The companies, National Payment Modification Company and The Bostonian Group, LLC, which conducts business under the name People’s First, have been accused of charging borrowers up to $2,500 upfront to negotiate a modification on their behalf.
However, the AG’s Mortgage Fraud Task Force found that the companies took the upfront payment and divided it into five equal payments secured by post-dated checks.
Each check was then associated with a “sub-contract,” or step in the loan modification process, thereby circumventing law that prohibits upfront payment.
Of course, consumers complained that both companies cashed the checks despite failing to begin negotiations or even contact the bank or mortgage lender to begin with.
The AG’s office is seeking permanent injunctions prohibiting the companies from charging upfront fees, restitution on behalf of the consumers, civil penalties of $15,000 for each violation, and reimbursement for attorney fees and investigation costs.
More than 75 additional companies that offer foreclosure-related rescue services are being investigated, and numerous others have also been targeted in the past.
Lawmakers in California recently banned upfront payments on loan modifications until 2013 via Senate Bill 94.
Upfront fees on loan modifications are already banned in 20 states, and the FTC is now considering a nationwide ban.