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FOR IMMEDIATE RELEASE
July 15, 2009
State, federal sweep slams loan-mod scams

Firms operating in Washington state in government crosshairs for taking advantage of homeowners facing foreclosure


SEATTLE – In the aftermath of the mortgage industry shakedown, a new type of bottom-feeder is chomping at homeowners struggling to keep up with their loan payments. Washington Attorney General Rob McKenna announced today that his office joined the Federal Trade Commission and other states in a nationwide crackdown on foreclosure rescuers and loan modification businesses that charge hefty upfront fees and often provide no help.

McKenna announced five new cases today by his office’s Consumer Protection Division, bringing the number of foreclosure-assistance actions filed by the Attorney General’s Office to nine since 2007.

In addition, the office sent civil investigative demands, which are similar to subpoenas, to four additional businesses that provide mortgage-related services.

In conjunction with the nationwide sweep, the Washington Attorney General’s Office also is sending letters this week to 138 businesses that market foreclosure assistance, loan modification services or other mortgage-related services to inform them about state laws.

“Housing Crisis 2.0 has launched an attack on financially strapped homeowners,” McKenna said. “With so many borrowers looking for an opportunity to refinance or modify their loan terms, it’s not surprising that we’ve seen a new crop of deceptive business practices and operators looking to make an easy buck.”

The Washington Attorney General’s Office has seen a spike in complaints to its Consumer Resource Center, like this one from a Brier woman who wrote about her experience with Mason Capital Group:

“I contacted this company for a loan modification....They have lied... many broken promises...taken my $2,300.00. I had to file Chapter 13 to keep hopefully from losing my home because of this company my home went into foreclosure. [sic]”

McKenna said some loan modification businesses charge homeowners a ridiculously high fee before providing any service, if they help at all. Often, a homeowner could have received the same assistance at no cost had they personally contacted their lender or a nonprofit organization. Worse, some loan modification companies instruct homeowners not to talk to their lender or to stop making payments.

NEW LAWSUITS

  • MASON CAPITAL GROUP (California): The Attorney General’s Office filed a lawsuit today in Snohomish County Superior Court accusing Mason Capital Group, LLC, of violating Washington’s Consumer Protection Act, Mortgage Broker Practices Act, Distressed Property Conveyance Act and Credit Services Organization Act.

The company, which is registered in New Mexico and has offices in California, is not authorized to do business in Washington but  has contacted homeowners in Snohomish County and Kitsap County, according to the state’s complaint.

“We alleged that Mason Capital Group charges homeowners $2,000-$3,000 upfront then does little or nothing to actually save a home,” Assistant Attorney General Jim Sugarman said. “To add insult to injury, the services the company purports to provide are widely available for free or a low cost from properly licensed nonprofit and government housing counselors.”

  •  G SERVICES GROUP doing business as GUARDIAN SERVICES (California): The Attorney General’s Office filed a complaint with similar allegations against G Services Group, of California. As with Mason Capital Group, the defendant isn’t authorized to do business in Washington but has charged upfront fees of $1,500 for services homeowners could have obtained by themselves or from properly licensed housing counselors.

A Burien homeowner who filed a complaint with the Attorney General’s Office said she and her brother paid Guardian Services $750 upfront and that the company withdrew an additional $750 from her checking account, causing an overdraft. After receiving no help from the company, she was eventually able to obtain a loan modification at no charge with assistance from ACORN.


NEW ENFORCEMENT AGREEMENTS

Godsend contacted homeowners facing foreclosure and offered them the opportunity to sell their homes to a third-party investor. Homeowners were told they would be able to stay on as renters and buy the property back later. Godsend arranged the sales of 18 Washington homes before eventually going out of business.

A couple who accepted Godsend’s offer told KOMO TV in March 2009 that the rent payments were higher than the mortgage payments they couldn’t handle. They ultimately were evicted from their home in 2007, according to the news report.

“Lane and Severson based their business on a model taught at a real estate seminar they attended in Seattle,” Assistant Attorney General David Huey said. “Fortunes have been made in real estate, but people should be skeptical of seminar promoters who promise a quick and easy path to riches – it might be illegal.”

Under an agreement filed in King County Superior Court, Lane and Severson did not admit any wrongdoing but promised not to engage in unfair practices in the future. They agreed not to offer homeowners a sale/leaseback transaction with option to repurchase without first disclosing the risks of the transaction, including the difficulties a homeowner is likely to experience in obtaining financing. They also agreed not to manipulate  pricing in order to receive excessive compensation from such transactions or permit an investor-partner to unfairly acquire the property at below market value.

The respondents will pay $1,500 in penalties. An additional $1,500 in penalties is suspended provided they comply with the terms of the agreement.

  • INTELLISOURCE (Issaquah) AND RENA CAROLYN MCGILL: Like Godsend, Intellisource, Inc., contacted homeowners facing foreclosure and offered them the opportunity to sell their homes to a third-party investor. Homeowners were told they would be able to stay on as renters and buy the property back later. The business, run by Issaquah resident Rena Carolyn McGill, charged homeowners for its services.

“Intellisource positioned itself as the responsible alternative to foreclosure rescue companies and offered homeowners financial counseling,” Sugarman said. “However, these deals were set up to fail. Homeowners never had a prayer of repurchasing their homes.”

McGill filed for Chapter 7 bankruptcy after the Attorney General’s Office began its investigation and dissolved Intellisource.

Under an agreement to be filed in King County Superior Court, McGill did not admit any wrongdoing but agreed to comply with terms that permanently ban her from participating in real-estate transactions involving properties in foreclosure or where any action has been taken to collect on a delinquent debt secured by someone’s home.

The Attorney General’s Office alleged the defendants misrepresented the consequences of foreclosure and used false testimonials in their advertisements.

“The company sent postcards that stated the Attorney General’s Office endorsed its services,” said Assistant Attorney General Jack Zurlini. “Our office doesn’t  endorse any business and, in fact, we caution consumers about dealing with foreclosure rescue companies.”

The respondents did not admit any wrongdoing but agreed to comply with the state Consumer Protection Act and Credit Services Organizations Act, including restrictions against charging upfront fees. They will pay $3,000 in attorneys’ fees and legal costs.

Earlier this year, the office won a trial involving a notorious foreclosure rescue scammer named Joseph Kaiser, of Tacoma, resulting in a $2.4 million judgment and permanent ban from foreclosure-related property deals. Kaiser’s business partners, also defendants in the case, settled allegations in 2007.

In 2008, the office reached agreements with two Florida-based businesses, United Home Savers and Foreclosure Assistance Solutions.

A 2009 case against a Colfax couple accused of equity skimming is still pending.

Also today, the Federal Trade Commission filed a case against an Idaho business named Apply 2 Save. At least one Washington resident has complained about the business.

And in related news, McKenna and Huey are headed to Washington, DC, to discuss mortgage enforcement issues at a Thursday meeting with officials from the U.S. Departments of Justice and Treasury.

Also, a new Congressional report shows that 1,401 Washington residents participate in the National Foreclosure Mitigation Counseling Program. Of those, 41 percent devote at least 75 percent of their income to their mortgage, property taxes and insurance. That puts Washington at the top of the chart, just above Hawaii, for the percentage of participants spending at least 75 percent or more of their income on mortgage-related expenses.

RESOURCES

If you are facing foreclosure or can’t pay your mortgage:

  • First contact your lender. Your lender may be able to temporarily reduce or suspend your payments or help you refinance with a new loan and better terms.
  • Talk to a housing counselor. Visit www.homeownership.wa.gov or contact the Washington State Homeownership Information Hotline at 1-877-894-HOME (1-877-894-4663) for a list of housing counselors. The Urban League has teamed up with the state Department of Financial Institutions and other organizations to provide three mortgage intervention workshops this July in the Puget Sound where participants can meet with a housing counselor.
  •  If you choose to go with a loan modification business, verify they have a license. The Washington State Department of Financial institutions requires that any provider offering loan modifications be licensed as a loan originator, mortgage broker or consumer loan company.  Check the DFI Web site at www.dfi.wa.gov or call 1-877-RING-DFI.
  • Contact an attorney. Homeowners in need of legal help who are unable to afford a lawyer should contact the Home Foreclosure Legal Aid Project, a partnership of the Washington State Bar Association and the Northwest Justice Project. Call 1-877-894-HOME (4663).
  • Additional resources to help homeowners can be found on the Attorney General's Web site at www.atg.wa.gov/foreclosure.aspx


Media Contact: Kristin Alexander, Media Relations Manager, (206) 464-6432, kalexander@atg.wa.gov

 

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