Madigan sues 2 companies in mortgage rescue fraud

The Illinois Attorney General's office filed lawsuits Tuesday against two companies that it alleges preyed on struggling homeowners with a new type of mortgage rescue fraud in the Chicago area.

Instead of just promising mortgage loan modifications, the companies allegedly offered "mortgage loan audits" to homeowners, convincing them that an audit of their loan would cut their mortgage payments and help them avoid foreclosure. The companies illegally charged upfront fees, which victims paid without receiving assistance.

The Federal Trade Commission has warned against so-called forensic mortgage audits and has taken action against operators. "There is no evidence that forensic loan audits will help you get a loan modification or any other foreclosure relief, even if they're conducted by a licensed, legitimate and trained auditor, mortgage professional or lawyer," according to the agency.

One of lawsuits filed by the state Tuesday in Cook County, alleges that Mortgage FACS Corp.  targeted homeowners in Cook, DuPage and Will Counties who were behind on their mortgage payments or in foreclosure. The firm, according to the suit, advertised its "forensic mortgage loan audits" as a way to obtain a modification and lower monthly payments, thereby avoiding foreclosure. Unsuspecting homeowners each paid hundreds of dollars for the audits.

Another suit, filed in Sangamon County against Enlightened LLC, which does business as AMT Auditing Services LLC and Mortgage Auditing Program, charged that the company told homeowners their audits would find savings from misapplied payments and interest rates but few, if any, received money back. AMT, according to the lawsuit, offered refunds if no errors were found but it was difficult for consumers to obtain those refunds. 

Customers of AMT, unaware that the company had signed them up for a mandatory trial of auditing software, later discovered that they were being charged monthly fees for the  programs. 

The companies were not immediately available for comment.

"These schemes put a new twist on the mortgage rescue fraud scam but generate the same result by charging struggling homeowners huge sums of money for nothing in return," said Attorney General Lisa Madigan in a release. "An audit can almost never be used to negotiate a lower rate with your lender. The best way homeowners can work to secure a loan modification is through a legitimate HUD-certified housing counselor, which provides services for free."

The lawsuits seek to ban the companies from operating in Illinois, void pending contracts, provide restitution to consumers and assess penalties.