ATTORENY GENERAL MADIGAN JOINS U.S. ATTORNEY GENERAL HOLDER TO ANNOUNCE NATIONAL SWEEP AGAINST MORTGAGE-RELATED FRAUD
Madigan Files Two Lawsuits as Part of Operation Stolen Dreams Initiative
Chicago — Attorney General Lisa Madigan joined U.S. Attorney General Eric Holder in Washington, D.C., today to highlight Operation Stolen Dreams, a joint initiative of the U.S. Department of Justice and state attorneys general targeting mortgage-related fraud. Holder announced today’s filing of 101 enforcement actions by state attorneys general across the country, including two lawsuits filed against Chicago-area mortgage rescue fraud companies and 57 cease and desist demands sent by Attorney General Madigan.
Madigan’s lawsuits continue her ongoing pursuit of scammers who prey on delinquent homeowners or those facing foreclosure, and brings the number of lawsuits she has filed against mortgage rescue fraud schemes to 33 and the number of cease and desist demands to 402. To date, Madigan’s rescue fraud lawsuits have resulted in judgments in 19 cases, ordering more than $1.2 million in restitution for homeowners. More than 200 mortgage rescue investigations are ongoing.
“The foreclosure crisis has become an opportunity for con artists to prey on desperate homeowners,” Madigan said. “These scammers promise to save homes, but all they do is steal homeowners’ hard-earned money. They are true predators.”
Madigan filed her complaints in Cook County Circuit Court against the following defendants:
Both of Madigan’s lawsuits allege that defendants target at-risk homeowners and, for an upfront fee, promise to save their homes by negotiating lower mortgage payments with the homeowners’ lenders. However, as outlined in the complaints, after the defendants collect the upfront fees, they fail to negotiate or perform any services on behalf of the homeowners, placing their victims at even greater risk of foreclosure.
Also, in the W2X lawsuit, Madigan alleges that the defendants use a second rescue scheme, called a sale-leaseback, to purportedly save the homeowner’s home. Madigan alleges that the defendants use straw buyers to purchase homes from distressed homeowners, sometimes falsely promising them that they can pay rent for a year and then be given the opportunity to buy back the property. At other times, according to the complaint, the defendants trick homeowners into unknowingly selling their homes to straw buyers by leading them to believe that they are signing paperwork for a new loan to help them avoid foreclosure.
Madigan alleges that the defendants use the sale-leaseback scheme to transfer title from the homeowner to a straw buyer for the purpose of stripping the remaining equity from the home. According to the complaint, individual homeowners lost from $60,000 to $149,000 of equity in their homes as a result of W2X’s fraudulent schemes.
The defendants’ alleged fraudulent tactics violate the Illinois Mortgage Rescue Fraud Act, a law that Madigan initiated and drafted, which prohibits companies from requiring upfront payment prior to completing all the terms of the mortgage rescue contract. The law also requires businesses to pay to the homeowner the bulk of the home’s value in the event that a sale-leaseback scheme fails to save the home, and to fully disclose to the homeowner the exact nature and terms of the proposed rescue services, including the homeowner’s right to cancel the contract.
In each lawsuit, the Attorney General is seeking a permanent injunction barring the defendants from engaging in mortgage rescue operations in Illinois. Madigan also is asking the court to award restitution to homeowners and to order each defendant to pay a civil penalty of $50,000 for each act committed with intent to defraud, an additional $10,000 for each act committed against a senior citizen, and costs for the investigation and prosecution of the case.
Madigan’s participation in today’s sweep underscores the increased level of cooperation between state attorneys general and federal agencies in the battle against all types of mortgage fraud, including mortgage rescue schemes. In April 2009, Madigan joined U.S. Treasury Secretary Timothy Geithner, Attorney General Holder, and other officials in Washington, D.C., to announce a coordinated state and federal enforcement effort against mortgage-related fraud.
Emphasizing that there are many legitimate sources of assistance for Illinois residents, Madigan urged struggling homeowners to immediately contact:
Madigan also directed homeowners to her Web site at www.IllinoisAttorneyGeneral.gov, to access her Mortgage Rescue Fraud Brochure and her Illinois Mortgage Lending Guide, a resource manual containing step-by-step instructions for those struggling to make their loan payments and a list of HUD-certified counseling agencies that offer legitimate default counseling services. Homeowners who do not have easy access to the Internet should call the Attorney General’s Homeowner Helpline to receive the guide or the brochure by mail.
Other law enforcement officials participating in today’s sweep include the U.S. Department of Justice and the attorneys general of Arizona, California, Colorado, Indiana, Maryland, Minnesota, North Carolina, Texas and Wisconsin.
Assistant Attorneys General DaToya Burtin-Cox, Anshuman Vaidya, Cecilia Abundis and Junko Minami are handling the lawsuits for Madigan’s Consumer Fraud Bureau.