Mortgage Foreclosure “Rescue” Service Settles FTC Unfair Trade Practices Lawsuit for $1.2 Million

20 Jan Mortgage Foreclosure “Rescue” Service Settles FTC Unfair Trade Practices Lawsuit for $1.2 Million

On January 5, 2009, Florida-based Mortgage Foreclosure Solutions, Inc.,agreed to a $1.2 million settlement with the Federal Trade Commission. The FTC had sued the foreclosure “rescue” service in February 2008, alleging unfair and deceptive practices in violation of federal law. The defendant claimed, in numerous websites and blogs, that it could stop mortgage foreclosures regardless of consumers’ payment histories or financial condition. One promotion stated, “We are so confident of our abilities to provide you with a solution in stopping your foreclosure that we guarantee our services in writing to you.”

The FTC’s complaint further alleged that consumers were charged an upfront fee of $1,200 after calling a toll free number and being interviewed about their mortgage foreclosure; regardless of their financial condition, consumers were told they qualified for a workout plan. The FTC alleged that after receiving payment, the defendant failed to return consumers’ telephone calls, or that consumers were told the defendant was working on a solution or that no solution could be achieved after all. The complaint stated that many consumers lost their homes to foreclosure, or that consumers prevented foreclosure through their own efforts.

Under the terms of the settlement filed in U.S. district court in Tampa, Florida, the defendant agreed to pay the FTC $1.2 million. Because of the defendant’s lack of resources, the FTC agreed to suspend payment of all but $8,320 of the judgment, unless the defendant was later found to have misrepresented its financial condition. The defendant also agreed to a list of conditions prohibiting future activities promising mortgage foreclosure “rescues.”

The FTC’s website, www.ftc.gov, contains a publication designed to assist consumers from falling victim to mortgage foreclosure “rescue” scams. The publication advises that consumers avoid doing business with any firm that:

  • guarantees to stop the foreclosure process – no matter what your circumstances
  • instructs you not to contact your lender, lawyer, or credit or housing counselor
  • collects a fee before providing you with any services
  • accepts payment only by cashier’s check or wire transfer
  • encourages you to lease your home so you can buy it back over time
  • tells you to make your mortgage payments directly to it, rather than your lender
  • tells you to transfer your property deed or title to it
  • offers to buy your house for cash at a fixed price that is not set by the housing market at the time of sale
  • offers to fill out paperwork for you
  • pressures you to sign paperwork you haven’t had a chance to read thoroughly or that you don’t understand.
  • See “Facts for Consumers, Foreclosure Rescue Scams: Another Potential Stress for Homeowners in Distress,” available at www.ftc.gov.

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    Craig W. Andresen is a consumer bankruptcy lawyer in Bloomington, Minnesota, with 22 years’ experience in consumer and small business bankruptcy cases. He is the Minnesota chair of the National Association of Consumer Bankruptcy Attorneys, and is a member of the Minnesota State Bar Association’s Bankruptcy Section. Mr. Andresen lectures often on the topic of consumer bankruptcy at local and national legal seminars.
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