PHOENIX (Friday, April 8, 2011) -- Attorney General Tom Horne announced today that a default judgment has been entered against a Scottsdale-based mortgage loan firm that had bilked consumers of nearly $4 million.
This week, a Maricopa County Superior Court judge entered a default judgment against Bryan Prehoda and Luis Belevan who operated Guardian Group LLC ("Guardian Group") until the Department of Financial Institutions shut down the business in May of 2010 for engaging in unlicensed mortgage broker activities. This action was followed by the filing of a lawsuit against the company and its principals by the Attorney General in July of 2010 accusing them of consumer fraud. To prevent Prehoda and Belevan from harming consumers in the future, the Attorney General obtained an order prohibiting them from engaging in any trade or occupation relating to mortgage loans in Arizona in the future. The judgment also requires Defendants compliance with the Arizona Consumer Fraud Act.
Horne said, “This default judgment is the result of a great deal of hard work on the part of the Attorney General’s Office and the Department of Financial Institutions. Since the mortgage collapse began in 2008, predators such as those involved in this case have proliferated in Arizona, ripping off thousands of vulnerable, innocent victims. I am committed to investigating and prosecuting such actions to the fullest extent possible to defend Arizonans and to send a clear message that consumer fraud is a serious crime with serious consequences.”
According to court documents, Guardian Group represented it could help struggling homeowners by reducing the principal amount of their mortgage loan. Guardian Group claimed it would negotiate with lenders to purchase a consumer’s note for less than face value and sell the note in an investment package to a third party investor. Guardian Group then told consumers that it would modify the rate and terms of the consumers’ mortgage loans to reduce the loan principal to 90% of the home’s current market value. After collecting up-front fees of $1595 from more than 2,495 consumers, however, Guardian Group failed to provide the promised principal reduction program.
The Arizona Department of Financial Institutions effectively shut down Guardian Group in May, 2010, by issuing a Cease and Desist Order for engaging in unlicensed mortgage broker activities. The Order also imposed a civil monetary penalty of $100,000. After hearing, an Administrative Law Judge found that Guardian Group harmed over 2,495 consumers, engaged in misleading or deceptive advertising, and engaged in unlicensed activity. Superintendent Lauren Kingry issued a Final Decision and Order on February 23, 2011, adopting the Judge’s recommended decision.
“A number of loan modification scams have plagued our communities in recent months,” said Robert Charlton, Assistant Superintendent of the Arizona Department of Financial Institutions. “Our Department, in cooperation with the Arizona Attorney General’s Office, moved quickly to stop the Guardian Group and limit the damages to Arizona consumers who can least afford this type of predatory activity.”
The Attorney General's lawsuit specifically alleged:
- Guardian Group misrepresented the services that a consumer in the Principal Reduction Program could expect to receive and the company’s ability to provide those services.
- Guardian Group misrepresented to consumers that it had multiple investors prepared to purchase mortgage notes, when no actual investors had ever invested money in the company.
- Guardian Group falsely told consumers their file would be processed within 60 to 90 days and promised refunds that were never delivered.
The default judgment further requires the Guardian Group, Prehoda and Belevan to pay consumer restitution totaling $3,979,525, in order to reimburse $1595 to each of the 2,495 consumers. The Attorney General also obtained the maximum civil penalties permitted by the Arizona Consumer Fraud Act, which is $10,000 per violation as defined by law. Because Guardian Group collected fees from over 2,495 consumers, the judgment includes a civil penalty award of $24,950,000.
If you have been charged an up-front fee for mortgage relief services, or believe you have been the victim of a foreclosure rescue scam or any other type of consumer fraud, please contact the Attorney General's Office in Phoenix at 602.542.5763; in Tucson at 520.628.6504; or outside the Phoenix and Tucson metro areas at 1.800.352.8431. To file a complaint in person, the Attorney General’s Office has satellite offices throughout the state with volunteers available to help. Locations and hours of operation are posted on the Attorney General’s Web site, azag.gov.