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It's The Law: All Might Not Be Lost In Foreclosure Assistant Scam

Q: A friend of mine lost his job and fell behind on his mortgage. He was contacted by a person claiming to work for a mortgage assistance company, who promised to help him keep his home. He paid the company $5,000.00, signed some papers and later found out that he actually sold him home and got nothing for it. Can he sue the company that claimed it was helping him?

A: Mortgage assistance fraud is all too common in Florida. In the economic downturn, people lose their jobs and in desperation accept offers to "help" from companies with facial sounding names. Legal action has been filed against companies with such names as Lincoln Lending Services, LLC, Attorney a Debt Services, LLC, Home Keeper, USA, Outreach Housing, LLC, National Foreclosure Counseling Services and Homestead Protection Services. All of these companies are or have done business in Florida.

Indicia of a typical scam include mandatory payment of upfront fees and, in many cases, a monthly service fee. To get around statutory prohibitions against upfront charges , the charges are billed for services that are never performed, such as "forensic analysis." Another indicia of foreclosure assistance scams including failure of the company to specify what services will be provided. In many cases, the company requires the homeowner to sign various documents, which can include power of attorney and even transfer of title to their home.

The scams operate differently based upon the equity in a victim's property. If there is no equity, the perpetrators are usually content to take fees and expenses only. If there is equity, the company often extends its efforts to steal the equity, either through a sale or refinance in which the unwitting homeowner signs documents allowing the foreclosure assistance company to skim funds.

The foreclosure assistance companies violate statutes or other common law, which will allow the property owner to sue for damages. Unfortunately, many of these companies will be out of business by the time the case reaches judgment and the property owner will have a hard time finding any money to pay the judgment.

Depending upon the circumstances, your friend may have a claim under the Florida Deceptive and Unfair Trade Practices Act. That statute prohibits unconscionable acts or practices and unfair or deceptive acts or practices in the conduct of any trade or commerce. It provides a private cause of action for damages plus attorney fees.

If your friend is elderly, he or she might also have a claim under statutes prohibiting abuse of the elderly which provide damages and attorney fees can be recovered. The importance of a statute providing for award of attorney fees is that fees are not generally recoverable unless provided by a statute or contract.

Since the company may be out of business long before the case is over, your friend will also want to pursue the individuals involved and all other parties, including mortgage brokers and title companies. That course of action was involved in the recent case of Charles v. Florida Foreclosure Placement Center, LLC. Charles was a 72 year old widow who purchased a home in 1975. She added mortgages in 1989 and 1991, totaling $116,000.00. In January 2006 she defaulted on the second mortgage.

The second mortgage holder filed foreclosure. Shortly after the foreclosure was started, Charles was contacted by a fellow named Winston, purportedly acting as agent for the Florida Foreclosure Placement Center. Two months later, Winston convinced Charles to signed documents to preserve her ownership. Charles did not understand the documents, but later found she had sold her home to a person she never heard of for $165,000.00. Not only did Charle s lose her home, but she also lost the equity.

Charles sued everyone her attorney could think of. She sued the title company who prepared the documents for and conducted the closing on the sale for negligence, fraud and conspiracy to defraud. She sued the mortgage broker on the same grounds. She sued the mortgage broker's principal for fraud and conspiracy to defraud. She sued Winston, the assistance company and the buyer.

The appellate court opined that the complaint was rather in artfully drawn, but that it did state valid claims against all of the defendants, albeit not all of the claims were sufficiently plead.

The perpetrators of these scams are often planning on leaving town quickly, so it is a good idea to pursue them promptly.

As with all legal matters, you are well advised to retain an experienced attorney at the earliest possible time. Your friend apparently chose to deal with the "assistance" service without counsel. I recommend that he or she now meet with an attorney without further delay.

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