Just two weeks after Texas’ Attorney General convened the Texas Residential Mortgage Fraud Task Force–a strategic partnership intended to improve collaboration among residential mortgage regulators and law enforcement officials–some progress has been made. Last Friday, Attorney General Greg Abbott charged Foreclosure Assistance Solutions, LLC (a Clearwater, Florida-based company) with operating an unlawful foreclosure rescue scam that targeted struggling Texas homeowners, and seized of $13,000,000.00 worth of the company’s assets.

As a result, the 408th District Court in Texas issued a temporary restraining order and froze assets belonging to three businessmen who organized the scheme. According to court documents, the defendants fraudulently advertised that they could save homeowners from imminent foreclosures.

Defendants named in the petition:

• Foreclosure Assistance Solutions, LLC of Florida
• Herb Zerden, co-owner of Foreclosure Assistance Solutions
• Adolfo Quintero, co-owner of Foreclosure Assistance Solutions
• J.W.W. Services, Inc. of California
• John Woodruff, owner of J.W.W. Services

According to the State of Texas, the defendants mailed cards and letters to homeowners whose mortgage payments were delinquent and thus facing foreclosure. Their correspondence with homeowners promised established relationships with mortgage companies and banks nationwide. As a result, they claimed, Foreclosure Assistance Solutions could stop the foreclosure process.

Homeowners who contacted Foreclosure Assistance Solutions were urged to sign a $1,200 contract immediately. Under the contract, Foreclosure Assistance Solutions strictly prohibited homeowners from contacting their lenders. After homeowners paid the fee, they rarely heard from the company’s representatives again. When homeowners repeatedly called the company for answers, they were ignored. As a result, many homeowners still lost their homes to foreclosure.

Last Friday’s action prohibits the defendants from making false representations to homeowners. Specifically, Foreclosure Assistance Solutions is prohibited from claiming that a home is at risk without providing proof of that risk. The court also ordered the defendants to stop assisting homeowners without describing the alleged assistance.

The Office of the Attorney General’s petition states that Foreclosure Assistance Solutions deposited over $13 million in Bank of America accounts between 2005 and 2006. Most of those funds came from homeowners who faced foreclosure. That account and others are subject to last Friday’s asset freeze.

The Attorney General is now seeking 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 is requesting up to $5,000 per violation for the defendants’ failure to register the business as one that conducts telephone solicitations.

As I mentioned at the outset of this post, the State of Texas is engaged in a variety of efforts involving residential mortgages. Last week, Attorney General Abbott launched the Texas Residential Mortgage Fraud Task Force, a partnership that involves key state regulatory agencies. The task force, established by Texas House Bill 716, is required “to take a proactive stance towards tracking and prosecuting mortgage fraud and the perpetrators of mortgage fraud statewide.”

Earlier this year, the state 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 Foreclosure Assistance Solutions, LLC, or similar fraudulent businesses in Texas may call the Office of the Attorney General’s toll-free complaint line at (800) 252-8011.