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Predatory Accusations Drive Lender into Bankruptcy

Predatory Accusations Drive Lender into Bankruptcy

Equitylink claims to have saved 41 borrowers from foreclosure

February 11, 2005

By PATRICK CROWLEY

A class-action lawsuit has helped push a Colorado company accused of operating a predatory loan program into bankruptcy.Equitylink, a Westminster, Colo., company that buys homes of distressed borrwers, has filed for Chapter 11 bankruptcy in U.S. Bankruptcy Court in Colorado, according to a filing with the court.

Lee Kutner, a Denver lawyer representing the company in the bankruptcy, said the class-action lawsuit filed in Jefferson County District Court in October of 2003 was “one of several reasons for the bankruptcy” but not the sole reason.

Equitylink, which also operates under the name Equitylink I, is “facing a cash shortage because of a large amount of assets pledged to various bondholders,” Kutner told MortgageDaily.com.

The company is trying to restructure $3.5 million in bonds in holds. According to the bankruptcy filing Equitylink had assets of $2.9 million and liabilities of nearly $5 million as of late December.

Lawyers for the company or the plaintiffs in the class-action suit did not return messages to comment.

Equitylink offered a program called “HomeSaver.” It worked liked this.

To save a homeowner from foreclosure Equitylink would payoff the delinquent mortgage. In return, the homeowner would sell the home to Equitylink and continue to live in the house, paying rent to Equitylink for up to five years while repairing their credit. At some point the homeowner could repurchase the home from Equitylink.

The company has not been taking any new homes into the program, however, since the fall of 2003, when the class-action was filed, Kutner said.

“The program is a good program for the people who have participated in it,” he said. “We have found very many people who were happy with it. They basically provide a way for homeowners who are losing their properties through foreclosure, bankruptcy or their inability to refinance the loan an avenue in which to try to regain” the home.

Equitylink also tried to help the owner retrieve any equity that had been built up.

Lawyers say they field the suit on behalf of more than 200 Colorado residents who claim they suffered damages by participating in the HomeSaver program since 1999.

They claim Equitylink is a predator that stalks distressed homeowners, getting their property and their equity in the process.

“The suit alleges that the program is predatory and has caused participants to lose ownership of their homes, all their home equity and occupancy of their houses,” according to a posting on Lawyers and Settlements.com, a clearinghouse of information for lawyers seeking plaintiffs to join class-action lawsuits. “According to the plaintiff’s attorney, ‘its equivalent to getting a loan with an interest rate of 20% to 50%.”

Equitylink Chairman William Turner reportedly told the Denver Business Journal that HomeSaver is not a real estate transaction disguised as a loan, which is the plaintiffs’ allegation.

“In our transaction, we always paid off the first lender,” he told the paper. “We always received a title insurance policy. There’s a clear transfer of title and it’s a legitimate closing.”

Turner went on to reportedly say that of the 280 people who participated in the HomeSaver program, 100 defaulted and 41 repurchased their homes. Those who bought back their homes pocketed an average of $35,000 in equity, he said.


Patrick Crowley is a political reporter and columnist and former business writer for The Cincinnati Enquirer. Email Patrick at: pcrowley@enquirer.com

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