Principal Reduction Group, LLC, Scottsdale, Arizona and its owner, Brian Cutright have been charged with alleged violations of the Arizona Consumer Fraud Act in connection with the marketing of purported “principal reduction” services for home mortgages. It alleges that between July and September of 2010, the company has charged some 100 Arizona homeowners up to $6,000 to participate in its principal reduction program.
The complaint alleges that Principal Reduction Group mailed hundreds of thousands of mailers to Arizona homeowners that were designed to appear as if they were from the homeowners’ lenders announcing the lenders’ principal reduction program and the possibility that the homeowners might qualify for it. The complaint further alleges that Principal Reduction Group misled consumers by emphasizing its purported relationship with investors who would purchase homeowners’ mortgage notes at a discount and then pass on some of the savings to the homeowner in the form of a lower mortgage payment.
The company allegedly failed to disclose that the company had no binding agreement with any investor to do anything for its clients and misrepresented successful results when, in fact, the company had not achieved principal reductions for any of its clients. The company is also accused of falsely telling consumers that federal programs and funds were a component of its services.
Queen Creek Mortgage, LLC, Mesa, Arizona, a licensed mortgage broker, which has marketed its service to some 180 homeowners this year at fees of up to $5,500 also had a complaint filed against them. The complaint alleges that the company touted its partnership with investors who would purchase its clients’ mortgage notes at a discount and pass on some of the savings to consumers in the form of lower mortgage payments. In fact, Queen Creek Mortgage had no binding agreement with any investors to do anything on behalf of the company’s clients.
The complaint also alleges that Queen Creek Mortgage misrepresented the relevancy of federal programs and funds to its program. The company is alleged to have misled clients by telling them they could expect significantly lower mortgage payments if they joined the program. The company is further accused of failing to disclose that it would send clients’ files and personal information to an out-of-state third party for work on their files once Queen Creek Mortgage collected the clients’ fees. The out-of-state company was not licensed to engage in mortgage broker or mortgage banker activities in Arizona.
In both cases, the State is requesting that the court prohibit the companies from engaging in unlawful activities and that it order them to provide restitution to consumers who paid for principal reduction services and pay the State civil penalties and fees. Assistant Attorneys General Cherie Howe and Natalia Garrett are handling these cases.