification, they are not happy about it," Petersen said.

He said Mesa has helped modify about 700 mortgages but that the firm never promises results. "We agree to process the paperwork and put our best effort in," Petersen said.

He said National Debt Management used to lease space in his office building but is no longer there. He said National Debt Management "is not affiliated with nor is it any part of Mesa Law Group."

I asked why the two companies share the same phone number. Petersen said this is because calls for both firms are handled by "a central answering service."

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