February 26, 2009
A Florida court has issued an order temporarily prohibiting an Orlando loan modification company from charging up-front fees to homeowners for its services.
According to the order issued by the Orange County Circuit Court, FMA Servicing, Inc. is barred from charging homeowners any fee in advance of providing loan modification services. FMA Servicing must comply with written notice requirements contained in the Foreclosure Rescue Fraud Prevention Act.
Attorney General Bill McCollum's Economic Crimes Division opened its investigation into FMA Servicing in December and filed a lawsuit against the company earlier this month.
The investigation revealed FMA Servicing, which does business under the name Financial Management Advisors, charges an up-front fee as high as $2,500 to homeowners seeking loan modification services.
The company subsequently refused to change its business practices even after receiving notification of the Foreclosure Fraud Rescue Prevention Act, which took effect on October 1, 2008.
The lawsuit charges violations of the Foreclosure Fraud Rescue Prevention Act, as well as false and misleading advertising and other deceptive and unfair trade practices. The injunction against FMA Servicing will remain in effect until the resolution of the case. No further hearings are set at this time.
The Foreclosure Fraud Rescue Prevention Act protects homeowners who are in foreclosure or nearing foreclosure from companies offering potentially fraudulent foreclosure "rescue" services.
Specifically, it governs companies providing foreclosure-related rescue services including loan modification and short sale services. These companies are prohibited from charging homeowners an up-front fee for these services and must provide homeowners with a written agreement.
McCollum recommends that homeowners exercise caution when seeking help to prevent mortgage foreclosure. Generally, they should first attempt to negotiate with their lender before turning to outside help.
