New York Attorney General Eric T. Schneiderman announced Thursday that his office has reached a more than $400,000 settlement in a mortgage foreclosure "rescue" scam that caused 14 Long Island homeowners to lose their deeds and equity.

"This shameful scam re-victimized families already suffering from the collapse of the housing market," Schneiderman said in a statement.

Empire Property Solutions in Medford and Bethpage advertised services to help struggling families save their homes from foreclosure by refinancing mortgages and repairing credit scores, Schneiderman said.

Empire principals John Rutigliano and Kenneth Kiefer encouraged homeowners to turn their deeds over to them through "sale-leaseback" agreements, in which they were told they could stay in their homes, pay rent, build up their credit, and after a year, the deed would revert to them, the attorney general said.

An investigation found Rutigliano and Kiefer failed to make good on their promises to use the homeowners' payments to pay down their mortgages. In the end, the homeowners faced foreclosure and eviction.

Schneiderman said other parties to the scam were: the Zornberg & Hirsch law firm in Hauppauge and its married principals, attorney Barry Zornberg, since disbarred, and Nanci Hirsch; H & Z Abstract, a title company owned by Hirsch; Hauppauge attorney Cory Covert; and Baldwin mortgage broker Leonie Neufville.

The state filed a civil complaint and multiple settlements were reached, with Zornberg agreeing to pay $340,000; Covert $67,500; and Neufville $10,000, plus a five-year ban on acting as a broker, Schneiderman said.

advertisement | advertise on newsday

Schneiderman's office also received a default judgment against Rutigliano and Kiefer, which it said will be converted into a monetary judgment.

The funds will be used to compensate victims of the fraud. The attorney general's office said it is working with several of the victims to return their deeds to their rightful ownership.

Attorneys for Empire and the individuals named in the state lawsuit could not be reached for comment Thursday.