NJ attorney general files foreclosure scam suits

October 20, 2008 4:46:19 PM PDT
New Jersey's attorney general on Monday announced lawsuits against 37 mortgage loan providers and employees who allegedly used bogus "foreclosure rescue" schemes to convince cash-strapped homeowners to sign over their homes. The defendants are charged with consumer fraud and civil racketeering.

The two complaints allege the defendants victimized 48 homeowners, taking advantage of their financial woes and fear of losing their homes by persuading them to take part in sale/lease back schemes.

Struggling homeowners were told that if they signed over their property titles to a third party, they could stay in the house as tenants while repairing their damaged credit and saving to buy back their homes.

In reality, they were scammed.

"What is particularly egregious about the exchanges is that the defendants preyed on struggling homeowners, who turned to them for hope in their darkest financial hour," said Attorney General Anne Milgram. "Our complaints charge the defendants with capitalizing on the desperation of homeowners by inducing them to surrender their titles to co-conspiring third parties or 'straw' buyers."

The new homeowners kept most of the sale/lease back proceeds for themselves, stripping the homes of their equity. The homeowners could not re-establish their credit, and in many cases couldn't pay their new rents. In some cases, the rents were not applied to the new mortgage, and the homes again ended up in foreclosure.

The victims of what Milgram termed "greed-driven fraud" included an elderly widow who was being bilked for $3,000 in monthly rent while trying to remain in her home after her husband died.

Milgram, whose office has three similar suits pending in state courts, said mortgage scams are likely to grow along with the number of foreclosures.

New Jersey saw 34,457 foreclosures last year, a 50 percent increase over 2006 and a 90 percent increase over 2005, she said.

With 12,000 foreclosures reported in the first quarter of this year, Gov. Jon S. Corzine has ordered mandatory foreclosure mediation as part of a broad reform package aimed at protecting neighborhoods from blight and helping residents stay in their homes.

The lawsuits, filed Wednesday in state Superior Court in Bergen County, charge Vest Financial LLC, formerly of Paramus, and JP Global Financial Management of Bloomfield, along with 35 lawyers, employees and others.

The telephone number for JP Global Financial is not in service, and a New Jersey listing for Vest Financial could not be located.

Milgram said the scam involved homes in 14 counties. She said at least $3 million in home equity was stolen and $13.5 million in fraudulent loans were obtained.

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