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Minnesota attorney general, two lawmakers warn of 'foreclosure consultant' scams

MOORHEAD - Minnesota Attorney General Lori Swanson and two state lawmakers stopped at the Moorhead Municipal Airport Friday to warn area residents about home "foreclosure consultant" scams.

She was accompanied by two Twin Cities-area lawmakers promoting legislation to require lenders to offer mortgage mediation before foreclosures.

Swanson said her office filed lawsuits against two Florida firms, IMC Financial Services and American Financial Corp (National Foreclosure Consulting Services), alleging they illegally charged up-front fees as high as $1,850, and failed to deliver on promised services to save homes from foreclosure.

"Nobody should ever pay a fee in advance," Swanson said, adding that a 2004 state law prohibits foreclosure consulting firms from charging fees until promised services have been performed.

She said the firms are "preying on people" throughout the sate who are struggling to pay their debts. "It's really kicking people when they're down," she said.

Swanson was joined by DFLers Sen. Ken Kelash, whose district includes Richfield, Bloomington and part of Minneapolis, and Rep. Debra Hilstrom, whose district includes Brooklyn Center and Brooklyn Park.

The lawmakers promoted the Homeowner-Lender Mediation Act, a bill now being carried in the House (HF354) and the Senate (SF340). It requires banks and other mortgage-holders to offer homeowners mediation before they begin foreclosures.

About 30,000 foreclosures are expected in Minnesota in 2009, Swanson said.

Kelash and Hilstrom said they hope the act will do for homeowners what the 1986 Farmer-Lender Mediation Act did to save 14,000 family farms from foreclosure during the farm crisis.

Fees to fund the mediation program would be rolled into home closing costs, and the program would have an end date of 2014, they said.

The program would require both parties to negotiation in good faith

Remedies could include:

- Adjusting interest rates or principal balances.

- Extending repayment periods.

- Modifying loan terms.

- Foreclosure would be deferred during mediation.

Hilstrom said the act has bipartisan support.