|A foreclosure rescue scam advertised on gospel radio promised to save delinquent borrowers from losing their properties, according to a lawsuit filed by Illinois. But instead of helping the borrowers during a recovery period, the company used cashout mortgages to strip the equity from the properties and leave the borrowers saddled with the larger payment.
The lawsuit, one of several filings in recent months by Illinois state officials, is part of an aggressive campaign to find and prosecute mortgage fraudsters.
"Mortgage rescue fraud artists, like these defendants, take advantage of homeowners who are in financial distress," Attorney General Lisa Madigan said in a statement. "Instead of fulfilling their promises to help, these defendants take away the homeowners' hard-earned equity, destroying the financial health of these families."
The case was filed in Cook County Circuit Court against Chicago-area Mutual Trust Funding, a residential mortgage broker; Creative Financial Solutions, a residential mortgage broker; and Eyes Have Not Seen, a mortgage foreclosure rescue service, as well as Eyes' president, Charles T. White Jr., and Debra Gray and Darius K. Monroe as agents of Eyes.
They are charged with violating Illinois' Consumer Fraud and Deceptive Practices Act and the Credit Services Organization Act.
According to the complaint, Eyes and White advertised mortgage foreclosure rescue services on a gospel radio show in Chicago. Borrowers who turned to the company for help were offered the opportunity to save their homes with a "sale-option to purchase" where an investor would buy the home and give the distressed homeowner an option to purchase it within one year.
If the borrower did not have a friend or relative who could act as an investor, Eyes said it would find an investor for the deal.
During the one-year option period, the borrower would not have to make mortgage payments. The investor-obtained mortgage was always larger than the defaulted mortgage. The new mortgage was supposed to be used to pay off the old mortgage. Funds remaining after the mortgage payoff would be used to make the new mortgage payments.
However, Eyes typically kept tens of thousands of dollars from each deal stripping the homes of their equity, Madigan's office said in the 42-page complaint. Homeowners never received any cash back. In consumer complaints filed against the defendants with Madigan's office, 13 homeowners say they lost from $28,174 to $85,000 at the closings.
State officials say that Eyes' intervention worsened the distressed homeowners' plight. The new mortgage payments were always significantly higher than the old payments and the equity in the home had, by that time, become non-existent. In addition, in several instances, Eyes and White failed to make the new mortgage payments, leaving the homeowner or the investor to cover the payments.
State officials say lenders were also deceived.
Madigan's office said the defendants created phony lease agreements, fake paystubs and faux income tax returns so that lenders would believe the investors had enough income to qualify for the loans.
Madigan has asked the court for an injunction prohibiting the defendants from engaging in the mortgage brokerage and mortgage foreclosure rescue business in Illinois. She has also asked the court to order the defendants to reimburse the homeowners and to pay penalties for violating state law.
Eyes did not return calls for comment. Mutual Trust Fund's telephone number has been disconnected. A telephone number for Creative Financial Solutions could not be found.