Friday, December 14, 2007

Foreclosure Rescue Company Required to Make Disclosures

Highland Financial, a Post Falls, Idaho business that offers mortgage foreclosure rescue services, will change its business and advertising practices.  Under the terms of a legal settlement, Highland Financial agrees to comply with the Idaho Consumer Protection Act in its future advertising and promotions.

According to RealtyTrac, an organization that compiles foreclosure statistics, Idaho has experienced a 158% increase in foreclosure filings since October 2006.  Due to the mortgage foreclosure crisis, foreclosure rescue businesses, which are a relatively new phenomenon, have multiplied. 

Highland Financial advertised that it could help financially distressed consumers end the “stress,” “worries,” and “hassles” of foreclosure, bad credit, and eviction.  The Attorney General alleged the company failed to make certain disclosures and may have misrepresented to homeowners that they could help homeowners retain ownership of their homes and improve their credit when that was not the case.

Highland Financial is not a state-registered credit repair business.  Therefore, its past offer of free credit repair services allegedly misrepresented the company’s legal authority to provide homeowners with such assistance.  “Under the terms of the settlement agreement, Highland Financial may not advertise that it offers debt counseling or credit repair services unless it establishes its qualifications and legal authority to provide those services to consumers,” Attorney General Wasden said. 

Highland Financial also must inform consumers in writing of certain important facts before the consumer agrees to transfer ownership of their homes to a third party.  Under the settlement, the company must:
· Explain to the homeowner the effect of a due-on-sale clause in an existing mortgage agreement.  A due-on-sale clause may require the homeowner to pay off the mortgage when any interest in the property is transferred to another.
· Provide the consumer with his or her home’s current fair market value as determined by a real estate appraiser, the county assessor, or by another method agreed upon by the consumer. 
· Disclose the approximate amount of equity that the consumer might lose, which must be calculated by subtracting the value of the home’s existing liens from the home’s fair market value.
· Inform homeowners that the Department of Housing and Urban Development (HUD) offers information to consumers about how to avoid foreclosure and that HUD maintains a current list of approved housing counseling agencies.

“It is important for consumers who are facing the possibility of losing their homes to work with their lenders to find an alternative to foreclosure,” Attorney General Wasden emphasized.  “HUD-approved housing counselors will provide consumers with free information about government and private organizations that offer assistance to financially distressed homeowners.”

Consumers should avoid doing business with individuals or companies that:
· Offer to negotiate with your lender for a fee;
· Discourage you from consulting with your lender or an attorney;
· Promise to pay off your mortgage if you give up your equity;
· Offer to rent the property back to you for more than your monthly mortgage payment; or
· Require you to sign your deed over to someone else.  This does not necessarily relieve you from responsibility for the debt.  Therefore, if the “buyer” fails to make the mortgage payments, the obligation falls on you.

Under the terms of the settlement, Highland Financial must pay $1,000 in civil penalties and reimburse the Attorney General’s Office $2,000 in attorney fees and costs.  Highland Financial did not admit any liability or wrongdoing and cooperated with the Attorney General during his investigation.

mortgage fraud