Events leading to the simultaneous collapse of the real estate and mortgage markets in 2008 and 2009 left many homeowners with new financial challenges created by an economic recession, high mortgage balances and declining home values. Some homeowners who needed to stop foreclosure and obtain manageable payments were able to obtain the fresh financial start they wanted through Chapter 13 bankruptcy.

Some financially distressed homeowners in Phoenix, Arizona, lost thousands of dollars to unscrupulous companies that promised to stop foreclosure and obtain loan modifications but did neither. The attorney general in Arizona sued two of those companies.

In one of the lawsuits, the attorney general’s office alleged that a Phoenix-based company gave homeowners access only to free forms and the website for the company, but did not provide the mortgage rescue services for which each homeowner paid nearly $2,000. A second company sued by the attorney general is alleged to have charged large fees in advance of services to stop foreclosure and obtain mortgage modifications. According to the lawsuit, the company took the money from homeowners but did not perform the promised services.

As pointed out by the Arizona attorney general, the effects of the mortgage crisis are still being felt in Arizona. The lawsuits filed by his office demonstrate that homeowners dealing with financial challenges are easy prey to businesses promising to stop foreclosure, reduce debt and reduce interest payments. Many people prefer the peace of mind they can get when they work with an experienced bankruptcy attorney to file for Chapter 13 bankruptcy and obtain a fresh start.

Source: San Francisco Chronicle, “Arizona sues 2 mortgage relief companies.