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Home Rescue Fraud Is Targeted
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Published: January 23, 2008
TAMPA - The Florida attorney general's office and two state legislators said Tuesday that they will more aggressively pursue and prosecute companies that use deception to acquire the homes of people trying to avoid foreclosure.
In addition, they announced the proposed Foreclosure Rescue Fraud Prevention Act, which seeks to make it tougher to commit fraud. The bill also is intended to better inform homeowners about their rights when they contract with such a company.
"When people are in foreclosure, they are in a vulnerable position, and a scam artist can take advantage of them," said Sen. Mike Fasano, R-New Port Richey, who sponsored the bill along with Rep. Clay Ford, R-Gulf Breeze.
Attorney General Bill McCollum also announced his office has filed a lawsuit against South Florida-based National Foreclosure Management. The suit alleges the company defrauded at least 80 homeowners out of $1.7 million in home equity. Representatives for the company could not be reached for comment.
Key provisions in the legislation include:
•A five-day right of cancellation period. Consumers would have five days to change their minds after signing a contract with a foreclosure consultant.
•Foreclosure consultants could not accept any payment until services are completed. Some charge up to $2,500 upfront.
•The contract must include a "clear and conspicuous" notice to homeowners of the cancellation period, as well as a recommendation that the homeowner contact the lender before signing the agreement.
•Companies that violate these provisions are subject to a $15,000 fine per violation.
Florida's foreclosure rate ranks second in the nation, and the state is No. 7 on the FBI's top 10 list for mortgage fraud. The designation has prompted unscrupulous companies to prey upon homeowners, said Alex Sink, Florida's chief financial officer, who spoke at the news conference Tuesday in Tallahassee.
In its lawsuit against National Foreclosure Management, now doing business as American Home Rescue Inc., the attorney general's office laid out how it says the company operates. The company finds homeowners who have substantial equity in their homes and face foreclosure. It then offers to hold the homeowner's title for a year, to refinance the consumer's debt and to provide cash and credit repair counseling, the suit says. Homeowners are told they can stay in the house and the company will deed the property back to the homeowner at the end of the year.
Instead, the attorney general's office says, the company strips equity from the house by refinancing at inflated prices and leaving little for the homeowner to recoup.
Sandi Copes, spokeswoman for the Attorney General's Office, said a new state mortgage fraud task force is investigating 21 foreclosure rescue companies in Florida, including three in Clearwater. Those are Mortgage Foreclosure Solutions, Law & Associates, and Mortgage Assistance Solutions LLC, Copes said.
Debra Behrens, owner of Mortgage Foreclosure Solutions, said the probe was news to her. She said her company only helps homeowners work out repayment plans with lenders and does not buy or refinance homes.
"I knew there had been complaints, but we're addressing them," Behrens said. "I was not aware of any investigation."
Behrens said she understands why legislators are going after companies that prey on homeowners, but said her business tries to help people keep from losing their homes. If the legislation passes, she said, particularly the part that prohibits upfront payment, she couldn't continue to operate.
Mortgage Assistance Solutions' Lisa Allen, senior vice president of administration, said the company has been cooperating with the investigation and agreed last month to close although it admitted no wrongdoing.
Representatives from Law & Associates could not be reached for comment.
Reporter Shannon Behnken can be reached at sbehnken@tampatrib.com or (813) 259-7804.
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