As part of a joint federal-state sweep by the Consumer Financial Protection Bureau, the Federal Trade Commission and 15 states targeting scam operations that prey on financially struggling homeowners and those facing foreclosure. Along with the FTC and CFPB, attorneys general from the following states participated in the sweep: Arizona, Delaware, Florida, Indiana, Illinois, Kansas, Louisiana, Maryland, Michigan, New Mexico, New York, North Carolina, Ohio, Washington and Wisconsin. Also participating is the Maryland Commissioner of Financial Regulation and Washington Department of Financial Institutions.
Yesterday the New York Attorney General secured a temporary restraining order barring the, Home Affordable Direct, Inc. (Farmingdale, NY), Home Affordable Solutions, Inc. (Farmingdale, NY), JR Holding Group Corp (Babylon, NY), Clear Solutions and Settlements, Inc. (Tampa, FL) and their principals, Javier Gutierrez and Shadi Soumekh, from collecting illegal advance fees from homeowners before they accept and execute a loan modification agreement and advertising and operating their business without providing the disclosures required by the federal Mortgage Assistance Relief Services (MARS) Rule. The court also placed a freeze on company bank accounts.
The suit was filed against entities the AG felt were operating a fraudulent loan modification scam.
The companies and their principals are alleged to prey upon financially vulnerable consumers by claiming they can provide substantial relief from unaffordable mortgage payments through loan modifications and other forms of foreclosure prevention. The firms allegedly collect illegal advance fees and routinely fail to deliver on their promises. The lawsuit seeks to stop the illegal practices, provide restitution and damages to consumers, obtain disgorgement of profits, as well as penalties and costs.
"There has to be one set of rules for everyone, no matter how rich or powerful, and that is why our office has aggressively cracked down on those who prey upon vulnerable consumers at risk of losing their home," said Attorney General Schneiderman. "I am proud to stand up for middle class New Yorkers against predatory scammers seeking to exploit those still reeling from the housing crisis."
Attorney General Schneiderman's lawsuit alleges that the companies engaged in fraudulent and illegal practices in the marketing and operation of their foreclosure rescue and loan modification business involving consumers from New York and outside the state. Through frequent radio advertisements and their website, they falsely represent that they are affiliated with the United States Treasury Department's Home Affordable Modification Program (HAMP), that they have the ability to "pre-qualify" homeowners for a modification under HAMP and can determine whether a homeowner qualifies for HAMP during a single phone call. These advertisements lacked critical disclosures required by law that are designed to protect consumers, such as informing the consumer that Home Affordable Direct is not associated with the government, that their services are not approved by the government or the consumer's lender, and that the consumer's lender may not agree to modify the consumer's mortgage loan even if the consumer uses Home Affordable Direct.
Company salespersons furthered the fraud by falsely representing to homeowners that they could get their mortgage servicing company to reduce the principal balance of their mortgage loan to the value of their home or that they would be able to obtain a specific reduction in their monthly mortgage payment. The companies failed to provide required disclosures that would have alerted consumers to be wary of these misleading claims, particularly the disclosure that the consumer can stop doing business with the companies at any time and that they do not have to pay anything to the company if they reject the offer of mortgage assistance obtained from the consumer's lender or servicer. The companies collected hefty upfront fees from homeowners, ranging from $1,500 to over $11,000, in violation of the law. The companies usually refused to refund the illegal advance fees once consumers realized they were victims of a scam.
If you were a victim of Home Affordable Direct or any of its affiliated companies or if you believe you were a victim of another mortgage fraud, please file a complaint with the Attorney General's Office. Complaint forms are available here. You may also call the New York Attorney General's Consumer Hotline at 1-800-771-7755.
Free help to New York homeowners is available through the Home Owner Protection Program ("HOPP"), which uses funds from the National Mortgage Settlement to fund legal services and housing counseling across New York to provide foreclosure prevention services. Consumers can call 855-HOME-456 for help. Attorney General Schneiderman's program funds roughly 90 organizations across the state, and HOPP has served a combined total of nearly 30,000 families since its launch in October of 2012. - Source
In addition, consumers who are considering hiring a company to assist them with a mortgage modification may want to do some homework to avoid being scammed. These free guides can walk you through the process of what to look for so you don't end up as a victim like so many others have. The first guide is How Not to Get Scammed by a Mortgage Loan Modification Company and contains commonsense and easy to follow steps to make sure you've utilized your free options and what to avoid. The second guide, How to Check Out a Business or Company to Avoid Getting Scammed or Ripped Off gives you some insight into what may be going on during the debt help sale.