Minnesota Attorney General's Office
1400 Bremer Tower
445 Minnesota Street
St. Paul, MN 55101
M - F 8 am - 5 pm
November 29, 2010
ATTORNEY GENERAL SWANSON FILES LAWSUITS AGAINST TWO COMPANIES THAT USE THE THREAT OF FORECLOSURE SCAMS TO DUPE CITIZENS INTO PAYING THOUSANDS OF DOLLARS IN UNLAWFUL FEES FOR SUPPOSED MORTGAGE HELP
Attorney General warns citizens not to pay advance fees to companies for assistance in renegotiating their home mortgages
Minnesota Attorney General Lori Swanson today filed lawsuits against two out-of-state companies that charged Minnesota homeowners up to $3,500 in unlawful fees to help them renegotiate their home mortgages. In both cases, the companies used the threat of prevalent mortgage modification assistance scams to convince homeowners to pay money to their companies. In the midst of the ongoing housing crisis, the Attorney General warned citizens not to pay advance fees to firms for mortgage help.
The first lawsuit was filed against Balanced Legal Group of California and its attorney, Deepak Parwatikar, which charged homeowners up to $3,500 for supposed mortgage help. The second lawsuit was filed against Home Protection Coalition of Wyoming, which charged homeowners up to $2,300.
Under Minnesota law, companies may not charge homeowners up-front fees before they deliver the promised help. (Law firms are only exempt if the attorneys are licensed to practice law in Minnesota and render services in the course of their legal practice; Mr. Parwatikar is not.)
As regulators around the country have cracked down on widespread mortgage assistance scams, Attorney General Swanson said that her Office has seen an uptick of complaints involving companies that (1) tout their attorney status to build credibility to get people to sign up for their services, and (2) get people to sign up for expensive services by warning homeowners to hire them because there are other fraudulent companies that make false promises of mortgage help.
For example, the Balance Legal Group website says:
“The banks have attorneys so you need to have a law firm on your side to protect your interests. Your home is one of your most treasured assets. DON’T use a non-attorney company that claims to work with attorneys to try and negotiate a solution concerning this treasured asset.”
The Balanced Legal Group website also says:
“BEWARE of brokers, ‘attorney based’, ‘attorney assisted’ and other boiler room type providers. Remember this is a relatively new industry and there is little regulatory control. The laws are constantly changing and these entities often skirt or break laws.”
Similarly, in 2009, the United States Congress funded a campaign called the “Loan Modification Scam Alert” to warn homeowners of fraudulent modification scams. The lawsuit against Home Protection Coalition alleges that the organization falsely posed as 501(c)(3) corporation and mailed Minnesota homeowners solicitations that bear an almost identical logo to the “Loan Modification Scam Alert.” Home Protection Coalition’s website also states as follows:
“Due to the current foreclosure crisis, a bill has been introduced to Congress. This bill allows Home Protection Coalition to offer assistance to homeowners through the Economic Foreclosure Stimulus Plan.
This initiative may reduce your mortgage payment by as much as 40%. . . . Home Protection Coalition is a not for profit housing counseling agency that employs forensic mortgage auditors, paralegals, attorneys and highly skilled lender specific negotiators that will write a loan modification that fits your specific financial needs.”
To further deceive consumers, Home Protection Coalition calls its $2,300 fee a charitable “donation.” In addition to charging the company with violations of Minnesota’s mortgage modification laws which prohibit advance fees, the lawsuit alleges that the organization engaged in charitable solicitation fraud.
Attorney General Swanson issued the following tips to consumers:
- Do not pay advance fees for mortgage help to out-of-state attorneys who are not licensed to do business in Minnesota.
- Do not pay advance fees for mortgage help to any other organization, including one posing as a nonprofit corporation.
- At the first sign of mortgage trouble, find a reputable, nonprofit credit counseling organization that serves you as part of its charitable mission.