$1.7M Provided to Arizona to Fight Mortgage Scams

Attorney General Terry Goddard has been awarded a $1.7 million grant from the U.S. Office of Justice Programs to fight mortgage fraud in Arizona.

The grant will be utilized to create a new six-person unit devoted exclusively to investigating and prosecuting mortgage-related crimes.

This new unit will operate as part of the Criminal Division of the Attorney General’s Office and will be operational within the next 90 days. The Office of Justice Programs is a part of the U.S. Department of Justice.

Goddard said the unit will enable his Office to go after more mortgage “rescue” businesses that exploit consumers struggling to keep their homes. Over the past three years, the AG’s Office has undertaken several dozen criminal and civil investigations of mortgage fraud, leading to 13 indictments and 19 lawsuits and settlements.

Goddard also said that in the past two weeks he has stepped up efforts to prevent mortgage scams by sending more than 600 letters to loan modification companies and licensed mortgage brokers, advising them about the new state laws that went into effect this summer. The letters affirm his commitment to vigorously enforce the laws and take action over any violations of the Arizona Consumer Fraud Act.

“With our State’s economy and housing market still on shaky ground, many homeowners are being targeted by unscrupulous businesses that promise far more than they can deliver,” Goddard said. “This federal award will enable my Office to better ensure that any company engaged in mortgage relief follows the letter of the law. We will continue to act aggressively against anyone violating the law.”

The new state laws prohibit foreclosure consultants (including loan modifiers) from charging upfront fees to consumers seeking to modify their existing loans. The laws also require anyone doing any business in loan modifications to obtain a loan originator license from the Arizona Department of Financial Institutions.

Goddard noted that one type of scam that appears to be on the rise involves a promise to reduce a homeowner’s mortgage loan principal in line with, or below, current market value. Such promises were made to customers of the Scottsdale-based Guardian Group, a company Goddard filed suit against two months ago.

The suit accused the company of engaging in allegedly deceptive mortgage loan reduction services that have cost more than 2,500 customers millions of dollars. The company made claims it would negotiate with lenders to purchase a consumer’s note for less than face value and sell the note in an investment package to a third-party investor. Guardian Group then told the consumer it would modify the rates and terms of the mortgage loan and reduce the principal owed to 90 percent of market value. Such refinancing rarely materialized.

At least one mortgage “rescue” company has been soliciting former Guardian Group clients by falsely stating that the Attorney General’s Office gave the company their contact information and is working with the AG’s Office to assist former Guardian Group customers. This is a scam.

Free help is available to homeowners who have questions or need help working through their housing situation form the Arizona Foreclosure Prevention Helpline at 1-877-448-1211. Callers will be directed to local housing counseling agencies approved by the federal government.

Arizonans who believe they have encountered fraudulent mortgage activity can file a complaint with the Arizona Attorney General’s Office at www.azag.gov or 602-542-5763 (Phoenix); 520-628-6504 (Tucson) or 800-352-8431 (outside the Phoenix or Tucson metro area). You may also visit our website at http://www.azag.gov/consumer/foreclosure/resources.html for more information.