Wednesday, October 24, 2007

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Attorney General Abbott Takes Legal Action Against Foreclosure Rescue Firm's Unlawful Texas Operations

UPDATE: On Sept. 2, 2008, the 215th Judicial District Court of Harris County entered a $2 million judgment and permanent injunction against Southern Residential LLC, National Homeowners Assistance, and Edward Casey. The court’s order concluded the State’s case against these defendants.

Final judgment against Southern Residential, National Homeowners Assistance, and Edward Casey

HOUSTON – Texas Attorney General Greg Abbott today obtained a temporary restraining order and asset freeze against an unlawful Texas-based foreclosure rescue operation targeting struggling homeowners in the state and across the country.

According to court documents, Southern Residential, LLC, and its director and manager, Edward Casey, fraudulently advertised that the company could save homeowners from imminent foreclosure. The enforcement action also names affiliated defendants National Homeowners Assistance, Stephanie Casey, Matthew Casey and Linda McCann. Under the temporary restraining order, the defendants must stop falsely soliciting distressed homeowners immediately. Although the order only applies in Texas, homeowners nationwide are protected by the asset freeze.

“At a time when regulators, policy makers and stakeholders are working to help struggling homeowners, a few unscrupulous operators are scheming to profiteer at homeowners’ expense,” Attorney General Abbott said. “These defendants charged large fees and failed to deliver on their false promises. This court order shuts down an unlawful scheme to defraud Texas homeowners.”

 

Media links

Southern Residential's
"Guarantee"

Southern Residential
Commercials

House911.com
Web Site
Attorney General's lawsuit against Southern Residential
Temporary restraining order against Southern Residential
Brochure: Avoid Home Buying Scams

Attorney General Abbott added: “Homeowners facing difficulty making their monthly mortgage payments should be wary of mortgage rescue scams. Schemes offering too-good-to-be-true solutions are usually just that. Texans who fall behind on their payments should contact their lender directly to work out a resolution.”

According to the attorney general’s enforcement action, homeowners who were delinquent on mortgage payments responded to the defendants’ television and newspapers advertisements. The defendants also advertised online through various Web sites, including House911.com and Stop911.com. The company’s so-called “stop foreclosure specialists” boasted that their established relationships with mortgage lenders and banks nationwide could stop the foreclosure process. The defendants also told homeowners that they would only accept clients whom they could help.

 

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View Video of News Conference

Homeowners who contacted Southern Residential and its affiliates were pressured to sign contracts and pay fees of up to $2,000 immediately. Under the contract, Southern Residential strictly prohibited homeowners from contacting their mortgage lenders. After homeowners paid the fees, many never heard back from the defendants’ representatives.

Others complained that Southern Residential’s “renegotiations” with lenders required immediate, upfront balloon payments totaling tens of thousands of dollars. Despite the defendants’ promises, many homeowners lost their homes to foreclosure or went into bankruptcy.

The attorney general’s legal action prohibits the defendants from making false representations to homeowners and deceiving potential clients about the services they provide. The state estimates that Southern Residential receives between $100,000 and $150,000 per month in fees paid by homeowners facing foreclosure. To protect funds already paid by homeowners, the court froze a trust fund and several bank accounts that belong to the defendants.

The Attorney General seeks court-ordered restitution for homeowners who were harmed by the defendants’ acts, as well as civil penalties of up to $20,000 per violation of the Texas Deceptive Trade Practices Act. Additionally, the Attorney General requests up to $5,000 per violation for the defendants’ failure to register their business as one that conducts telephone solicitations.

Attorney General Abbott reminded the company’s customers that they should not wait for Southern Residential to contact them about the status of their mortgages. Homeowners need to call their lenders immediately and ask what preventative measures, if any, the defendants have taken on their behalf.

The Office of the Attorney General is engaged in a variety of efforts to protect Texas homeowners. Last week, Attorney General Abbott secured a temporary injunction against Foreclosure Assistance Solutions, a Florida-based “foreclosure rescue” scheme that targeted Texans who fell behind on their mortgage payments.

In September, Attorney General Abbott launched the Texas Residential Mortgage Fraud Task Force, a partnership that involves key state regulatory agencies to take a proactive stance towards tracking and prosecuting mortgage fraud.

This month, Attorney General Abbott urged three of the largest mortgage lenders and servicing companies doing business in Texas to take steps to address the high foreclosure rates in the state. In meetings with EMC Mortgage, Countrywide Mortgage and Litton Loan Servicing, he outlined five measures that the companies should implement to restore borrowers’ financial stability, including stepping-up efforts to convert adjustable rate mortgages to fixed-interest loans; subjecting more delinquent loans to mitigation first rather than immediately submitting them to an antagonistic collections process; improving communication and outreach with consumers; waiving penalties and fees while companies work with troubled homeowners; and promptly addressing complaints filed against them with the Office of the Attorney General.

Earlier this year, Attorney General Abbott secured $21 million in restitution for Texas homeowners who were harmed by lending giant Ameriquest Mortgage Co. That case resolved allegations that the company and its affiliates did not clearly disclose certain terms to homeowners, including unpredictable adjustable rates.

Homeowners who believe they have been harmed by this or similar fraudulent businesses may call the Office of the Attorney General’s toll-free complaint line at (800) 252-8011 or file a complaint online at www.texasattorneygeneral.gov.