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Actions taken against unlicensed Loan Modification companies, unlicensed Debt Management firm

April 05, 2010

Actions taken against unlicensed Loan Modification companies, unlicensed Debt Management firm

For Immediate Release: Monday, April 5

Allegations include forgery and pocketing fees for services not rendered

(ST. PAUL, MN)  The Minnesota Department of Commerce has taken action against two loan modification companies for operating in the state without a license and allegedly engaging in deceptive or dishonest practices. The department also took action against an unlicensed debt management company for allegedly charging excessive fees and failing to provide promised services in exchange.  All three companies could be subject to civil penalties.

LMS and Associates
The department has charged St. Louis Park-based LMS and Associates with engaging in unlicensed loan modification activity in the state.  Though the company applied for a mortgage originator license in April 2009, the application was not complete and a license was never issued.  The application listed Todd Jacobson as the sole owner, officer and partner of the company.  However, an investigation by the department revealed the company allegedly had another owner, Clinton Rooney, who was convicted of fourth-degree assault on a peace officer in 2004.  Rooney also has a 2005 second-degree felony assault on his record.

The department's investigation further revealed that between April 24, 2009 and October 27, 2009, the unlicensed LMS allegedly invoiced 105 files for a total of $250,941 in fees.  The company allegedly told customers it could assist with a number of services, including repayment plans, repayment restructuring, loan modification, refinancing or short sales and that the customer would receive a refund if LMS couldn't complete one or more of those services.  According to the department's investigation, LMS allegedly did not perform the services it said it would, yet failed to issue refunds to customers as promised.

In the case of a customer in Paynesville, Minnesota, LMS allegedly forged a customer's signature and used White-Out to alter information on forms.

A prehearing conference will be held on Wednesday, May 5 at the Office of Administrative Hearings to determine whether the company has committed the alleged violations and should be subject to disciplinary action.

Mortgage Auditors of America
Mortgage Auditors of America (MAA) allegedly operated a scheme by which they offered mortgage loan modifications to distressed homeowners who paid a fee ranging from $1,500 to $2,995.  In return, the company allegedly offered to review the homeowner's mortgage closing documents to determine whether the homeowner had been a victim of mortgage fraud.  In addition, MAA allegedly offered homeowners "free" loan modification services through affiliates County Loan Modification or Take the Land on Profit Services.  The company advertised its services on KTTB-FM (B96) and allegedly claimed "There is no risk to call and no charge" if they couldn't help.

An investigation by the department revealed that MAA and its affiliates allegedly collected more than $27,000 in fees in at least 30 different cases.  The department found no evidence, however, that the companies had successfully modified any of the loans.

Neither Mortgage Auditors of America nor its affiliate, Take The Land Nonprofit Housing Corp., are licensed mortgage originators in Minnesota.  The department has issued a cease-and-desist order, demanding that MAA and its affiliates stop representing themselves as residential mortgage originators in Minnesota.

A prehearing conference on the matter is scheduled for May 17 at the Office of Administrative Hearings.

One Source Management
The department issued a cease and desist order against One Source Management of Chandler, Arizona for conducting unlicensed debt servicing activity in Minnesota.  In recent months, the department received complaints from Minnesota residents who claimed that One Source offered to contact the consumers' credit card companies and get their interest rates reduced to lower, fixed rates, thus saving the consumers money.  One Source allegedly charged a fee of $998.95 to the consumers' credit cards on the same day the company made contact with the consumers.  However, no debt settlement services were provided, the department alleges.

In addition to the cease and desist order, the department is charging One Source with charging excessive fees in violation of Minnesota law.  A civil penalty could be assessed in the case if it is determined that the company violated any law, rule or order.

A prehearing conference will be held on May 26 at the Office of Administrative Hearings.

The Minnesota Department of Commerce licenses and regulates mortgage originators, brokers, servicers and multiple other individuals and companies in the real estate industry.

In 2009, the department took action against 71 individuals and companies in the mortgage industry and 45 actions against individuals and companies in the real estate sector.  The department is increasingly referring its cases to criminal authorities for prosecution.

Consumers with complaints or questions may call the Minnesota Department of Commerce at (651) 296-2488 or toll free, 800-657-3602.


  • Check with the Minnesota Department of Commerce to see if a Credit Service Organization is registered or if a Debt Management Company is licensed.

  • Find out if the counseling agency is a member of a major association.  These organizations work to ensure that member agencies meet certain quality and ethical standards and that credit counselors receive proper training.

  • Choose an agency that offers free face-to-face counseling sessions to discuss your spending habits, arrange a budget and help you handle your personal finances. Signing up for consumer credit services or a debt reduction plan over the phone or the Internet puts you at risk for losing money to a fraudulent enterprise.

  • Get an agreement in writing and read it before you sign it.

  • Avoid companies that require high up-front fees, "voluntary contributions" or a high monthly service fees that only add to your debt. Most legitimate agencies charge about $10 to $20 to start up a debt repayment plan and less than $20 per month in service fees.

  • If you are dealing with a debt management company, make sure you are kept informed about when and how much of your monthly payment is going to your creditors

  • Beware of unrealistic promises, such as erasing your debt for pennies on the dollar in a short time span (most legitimate debt reduction plans take two to four years to repay) or promises to reverse a bad credit score.

  • Know that there are several free, reputable loan counseling services out there.