AG seeks to protect Texans from foreclosure rescue scams

Chris Rizo Dec. 10, 2008, 11:58am

Greg Abbott (R)

Craig Estes (R)

AUSTIN, Texas (Legal Newsline)-Texas Attorney General Greg Abbott on Wednesday said he is seeking legislation that would boost his statutory authority to help protect Texans from foreclosure rescue scams.

Announced by the Republican attorney general and state Sen. Craig Estes, R-Wichita Falls, the proposal would, among other things, place new restrictions on foreclosure prevention consultants, and allow the attorney general to pursue bad actors under the Texas Deceptive Trade Practices Act.

"At a time when regulators, policy makers and stakeholders are working to help struggling families, unscrupulous operators are scheming to profiteer at homeowners' expense," Abbott said. "Too many scam artists attempt to target homeowners with large fees and the false promise that they could help Texans avoid foreclosure on their homes."

Last week, the Mortgage Bankers Association said 11.5 percent of subprime loans in the Lone Star State had either started the foreclosure process or were more than 90 days in arrears. Nationwide, nearly 7 percent of homeowners were late on their house payments, the trade group said.

The proposed Foreclosure Rescue Fraud Prevention Act would require foreclosure prevention consultants to provide consumers a plain language contract, obtain customers' written consent before beginning any services or accepting any fees and require them to provide a disclosure statement instructing homeowners to contact an attorney or a housing counselor before signing mortgage rescue agreements.

"While most homeowners may never feel the threat of home foreclosure, it is an issue that can impact all of us when it strikes our neighbors, friends, and family," Estes said. "We are here today to send a very clear signal that these actions by unscrupulous mortgage foreclosure consultants will not be tolerated."

The attorney general's announcement came on the heels of an enforcement action against Arizona-based Abell Mediation, Inc., and its president and vice-president, Elizabeth Cory and Michael Cory.

They were charged with fraudulently claiming that their company could save homeowners from foreclosure. Their business cards claimed "Abell Mediation, Inc. has saved over 7,000 homes from foreclosure," and boasted about a "staff of highly trained loss mitigation specialists" with established relationships with mortgage lenders and banks.

They promised to "achieve results that no one else can," the attorney general's office said.

Under a settlement between the attorney general's office and the defendants, they are permanently enjoined from conducting a foreclosure mitigation business. They are also required to pay a total of $1.55 million in fines, restitution and attorneys' fees.

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