The New York State attorney general has sued two Long Island loan modification firms and prompted a third to shut down, accusing them of illegally taking clients' fees but doing no work despite guarantees of success.
At an Elmont news conference Thursday, Attorney General Andrew Cuomo accused National Modification Service in Farmingdale and Infinity Mitigation Corp. in Bohemia of having misleading advertising, making unsubstantiated claims of success and refusing to refund clients' money.
ABM Mitigation Corp. in Ronkonkoma agreed to exit the industry; it also promised to refund thousands of dollars in fees to clients if it can't prove they got them loan modifications, according to court papers.
Cuomo also said a Florida-based loan modification firm, Raymond, Louis & Fitch, which also is known as RLF Housing Counseling Community Service, agreed to stop doing business in New York State.
Officials at National Modification declined to comment. Infinity's phone line had busy tones, and no one could be reached for comment at Raymond, Louis & Fitch. ABM president Joseph Vozza declined to comment.
Cuomo voiced frustration Thursday over the loan modification firms and the scams despite free services from nonprofits: "It is like a virus spreading across the state . . . They have the marketing advantage, and they often have a desperate audience."
Loan modification firms typically pore over public filings of new foreclosure cases as soon as lenders file them, sending homeowners letters promising help.
Shortly after her bank started foreclosure proceedings in late 2008, Barbara Weaver of Freeport said she got 15 letters from such firms in one week.
Weaver, who spoke at the news conference, said she didn't know about nonprofits' services and paid $1,500 to National Modification Service. To save her home, she filed bankruptcy in January 2009, the day before the auction on the house.
Weaver said she learned from her bank that the company made no attempts at modification, and she asked for her fee back.
"They refused to issue my refund and even threatened to have me arrested," she said of her office visit with Joseph Romano, the firm's founder.
So far, 500 victims who paid more than $1 million have been identified through subpoenaed documents and complaints, Cuomo's office said, with average payments ranging from $3,000 to $6,000.
Since September 2008, it has been illegal in New York State to charge up-front fees for modifications. Last year the state closed a loophole that allowed fees to be placed in escrow by attorneys tied to modification firms.
Modification scam red flags
Claims that success is guaranteed, including high or 100 percent success rates
Fees charged up front
Firm's name sounds like a government name
Brochures have government agencies' seals
No written contracts given
No notice that nonprofit firms offer free services