UPDATE 1-Calif. sues six lenders for predatory practices

(Recasts first paragraph, adds details of lawsuit, byline)

By Gina Keating

LOS ANGELES, March 18 (Reuters) - California Attorney General Edmund G. Brown Jr. sued six small mortgage companies and 10 individuals in what Brown said on Tuesday would be an ongoing crackdown on "fly by night" companies seeking to profit from the deepening subprime mortgage crisis.

The lawsuit, filed under seal on Monday in Los Angeles, alleges a complex scam targeting homeowners who wanted to refinance out of high-interest loans but were forced through intimidation or fraud into even more unaffordable loans.

In many cases, the victims lost their homes, Brown said.

Lifetime Financial, Nations Mortgage, Greenleaf Lending, Virtual Escrow, Olympic Escrow and Direct Credit Solutions were shut down and their real estate and bank accounts were frozen by court order, Brown said.

Authorities in San Bernardino, California, served arrest warrants for seven people connected with Lifetime Financial on Tuesday morning and took five into custody on charges including conspiracy, grand theft, forgery and elder abuse, a District Attorney's Office spokeswoman said.

Brown is seeking $20 million in penalties and restitution. The state said 25-year-old Eric Pony, a former real estate agent who lost his license last year, ran a predatory lending scheme he carried out with his mother and sister, according to court documents.

Lifetime Financial, Nations Mortgage, Direct Credit Solutions and Greenleaf Lending, all run by Pony and his family, could not be reached for comment and the phone number for its headquarters had been disconnected.

Virtual Escrow could not be reached for comment. No contact information could be found for Olympic Escrow.

In coming weeks, Brown said he expects to file criminal and civil legal actions against other mortgage lenders and foreclosure consultants who he said are preying on homeowners as the mortgage crisis deepens.

The defendants used forged loan documents and "bait and switch" tactics to "ensure that loans went through at onerous terms which were never disclosed to victims prior to the close of escrow," the lawsuit said.

The two escrow companies named in the lawsuit also falsified documents and failed to honor borrowers' requests to cancel the transactions, the lawsuit said. (Reporting by Gina Keating; Editing by Brian Moss and Carol Bishopric)