Blumenthal, Courtney Warn About Harmful Mortgage Rescue Deals Hitting Connecticut

February 19, 2009

Attorney General Richard Blumenthal and U.S. Rep Joe Courtney today announced an investigation -- and issued an urgent warning to homeowners -- about so-called mortgage rescue deals that may actually cost consumers their homes.

Two homeowners, both facing foreclosure after paying for mortgage rescue offers, joined Blumenthal and Courtney at a press conference today.

Blumenthal is investigating H.O.P.E. Alliance (HOPE Alliance), Inc. after Courtney alerted his office about the company's alleged false promises to rescue homeowners from foreclosure.

Blumenthal said, "I am alarmed by allegations that HOPE Alliance is masquerading as a reputable non-profit and erasing all hope for homeowners. I thank Congressman Courtney for alerting my office and aiding victims. We are investigating HOPE Alliance because it allegedly took consumer money, convinced homeowners to stop mortgage payments and then left them with nothing.

"My advice to homeowners: insist on dealing with a non-profit, and resist any advance fee. Like quicksand, deceptive debt rescue schemes sink consumers deeper in distress the more they struggle. We must rescue families from false rescuers, who offer lead-filled lifelines. As economic woes worsen, financial bottom feeders become more prevalent and pernicious. I am proposing new laws to prohibit advance fees and ban for-profit mortgage rescue companies and debt reducers."

Courtney said, "Homeowners and working families are finding it more and more difficult to make ends meet during these challenging economic times, but we cannot let our guard down because apparently if it seems too good to be true -- it probably is. I applaud the willingness of these families to bring this unscrupulous scheme to my attention because they have undoubtedly prevented other Connecticut families from falling prey to this and other scams. I thank Attorney General Blumenthal for moving quickly and decisively to seek a remedy for these families."

HOPE Alliance allegedly charged at least two homeowners, and possibly many more, $1,500 each to save their homes. In both cases the company allegedly urged the homeowners to cease making mortgage payments. Both consumers say they are now on the verge of losing their homes as a result of HOPE Alliance's practices.

HOPE Alliance's name mimics that of HOPE NOW, a non-profit alliance of counselors, mortgage companies, investors and others that offers outreach to distressed homeowners free of charge.

Blumenthal's office has issued a demand for information to HOPE Alliance, including details about its services and representations made to consumers, its corporate structure and a list of its Connecticut clients.

This investigation comes as Blumenthal's office pursues legislation to fight predatory debt reducers that offer such mortgage and debt rescue services that may actually cost consumers their homes.

Debt reducers are unregulated and often claim to offer services to rescue homeowners from foreclosure or severe debt.

In some cases, debt reducers deceive consumers into relinquishing their homes, turning homeowners into tenants. In other cases, consumers pay expensive advance fees to debt reducers that fail to provide promised relief. Often, consumers report that oral promises fail to translate into consumer contracts.

Blumenthal's proposal -- An Act Concerning Foreclosure Rescue and Debt Reducers -- would compel debt reducers to provide advance disclosures that clearly and conspicuously explain their services, and prohibit advance fees. The proposed legislation would also authorize the Banking Commissioner to investigate and reduce debt reducer fees that are excessive when compared to common industry fees and in relation to the consumer's financial benefit of such services.

Blumenthal said, "Rescue predators pitch a variety of financial snake oil -- promises to stop foreclosures and save homes, reduce mortgages and erase credit card debt, eliminate back tax obligations and rehabilitate bad credit histories. Most charge upfront or advance fees -- only deepening debt. They leave consumers out of cash and out of luck, and even out of their homes.

"Debt reduction schemes exploit our most distressed consumers -- homeowners devastated by debt and terrified of looming foreclosure. Many are willing to spend their last pennies on unfair and excessive advance fees, but end up stranded without relief."