Arizona Attorney General Terry Goddard filed a lawsuit Wednesday against Discount Mortgage Relief and Mortgage Relief LLC in Scottsdale, alleging its principals engaged in deceptive loan modification services that may have duped thousands of victims.
The Attorney General’s Office also secured a temporary restraining order to prevent the Scottsdale companies that do business under both names from charging or receiving money for loan modification services or advertising their services.
The lawsuit alleges that, at least since July 2009, the mortgage companies have deceived consumers into paying thousands of dollars for mortgage loan modification services by misrepresenting their ability to help those consumers obtain mortgage relief and save their homes, a violation of the Arizona Consumer Fraud Act.
Consumers allegedly paid Discount Mortgage Relief and Mortgage Relief approximately $1,350 to $5,000 each for loan modification services and were guaranteed results.
John Common, who is named in the lawsuit, disagrees with the AG’s assertions and said his company is being unfairly scrutinized.
“To target every company just because they have ‘mortgage’ or ‘modification’ in their name is unfair,” said Common, a manager of the company.
He described the FBI and local law enforcement search as a “shoot first, ask questions later” affair.
“They need to show something for those efforts,” said Common.
Also named in the lawsuit were Bruce Spurlock and both men’s wives.
The lawsuit alleges Discount Mortgage Relief and Mortgage Relief violated the Arizona Consumer Fraud Act by:
• Misleading consumers into believing they were prequalified and guaranteed to receive a loan modification through the company’s services.
• Falsely promising favorable results and telling consumers that any foreclosure proceedings against their homes would stop once they hired the company.
• Misrepresenting that the company used attorneys to negotiate consumers’ loan modifications.
• Falsely stating that they were associated with or acting on behalf of the government and associated with or acting on behalf of the consumer’s lender.
• Falsely stating that the company was “FBI certified.”
• Misrepresenting the nature of the company’s loan modification services by referring to them as forensic loan documentation audits or analyses.
• Falsely promising consumers their fees would be refunded if the company failed to get them a loan modification, and failing to return fees to some consumers who decided not to hire the company and never signed a contract.
Common said the company’s television commercials make no such claims, and the number of complaints cited in the lawsuit represent only 3 percent of its clients.
“Ninety-seven percent is not a bad score,” he said, arguing that many of the claimants are financially challenged and may act or say things they normally wouldn’t.
Discount Mortgage Relief and Mortgage Relief operate from a 129,000-square-foot office at 14000 N. Pima Road. They employ 134 people.
In the lawsuit, Goddard asks the court to order Discount Mortgage Relief/Mortgage Relief to:
• Refrain from violating the Arizona Consumer Fraud Act.
• Pay full restitution to all homeowners who paid Discount Mortgage Relief/Mortgage Relief for loan modification services.
• Pay a civil penalty of up to $10,000 for each violation of the Arizona Consumer Fraud Act.
• Reimburse the Attorney General’s Office for its costs in this matter.
Goddard said he is committed to fighting deceptive practices targeted at homeowners who are struggling to make their payments.
“Instead of providing assistance, many loan modification companies have been pocketing large up-front fees and failing to obtain any kind of mortgage relief for homeowners,” he said in a prepared statement. “In this past legislative session, my office championed the passage of (Senate Bill) 1130, which prohibits foreclosure consultants from receiving fees before they provide loan modification or other services.”
That law prohibiting consultants from collecting up-front fees takes effect July 29.
A hearing is scheduled for Friday, when the Maricopa County Superior Court will determine whether the temporary restraining order should remain in effect.