Five accused of foreclosure scam; Two area men among those sued for allegedly misspending $350,000.
BOSTON -- Two Central Massachusetts men are among five people being sued by Attorney General Martha Coakley for allegedly misspending more than $350,000 in advance payments from homeowners seeking help to avoid home foreclosures.
The state has alleged in a suit filed in Suffolk Superior Court that since 2009 the five individuals ran organizations claiming to provide financial and legal services, including foreclosure-related services to distressed homeowners, but instead spending clients' fees on personal expenses.
Named in the suit are the Alliance for Affordable Housing and the Global Advocates Foundation Inc., both located in Everett, and the Alliance for Hope Network Inc. in Framingham. Individual defendants include Gailon Arthur Joy of Boylston, John Charles Schumacher of Lancaster, Paula Carvalho of Framingham, Obeilson Roosevelt Matos of Framingham and Pricila Trancoso Silva of Revere.
Judge Frances McIntyre granted a preliminary injunction Thursday against the defendants, to prevent them from soliciting or advertising for any foreclosure-related services or improperly charging advance fees.
Ms. Coakley alleged that the defendants portrayed themselves as tax-exempt, nonprofit organizations, but operated like for-profit businesses, seeking financial gain for their officers and directors. The complaint also alleges that the defendants, who are not attorneys or law firms, engaged in the unauthorized practice of law.
According to the complaint, the individuals required homeowners to give deposits of up to 25 percent of their gross monthly incomes, claiming the deposits were necessary to be eligible for federal and other mortgage relief programs. Between March 2010 and October 2012, the defendants allegedly collected and spent more than $350,000 in deposits that they received from homeowners and which they had said would be placed in escrow for the homeowners to use to help mitigate their pending foreclosure.
The complaint alleges, however, that the defendants never properly accounted for the use of the funds and allegedly used the money for personal expenses, including housing costs, car insurance fees, car repairs and vehicle excise payments.
"We allege these defendants targeted and took money from homeowners facing foreclosure, promising to help them stay in their homes, but instead used that money for personal expenses,'' Ms. Coakley said in a statement.
State regulations prohibit soliciting or accepting an advance fee in connection with foreclosure-related services, or advertising services without disclosing exactly what is offered to avoid foreclosure, among other unfair practices.
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