SCAMS that claim to help consumers avoid foreclosure have been on the rise lately as some individuals try to take advantage of financially distressed homeowners.
Now state and federal authorities are intensifying efforts to combat these schemes while also reminding consumers that legitimate services are free and widely available.
The New York attorney general, Andrew M. Cuomo, announced this month that he intended to file a civil lawsuit against the American Modification Agency, a company based in Uniondale, N.Y., that markets itself as a loan-modification specialist under the Amerimod brand. He said he had also issued subpoenas to 14 other loan-modification companies.
Mr. Cuomo’s office alleged that Amerimod “charged homeowners heavy upfront fees in advance of providing any services, a violation of New York law,” and engaged in misleading advertising, among other things.
Amerimod, which assists borrowers in loan-modification negotiations with lenders, did not return telephone calls seeking comment. But Salvatore Pane Jr., the company’s chief executive, sent an e-mail statement that read, in part: “Amerimod has been and will remain a front-runner for compliance as well as a reliable source for distressed homeowners and consumer advocacy groups.”
Federal authorities are also more closely scrutinizing foreclosure-rescue services. The Federal Trade Commission filed a civil contempt action this month against the Financial Group Inc., an Orange, Calif., company doing business as Tax Relief ASAP. The F.T.C. said it had charged homeowners up to $5,500, and “obtained few, if any, loan modifications for customers.”
Last week, Tax Relief ASAP’s phone number was answered with an automated message, saying that a federal court had frozen the company’s assets and suspended its business operations. It provided no further contact information for the company’s principals.
Other state attorneys general have made this issue a priority as well.
In February, Connecticut’s attorney general, Richard Blumenthal, began an investigation into H.O.P.E. Alliance of Tampa, Fla. Mr. Blumenthal said the company had charged two homeowners $1,500 for services, directed them to stop making mortgage payments and then failed to help them save their homes.
Mark Roberts, a spokesman for H.O.P.E. Alliance, disputed Mr. Blumenthal’s allegations. He said that his company’s loan-modification negotiators provided better service than the free services affiliated with HUD. “Our counselors have better qualifications,” Mr. Roberts said, adding that two of them are former bankers and one is a former Fannie Mae employee.
When the investigation was announced, Mr. Blumenthal noted that H.O.P.E. Alliance’s name was similar to that of Hope Now, a nonprofit consortium of mortgage industry companies and counseling organizations that last year began a widely publicized initiative to offer free foreclosure counseling to borrowers. Distressed homeowners can get more information about its services at www.hopenow.com.
Douglas Robinson, a spokesman for Neighborworks America, a nonprofit housing preservation group that participates in the Hope Now initiative, says that fraudulent counseling groups often use variations of the names of legitimate government programs.
These fraudulent operations, Mr. Robinson said, often buy advertisements on search engines like Google and Yahoo. The ads frequently link to Web sites with official-sounding names, and although they may offer free consultations, the companies often charge fees for their services, he said.
Direct-mail campaigns or cable advertising campaigns, which are relatively inexpensive, follow the same branding approach, Mr. Robinson said.
“It’s a very slick way of getting the consumer’s attention,” he said.
BORROWERS who struggle with their mortgage payments should never pay for help when negotiating with a lender to avoid foreclosure, said Susannah Gillette, the director of program quality and impact at Neighborhood Housing Services of New York City.
She noted that the Web site FindAForeclosureCounselor.org lists all the free services affiliated with the federal government’s National Foreclosure Mitigation Counseling Program."