Oregon Sues Loan Modification Firm, Settles With Another

In response to the foreclosure crisis, the federal government, non-profit organizations, mortgage lenders and private companies began offering loan modification services to financially distressed homeowners facing foreclosure.

But the system proved frustrating and complex for consumers who complained of incompetence and indifference from loan servicers. That led to a proliferation of predatory mortgage relief companies that charged excessive fees to perform services they lacked the knowledge and resources to perform.

While little has been done at the national level to offer relief, states have in recent months become active in prosecuting mortgage modification companies accused of deceiving homeowners. The state of Oregon, for example, has just sued one California-based modification and settled with another.

Collected $90 in fees

Oregon Attorney General John Kroger has sued NOD Consultants, LLC, charging it with illegally collecting about $90,000 in fees from nearly three dozen Oregon homeowners and then refusing to provide refunds after the company failed to obtain promised loan modifications.

Since November 1, 2009, Kroger says at least 34 Oregonians have become clients of NOD Consultants after company officials led them to believe they would successfully obtain loan modifications on their behalf.

The complaint alleges that the defendants collected advance fees ranging from $725 to $2,950 in violation of Oregon law, which caps advance fees at $50.

According to the complaint, although most of the defendants' Oregon clients were current on their mortgage payments, the defendants encouraged them to skip at least one payment, claiming it would encourage their lender to re-negotiate.

Notwithstanding promises to obtain loan modifications, NOD Consultants allegedly failed to obtain a loan modification for 33 of its 34 Oregon clients.

Settlement

Meanwhile, Kroger reports a previous lawsuit has yielded results. The agreement bans American Team Mortgage, Inc., dba American Mortgage Relief, and Steve Hufstedler from foreclosure counseling, credit/debt counseling, loan modification or mortgage origination in Oregon.

Under the agreement, 28 homeowners will receive $67,000 in restitution. Oregon will receive an additional $65,000 for its consumer protection efforts.

The Department of Justice (DOJ) and the Department of Consumer and Business Services (DCBS) conducted a joint investigation into allegations that the companies took illegal upfront fees to provide loan modifications. The investigation determined that 28 Oregon homeowners received neither the loan modification they paid for nor a refund.

"Distressed homeowners need help, not empty promises," Kroger said."I want to thank DCBS for its work on this case."