Va. Mortgage Modifier Is Accused of Scheme

The angry homeowners had been waiting for hours. One desperate man dialed 911 -- the second time in a week Fairfax County police were called to the Tysons Corner office building. Many had paid thousands of dollars to the Shmuckler Group to help get their loans modified so they wouldn't lose their homes. But they said nothing was done as dire notices from banks kept filling their mailboxes.

Now they crammed into the tiny waiting area, waving papers, full of questions.

"My mom's been waiting for eight months!" said one.

"We paid $5,000. . . . What happened?" said another.

Government officials and housing advocates across the region have noticed an increase in companies that offer help renegotiating loans. Many are scams that urge clients to stop paying mortgages and instead pay upfront fees for services they could get for free, a practice that is illegal in Maryland. Gov. Timothy M. Kaine (D) signed a bill this week that clarifies that the practice is also illegal in Virginia but allows legitimate companies to be paid after they help save a home.

Officials at Maryland's Department of Labor, Licensing and Regulation say the Shmuckler Group, a mortgage and financial consulting firm in Vienna, is one of 45 businesses nationwide that the agency is investigating in connection with allegations of fraud against Maryland consumers. They said a trickle of complaints about unscrupulous loan modifiers that began in December became a deluge in the spring.

"It's like a no-ending story. We're having these cases coming out of the blue moon, from everywhere . . . not just in the state of Maryland but other states as well, Florida and California," said Zenaida Dorsey, a financial investigator for the state. "They're getting scammed by the Internet, by the telephone." Dorsey said such firms often prey on immigrant communities.

Many thought Howard R. Shmuckler, 65, was a lawyer in good standing when they forked over thousands in cash for his help. But he spent time in federal prison for bankruptcy fraud and is facing possible disbarment in the District. On the tense day this month at his business, Shmuckler eventually emerged.

"It's important people know the facts," he told the group. "We've been around for many years," he added -- actually, his business has been around less than a year, according to his attorney -- "and we will stand behind any representation that was made. We will fight to keep your house."

"But I have six days!" cried Jessica Avila, a pregnant mother from Reston. "What am I going to do?"

Shmuckler's attorneys say he is operating a legitimate business that has helped hundreds with their loans and has not been charged with wrongdoing. He says some files and money were unaccounted for after an acrimonious split last month with his former marketing group, which the marketer denies.

"The Shmuckler Group has at all times acted in good faith and always provided services for money rendered," said Stephen D. Charnoff of Rees Broome PC in Vienna. "To the extent that any government entity may wish to investigate the Shmuckler Group's activities, the Shmuckler Group will respond to such an investigation in a timely and appropriate manner." He declined to discuss specific cases, citing confidentiality.