(Phoenix, Ariz. - July 29, 2010) Arizona Attorney General Terry Goddard today announced he has filed a lawsuit against The Guardian Group, LLC (“Guardian Group”) for engaging in allegedly deceptive mortgage loan reduction services that have cost more than 2,500 consumers millions of dollars.
Goddard also called attention to a new state law taking effect today that prohibits foreclosure consultants and mortgage “rescue” companies from charging upfront fees. The Attorney General supported passage of the law.
“This company has exploited the financial struggles of hundreds of homeowners by promising them mortgage relief it couldn’t deliver,” Goddard said. “The Guardian Group’s conduct makes the case for the state’s new foreclosure law, which prohibits the kind of large upfront fees it collected.”
The lawsuit, filed in Maricopa County Superior Court, alleges that the Scottsdale-based Guardian Group fraudulently represented itself as providing loan reduction services to homeowners struggling to make their mortgage payments. The company charged consumers an average advance fee of $1,595 for mortgage loan refinancing services, which it rarely provided. It collected fees from more than 2,500 consumers for enrollment in its Principal Reduction Program since August 2009.
The company, which markets nationally, made claims it would negotiate with lenders to purchase a consumer’s note for less than face value and sell the note in an investment package to a third-party investor. Guardian Group then told the consumer that it would modify the rates and terms of the consumer’s mortgage loans and reduce the principal owed to 90 percent of current market value.
Guardian Group fraudulently represented to consumers that it had $5 billion allocated for its “Principal Reduction Program” because it had multiple investors prepared to purchase mortgage notes. The Attorney General’s Office learned that not one of the supposed investors actually invested money in the company.
This lawsuit was filed just before the new law regulating foreclosure consultants took effect today. The law prohibits foreclosure companies from charging upfront fees and sets forth requirements that apply to foreclosure consultants. Had this law been in effect prior to the filing of the lawsuit against Guardian Group, it would have provided an additional legal avenue to pursue further recourse for consumers.
The lawsuit specifically alleges:
- Guardian Group misrepresented the services that a consumer in the Principal Reduction Program could expect to receive and the company’s ability to provide those services.
- Guardian Group misrepresented to consumers that it had multiple investors prepared to purchase mortgage notes, when no actual investors had ever invested money in the company.
- Guardian Group misrepresented the time required to process a file, declaring it would take 60-90 days, when it actually would take much longer to process or not be processed at all.
- Guardian Group deceived consumers by promising them a refund while often not providing one.
The lawsuit asks the court to:
- Enter an injunction against the defendants, prohibiting them from engaging in the unlawful acts and practices alleged in the complaint.
- Order defendants to pay restitution to all victims.
- Order defendants to pay a civil penalty of up to $10,000 for each violation of the Consumer Fraud Act.
- Order defendants to reimburse the Attorney General’s Office for its costs in the investigation.
This case is being handled by Assistant Attorney General Rebeca Hoeffer.
In a separate administrative action, the Arizona Department of Financial Institutions issued a Cease and Desist Order against Guardian Group for acting as mortgage broker without obtaining a license. A hearing on that matter is set for October 18, 2010.
Free help is available to homeowners who have questions or need help working through their housing situation form the Arizona Foreclosure Prevention Helpline at 1-877-448-1211. Callers will be directed to local housing counseling agencies approved by HUD.
Arizonans who believe they have encountered fraudulent activity through so-called "rescue" scams can file a complaint with the Arizona Attorney General’s Office, Consumer Information & Complaints, www.azag.gov or 602-542-5763 (Phoenix); 520-628-6504 (Tucson) 800-352-8431 (outside Phoenix or Tucson metro area).
A copy of the complaint is attached. For additional information, contact Press Secretary Molly Edwards at (602) 542-8019.