TRENTON
– Attorney General Anne Milgram announced
today the filing of a lawsuit charging three
individuals and two corporate defendants with
mortgage fraud. The defendants are charged
with promising to help distressed homeowners
keep their homes but, instead, acquiring their
properties at exorbitant discounts, binding
the victims to predatory “sale-leaseback”
agreements and, typically, evicting them before
selling their homes to other buyers.
Named as defendants in the lawsuit are Property
Solutions of N.J, Inc. and PSRE Holding Company,
LLC, both of Union City. Also named are individual
defendants Edward Toledo, the president of
Property Solutions and a member of PSRE, Leon
Toledo, the vice-president of Property Solutions,
and Raymond Vega, the company treasurer and
a member of PSRE.
Filed
last Thursday in Superior Court in Hudson
County, the state’s two-count lawsuit
charges each defendant with violating the
Consumer Fraud Act through unconscionable
commercial practices, deception, false promises
and misrepresentations.
Today’s
suit brings to nine the number of civil mortgage
fraud prosecutions that have been brought
by the state since June charging a total of
92 individual and corporate defendants. Defendants
in the cases have been charged with various
scams, including some aimed at victims who
sought to acquire investment properties, some
targeting people who hoped to upgrade their
living situations through “rent-to-own”
opportunities and, more recently, schemes
aimed at desperate mortgage-holders in need
of “foreclosure rescue.”
“The
unifying thread among these cases is that
the defendants not only stole people’s
money, they stole their hope,” said
Milgram. “In the case we are announcing
today, these defendants callously exploited
the fears of struggling homeowners.
“They promised financial ‘solutions’
to desperate people on the verge of losing
their homes but, in the end, delivered only
profits for themselves,” Milgram said.
According to the state’s lawsuit, the
Toledos, Vega, Property Solutions and PSRE
typically operated by contacting homeowners
in foreclosure either shortly before, or shortly
after, their homes were auctioned at sheriff’s
sale.
The
defendants would promise to save consumers’
homes by paying off the balance of their delinquent
mortgages either before the sheriff’s
sale, or within the redemption period following
the sale.
Using
this approach, the defendants bypassed the
typical sheriff’s sale process and acquired
homes for the “pay-off amount”
of the foreclosed mortgages – an amount
that was usually far lower than what the properties
would have sold for at sheriff’s sale.
As part of the ostensible “solution”
offered to victims, the defendants would enter
into a sale-leaseback agreement with them
that provided a chance to repurchase the home,
but on grossly unfavorable terms. For example,
the contracts typically required consumers
to repurchase their homes within 90 days,
and at prices significantly higher than what
the defendants had paid to acquire the properties.
Although consumers who entered these agreements
were, for a time, able to remain in their
homes, the arrangement typically did not last.
Monthly lease payments required by the defendants
were often higher than the mortgage payments
the homeowner had been unable to afford. Ultimately,
many victims either vacated or were evicted
by the defendants – even if they’d
remained current with the higher monthly payments.
Under the sale-leaseback agreements, former
homeowners who ended up unable to repurchase
their homes were promised cash payments from
the defendants. However, more often than not,
such payments did not materialize.
The
state’s lawsuit also charges that the
defendants lied to consumers about their level
of experience in the industry, as well as
their ability to secure financing that would
help them repurchase their homes.
“These
defendants misled consumers from the start,”
said Division of Consumer Affairs Director
David Szuchman. “And they knew full
well where their victims would end up –
either saddled with monthly rental payments
they could not afford or forced to vacate
homes the defendants had promised to save.”
The state’s lawsuit contains examples
of four cases in which the defendants exploited
homeowners in need. The experience of a 43-year-old
Paterson woman and her brother is typical.
In June 2005, their house was listed for sheriff’s
sale. The defendants allegedly met with the
two owners around this time and promised they
could help them stay in their home and also
“wipe clean” their damaged credit.
Subsequently,
the defendants again met with the owners and
told them they would save the home by paying
off the outstanding debt -- $96,000. In return,
the owners were told, they would have to sign
over title to the home, but would have the
opportunity to repurchase it within 90 days
for $159,900.
The
defendants also said they would secure financing
to help the sister-and-brother owners repurchase
their property, and promised a payment of
$30,000 if the two ultimately were unable
to accomplish the repurchase within 90 days.
The defendants had the two siblings sign a
sale-leaseback agreement whereby they would
have to pay $1,388-per-month in rent to remain
in their home – an amount slightly higher
than the mortgage payments they had been unable
to afford.
Despite the higher rental payments, the owners
kept current on their monthly payments. However,
the defendants never secured financing to
help the two repurchase their home and, in
December 2005, took legal action to force
the pair out.
The
defendants never paid the owners the $30,000
promised if the repurchase failed and, in
September 2007, sold their home to other buyers
for more than $384,000.
In addition to the appropriate penalties and
consumer restitution, the state’s lawsuit
seeks to permanently enjoin the Toledos, Vega,
Property Solutions and PSRE from engaging
in future foreclosure-related real estate
acquisition or foreclosure rescue services.
Attorney
General Milgram thanked Deputy Attorney General
Megan Lewis, Chief of the Affirmative Litigation
Section; Deputy Attorney General Jah-Juin
Ho, of the Division of Law's Consumer Fraud
Prosecution section; Deputy Attorney General
Lorraine Rak, Chief of the Division of Law’s
Consumer Fraud Prosecution Section; Assistant
Attorney General James J. Savage of the Consumer
Affairs Practice Group, Supervising Investigator
Jennifer Micco of the Division of Consumer
Affairs and Investigator Jared O’Cone
of the Division of Consumer Affairs for their
hard work on the Property Solutions case.
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