Arizona investigating mortgage firms for fraud

Originaly by Mike Sunnucks:  Arizona Attorney General Terry Goddard said the state is investigating more than 50 mortgage modification and refinancing firms his office has received complaints about for ripping off consumers.

Though Goddard would not disclose which companies are under investigation, he said the biggest problems in the industry right now are third-party advocates that charge up-front fees of sometimes thousands of dollars and promise distressed homeowners reworked mortgages that lower payments to help forestall foreclosures.

The Better Business Bureau, Attorney General’s Office and other consumer-protection groups say mortgage- and refinancing-related complaints are way up, and consumers should be on the look out for unscrupulous businesses.

The U.S. Federal Trade Commission also is investigating “mortgage mod and refi firms” and has gone after outfits with deceptive Web sites and business and advertising practices.

Goddard said there are federally approved, nonprofit housing advisers that can offer many of the same services free. Banks and mortgage lenders are telling customers to first try talking to them and then to federally and state-approved nonprofit housing assistance groups before looking at private mortgage modification firms. They stress the nonprofit, government-approved housing agencies offer free assistance while private mortgage modifications firms charge for their services.

“We encourage borrowers to contact their lenders directly to discuss the options that may exist to avoid foreclosure. We also understand some borrowers prefer to engage a third-party to help them through the process,” said Wells Fargo spokesman Jason Menke. “When selecting a counselor or mediation resource, we encourage borrowers to consider HUD-approved counseling agencies or resources available through the Arizona Department of Housing. Homeowners should understand that counseling and mediation services provided by these agencies are done at no cost to them.”

Big banks and mortgage firms have been criticized for not moving fast enough to modify or refinance distressed mortgages and setting up confusing systems and protocols for mortgage assistance.

Some new modification and refinancing firms are based in Arizona while others are out-of-state companies that have accessed delinquent and trouble mortgages in Phoenix, which has some of the worst foreclosure rates in the country.

Valley homeowners are getting solicitations from all sorts of mortgage and refinancing firms. Some of the solicitations come in the form of letters, e-mails and automated telephone calls that can lead homeowners to believe they are from their lenders or from government agencies related to the federal “Making Home Affordable” program.

Sometimes mortgage firms will create logos that look like government agencies or use the non-copyrighted federal fair housing and other logos.

Columbus, Ohio-based Oxford Lending Group LLC, for example, has sent letters to Valley homeowners with a logo and letterhead for the “Economic Stimulus Act 2009.” The official-looking letter tells consumers they could be eligible for mortgage refinancing. The letter says Oxford is not a government agency.

Johnny Zamora, an Oxford employee at the company’s Scottsdale office, said the company does mortgage refinancing, does not ask for up-front fees, perform or promise modifications. He said Oxford’s fees are built into refinancings and new loans. Zamora said Oxford solicits consumers so they know about refinancing options. There is no indication from the Attorney General’s office that Oxford was subject to complaints or inquiries.

Zamora said stressed out homeowners often are frustrated with their lenders and confused about navigating the process to have their mortgages refinanced or modified.

“They don’t really know where they are going,” Zamora said. Oxford does loan refinancings in 32 states.

Chase spokeswoman Mary Jane Rodgers said troubled mortgage holders should come to her bank first including a home-ownership-assistance center in Phoenix where they will meet with mortgage assistance counselor.

“There is no fee for our customers to work with us in seeking modifications to their loans,” Rodgers said.