Scottsdale-based Guardian Group is being sued by the Arizona attorney general and accused of deceiving more than 2,500 homeowners who paid the firm to modify their mortgages and reduce their payments.
The civil lawsuit, filed in Maricopa County Superior Court, alleges that Guardian Group charged consumers up-front fees of $1,595 for its principal-reduction program but then "rarely" provided the service. The firm collected millions of dollars in fees from this program, according the Attorney General's Office.
Guardian principals Bryan Prehoda, Luis Belevan and Jose Carreon were named in the suit.
Foreclosure-help scams - many that ultimately cost struggling homeowners more than a mortgage payment and often their home - continue to climb in Arizona.
"The Guardian Group's conduct makes the case for the state's new foreclosure law, which prohibits the kind of large up-front fees it collected," Arizona Attorney General Terry Goddard said in a news release. "This company has exploited the financial struggles of hundreds of homeowners by promising them mortgage relief it couldn't deliver."
Senate Bill 1130, which went into effect Thursday, prohibits "foreclosure consultants" from collecting any fees until they have completed all the services they promise, with the services outlined in a signed contract. Thousands of Phoenix-area homeowners have paid home-loan modification firms up-front fees ranging from $1,000 to $4,000 and then received no help.
The Guardian Group could not be reached. Its Scottsdale phone has been disconnected.
In a separate legal action, the Arizona Department of Financial Institutions issued a cease-and-desist order against Guardian Group for acting as a mortgage broker without a license. A hearing on that action is scheduled for Oct. 18.
Guardian marketed its services nationally, asserting it could negotiate with lenders to buy homeowners' loans from their lenders for less than what they owed and then sell the loan to investors, according to the lawsuit. Guardian told homeowners it would then lower the interest rate and reduce the overall amount they owed to 90 percent of the house's current market value.
But the suit alleges Guardian was fraudulent in how it represented the program because it didn't have any investors or the $5 billion it claimed for its principal-reduction program.
The Attorney General's Office has prosecuted more than a dozen firms and individuals for loan-modification schemes in Arizona since the federal Home Affordable Modification Program was launched in 2009.
Non-profit housing counselor provide free help to homeowners facing foreclosure. There are also reputable for-profit firms that charge for negotiating loan modifications with lenders. But now, no firms can charge up-front fees in Arizona.
Foreclosure aid
• Homeowners facing foreclosure can receive free help by calling the Arizona Foreclosure Prevention Helpline, 877-448-1211.
• To report possible foreclosure scams, contact the Arizona Attorney General's Office's consumer-complaints division, www.azag.gov or 602-542-5763.
Arizona sues Guardian Group over foreclosure-help scams
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