Watch out for 'Foreclosure Rescue' Scams
Tuesday December 5, 2006
A recent episode of the Wall Street Journal's Your Money Matters podcast warns that foreclosure rescue scams are getting popular. With a combination of risky mortgages, rising rates, and falling home values, foreclosure is the last option for many homeowners. Foreclosure rescue scams sometimes operate by taking ownership of your home and promising to rent it to you until you're back on your feet. Of course, they break this promise. Listen to the story in the December 1st podcast.
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For links to stories from around the country on “foreclosure scams” & other “home equity theft” scams, check out:
The Home Equity Theft Reporter at
http://homeequitytheft.blogspot.com
If a Foreclosure Rescue Company has been in business since 1992, and claims to have helped thousand save their homes, can they still be considered a scam?
American Rescue Trust claims to be the above, please advise.
If not a scam then why would F.Pullano claim that a client that he had helped did not pay mortgage to him for 3 months, and then when brought to court the client showed proof of the 3 payments that had been cashed by Mr Pulano himself…American Rescue Trust is an all out scam
New Jersey has filed a landmark suit – the first “equity skimming” case in State history – against a self-described real estate investment company, related companies and their principals for allegedly bilking thousands of dollars from unsuspecting consumers by promising to save consumers’ homes from foreclosure, when the company was in fact pocketing the payments, often causing consumers to lose their homes to foreclosure, State Attorney General John J. Farmer, Jr., and New Jersey Division of Consumer Affairs Director Mark S. Herr announced.
The suit, filed in Superior Court, Monmouth County, alleges that HRS Holding Corp. (”HRS”) and RPO Enterprises, Inc., doing business as Homeowner’s Rescue Service (”Homeowners”), targeted consumers saddled with overwhelming debt and facing foreclosure and misled them into believing that the Homeowners “Rescue Program” would save their homes from foreclosure.
This is the first time the State has filed suit against a company that tried to defraud homeowners out of the equity in their homes.
Homeowners who are saddled with overwhelming debt and who can’t keep up with their mortgage payments or people who need to quickly relocate are vulnerable to “equity skimming” scams. Typically, con artists will convince homeowners to deed their property over to him or her. In exchange, the con artist either rents the property to the homeowner or new tenants and promises to use the money to make mortgage payments.
However, the person uses the money for other purposes and never makes the mortgage payments as promised. Eventually, the mortgage lender forecloses and the homeowner loses his or her property, the equity in his or her home and damages his or her credit rating.
HRS and Homeowners also conducted business by and through other entities, namely Consolidated Financial Services, Consolidated Mortgage Buyers, Canton, Freeland & Associates and Homeowners Rescue Service of North Jersey, Inc. All of the entities have also been named as defendants in the suit.
Also named as defendants in the suit are Francis C. Pullano of Ocean Township, New Jersey and Michael Klebanoff of Long Branch, New Jersey, principals of the companies.
The suit alleges that as part of the “Rescue Program”, Homeowners told consumers it would purchase a consumer’s home from the foreclosing bank before or at the foreclosure sale and would provide the consumer with financing to repurchase their home from Homeowners.
Consumers who participated in the “Rescue Program” were allegedly required to sign either a deed or “quitclaim” deed to transfer ownership title in their homes to HRS. A quitclaim deed is a deed that transfers the owner’s interests to a buyer but does not guarantee that there are no other claims against the property.
Consumers who participated in the “Rescue Program” were also allegedly required to sign a lease agreement.
Under the lease agreement, consumers were obligated to make rent payments to HRS for a specified period, either one, two or three years, the complaint alleges. Consumers were also told that by making monthly rent payments they would re-establish good credit.
HRS and Homeowners told consumers that their monthly rent payments would be applied to their mortgage payments or to purchase their homes from the foreclosing banks before or at the foreclosure sales. Consumers were also told that the rent payments would be kept in an escrow account, the complaint alleges.
According to the complaint, at no time did HRS or Homeowners contact the foreclosing banks on behalf of the consumers or forward any payments to them.
The complaint also alleges that HRS and Homeowners instructed the consumers to make rent payments to them and discontinue making any mortgage payments.
“This is an insidious fraud that preys on the desperation of homeowners who are struggling to make ends meet,” Attorney General Farmer said. “We will take action against any business that disregards New Jersey laws.”
“People already drowning in debt thought Homeowner’s Rescue was throwing them a life line,” Herr said. “But we’re alleging it turned out to be a lead weight that dragged them to the bottom.”
In one complaint to Consumer Affairs, an East Orange woman contacted Homeowners in 1998 after falling behind in mortgage payments. The homeowner had received a notice of intention to foreclose from her mortgage company. At the time, the homeowner’s mortgage company demanded payment of the entire loan balance of $112,673.11.
During two conversations with Homeowners, including one with Pullano, the woman was told that Homeowners could save her home from foreclosure.
According to her complaint, the East Orange woman was told that in order to be eligible for the “Rescue Program” she would have to transfer title to Homeowners by a quitclaim deed and for $10 in consideration.
In her complaint, the woman states that Homeowners told her that she would have to enter into a one-year lease agreement. Under the lease agreement, the woman had to pay Homeowners $950 per month. The woman states that Homeowners told her that her monthly payments would be put in an escrow account and that the money would be used as a down payment to purchase her home from the mortgage company.
The East Orange woman said she received a letter from Homeowners, apparently signed by Pullano, stating that Homeowners would negotiate with the foreclosing bank for discounted payoffs of her mortgage. In the letter, Homeowners promised to provide the woman with new funding for the repurchase of her home “without the hassles of applying for a mortgage.”
During the period of September 1998 through April 1999, the woman made monthly rental payments to Homeowners, totaling $7,625.
On February 19, 1999, the woman received a “Demand to Vacate” and learned that her mortgage company acquired title to her home at a foreclosure sale.
The woman contacted Homeowners, who repeatedly told her not to worry.
The woman states in her complaint that even after she was directed by the Essex County Sheriff ‘s Office to give possession of her home to the mortgage company by April 2, 1999, Homeowners assured her that they were handling the situation and told her not to worry.
After receiving another notice to vacate her home, the woman again contacted Homeowners. The woman further explained in her complaint that her daughter contacted the mortgage company, who informed her that they never heard of Homeowners.
Based on that information, the woman stopped making payments to Homeowners and subsequently filed an incident report with the East Orange Police Department against Pullano and Homeowners.
The woman said that she and her family were forced to vacate her home by July 1999.
Although the woman repeatedly asked, Homeowners never told her what happened to her monthly rent payments.
HRS, formerly known as Thirty-Eight Third Avenue Incorporated, is a New Jersey corporation established in 1994. Its principal place of business is listed as 1903 Highway 35 North, Oakhurst. HRS has described itself as a real estate investment company, engaged in the purchase and sale of defaulted real estate.
Homeowners was established in 1991 and maintains the same business address as HRS. As of December 1993, Homeowners was suspended from doing business in New Jersey due to its failure to make annual report payments.
In January 2001, both HRS and Homeowners filed for reorganization under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court, District of New Jersey.
As part of the filing, HRS listed assets of $4,741,312.28 and liabilities of $637,875.43. At the time it filed for bankruptcy, Homeowners listed assets of $416,159.33 and liabilities of $564,875.43.
The complaint alleges that HRS, Homeowners and the other defendants engaged in false and deceptive advertising, made false misrepresentations, knowingly concealed, suppressed or omitted material facts and/or engaged in unconscionable commercial practices by:
Stating to consumers, in writing, that after they made 12 monthly rent payments, HRS or Homeowners would bid on the home at the foreclosure sale;
Stating to consumers, in writing, that once they made six monthly rent payments, they would have the option to buy their homes from HRS or Homeowners for no more than 90 or 95 percent of its fair market value;
Telling consumers that HRS or Homeowners would provide them with guaranteed mortgage financing, at more favorable rates than their current mortgages; and
Telling consumers that they would delay or stop any foreclosure sale by filing bankruptcy petitions.
The State is seeking to halt HRS, Homeowners and the other defendants from engaging in any further acts or practices in violation of the Consumer Fraud Act. In addition, the State is seeking a court order against the defendants assessing the maximum civil penalty of $7,500 for each violation of Act as well as attorneys’ fees and costs.
Deputy Attorney General Lorraine K. Rak is handling this case for the State of New Jersey.
D,
Why are you posting this old story? It goes back to the early 90’s and the defendants were victorious!
Hey Monroe,
How was an individual able to cash a check made out to a corporation?
I think the bank has some liability here.
Foreclosures risk are common because of worst economic conditions , lower property values and greater rates .