Foreclosure Rescue Operator Violated State Consumer Fraud Act By Using Bogus Sale Leasebacks To Strip Equity From Homeowners, Says NJ AG In Civil Suit

From the Office of the New Jersey Attorney General:

• Attorney General Anne Milgram announced [...] the filing of a lawsuit charging three individuals and two corporate defendants(1) 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. [...] 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.(2)

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• According to the state’s lawsuit, the [defendants] 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.

For the entire New Jersey AG press release, see Attorney General Sues Foreclosure Rescue Company (Defendants Accused of Making False Promises to Gain Houses at Discounts).

For the lawsuit, see Milgram v. Property Solutions of NJ Inc., et al.

(1) 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. 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.

(2) The Arizona Attorney General's Office has also recently targeted a foreclosure rescue operator with a civil suit alleging the use of bogus sale leasebacks to strip the home equity from financially strapped homeowners. For more on the Arizona case, see:

• 400 Sale Leasebacks Are Disguised Equitable Mortgages, Says AZ AG In Invoking State Consumer Fraud Act, TILA In Suit Against Foreclosure Rescue Firm,
• Terry Goddard Files Lawsuit to Stop Foreclosure Rescue Operation,
• For the lawsuit, see State of Arizona v. Winer, et al.