Minnesota Attorney General's Office
1400 Bremer Tower
445 Minnesota Street
St. Paul, MN 55101
M - F 8 am - 5 pm
March 19, 2010
ATTORNEY GENERAL SWANSON FILES TWO LAWSUITS AGAINST MORTGAGE MODIFICATION COMPANIES FOR VIOLATING NEW STATE LAW Lawsuits Are First Ones Filed Under 2009 Law Designed To Protect Consumers From Abuses By Mortgage Modification Companies
Minnesota Attorney General Lori Swanson today filed two lawsuits against separate out-of-state mortgage modification companies for violating a 2009 state law that prohibits companies that offer to negotiate or modify the terms or conditions of an existing home mortgage from requesting advance payments from homeowners. These are the first lawsuits filed under the new law.
“Homeowners who contact their lenders to modify their mortgages often face unreturned phone calls, lost paperwork, and other red tape. This and the bad economy have created an opening for mortgage modification companies to swoop in and take advantage of people,” said Attorney General Swanson.
The lawsuits were filed against: American Modification Consultants, LLC of Philadelphia, Pennsylvania, d/b/a American Mitigation Consultants; and INQB8 LLC of Scottsdale, Arizona, d/b/a Discount Mortgage Relief.
A state law that went into effect on June 20, 2009 prohibits mortgage modification companies—i.e. companies that provide assistance to consumers in negotiating or modifying the terms or conditions of an existing home mortgage loan—from charging fees to consumers before they deliver on the promised services. The law was drafted and supported by the Attorney General’s Office to combat the problem of mortgage modification companies taking advance payments from homeowners and then disappearing, going out of business, or not delivering the promised services.
The lawsuits allege that the companies violated Minnesota law by charging advance fees to homeowners and then failed to deliver the promised services. American Mitigation Consultants charged homeowners advance fees of up to $1,250; and Discount Mortgage Relief charged homeowners advance fees of up to $3,000. American Mitigation Consultants sent marketing solicitations to Minnesota consumers stating that they may be entitled to special modification programs as a result of the federal economic stimulus act.
“No homeowner should pay advance fees to companies for assistance in modifying the interest rate or terms of their mortgage,” said Attorney General Swanson. She added that people facing financial trouble can find reputable nonprofit organizations that will help them at little or no cost. Borrowers may locate legitimate counselors by contacting the Minnesota Housing Finance Agency at (651) 296-7608 or 1-800-657-3769, or the U.S. Department of Housing and Urban Development (“HUD”) at 1-800-569-4287.
The Attorney General also warned homeowners to be on the lookout against so-called “forensic loan auditors,” in which auditors claim they will review a homeowner’s loan to discover legal violations, which will provide the homeowner with leverage to negotiate with their lender. Like mortgage modification companies, loan auditors typically ask for hefty advance fees for their services.