After being accused by New York Attorney General, Andrew Cuomo, of using illegal scare tactics to “terrify” indebted Americans into repaying their debt, a Buffalo, N.Y., debt collection agency run by convicted felons has been shut down by state authorities (more…)

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The credit scores of consumers in Nevada are tanking as Nevadans continue to struggle to pay their bills. The average credit score in the state has dropped 12 points since the first quarter of last year to 618 from the average score of 630 (more…)

Popularity: 9% [?]

Since January, employers have been more likely to scale back employee salaries than to eliminate positions, a recent survey reveals. (more…)

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After having settled predatory lending charges with 42 states, Bank of America has modified more than 64,000 home loans worth $823.5 million in principal and interest savings, with the intention of modifying loans and reducing interest rates for up to 100,300 borrowers (more…)

Popularity: 13% [?]

Two Arkansas women who have been sued for defrauding at least 139 people in a credit-repair scam have refused to respond to a judge’s order to pay $700,000 in penalties and have even started a new credit repair operation, the Arkansas Democrat Gazette reports (“State Wins Credit-Repair Fraud Case,” May 26, 2009).

For four years, Sherrye Mance and Tiffany Morris allegedly defrauded customers seeking the credit repair services of three of their companies. The women, who operated the three unincorporated businesses Financial Services Unlimited, Service Unlimited Inc., and Credit Counseling Service, have reportedly started running a new credit repair operation under the name “Fresh Start Credit Service.”

In a lawsuit, the Arkansas attorney general has accused Mance and Morris — who collectively owe their victims $127,565 — of charging customers for “services purported to improve a customer’s credit history, credit record, and credit ratings,” although these services were likely never “actually performed.”

Mance and Morris have, so far, refused to respond to the lawsuit, missed their court hearing, and failed to respond to a court injunction. Meanwhile, the Arkansas attorney general’s office has already started receiving complaints from California residents about the defendants’ new company.

Arkansas Attorney General Dustin McDaniel believes the two women still live nearby — Mance in a neighboring Arkansas county and Morris in Mississippi. McDaniel says he is exploring all legal options that would force the women to pay the penalty fees and repay the 139 affected customers.

Popularity: 13% [?]

With more than 2.1 million homeowners estimated to lose their homes this year according to Moody’s projections, more and more homeowners nationwide are falling prey to mortgage modification scams promising to help homeowners retain their homes.

In Arizona, foreclosure-rescue scams have skyrocketed 30 percent in the past few months, Arizona Attorney General Terry Goddard revealed at a recent meeting of the Arizona Foreclosure Prevention Task Force (“Foreclosure Scams on the Rise,” The Arizona Republic, May 20, 2009).

“Firms are contacting homeowners on the verge of foreclosure, offering help and instead taking the money the homeowner has,” Goddard said. “We have a real obligation to find these people and prosecute them.”

New foreclosure-rescue scams have arisen under the federal government’s mortgage loan modification plan that began in March, in which lenders work with homeowners who are at risk of losing their homes to reduce the interest rate or principal on a mortgage in an effort to help these homeowners avoid foreclosure. The federal program was recently expanded to assist homeowners who previously didn’t qualify for mortgage loan modifications due to the fact that they owed more on their home than what the home was worth.

Just-released data shows that mortgage companies have made more than 55,000 offers to modify mortgage loans since the government mortgage modification program’s March inception date, according to The Arizona Republic. Currently, 14 companies, which service 3 out of every 4 of all U.S. mortgages, have signed up to do mortgage modifications under the new government plan.

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April marked the second month in a row that more than 300,000 troubled homeowners received foreclosure notices, a jump of 32 percent over the same time last year, reports The Associated Press (“April Foreclosures Up 32% Over Last Year, Report Says,” May 13, 2009).

According to foreclosure data service RealtyTrac, more than 324,000 homeowners received at least one foreclosure-related notice in April. One in every 374 U.S. housing units received such a notice last month, the highest monthly foreclosure rate since RealtyTrac began collecting data in 2005.

“We’ve never seen two consecutive months like this,” said Rick Sharga, senior vice president for marketing at RealtyTrac. “It’s the volume that’s surprising.”

Nevada, Florida, and California posted the highest rates of foreclosure of all states, with Arizona, Idaho, Utah, Georgia, Illinois, Colorado, and Ohio rounding out the other top 10 states in the nation. In Nevada, one in 68 homeowners received a foreclosure filing, compared to 1 in 135 in Florida, and one in 138 in California, RealtyTrac data showed.

Although the number of homes repossessed by banks was down by about 11 percent since March, RealtyTrac cautions that what seems to be good news may not be as positive as it appears. The decline in home repossessions is likely the result of widespread mortgage moratoriums implemented earlier this year, in which banks suspended foreclosure proceedings as they waited for the launch of the government’s new Making Home Affordable plan in April.

Now that many of those moratoriums have been lifted, experts project that home repossessions may soon go back to their previous levels.

Whether Obama’s housing plan will actually help the projected 9 million homeowners seeking debt relief through mortgage modifications or refinancing remains unclear, as initial reports by homeowners indicate that lenders have been extremely slow or unresponsive to homeowners’ attempts to take advantage of the government programs.

Homeowners on the brink of foreclosure fear that the government’s housing plan may not do enough to help them keep their homes and stem the tide of foreclosures.

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New York State Attorney General Andrew Cuomo has subpoenaed 14 debt settlement companies and one law firm as part of an investigation into the debt settlement industry, a move that has been labeled a “P.R. stunt” by an industry lawyer, The New York Times reports (“An Inquiry Into Firms That Offer to Cut Debt,” May 8, 2009).

Robby H. Birnbaum, a debt settlement lawyer who is also on the board of an industry trade group, said late last week that the debt settlement companies named in the investigation were placed in an awkward position when they first learned of Cuomo’s inquiry via the media.

“The press release was issued before any of these companies even received subpoenas,” Birnbaum said, so initially the debt settlement organizations would have had nothing to respond to. The companies in question didn’t receive their subpoenas until after Cuomo’s office generated its press release.

Companies’ Services May Not Be Living Up to Their Advertising

According to The Times, Cuomo will be investigating to what extent the subpoenaed debt settlement firms provide the debt relief services described in their advertisements by examining the companies’ fee structures and client base. Debt settlement organizations negotiate with credit card companies to reduce a client’s debt balance and typically charge a fee of about 15 percent of the client’s debt.

“With all of the problems we face in this time of economic distress, it is outrageous that these firms are targeting those who are the most financially vulnerable,” Cuomo said through an aide.

The purpose of the inquiry is to “ensure that people are not victimized when faced with financial hardship,” Cuomo’s office stated (“N.Y. Attorney General Probes Debt Settlement Firms,” Reuters, May 7, 2009).

Cuomo’s new investigation stems from a previous inquiry by the attorney general into two firms, Texas-based Credit Solutions, the nation’s largest alleged debt settlement firm, and Nationwide Asset of Arizona. Credit Solutions was accused of engaging in “false, deceptive, and misleading acts and practices” in a March suit against the company, and Nationwide will soon be named in a suit and be accused of fraud.

Several Firms Welcome Industry Investigation

Cuomo’s current suit targets several debt settlement companies located across the nation and a single law firm:

American Debt Foundation Inc., American Financial Service, Consumer Debt Solutions, Credit Answers L.L.C., Debt Remedy Solutions L.L.C., Debt Settlement America, Debt Settlement USA, Debtmerica Relief, DMB Financial L.L.C., Freedom Debt Relief, New Era Debt Solutions, New Horizons Debt Relief Inc., Preferred Financial Services Inc., U.S. Financial Management Inc. (operating as My Debt Negotiation), and Allegro Law.

Several of the 14 firms named in Cuomo’s investigation have said they would welcome an investigation into the industry, which includes as many as 2,000 debt settlement companies nationwide. Some of these companies even went as far to say they would embrace tougher regulations in their industry, one that critics claim is under-regulated.

“The only companies that will suffer are those that don’t offer genuine value,” said Jeff Takle, a spokesman for a Massachusetts debt settlement firm.

Robert Linderman, general counsel for one of the firms named in the investigation, Freedom Debt Relief of San Mateo, Calif., echoed Takle’s sentiments and said, “We’re delighted the attorney general is seeking information from the industry.”

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To keep renters from ending up on the street after their landlords have lost their property to foreclosure, the Ohio House has passed a bill that will help protect renters in the state from being victimized by the nation’s housing crisis, the Dayton Daily News reports (“House Bill to Guard Renters in Foreclosures,” May 6, 2009).

The legislation, which passed the state House last week by a narrow 53–42 margin and now faces Senate approval, requires landlords to give renters written notice of foreclosure within 60 days of when the court notifies the property owner of default.

If a foreclosed house has been sold, the bill specifies, the new owner or landlord must honor a tenant’s lease, which will automatically be converted to a month-by-month lease arrangement. The legislation also stipulates that landlords must give tenants a 21-day notice after a sheriff’s sale of a foreclosed property.

Republican Rep. Shannon Jones, who voted against the bill, said there was “much to like about the legislation,” but was worried that it would discourage investors from purchasing foreclosed properties since the bill would force investors to take on the previous owner’s tenant.

The bill’s chief co-sponsor, Democratic Rep. Ted Celeste, on the other hand, thinks the new legislation is a good idea, considering a third of the foreclosures in the state are on rental properties, according to the Coalition on Homelessness and Housing in Ohio (“Collateral Damage: Renters in the Foreclosure Crisis,” June 2008).

Celeste said, “Tenants who play by the rules … should never be penalized because of their landlord’s foreclosure.”

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Although many banks have already received their portion of the $75 billion the government has allocated for the new Making Home Affordable plan, some mortgage lenders are moving so slowly to modify homeowners’ mortgages through the plan that homeowners fear they could still lose their homes to foreclosure, National Public Radio reports (“Homeowners Find Loan Modification Slow Going,” May 7, 2009).

“I faxed my loan-modification application six times to the two banks and everybody keeps saying, ‘We didn’t get your application yet, we didn’t get your application yet,’” says Dorothea Wang, a California homeowner who hasn’t been able to pay her mortgage since January and is about to default on her home loan with Wells Fargo. Wang says she’s called and left several messages with the bank, but nobody ever returns her calls.

“Unfortunately, that’s a true story and I hear it all the time,” says Yolandra McClinton, a Los Angeles Neighborhood Housing Services counselor. McClinton says this has been typical of mortgage holders since they‘ve become overwhelmed with the large number of homeowners attempting to get their loan modified through government programs.

Wells Fargo just received its $3 billion subsidy from the government to help struggling homeowners like Wang, but according to Ed Delgado, senior vice president of default and retention operations at Wells Fargo Home Loans, his company has been busy getting up to speed with the new program.

It takes time to roll out the “decisioning” software that helps lenders determine if homeowners qualify under the new program, Delgado says. Lenders use the software, in part, to determine if homeowners actually live in their home and if they spend more than 31 percent of their gross monthly income on their mortgage payment.

Those customers who meet the eligibility requirements, Delgado explains, would typically have the interest rate on their mortgage reduced for at least five years under the government’s plan.

Many industry insiders including Lori Gay, president of the Los Angeles Neighborhood Housing Services, believe that lenders are just too busy dealing with foreclosures and don’t have the time to help homeowners with mortgage modifications.

“Are they ready to make this a massive program yet, or do they need three months to get their systems in place?” Gay asks. “This is where people get lost in the cracks.”

Popularity: 9% [?]