Tuesday, April 22, 2008

200 Foreclosure Rescue Victims Will Receive Refunds

Approximately 200 Washington consumers who paid for a service that they thought would help save their homes from foreclosure will receive partial refunds under a new settlement announced by the Washington Attorney General’s Office.

The homeowners each paid $1,200-$1,500 to Foreclosure Assistance Solutions LLC, of Clearwater, Florida. More than 70 percent of homeowners who signed up with Foreclosure Assistance Solutions ended up losing their homes anyway. The company went out of business in fall 2007.

“We believe Foreclosure Assistance Solutions used coercive tactics to pressure consumers into paying for a service they really couldn’t afford and then doing little or nothing to actually help those consumers save their homes,” Attorney General Rob McKenna said. “Today’s settlement puts some money back into the pockets of those who bought into the company’s false promise of hope.”

The Attorney General’s Office accused the company of violating the state’s Consumer Protection Act, Credit Services Organization Act and Commercial Telephone Solicitation Act.

According to the state’s complaint filed with the settlement in Spokane County Superior Court, the company sent letters and postcards to consumers whose homes were in foreclosure. Some of the solicitations mimicked official government notices. The messages instructed the consumers to call the company for help.

“Foreclosure Assistance Solutions employees delivered a deceptive sales pitch to frighten consumers into believing they needed to act quickly,” said Assistant Attorney General Jack Zurlini. “Homeowners who paid for the service were then presented with a contract that prohibited them from contacting the mortgage lender that initiated the foreclosure for any reason. And for consumers who paid Foreclosure Assistance Solutions with a credit card, the contract prohibited them from trying to dispute the charges by contacting their credit card provider before Foreclosure Assistance Solutions. Consumers who did would not receive a refund.”

Foreclosure Assistance Solutions did not admit to any wrongdoing in the settlement but agreed to pay $78,125 in restitution to Washington consumers, as well as $20,000 in attorneys’ fees. The settlement also includes injunctive provisions limiting how the company does business, should it offer services again in the future, as well as an additional $100,000 in civil penalties for failure to comply with the agreement.

The company will provide the Attorney General’s Office with contact information for Washington consumers who purchased its services. The state will mail checks to eligible consumers within the next three months. The total restitution will be divided among all eligible consumers; individuals will likely receive $300-$500 each. Consumers who have questions about the settlement can contact the Attorney General’s Consumer Resource Center at 1-800-551-4636 between 10 a.m. and 3 p.m. weekdays.

The Texas Attorney General’s Office reached a settlement with Foreclosure Assistance Solutions and its operators earlier this month. A court agreed in September 2007 to freeze the defendants’ assets on conjunction with Texas’ investigation, and the company subsequently went out of business.

The Washington Attorney General’s Office introduced legislation this past session to help protect homeowners from foreclosure rescue scams where the rescuer agrees to purchase the distressed property then sell or lease it back to the original homeowner. HB 2791 takes effect June 12, 2008. The new law will require that the purchaser prove the homeowner is able to make the payments and provide a written contract with clearly disclosed terms. The new law gives the homeowner the right to cancel the contract within five business days. It also requires that the original homeowner receive at least 82 percent of the difference between the property’s fair market value and the underlying mortgage should the home be sold to a third party.

mortgage fraud