Public Counsel eNews

CONSUMER LAW PROJECT TACKLES DRAMATIC GROWTH IN REAL ESTATE FRAUD

Marcela and Onesimo Hernandez thought their hard work and sacrifice had finally paid off. After several years of cleaning homes and painting houses, they had struggled and saved enough to buy their first home for their three children.

When they began to inquire about the process of becoming homeowners, however, they ran into trouble. Two of their friends, who claimed to have experience in real estate, convinced them that they could not hold the title to the property in their own names. The friends offered to “help” by suggesting that the Hernandezes place title to the property in their name instead – with the express understanding that the house would belong to the Hernandezes and all payments would be made by them. Relying on this fraudulent advice, Mr. and Mrs. Hernandez made the down payment, moved in, and proceeded to make all the payments on the house for the next several years.

The fraud only became apparent in 2004, when the couple asked their friends to restore title as originally agreed. The friends refused, served them with an eviction action, and took out subsequent loans on the property draining over $120,000 in equity from the Marcela and Onesimo’s home. At this point, the Hernandezes sought the assistance of Public Counsel.

The Consumer Law Project at Public Counsel accepted their case and quickly teamed up with Sonnenschein, Nath & Rosenthal, LLP. Last year, after a five-day bench trial, the Court issued a decision in favor of the Hernandezes. The Court ordered the title restored to Mr. and Mrs. Hernandez, $110,000 in compensatory damages and $35,000 in punitive damages. Lead trial attorney Christopher Prince at Sonnenschein was certainly pleased with the result. “For working people in America, and particularly in Los Angeles, the value of a home is not measured in dollars,” says Chris, “rather, it represents hope for the future, and it affects a family's entire way of life. I was honored to help the Hernandez family preserve the life they had built through so much sacrifice and hard work.”

Unfortunately, the plight of the Hernandez family is not unique in Los Angeles. Public Counsel is seeing a dramatic growth in the number and complexity of real estate fraud cases. Experts agree that the proliferation of sophisticated consumer fraud is due in part to the booming Southern California real estate market. “Even traditionally distressed communities have seen a significant increase in property values” explains Hernán Vera, the Directing Attorney of the Consumer Law Project “ and, unfortunately, this has resulted in highly aggressive efforts by scam artists to illegally obtain title or possession of the houses so they can get their hands on the growing equity.”

The scams take many different forms, from title scams perpetrated on immigrants like the Hernandezes to foreclosure fraud targeted at desperate homeowners behind on their payments, to all forms of home equity fraud and predatory lending schemes aimed at elderly homeowners. One recent case that drew headlines involved the federal indictment by the Unites States Attorneys’ Office of a group of con artists who ran a foreclosure scam that ensnared over 70 victims (see the December 6, 2005, Los Angeles Times article, “Pair Plead Not Guilty In Home Loan Scam”). Public Counsel is currently representing many of these victims in their quest to recapture their homes, and is continuing to look for more firms to provide pro bono representation to clients victimized by these same defendants.

The success of the Consumer Law Project in fighting real estate fraud would be impossible without the hundreds of committed pro bono attorneys that volunteer each year to litigate these important cases. By tapping the combined resources of large and small firms, corporate counsel, and solo practitioners, the Consumer Law Project is able to leverage its ability to address the countless scams that prey upon those who can least afford it.

The results truly change lives. The Hernandez children can now look forward to staying in their neighborhood school and building a life in the place they call home. One of the children asked after the Court issued its decision, “Did I win, too?” We are happy to report that they did.