States Sue Foreclosure Rescue Firms

Officials in neighboring Mid-western states – Illinois and Indiana – have taken action against companies they say are violating the law and abusing consumers with so-called foreclosure rescue plans.

Illinois Attorney General Lisa Madigan has sued two Chicago companies for mortgage rescue fraud schemes that she said illegally charged consumers more than $61,000 in upfront fees that resulted in little, if any, help to stay in their homes. The suits were filed against Avatar Realty Group Inc., formerly known as Monroe Realty & Financial Enterprises Inc. and Monroe Realty Corporation, and its president Arthur Monroe.

Madigan filed a separate lawsuit against Skyline Capital Inc. and Rahul Shah, company president. The lawsuits seek to shut down the businesses and obtain restitution for the 40 consumers who have reported being victimized.

“Financially strapped homeowners are often desperate for help, but anytime a purported mortgage ‘rescue’ firm requires an upfront fee, warning bells should sound. These fees are prohibited in Illinois,” Madigan said. “Too often the only thing these so-called businesses accomplish is to take money from already struggling homeowners.”

Madigan alleges the defendants advertised to homeowners that they could negotiate with their mortgage lender to obtain a modification to their loan. But the businesses instead charged dozens of distressed homeowners upfront payments for the alleged services for little to no work to modify the homeowners’ mortgage. Madigan said that the business’ failure to perform any services on behalf of these homeowners often left consumers at an even greater risk of losing their homes to foreclosure.

Crackdown in Indiana

Across the state line in Indiana, Attorney General Greg Zoeller has filed a lawsuit against a California-based foreclosure consultant company. According to the complaint, homeowners in seven Indiana counties signed contracts with the company believing it would help prevent foreclosure based on claims made on the defendants' website and advertising; but the company was operating illegally.

The suit names Premier Legal Advocates, which has addresses in Agoura Hills, Calif., and Westlake Village, Calif., and its owner, Brian Pascal, as defendants.

"Most foreclosure consultant scams originate from out-of-state companies who make exaggerated claims and prey upon distressed homeowners in need,” Zoeller said. “Hoosiers need to be aware of these frauds and seek help from legitimate housing counseling services or non-profit alternatives."

The Attorney General's lawsuit states that Premier Legal Advocates violated Indiana's consumer protection laws when it collected a nearly $1,000 fee from a Shelbyville, Ind., homeowner before performing any services. Indiana law requires credit service organizations and foreclosure consultants to register a $25,000 surety bond with the Office of the Attorney General prior to performing any services as a foreclosure consultant, including collecting money upfront.

The bond acts as an insurance policy for consumers in the event the company fails to perform the services and does not provide a refund. According to the lawsuit , Premier Legal Advocates would not provide a refund despite repeated requests from the consumer.