The final order granting judgment, issued by Superior Court Judge Thomas J. Olivieri in Hudson County after a 10-day bench trial, found that defendants Property Solutions of N.J., PSRE Holding Company, Edward Toledo and Raymond Vega violated the Consumer Fraud Act through numerous unconscionable commercial practices.

Specifically, the defendants were found to have defrauded certain struggling homeowners by promising to help them keep their homes but, instead, acquiring their properties at steep discounts, binding the victims to predatory “sale-leaseback” agreements and, typically, evicting them before selling their homes to other buyers.

As a result of the court’s decision, Property Solutions, PSRE, Toledo and Vega have been ordered to pay the State a total of $280,000 in civil penalties, and to pay three defrauded New Jersey homeowners a total of $189,500 in restitution. The defendants are also permanently banned from operating any foreclosure-related businesses in New Jersey.

“These defendants promised struggling homeowners help, but in the end only helped themselves. For their callous exploitation of people in need, they are now – appropriately – being held accountable,” said Attorney General Chiesa. “This is an important win on behalf of New Jersey citizens,” Chiesa said, “not only because it provides restitution for homeowners who were harmed by the defendants’ fraudulent actions, but because it sends a clear message that we will not tolerate this kind of predatory, greed-driven conduct.”

Thomas R. Calcagni, Director of the Division of Consumer Affairs, called the Property Solutions verdict “a clear victory on behalf of New Jerseyans who are struggling during these difficult economic times, and against those who seek to take advantage of their desperation.”

“Supposed ‘rescue plans,’ created to deceive financially distressed individuals, are merely one of the many types of fraud or unacceptable business practices to which homeowners become vulnerable when they face foreclosure,” Calcagni said. “The Division of Consumer Affairs' Financial Fraud Unit has responded by aggressively cracking-down on those who unlawfully seek to exploit financially-strapped homeowners.”

Fraudulent conduct charged in the State’s two-count lawsuit took place between 2005 and 2007. According to the suit, Property Solutions and the other defendants, all of whom listed Union City addresses at the time, typically operated by contacting homeowners in foreclosure shortly after their homes were auctioned at sheriff’s sale, and within the 10-day period the homeowners had to redeem their homes by paying off the outstanding liens.

The defendants would promise to save consumers’ homes by paying off the balance of their delinquent mortgages within the redemption period following the sale and further promising the consumers that defendants would help them obtain financing to save their homes. 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.

Although the defendants held themselves out as experts in the foreclosure field, they failed to disclose to victimized homeowners that they would have been entitled to surplus funds representing the difference between the amount they owed and the higher price for which their homes sold at sheriff’s sale.

As part of the ostensible “solution” offered to these 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.

As a result, the homeowners forfeited their right to seek surplus funds that, in the case of one family, had amounted to $154,000.

Although the consumers who entered these agreements were, for a time, able to remain in their homes, the arrangement typically did not last. Monthly use and occupancy payments required by the defendants were in some cases higher than the mortgage payments the homeowner had been unable to afford.

Ultimately, victims in the State’s case either vacated or were evicted by the defendants – even when they’d managed to remain current with the higher monthly payments. In several cases, pleadings filed by the defendants contained false sworn statements that the victims had failed to make any of their use and occupancy payments.

In rendering his decision in the Property Solutions case, Judge Olivieri reserved decision on the State’s application for investigative costs and attorney’s fees.

Deputy Attorney General Jah-Juin (Jared) Ho, Deputy Attorney General Janine Matton and Assistant Attorney General Brian McDonough of the Affirmative Civil Enforcement Practice Group represented the State in the Property Solutions trial. Investigator Jared O'Cone of the Division of Consumer Affairs Office of Consumer Protection, conducted the investigation.

###