PHOENIX (Legal Newsline) - Arizona Attorney General Terry Goddard announced on Monday that he has filed lawsuits against two mortgage companies that allegedly violated the state's Consumer Fraud Act.
The first lawsuit against Principal Reduction Group LLC, of Scottsdale, Ariz., and its owner, Brian Cutright, alleges that during the period of July to September, the company charged approximately 100 Arizona homeowners up to $6,000 to participate in its principal reduction program.
Goddard alleges that the company marketed purported "principal reduction" services for home mortgages by sending letters designed to trick the homeowner into thinking his or her lender was offering a principal reduction program.
The complaint further alleges that the company misled consumers by emphasizing its purported relationship with investors who would purchase mortgage notes at discounts in order to direct some of the savings towards lower mortgage payments for the homeowner.
Hundreds of thousands of mailers were sent to Arizona homeowners in this alleged fraudulent scheme.
At no time did Principal Reduction Group disclose that it didn't have a binding agreement with any investor to do anything for its clients. It also misrepresented successful results even though it had not achieved principal reductions for any of its clients.
Furthermore, the company allegedly falsely told consumers that federal programs and funds were a component of its services.
A second lawsuit was filed against mortgage broker Queen Creek Mortgage LLC, of Mesa, Ariz., alleging that it touted its partnership with investors who would purchase its clients' mortgage notes at a discount to pass on the savings in lower mortgage payments.
Queen Creek Mortgage offered this service to approximately 180 homeowners in 2010 at fees of up to $5,500, yet the company had no binding agreement with any investors to do anything on behalf of the company's clients, Goddard claims.
Goddard alleges that Queen Creek Mortgage misrepresented the relevancy of federal programs and funds to its program, and misled clients by telling them to expect significantly lower mortgage payments if they joined the program.
The complaint also alleges that the company never disclosed that it would send clients' files and personal information to an unlicensed, out-of-state third party for work on their files.
In both lawsuits, Goddard is asking that the court prohibit the companies from engaging in unlawful activities and that it order them to provide restitution to consumers who paid for principal reduction services. He also seeks civil penalties and fees.