New York Attorney General Eric T. Schneiderman's office filed a lawsuit Wednesday against four companies and their principals for operating a fraudulent loan modification scam.

The lawsuits, filed in New York County Supreme Court, name Home Affordable Direct Inc. and Home Affordable Solutions Inc., both based in Farmingdale, N.Y., JR Holding Group Corp., based in Babylon, N.Y. and Clear Solutions and Settlements Inc., based in Tampa, Fla., along with principals, Javier Gutierrez and Shadi Soumekh. 

The defendants are alleged to offer relief from unaffordable mortgage payments through loan modifications and other forms of foreclosure prevention.  The firms allegedly collected illegal advance fees ranging from $1,500 to $11,000 but failed to deliver on the promises. The lawsuit seeks to stop the practices and provide restitution and damages to consumers.

The lawsuit states that through frequent radio advertisements and a website, the defendants falsely represented that they are affiliated with the U.S. Treasury Department’s Home Affordable Modification Program, that they have the ability to “pre-qualify” homeowners for a modification under HAMP and can determine whether a homeowner qualifies during a single phone call.

The advertisements, according to the lawsuit, lacked critical disclosures required by law that are designed to protect consumers, such as informing the consumer that Home Affordable Direct is not associated with the government, that their services are not approved by the government or the consumer’s lender and that the consumer’s lender may not agree to modify the consumer’s mortgage loan even if the consumer uses Home Affordable Direct.  

Company salespersons furthered the fraud, according to the lawsuit, by stating they could get mortgage servicing companies to reduce principal balances of mortgage loans to the value of the homes or that they would be able to obtain specific reductions in monthly mortgage payments.

The companies failed to provide required disclosures that would have alerted consumers to be wary of these misleading claims, particularly the disclosure that the consumer can stop doing business with the companies at any time and that they do not have to pay anything to the company if they reject the offer of mortgage assistance obtained from the consumer’s lender or servicer. The companies usually refused to refund the illegal advance fees when asked.

Earlier Wednesday, Schneiderman's office secured a temporary restraining order barring the companies from collecting the advance fees before they accept and execute a loan modification agreement and advertising and operating their business without providing the necessary disclosures.  The court also placed a freeze on company bank accounts.  

"There has to be one set of rules for everyone, no matter how rich or powerful, and that is why our office has aggressively cracked down on those who prey upon vulnerable consumers at risk of losing their home," Schneiderman said. "I am proud to stand up for middle class New Yorkers against predatory scammers seeking to exploit those still reeling from the housing crisis."

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