Indiana Sues Two More Foreclosure 'Rescuers'

State claims homeowners paid upfront for no services

Forsta Mediation of Arizona and Mortgage Relief Center of California face charges of ripping off homeowners in Indiana. Lawsuits accuse the two firms of violating the state's consumer protection laws by promising to modify customers’ home loans in exchange for an upfront fee.

The state has been active in pursing companies it suspects of abusing distressed homeowners. Since 2006, the state has filed 124 lawsuits against foreclosure consultant companies in more than 30 counties across Indiana.

“Red flags should be raised when a company contacts you promising a home loan modification -- which could include lowering your interest rates -- for an upfront fee,” said Indiana Attorney General Greg Zoeller said. “Their offer will sound convincing and promises of a guaranteed refund will make the transaction feel safe. Unfortunately, victims often learn when it’s too late that little or no work has been made on their loan and calls to the company go unanswered.”

Promises, promises

The companies are accused of defrauding two homeowners by promising mortgage modifications in exchange for upfront payments. The suit says one homeowner paid $1,490 and the other $1,000. The Victims told authorities they made the payments before figuring out that little or no programs had been made toward modifying their loans.

Modifying a mortgage has proved to be a difficult undertaking, which may explain why so many people nationwide have turned to so-called modification consultants. But if homeowners have difficulty breaking through a loan servicer's bureaucracy, there is little reason to believe an outside firm will produce better results.

Multiple violations

The Indiana lawsuits claim the defendants violated the Credit Services Organization Act, the Mortgage Rescue Protection Fraud Act, the Home Loan Practices Act and Deceptive Consumer Sales Act. Zoeller also says the companies did not register a $25,000 surety bond with the Attorney General’s Office to conduct business as foreclosure consultants in Indiana. The state seeks injunctions, restitution and civil penalties against the companies.

All homeowners should avoid foreclosure “rescue” specialists who charge an upfront fee. The fee in itself should be a red flag since it is now illegal to charge in advance before any service has been provided.

Zoeller says illegitimate companies will contact homeowners by telephone after they obtain a list of public foreclosure notices. Other businesses may advertise on the radio, Internet or through direct mail promising to “reduce your interest rates or monthly payments” or “stop foreclosure now.”

Why do people fall for these schemes? A homeowner faced with the fear and embarrassment of losing his home can often be easily scammed into believing the company’s promises, especially when they are falsely told he will receive a guaranteed refund if a modification is not obtained.

Homeowners should hang-up on unsolicited phone calls and disregard advertisements that make unrealistic or too good to be true promises, Zoeller said. In fact, that's pretty good advice for all manner of pitches, not just foreclosure “rescue” services.

Story provided by ConsumerAffairs.
Consumer Affairs

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