Mortgage Rescue Industry Warned To Cease ‘Misleading And Illegal Conduct’ Against Homeowners

The New York State Attorney General’s office (yes, with Andrew Cuomo still in charge – until he becomes the state’s governor) has sent more than 180 cease-and-desist letters to mortgage rescue companies with customers in New York, warning them to immediately end all misleading and illegal conduct. That was necessary, Cuomo says, because his investigation into the mortgage rescue industry has revealed that “many companies routinely collect illegal up-front fees from homeowners on the brink of foreclosure and then fail to help them lower their mortgage payments or save their home as promised.”According to Cuomo, thousands of New Yorkers have been affected by mortgage rescue scams. 

As explained by Cuomo: Mortgage rescue companies target homeowners facing foreclosure by claiming to be able to modify home mortgage loans and lower monthly payments. Often, these companies engage in deceptive and illegal marketing practices to lure customers and then fall short on their promises. After using a mortgage rescue company, homeowners can find themselves in worsened financial circumstances and at greater risk of losing their homes. (Under the law in New York, mortgage rescue companies are required to provide clients with contracts, notify financially vulnerable homeowners that there are non-profit counselors that can help them for free, and in most cases refrain from charging up-front fees.)
 
“Today, we are putting mortgage rescue companies on notice – they must immediately cease any dishonest tactics used to prey on homeowners or they will face the consequences,” Cuomo said. “The business model for many mortgage rescue companies is based on false promises, but the true cost of their deception is all too real. When faced with the threat of foreclosure, New Yorkers should remember the rights they have as homeowners and the protections that my office ensures.”
 
The cease-and-desist letters – which are going to 182 companies – warn them to end any illegal, deceptive, and misleading practices, including:
 

• Charging up-front fees for consulting services;
• Failing to enter into written contracts with homeowners, in the language the homeowners use, that fully disclose the exact nature of, and fees for, the services to be provided;
• Failing to allow homeowners to cancel their contract, without any penalty, within five business days after signing and failing to provide homeowners with notice of this right in the contract;
• Using any deceptive and misleading advertising practices, including: false guarantees regarding success rates, false 100% money-back guarantees, and fabricated consumer testimonials;
• Using any advertisements designed to give consumers the false impression that a company is affiliated with the government or a government-sponsored program.  

This is not Cuomo’s first efforts with respect to the mortgage rescue industry. For example:
 

• In August 2009, Cuomo’s office filed a lawsuit against American Modification Agency, Inc. (“Amerimod”), formerly one of the largest mortgage rescue companies in the country, and its owner and president Salvatore Pane, Jr. According to the Attorney General’s office, Amerimod routinely collected illegal up-front fees from homeowners on the brink of foreclosure and then failed to modify their home mortgage loans and lower their monthly mortgage payments. In April 2010, the New York Supreme Court held Pane personally liable for engaging in fraudulent and illegal acts, continuing a freeze on Amerimod’s assets, and ordering further proceedings to determine the amount of consumer restitution, costs, and penalties. Pane is currently serving time in jail on an unrelated conviction.
• In March 2010, Cuomo’s office sued Infinity Mitigation Services and its principals for illegally charging homeowners for loan modification services that were not performed. In June 2010, the Attorney General’s office obtained an order and default judgment from the New York Supreme Court shutting down the company, freezing their assets, and ordering them to pay a judgment in the amount of $8.8 million.
• In March 2010, Cuomo’s office announced settlements shutting down two mortgage rescue companies: Ronkonkoma-based ABM Mitigation Corporation (“ABM”) and Florida-based Raymond, Louis & Fitch (“RLF”). As part of the settlements, ABM agreed to shut down their practices nationwide and RLF agreed to stop doing business in New York State. The companies also agreed to refund fees to all customers who have not obtained a loan modification.
• In May 2010, Cuomo’s office entered into a settlement with Global Modifications Services, Inc. and its principal. Under that settlement, the company and its principal agreed to pay restitution to homeowners who were charged illegal up-front fees.