Predatory Lender: $30.5 Million Verdict

Pasadena Loan Broker Hit with $30.5 Million Jury Verdict, Settled before Punitive Damage Phase in Predatory Lending Trial

 

November 1, 2016— A predatory lending-foreclosure trial settled confidentially today before the punitive damage phase was set to begin, following a $30.5 million judgment against a Pasadena loan broker that knowingly issued a toxic and deceptive loan to a Los Angeles woman which resulted in the rapid default and foreclosure of her home.

A Long Beach jury reached its verdict on Friday, October 28, 2016, finding Cervenka and Lukes Mortgage Corporation responsible for providing the plaintiff a loan with hidden terms. The undisclosed terms (24.99% interest for one missed payment) caused the plaintiff’s mortgage to skyrocket from $11,000 to $31,000 after she missed two loan payments and the defendant issued the Notice of Default and began the foreclosure process.

The company began the process of selling the home to a favorite client, who was introduced as a would-be rescue lender which coaxed the plaintiff into giving a personal tour of her house. The defendant intentionally issued a loan with the hope and expectation that they would own the home. In order to effectuate that plan, they inappropriately classified the home loan as a business purpose loan allowing them to avoid all consumer protection laws.

“This case once again shows the power of the jury system in reigning in bad corporate actors who evade the reach of government. The jury saw how lenders were using a loophole to call residential mortgages ‘business loans’ to get around safeguards enacted after the housing crisis which were put into place to crack down on predatory lenders,” said co-lead counsel, Daniel Balaban, with the law firm Balaban | Spielberger. “We hope this verdict will close that loophole.”

The plaintiff worked as a civil servant for 31 years before she pursued her passion for renovating historic properties in LA’s Angelino Heights. Some of her work includes the preservation and relocation of the 1941 Maxwell house by Richard Neutra, who is considered one of the region’s most distinguished residential architects.

“The jury has found the courage and wisdom to do what our federal and state governments have failed to do, provided a remedy that directly benefits the victim of a wrongful fraudulent foreclosure,” said co-lead plaintiff counsel Daniel G. Brown of the Law Offices of Daniel G. Brown.