February 10, 2009
Florida Attorney General Bill McCollum today announced that his Economic Crimes Division has reached a settlement with a Tampa business engaged in foreclosure rescue services over allegations the conduct violated the newly enacted Foreclosure Rescue Fraud Prevention Act.
In Minnesota, officials filed suit against two mortgage "rescue" companies.
Attorney Debt Services, LLC, which conducted business under the name HomeKeeper USA, will cease its operations until it is able to fully comply with the law. Additionally, it will pay $10,000 to the Attorney Generals Seniors vs. Crime program.
A four-week investigation by the Economic Crimes Division revealed Attorney Debt Services was allegedly providing foreclosure rescue services to homeowners who were in various stages of the foreclosure process.
The company allegedly offered, for an advance fee, to assist consumers in arranging an alternative payment plan with the homeowners lender for the purpose of avoiding foreclosure.
Under the settlement, the company has 60 days from the date of the settlement to complete any contracted services; if the services are not completed, the company must report back to the Attorney Generals Office about the status and any consumer whose contracted services are not provided within six months of the date of agreement shall be fully refunded.
No refunds are due to consumers if the contracted services have been provided or if consumers have been previously refunded.
The new law prohibits the collection of upfront fees before completing or performing all services contained in the foreclosure rescue agreement and was one of the Attorney Generals legislative priorities during the 2008 Legislative Session.
Minnesota action
Minnesota Attorney General Lori Swanson today filed lawsuits against two so-called mortgage foreclosure consultants alleging that they targeted homeowners facing foreclosure with illegal up-front fees and empty promises to save their homes.
The lawsuits are against IMC Financial Services, LLC (IMC) and American Financial Corp. d/b/a National Foreclosure Counseling Services (NFC), both with offices in Florida. The lawsuits allege that both companies unlawfully charged up-front fees as high as $1,850 and failed to deliver promised services to save the homes from foreclosure. Todays lawsuits bring to twelve the number of bogus foreclosure consultants sued by the Attorney General in the last year.
These foreclosure consultants exchanged the hard-earned money of desperate homeowners for empty promises. Nobody should ever pay money in advance to a company promising to save their home from foreclosure, Swanson said.
Foreclosure consultants typically represent that they will save a homeowners home from foreclosure by negotiating or modifying the terms of the homeowners existing mortgage.
A 2004 Minnesota law bars foreclosure consultants from charging any compensation until after the foreclosure consultant has fully performed each and every service the foreclosure consultant contracted to perform or represented he or she would perform.
The Attorney General also expressed concern about a new breed of company that operates like a foreclosure consultant in promising to negotiate or modify the terms of the homeowners existing mortgage, but instead targets homeowners who may be struggling financially but are not yet in default or foreclosure.
Swanson and state legislators proposed legislation designed to close loopholes in existing state law regulating foreclosure consultants and to prohibit so-called mortgage modification companies from soliciting up-front fees and then failing to deliver the promised services.
These companies are very creative in finding a number of ways to capitalize on the foreclosure crisis and skirt existing law. We need to further tighten the laws on the books to provide the maximum level of protection to struggling homeowners in this rocky economy, Swanson said.
What to do
The Attorney General issued these suggestions for consumers struggling to pay their mortgage:
• Take immediate action to contact the lender if you are having trouble paying a loan. The lender may be willing to work out a repayment plan, loan modification, forbearance, reinstatement, etc. Dont wait to contact the lender, as delays may jeopardize your options.
• Contact a reputable mortgage counselor. Borrowers may find legitimate counselors by contacting the Minnesota Housing Finance Agency (MHFA) or the U.S. Department of Housing and Urban Development (HUD).
• Never pay money in advance to a foreclosure consultant. Minnesota law bans foreclosure consultants from collecting a fee until after they deliver their services. Swanson also suggested that homeowners not pay money in advance to companies promising to modify or negotiate terms of existing mortgages where the homeowner is struggling financially but not yet in default.
