Madigan targets Lombard firm in mortgage rescue fraud

A Lombard company is one of four firms being sued for mortgage rescue fraud by Illinois Attorney General Lisa Madigan.

But, the owner of Loan Modification Inc. in Lombard said he is stunned by the charges because he has never received as much as a phone call from the Attorney General's office before Madigan's office announced Wednesday he is committing fraud.

Edward J. Galowitch, owner of the Loan Modification Inc., have been targeted in a national crackdown conducted by the Federal Trade Commission, the U.S. Department of Justice and state attorneys general according to a news release sent from Madigan's office on Tuesday.

The other companies being sued are Capital Foreclosure Solutions of Chicago, Midwest Forclosure Solutions of Norridge and People's First Financial of San Diego.

"As part of the mortgage foreclosure crisis, we are seeing many fraudulent schemes in which companies promise they will help desperate homeowners to modify their loans or rescue their homes from foreclosure," Madigan said in a written statement. "These promises are false. All the con artists do is take money from homeowners and run, leaving them in a more desperate situation."

But Galowitch said he was surprised by the announcement, adding that he has worked with Madigan's office in the past to get loan modifications completed in a more timely manner, as well as to help people who are being foreclosed on.

"There are other company's out there who take the money and run like the Attorney General stated," he said. "But, that's not us. We do everything we can to ensure we are not tied in with those people."

Madigan said companies committ fraud by asking clients for an upfront fee to negotiate with mortgage lenders to reduce payments and save their homes. After collecting the upfront money, they failed to follow up with the negotiations or perform any services on behalf of the homeowners.

That behavior violates rules in the Illinois Mortgage Rescue Fraud Act, which prohibits companies from requiring upfront payment from consumers before completion of the contract.

Galowitch said he does ask for a retainer fee up front but said he refunds the money if the client isn't happy, adding out of 75 clients, only two have asked for and received a refund. He also said he does not require an upfront fee from people in foreclosure.

Galowitch also added his company has completed numerous mortgage remodifications, and that the attorney general's office has never contacted him or ran any investigation into his books prior to announcing the charges.

"I am actually surprised they would file something against me like this without ever calling me or my office, or coming here and looking at my books first," he said. "There are only three of us in this office. If they were investigating, I would have known it."

Madigan has brought 24 similar lawsuits against other companies. At least 17 states, from Arizona to Maryland, announced lawsuits in this week's crackdown.