Minnesota Attorney General Cracks Down On Predatory Foreclosure Servicers

Minnesota Attorney General Lori Swanson today filed lawsuits against two so-called mortgage “foreclosure consultants” alleging that they targeted homeowners facing foreclosure with illegal up-front fees and empty promises to save their homes. The lawsuits are against IMC Financial Services, LLC (“IMC”) and American Financial Corp. d/b/a National Foreclosure Counseling Services (“NFC”), both with offices in Florida. The lawsuits allege that both companies unlawfully charged up-front fees as high as $1,850 and failed to deliver promised services to save the homes from foreclosure. Today’s lawsuits bring to twelve the number of bogus foreclosure consultants sued by the Attorney General in the last year.

Foreclosure consultants typically represent that they will save a homeowner’s home from foreclosure by negotiating or modifying the terms of the homeowner’s existing mortgage. A 2004 Minnesota law bars “foreclosure consultants” from charging any compensation until after the foreclosure consultant has “fully performed each and every service the foreclosure consultant contracted to perform or represented he or she would perform.”
(Atypically, these companies will do little or no work for their fee. And because of privacy concerns, lenders are leary about discussing finances with third parties. The best way to prevent foreclosure is for the homeowner to contact the lenders directly and if necessary consult an attorney licensed in the state of Minnesota for additional assistance.) (editorial comment).

The Attorney General also expressed concern about a new breed of company that operates like a foreclosure consultant in promising to negotiate or modify the terms of the homeowner’s existing mortgage, but instead targets homeowners who may be struggling financially but are not yet in default or foreclosure. Swanson and state legislators proposed legislation designed to close loopholes in existing state law regulating foreclosure consultants and to prohibit so-called mortgage modification companies from soliciting up-front fees and then failing to deliver the promised services. Source: Press release from Minnesota Attorney Generals office.