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Florida Sues Foreclosure Rescue Company for Deceptive Practices

"Debt mitigation" firm falsely claimed it could solve mortgage problems

October 22, 2008

An investigation by the Attorney General Bill McCollum's Mortgage Fraud Task Force indicated Outreach and its owners allegedly told Florida homeowners that they should not make payments to their mortgage lenders as due, but should instead pay the company approximately 60 percent of the monthly payments due to their lenders.

In return for these monthly payments, the company and its owners allegedly claimed they would work with the lenders to reduce the consumers' mortgage debts. Consumers contend these services were not provided.

McCollum's office received more than 50 complaints from homeowners, but further investigation revealed that more than 600 homeowners had signed up for the company's services.

The lawsuit seeks consumer restitution and civil penalties of $10,000 per violation of Florida's Deceptive and Unfair Trade Practices Act. The Attorney General has also asked the Court to prohibit the defendants from engaging in any business activity or operations offering, soliciting, providing or otherwise generally dealing in or related to the residential and commercial real estate business, including but not limited to mortgage financing, sales and/or brokerage.

The new Foreclosure Rescue Fraud Prevention Act of 2008 specifically targets schemes like Outreach Housing's and offers homeowners additional protections against such practices.

The Florida law, which went into effect on October 1, requires that a foreclosure rescue consultant -- a person who tries to arrange a new payment plan with lender or other alternative to foreclosure -- provide a written agreement to the consumer and obtain the consumer's signature before beginning any services.

The legislation further requires the rescue consultant to include in the written agreement a specific notice of the homeowners' right to cancel, including the procedure for canceling, and a disclosure that the consumer should contact his or her lender first before signing because the lender may be willing to negotiate a payment plan free of charge.

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