American Modification Consultants, LLC, d/b/a American Mitigation Consultants; Philadelphia, Pennsylvania and INQB8 LLC, d/b/a Discount Mortgage Relief, Scottsdale, Arizona, had lawsuits filed against them for offering to negotiate or modify the terms or conditions of an existing home mortgage from requesting advance payments from homeowners.
A state law that went into effect on June 20, 2009, prohibits mortgage modification companies,i.e. companies that provide assistance to consumers in negotiating or modifying the terms or conditions of an existing home mortgage loan-from charging fees to consumers before they deliver on the promised services. The law was drafted to combat the problem of mortgage modification companies taking advance payments from homeowners and then disappearing, going out of business, or not delivering the promised services.
The lawsuits allege that the companies violated Minnesota law by charging advance fees to homeowners and then failed to deliver the promised services. American Mitigation Consultants charged homeowners advance fees of up to $1,250; and Discount Mortgage Relief charged homeowners advance fees of up to $3,000. American Mitigation Consultants sent marketing solicitations to Minnesota consumers stating that they may be entitled to special modification programs as a result of the federal economic stimulus act.
Minnesota Attorney General Lori Swanson made the announcement.
“Homeowners who contact their lenders to modify their mortgages often face unreturned phone calls, lost paperwork, and other red tape. This and the bad economy have created an opening for mortgage modification companies to swoop in and take advantage of people,” said Attorney General Swanson.
“No homeowner should pay advance fees to companies for assistance in modifying the interest rate or terms of their mortgage,” said Attorney General Swanson. She added that people facing financial trouble can find reputable nonprofit organizations that will help them at little or no cost. Borrowers may locate legitimate counselors by contacting the Minnesota Housing Finance Agency at (651) 296-7608 or 1-800-657-3769, or the U.S. Department of Housing and Urban Development (“HUD”) at 1-800-569-4287.
The Attorney General also warned homeowners to be on the lookout against so-called “forensic loan auditors,” in which auditors claim they will review a homeowner’s loan to discover legal violations, which will provide the homeowner with leverage to negotiate with their lender. Like mortgage modification companies, loan auditors typically ask for hefty advance fees for their services.