Massachusetts AG Sues Foreclosure Rescue Companies

Massachusetts ""Attorney General Martha Coakley"":http://mass.gov/ag has filed a lawsuit and obtained a temporary restraining order against four defendants for their involvement in a foreclosure rescue scam.
The complaint, filed in Suffolk Superior Court, alleges that Loan Modification Group Corp.; Mitigation, LLC; the two companies’ principal Daniel H. Fox; and Web site operator Chris Fuelling sought to capitalize on the foreclosure crisis and prey upon Massachusetts residents facing the loss of their homes.
Coakley said, ""In the wake of the current economic crisis, our office has seen an emergence of scams that prey upon Massachusetts residents on the verge of foreclosure. We hope to prevent these scam artists from victimizing individuals in vulnerable situations by taking their money and in the end, offering them no assistance in saving their homes from foreclosure.""
The attorney general says in the lawsuit that the defendants offered services claiming to assist homeowners as ""loss mitigation specialists"" who are able to negotiate loan modifications to avoid foreclosure. Coakley argues that instead the defendants’ business practices were unfair and deceptive, and in violation of the Massachusetts Consumer Protection Act, because they solicited fees in advance of services and failed to disclose the details of the foreclosure assistance offered, while guaranteeing a loan modification that would improve the homeowner’s financial situation and save the home.
Under the terms of the temporary restraining order, granted by Judge Linda E. Giles on Tuesday, the defendants and their employees are prohibited from soliciting or accepting any fees from Massachusetts homeowners for providing foreclosure-related services and from publishing any ""false, deceptive, or misleading documents"" offering loan modifications. A hearing for a preliminary injunction has been scheduled for April 16, 2009.
According to the attorney general's office, the defendants advertised their loan modification services through telephone solicitations, emails, and various websites, claiming to be attorney-based loan mod experts that could guarantee drastically reduced interest rates. Coakley's office said that in one telephone solicitation, a representative claimed that Fox’s organization was ""one of fourteen law firms recruited by the government to help people avoid foreclosure and help them stay in their home.""
The defendants also directed consumers to stop making payments on their mortgages, deceptively claiming that homeowners will benefit by defaulting on their mortgage in order to receive a loan modification, Coakley's office said.
The attorney general’s investigation of the companies and their operations also revealed that they demanded up to $2,000 in fees before providing services to homeowners. Such advance fees are illegal in Massachusetts under regulations issued by the attorney general’s office in 2007.
Coakley's office said it will be in court seeking a preliminary injunction in a similar case within the next week, but did not disclose the name(s) of that defendant. Just last month, Coakley obtained a temporary restraining order against Express Modifications, Inc., d/b/a Loan Mods By Lawyers, Inc., which ran prominent advertisements in a Massachusetts newspaper offering to help homeowners avoid foreclosure. In that case, the attorney general's office said the company not only solicited illegal advance fees, but there was no evidence that the company had any attorneys assisting consumers with loan modifications.
In addition to pursuing legal action against fraudulent foreclosure rescue companies, Massachusetts' attorney general’s office is launching a campaign to educate the public about these scams and encourage struggling homeowners to speak directly with their lenders or servicers. The initiative includes a consumer advisory, which was issued by Coakley on Tuesday, as well as public service announcements (PSAs) featuring the attorney general that are being made available to cable and public access stations throughout the state.
Coakely said, ""While we will continue to pursue those who perpetrate these scams, it is also vital that the public be aware of the tactics being used so that they can take steps to protect themselves.""
""Earlier this week"":http://dsnews.comindex.php/home/news_story/2797, federal and state officials announced a nationwide crackdown on what they called predatory companies perpetrating fraudulent foreclosure rescue and loan modification schemes. Treasury Secretary Timothy Geithner warned homeowners that a growing number of suspect organizations are robbing Americans of their savings and their homes under the guise of the government's Making Home Affordable program.