Oregon and Washington Attorney Generals are cracking down on more and more loan modification companies preying on desperate mortgage holders with false and deceptive tactics.
Attorney General John Kroger last week announced small fines against two companies and investigations into several more.
In Washington, Attorney General Rob McKenna is working with the Federal Trade Commission to prosecute five cases announced in July, investigate four more, and this summer sent out state policy statements informing some 138 foreclosure and loan modification assistance companies of their legal obligations.
In many cases the companies either imply they are connected to the federal government, or they charge fees for mortgage counseling.
In Oregon as well as Washington, mortgage counseling is available free of charge from legitimate organizations. In Oregon a new law requires banks to renegotiate home loans with at-risk borrowers in good faith.
"We're getting at companies that offer loan modification services and these are typically people who are in foreclosure and they're attempting to avoid that by changing the terms of their payment so they can continue to stay in their homes," Kroger's spokesman Tony Green told The Skanner News.
Oregonians benefit from a new law authored by Sen. Suzanne Bonamici earlier this summer, which requires lenders to inform their customers on loan modification eligibility. It also prohibits such companies from foreclosing on borrowers who are in negotiations to modify their lending terms
The law is backed by a half million dollar settlement paid to Oregon by a company accused of such abuses, Countrywide Financial Corporation
"These problems will only get better if we take swift action," Kroger said in a statement. "By working with a coalition of law enforcement and state government, we can do a better job of protecting Oregonians from new rip-offs."
"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," McKenna said in July.
McKenna and Iowa Attorney General Tom Miller are co-chairing a new State-Federal Task Force on Mortgage Enforcement described as "an unprecedented partnership to target fraudsters."
McKenna's staff says the task force was built after a July meeting in Washington, DC, between several state attorneys general and the U.S. Justice and Treasury departments focused on mortgage enforcement.
In Oregon, the Financial Fraud and Consumer Protection Unit has so far fined the National Homeowners Assistance Services, Inc., of Lake Forest, Calif., and American Mitigation Group, of Newport Beach, Calif.
"We just last week reached a settlement with two California companies that were both misleading consumers by suggesting they were affiliated with HUD (Housing and Urban Development) or other federal housing related agencies or programs that a consumer might be under the impression that these were approved by one of these agencies," Green said. "They were also charging upfront fees for loan modifications and Oregon law – the legislature passed a law prohibiting charging upfront fees for loan modification."
The Washington Attorney General's Office says they've seen a spike in complaints to their Consumer Resource Center.
The office cites the complaint filed by a Brier resident who did business 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."
McKenna has filed suit against the California-based Mason, as well as Guardian Services of California; Godsend Security Funding of Seattle; Intellisource of Issaquah; and Property Research Specialists of Richland.
McKenna's staff says a case is still pending against a Colfax couple charged this year, and that Apply 2 Save, which triggered a complaint from a Washington customer, is being sued in Idaho.
"Given the recession and given the crash in the housing market, people are facing an enormous amount of stress making their payments and staying in their homes, and inevitably, although unfortunately, what happens in a crisis like this is the unscrupulous companies move in and either rip you off outright or they take advantage of you in other ways that are not strictly legal," Green said.
In Washington, call the Homeownership Information Hotline at 1-877-894-HOME
In Oregon, call the Foreclosure Hotline at 888-995-HOPE.