Cuomo to sue L.I. loan modification biz

By Adam Pincus | June 09, 2009 12:43PM

New York Attorney General Andrew Cuomo announced he would sue Uniondale, L.I.-based loan modification company American Modification Agency and 14 similar companies with business in New York under the state’s consumer protection statutes.

He said American Modification Agency, known as Amerimod, and others were illegally charging upfront fees for services to modify loans facing foreclosure, which is not allowed by state law, as well as making misleading statements about their level of success with prior clients in advertisements.

“In many ways the entire [loan modification] industry is a scam, in my opinion, because no one had to pay for this service in the first place,” because the federal government offers it for free, he said.

Amerimod charges a 1 percent fee upfront and claimed it had success rates of 90 to 100 percent, Cuomo said.

The company, which did not immediately respond to a request for comment, says on its Web site that it is a leader in loan modifications and also fights predatory lenders and foreclosures. See update below.

Loan modification companies often promise to reduce interest payments, get late fees and penalties forgiven, and reduce principal amounts, but in fact often do none of that, said Joy Feigenbaum, chief of the AG’s consumer frauds and protection bureau.

She said it was an ongoing investigation, and subpoenas had been issued for 14 other companies in New York state and nationwide on similar allegations.

Update (5:09 p.m.):

The company said in a statement it had worked with Cuomo’s office and other state government officials for about a year on compliance issues, but had not heard complaints.

“At no time has the New York attorney general’s office, or any other state official, condemned Amerimod Inc.’s integrity or success in completing modifications and helping homeowners in a time of need,” Amerimod said in a statement.

“Amerimod has been and will remain a frontrunner for compliance as well as a reliable source for distressed homeowners and consumer advocacy groups,” the company said.