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| A Colorado court has ruled against a mortgage company that allegedly deceived delinquent borrowers into giving up their homes.EquityLink, touted in its ads as providing financially distressed homeowners with a second chance, engaged in deceptive trade practices, the court found.
In a strongly worded 35-page opinion, the court said the company used “bait and switch” techniques, gave out “false and misleading” information and provided a disclosure of the program’s practices so “voluminous and complex” that it acted more as an inducement for consumers under time and financial pressures to participate in the program rather than to clarify any questions about EquityLink. “The practical effect of this case is going to be quite significant. It will demonstrate that those people who prey on the desperate and the unsophisticated can be made to pay for their chicanery,” said the plaintiffs’ attorney, John Head. He also explained that this is the first successful class action lawsuit in Colorado against a predatory lender under the Consumer Protection Act. Denver-based EquityLink LLC was accused of using a sale/rent/buyback program — dubbed “HomeSaver” — to fleece homeowners of their homes. After a market value for the home was determined, EquityLink’s clients would sell their home to the company and then rent the house with an option to buy the property within five years. In addition to rent payments, homeowners paid a predetermined monthly sum as an option payment. Head said that company owner William Turner set up a situation where homeowners with equity in their homes were losing their houses in a fairly elaborate procedure. “No one could understand it,” Head said. Head pointed out that only about one-third of EquityLink’s clients since 2000 have been able to buy their homes back from the company. However, in an earlier interview, defense attorney Bobbee Musgrave emphasized that 73 families were able to keep their homes because of EquityLink. She said that about 62 homeowners are presently involved in the program. Head said program participants lost a total of $8 million in equity. As the court observed, “EquityLink got greedy.” Head hopes to recoup the homeowners’ losses. He has already filed a complaint with the bankruptcy court in an attempt to recover the houses or money lost to the company’s investors. EquityLink filed suit in bankruptcy court last year in part because of the class action lawsuit. “I intend that the homeowners who lost 278 homes will either have their homes returned to them or they will have the equity that they had before they entered the HomeSaver Program,” Head said. Turner created the HomeSaver program in 1999 after reportedly experiencing the loss of his home to foreclosure. It is described on the company’s Web site as providing a “second chance” to homeowners in need of assistance on their mortgages. “If you throw a snake to a drowning man, he will grab it on the outside chance it is a rope. Those drowning in financial misfortune are just as desperate and make easy targets to the operators in the foreclosure rescue business,” Head said. The bench trial lasted six days. Musgrave did not a call for comment on the court’s decision. Equitylink filed for Chapter 11 bankruptcy in as a result of this case, according to a filing with the bankruptcy court. RELATED: Predatory Accusations Drive Lender into Bankruptcy |
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Lisa D. Burden is a legal analyst for MortgageDaily.com and holds a law degree from the University of Maryland. She is currently a freelance journalist who previously wrote for Institutional Investor publications and the Baltimore Daily Record. e-mail Lisa at: burdenlisa@yahoo.com |
