July 28, 2008
Jefferson City, Mo. - Attorney General Jay Nixon is taking legal action to stop those who are preying on Missouri homeowners left vulnerable to mortgage fraud because they are facing foreclosure or other financial difficulties.
Nixon today launched Operation Stealing Home by filing seven lawsuits in Buchanan, Greene, Henry, Jackson, St. Louis, and St. Charles counties. The suits are aimed at individuals and businesses Nixon said had defrauded consumers through refinancing, advance fee and foreclosure consulting scams. In several of the cases, the consumers lost their homes and ended up much worse financially than they were before. Victims of the scams live throughout Missouri and several other states.
"As more and more families are threatened with foreclosure on their homes during these tough economic times, unscrupulous people will try to take advantage of them under the guise of help," Nixon said. "With these lawsuits, we are working to stop the empty promises made to and the exploitation of homeowners who already are in dire straits."
Nixon said the lawsuits send a strong message that his office will not tolerate mortgage fraud in Missouri. The Attorney General's actions were supported by advocates for Missouri seniors and consumers.
"Anyone taking advantage of needy Missourians, especially seniors, in this way needs to be stopped," said Dorothy Knowles, President of the Missouri Alliance of Area Agencies on Aging. "I am encouraged that Attorney General Nixon is taking this legal action to protect homeowners who are already facing difficult and frightening circumstances."
"In this economic climate, elderly Missouri homeowners need to have confidence in their financial advisors and lenders," said John McDonald, AARP's Missouri state director. "Our hope is that a crackdown like this one will send a message to others who would try to take advantage of seniors who desperately need help with their housing situation."
Four of the defendants operate what Nixon termed "foreclosure rescue scams." They search foreclosure listings in publications or online and approach the homeowners with promises to stop the foreclosures by paying off the lenders.
The companies then convince the homeowners to deed their property over and rent it back from the company so they can still live in the home, on the premise that the rent goes to make the mortgage payment, plus a modest profit for the company.
Unfortunately, the homeowners discover that the companies are not using their rent payments to make mortgage payments, causing the lenders to initiate foreclosure proceedings. The defendants present the homeowners the choice either leaving their homes or buying them back from the company. In one such case, a consumer was told she would be thrown out of her home unless she paid the company $230,000, the value of the home.
Nixon is alleging in his lawsuits that these defendants carried out this type of scheme:
Nixon also is suing several mortgage companies as part of Operation Stealing Home. The companies promised homeowners - and in one instance, small businesses - that their loans for re-financing would feature terms they could afford. The consumers often were facing skyrocketing house payments because of their adjustable rate mortgages, and wanted to obtain more favorable loans.
What the homeowners often discovered, however, was that the actual terms were far different - and much less favorable to the consumers - than what the mortgage companies had promised. Some homeowners found that they were charged much higher fees at closing than what had been promised. In another case, the company failed to credit loan payments from consumers in a timely fashion and then charged late fee and filed credit reports indicating the consumer was delinquent with payments. Another defendant charged advance fees of as much as $30,000 for loans that were never obtained.
Again, Nixon said, many consumers who had been experiencing financial difficulties before they did business with these companies found themselves worse off after their dealings with the defendants.
Nixon is suing the following mortgage brokers:
Nixon is asking the courts to void the deeds the companies illegally obtained; to award restitution to consumers who suffered losses; to impose appropriate penalties; and to issue injunctions to prohibit the defendants from future violations of Missouri consumer protection laws.
Nixon said consumers - especially if they are already facing financial difficulties - should be extremely cautious when dealing with individuals or companies they are unfamiliar with in regard to home-financing issues: