Mortgage Fraud Lawsuit Filed Against Foreclosure Rescue Company

Allison Tussey —  May 1, 2009 — 3 Comments

Three individuals and two corporate defendants have been charged by New Jersey Attorney General Anne Milgram with mortgage fraud.

Named as defendants in the lawsuit are: Property Solutions of N.J, Inc. and PSRE Holding Company, LLC, both of Union City, New Jersey. 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. 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 in Hudson County Superior Court, the state’s two-count lawsuit charges each defendant with violating the Consumer Fraud Act through unconscionable commercial
practices, deception, false promises and misrepresentations.  The suit brings to nine the number of civil mortgage fraud prosecutions that have been brought by the state of New Jersey since June 2008 charging a total of 92 individual and corporate defendants.

Defendants in the cases have been charged with various scams, including some aimed at victims who sought to acquire investment properties, some targeting people who hoped to upgrade their living situations through “rent-to-own” opportunities and, more recently, schemes aimed at desperate mortgage-holders in need of “foreclosure rescue.”

“The unifying thread among these cases is that the defendants not only stole people’s money, they stole their hope,” said New Jersey AG Anne Milgram. “In the case we are announcing today, these defendants callously exploited the fears of struggling homeowners.” “They promised financial ‘solutions’ to desperate people on the verge of losing their homes but, in the end, delivered only profits for themselves,” Milgram said.

According to the state’s lawsuit, the Toledos, Vega, Property Solutions and PSRE 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.

Although consumers who entered these agreements were, for a time, able to remain in their homes, the arrangement typically did not last. Monthly lease payments required by the defendants were often higher than the mortgage payments the homeowner had been unable to afford. Ultimately, many victims either vacated or were evicted by the defendants – even if they’d remained current with the higher monthly payments.

Under the sale-leaseback agreements, former homeowners who ended up unable to repurchase their homes were promised cash payments from the defendants. However, more often than not, such payments did not materialize. The state’s lawsuit also charges that the defendants lied to consumers about their level of experience in the industry, as well as their ability to secure financing that would help them repurchase their homes.

“These defendants misled consumers from the start,” said Division of Consumer Affairs Director David Szuchman. “And they knew full well where their victims would end up – either saddled with monthly rental payments they could not afford or forced to vacate homes the defendants had promised to save.”

The state’s lawsuit contains examples of four cases in which the defendants exploited homeowners in need. The experience of a 43-year-old Paterson woman and her brother is typical. In June 2005, their house was listed for sheriff’s sale. The defendants allegedly met with the two owners around this time and promised they could help them stay in their home and also “wipe clean” their damaged credit.

Subsequently, the defendants again met with the owners and told them they would save the home by paying off the outstanding debt — $96,000. In return, the owners were told, they would have to sign over title to the home, but would have the opportunity to repurchase it within 90 days for $159,900.

The defendants also said they would secure financing to help the sister-and-brother owners repurchase their property, and promised a payment of $30,000 if the two ultimately were unable to accomplish the repurchase within 90 days. The defendants had the two siblings sign a sale-leaseback agreement whereby they would have
to pay $1,388-per-month in rent to remain in their home – an amount slightly higher than the mortgage payments they had been unable to afford.
Despite the higher rental payments, the owners kept current on their monthly payments.

However, the defendants never secured financing to help the two repurchase their home and, in December 2005, took legal action to force the pair out. The defendants never paid the owners the $30,000 promised if the repurchase failed and, in September 2007, sold their home to other buyers for more than $384,000.

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.

Attorney General Milgram thanked Deputy Attorney General Megan Lewis, Chief of the Affirmative Litigation Section; Deputy Attorney General Jah-Juin Ho, of the Division of Law’s Consumer Fraud Prosecution section; Deputy Attorney General Lorraine Rak, Chief of the Division of Law’s Consumer Fraud Prosecution Section; Assistant Attorney General James J. Savage of the Consumer Affairs Practice Group, Supervising Investigator Jennifer Micco of the Division of Consumer Affairs and Investigator Jared O’Cone of the Division of Consumer Affairs for their hard work on the Property Solutions case.

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Allison Tussey

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3 responses to Mortgage Fraud Lawsuit Filed Against Foreclosure Rescue Company

  1. Foreclosure Fraud is the natural next step in Mortgage Fraud. It’s a whole new scam. You must check out “Mortgage Foreclosure Fraud for Dummies” in NJ. Docket #: F-35621-07.

  2. I am at the end of my rope. Help !
    I need to find a class action siut or group or lawyer. Someone honest. Countrywide and Bank of Amerca KEEP saying that they are dong HOME RETENTION or MAKE HOME AFFORDABLE to tose behind in teir mortgages. I don’t kno who to trust or turn to anymore and even though the President as set up erms to ep those in trouble …is there anyone playingcp here? My friend told me Ca. can not foreclose anymore o omeowners and soe have not paid in oer two years on their homes.
    Yet , in NJ I am told it is different because of your amount that you make, debt to ratio to qualify for ANYTHING?
    I was late on a payment, then they claim they did not receive it. Then due to personal reasonsI ot several months behind. S instead of catch-upI was avised to set a repay up. Sent all papers asked for ……NO RESPONSE…..we are aware…..WE are working on it…..we will contact you in 30 days …..don’t cal as it will mess up your case… not ask questions… BUT I kept getting pre and foreclosure letters from them!!!!!!!!!!! More phone calls . We are working on it….IGNORE LETTERS….. We will reveiw and help you. It takes time ….YOU WILL NOT LOSE YOR HOME!.. ore time passes I get so worried I send inall te money but one payment. Now they say I sould not do tha don’t snd money and yet months efore the WORKOUT, they said send what you can! So now they can not help me. But I am still ehind No papers ever nothing in writing they don’t even have an idea of what I sent until I say I have proof Or they don not apply what I send in thousands of $ because they are holding te money as it was not a full paymentsince th late fees get paid first and are almost as much as the payment itself. This has happenend more than once. It is like playing russian roulette with no end n site. I am still in the dark ,they will not help me or level with me. HELP I am desparate. Am I the only one out there?

  3. I can’t see why that the mortgage foreclosure fraud in Phillipsburg, NJ by Michael and Joann Kudrewicz isn’t being investigated other than there are judges, lawyers, sheriff dept. etc. trying to cover thier asses. In fact it is now bankruptcy fraud in NY. They filed for bankruptcy to cover the mortgage foreclosure fraud. They have over one million in mortgages with the Bank of America and they are covering for them. Check it out yourself docket # F-35621 NJ and bankruptcy case in Northern District NY case no: 08-61710-6-sdg. The attorney general’s office has ignored my letters, even sent out a detective and then it died. These people almost got away with stealing $359K from the Bank of America with thier help. They abandoned the house that they called in court an “1895 restored Victorian.” It’s a handy man special at the best and he’s up in Delhi, NY advertising “artistic restoration.” Judge John Coyle is still helping them and rules of law don’t apply in Warren County. This is racketeering and the destabilization of a community.

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