State AGs Opting For Civil Lawsuits In Lieu Of Criminal Prosecutions In Combatting Foreclosure Scams

A recent Associated Press story reports on how some state attorneys general are pursuing loan modification scams:

• [W]hile some states have recently toughened penalties for perpetrating the booming business of foreclosure scams, and some prosecutors have used existing fraud statutes to bring criminal charges, the reaction of many state prosecutors are civil actions designed to recover a victim's money.

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• Florida Attorney General Bill McCollum has filed several civil lawsuits, including one against a company with an estimated 600 clients. So have attorneys general in at least a dozen states.

• In Maryland, state criminal prosecutors have filed no charges under that state's new foreclosure-rescue statute. Ditto in Massachusetts, which recently barred for-profit mortgage-foreclosure rescues entirely. "We found these cases are more appropriately brought in civil court, where we can get better remedies for the victims,"' said Amie Breton, a spokeswoman for Massachusetts Attorney General Martha Coakley.

• In Alabama, the attorney general's office usually reaches out to the foreclosure-relief firms first to find out if there is any money to recover before seeking criminal charges, said Rushing Payne, chief of the office's Consumer Protection Division. "It depends on the nature (of the allegations) and what we're able to prove," Payne said, adding there had been no convictions for foreclosure rescue scams in the past year.

• In several states, attorneys general can only bring a criminal case when asked by a local district attorney. In others, they lack the jurisdiction entirely. There are some attorneys general making criminal cases.

• In Arizona, Attorney General Terry Goddard has brought three cases this year on felony theft, fraud or money-laundering charges. Two defendants pleaded guilty, and the third case is pending. In California, the attorney general's office busted a fraud ring last November that had collected upfront fees ranging from $1,500 to $5,000, stealing more than $700,000 from homeowners in all. Three people have pleaded guilty to grand theft charges and received sentences ranging from probation to 6 years in prison.

• Lawmakers in Nevada, which has one of the highest rates of foreclosure rates in the country, took steps last fall to make foreclosure fraud a criminal offense. So far, five people have been charged under the new statute, none have yet gone to trial. The new law there makes defrauding a homeowner in foreclosure a felony punishable by up to 20 years in prison and a $50,000 fine.

For the story, see It's boom time for foreclosure scam artists (Only in a few states are attorneys general offices willing and able to seek criminal charges and jail time against foreclosure con artists) (if link expires, try here).