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Suthers cracks down on mortgage fraud

By John Rebchook, Rocky Mountain News (Contact)

Published November 18, 2008 at 12:22 p.m.

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Colorado Attorney General John Suthers today said he has reached settlements with three mortgage companies as part of a crackdown on false advertising that he launched about two years ago.

Suthers said that Denver’s Arbor Financial Inc., 5280 Financial Group and Centennial-based Mortgage Toolbox have agreed to eliminate deceptive use of teaser rates in mortgage loan advertisements in newspapers.

Each of the three companies ran ads in the “Mortgage Marketplace” sections of the Denver Post and Rocky Mountain News, advertising low teaser rates and/or low minimum monthly payments associated with option ARM loans.

Disclosures of true interest rates and other loan terms were buried in agate footnotes, if included at all, Suthers said.

He said that several of the brokers interviewed during the course of the investigations remarked that these advertisements “made the phones ring.

” As part of the settlements, each of the brokers has agreed to advertise only traditional fixed rate loans or traditional ARMs, not option ARMs. The firms also have agreed to include certain disclosures about material loan terms in readable print. Finally, the brokers must ensure that at least 24-hours prior to closing, each borrower will be provided with a copy of the Consumer Handbook on Adjustable Rate Mortgages.

The Attorney General also has filed civil claims under the Colorado Consumer Protection Act in Arapahoe County District Court against Englewood-based Home Mortgage Solutions, Inc., and three associated individuals: owners Toan Le (aka James Le) and An Nguyen, and general manager Leonard Smith.

Home Mortgage Solutions allegedly used direct mail to market risky option ARM loans to borrowers without disclosing the associated risks, he said in a release.

The complaint alleges that Home Mortgage Solutions misrepresented the low introductory rate as a permanent interest rate, and made refinancing nearly impossible with prepayment penalties, facts which Home Mortgage Solutions failed to disclose to borrowers.

In another action, l Suthers reached a settlement with Englewood’s Encore Lending, LLC, and one of its owners, Paul Baker, for depositing money into borrowers’ accounts and inflating their incomes to qualify them for larger loans. Baker has agreed to surrender his mortgage broker license.

The Attorney General has also reached a settlement with Sacramento, California-based mortgage broker Tri-Point Realty, which he said sent letters to Colorado homeowners that appeared to be from a homeowner’s bank.

The letters urged the homeowner to refinance to take advantage of his home’s increased value. Tri-Point, however, had no affiliation with the lender and did not conduct any research to determine if the home had actually increased in value.

Mail that appears to come from the government or a homeowner’s bank is more likely to be opened and considered by the homeowner, and thus places honest advertisers at a disadvantage, he said. The settlement prohibits Tri-Point from further misrepresentations in its advertisements.

Suthers also said he has taken action to protect homeowners who are in foreclosure from “rescue” firms that are not following Colorado’s Foreclosure Protection Act, which he supported and saw passed during the 2006 legislative session.

So far, his office cease and desist agreements with 15 companies to prevent them from operating in Colorado until they follow this law.

Many distressed homeowners in foreclosure are bombarded with solicitations from companies that offer to help save their homes.

Under the Foreclosure Protection Act, homeowners enjoy many protections against abusive tactics. Rescue firms cannot accept an upfront fee and must provide the homeowner with a contract that specifies the services to be performed. Rescue firms are also prohibited from taking a lien or interest in the title to the home unless they provide certain disclosures.

Under the cease and Desist agreements, seven rescue firms have agreed to cease operations in Colorado until they comes into compliance with the Foreclosure Protection Act. Companies that have agreed to cease & desist during 2008 include: Crisis Management, LLC, in Glendale, Arizona; Davis Foreclosure Assistance, Englewood, N.J. Debt Advocacy Center; Cleveland; Franklin Equity, Santa Ana, Calif.; HomeAssure, New York, N.Y.; National Foreclosure Counseling Servicesl Jacksonville, Fla.: and New Hope Modifications, Bellmawr, N.J.

An additional eight companies have previously reached cease and desist agreements with the attorney general since the Foreclosure Protection Act was enacted, including one Colorado company, Denver Home Rescue.

Suther’s office also indicted 10 individuals last March in an $11 million mortgage fraud ring involving 34 local properties. Three of the defendants, Heather Etuk, Jennifer Wolsey, and Jessica Decker, pled guilty to felony and misdemeanor counts and received probationary sentences. The remaining seven defendants, including the alleged ringleaders, are scheduled for trial in late February and March.. Several other investigations of mortgage fraud are ongoing.

Suthers l urges borrowers to learn more and shop around before taking out a home loan. The Colorado Housing and Finance Authority has many free or low-cost programs available for consumers to learn how to buy a home and take out a mortgage.

Homeowners facing difficulties are encouraged to call Colorado’s Foreclosure Hotline at 1-877-601-HOPE (4673). Homeowners contacting the Foreclosure Hotline stand a much better chance of saving their home than those who go it alone.

Comments

  • November 18, 2008

    1:29 p.m.

    Suggest removal

    WarrenJimmyBuffett writes:

    The AG has now gone after .0000001% of the fraud perpetrated by mortgage companies, appraisers, buyers, and sellers over the last 8 years. I guess you have to start somewhere...

  • November 18, 2008

    2:14 p.m.

    Suggest removal

    jacka writes:

    WJB,

    Maybe every home owner going into foreclosure should have an AG investigation of their loan application.

  • December 8, 2008

    1:51 p.m.

    Suggest removal

    PaulMolinaroEsq writes:

    In California, the Department of Real Estate website (www.dre.ca.gov) lists the companies that have DRE "permission" to modify loans... add to this list any licensed California attorney, and that is where you should begin your due diligence when you seek help in California. Other states probably have similar laws, so check with your own state DRE.

    My law firm has been getting more and more calls recently from homeowners that were victims of predatory lenders who put them into an unaffordable loan and now fell into the hands of those same people who sold the toxic loans but profess to be saviors... DON’T BE A VICTIM TWICE!

    Do your homework and THOROUGHLY investigate any firm before hiring them to save your biggest asset and the place you call “home.” These scammers are popping up like dandelions on a new mowed law. They advertise on the Internet, freeway billboards, radio, television, and print media everywhere. Make no mistake, in many cases, these are the exact same loan officers and mortgage brokers who fleeced homeowners the first time around. They’ve lost their jobs, and have found a new way to replace the enormous amount of money they were making through loan modifications. In California, with very few exceptions (and attorneys are one exception), it is against the law for anyone to take money up front for helping a homeowner who is in default. Don’t trust a company that begins its relationship with you by breaking the law.

    Of course, this is one lawyer's biased opinion, but one based on many distressing calls to my office every day. And, yes, my firm does take cases against loan modification companies who have violated laws. This field is quickly becoming one of the fastest growing sections for our mortgage law firm.

    - Paul J. Molinaro, Esq.

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