January 30, 2006
posted online February 9, 2006
Lawmakers take on mortgage foreclosure
By Melissa Merz,
Chicago – Calling mortgage rescue fraud "a cancer
that is eating away at our neighborhoods," Attorney General
Lisa Madigan, lawmakers and community advocates today announced
legislation to prevent two types of the fraud. Madigan also
announced that her office is filing two lawsuits to help
individual homeowners whose circumstances might have been
prevented by the legislation.
Speaking at a news conference at the Temple of Glory
International Church on Chicago's South Side, Madigan,
State Sen. Jacqueline Collins and State Rep. Marlow Colvin were
joined by victims of mortgage "rescuers" who led them
to believe they could save their homes when in fact the
"rescue" companies were selling the homes to third
parties, stripping out the substantial equity and leaving
homeowners on the verge of eviction.
In an effort to help individual victims, Madigan said her
office today is filing two lawsuits against companies that
allegedly used unfair and deceptive practices to defraud
consumers. She said that the legislation she, Collins and Colvin
are proposing will help future victims from falling prey to these
mortgage rescue scams.
"Mortgage rescue fraud is a cancer that is eating away
at our neighborhoods," Madigan said. "We are
proposing this legislation to give people who want to save their
homes a fighting chance. Without these protections, they are
vulnerable to the greediest of predators that take their money
and strip the equity in their homes like piranhas strip their
Madigan said the legislation she is proposing with Collins and
Colvin can help ensure consumers do not pay money for
non-existent services or see the hard-earned equity they have
built disappear into thin air. Consumers in trouble on their
mortgage payments should be referred to reputable housing
"The people most adversely affected by mortgage rescue
fraud are often those who need the most help," said
Collins, who was expected at the news conference.
"It's been shown that those in low-income
neighborhoods are at the highest risk."
"Mortgage rescue schemes are threatening the health of
neighborhoods all across Chicago and the state," said
Colvin, who also was expected at the news conference. "This
legislation is critical to protecting unsuspecting homeowners and
Madigan said the Mortgage Rescue Fraud Prevention Act is
narrowly tailored to target the two most common types of mortgage
fraud rescue schemes. First, it targets "distressed
property consultants" who offer phantom help to homeowners,
usually promising to "buy them time" or "save
the home" by negotiating with the homeowners'
creditors. In exchange for upfront fees, the consultants do
nothing and abandon the homeowner to a fate that might have been
prevented with legitimate professional intervention.
Madigan targeted "distressed property consultants"
through a lawsuit filed today in Sangamon County Circuit Court
against HomeSavers USA, Inc., and its CEO, David Moakler.
HomeSavers USA, Inc., is a North Carolina company that advertises
mortgage foreclosure assistance to Illinois consumers on the
Internet. In her complaint, Madigan alleges the defendants
promised to negotiate with consumers' mortgage companies
and guaranteed they would not lose their homes. HomeSaversUSA
demanded that consumers pay a non-refundable service fee before
the company would begin any work; Illinois consumers paid fees to
the defendants ranging from $350 to $900. Madigan's
complaint alleges the defendants failed to engage in the promised
negotiations and did nothing more than consumers could easily do
Illinois consumers applied for assistance from defendants
online at www.homesaversusa.com or called a toll-free phone
number. The defendants requested detailed information regarding
consumers' income, expenses and debts. After the defendants
accepted the consumers for service, they sent an agreement which
consumers must sign and return along with the non-refundable
service fee. At least one Illinois consumer understood the
defendants would lower her monthly mortgage payments, when in
fact HomeSavers USA "negotiated" with her lender by
proposing a plan that raised her monthly payments substantially.
Madigan's complaint alleges that the defendants provided
nothing more than phantom help that left consumers in a worse
financial position than when they started with the
While Madigan's lawsuit seeks to help alleged victims of
HomeSaversUSA, the proposed legislation would put in place
significant protections to prevent HomeSaversUSA and many other
companies like it from scamming other consumers.
The legislation would prevent consultants from fleecing
homeowners by requiring that: consultants must provide homeowners
a written contract laying out all the services to be performed;
the consultant contract must contain a right to cancel at any
time before all services have been performed; and the consultant
cannot receive any compensation until all services have been
performed in full.
Secondly, the bill targets "distressed property
purchasers." These con artists lead homeowners to sign over
the deed to their property by telling them they can stay in their
home and pay rent until they are back on their feet financially
and can repurchase their home. Many homeowners who enter into
these deals believe that they are getting help to catch up on
their payments and do not realize they are selling their home to
a third party. Most receive little financial benefit from the
transaction. Commonly, the homeowners' rental payments end
up higher than the mortgage payments. Using a variety of devices,
the "rescuer" ultimately strips the home of its
equity and leaves the homeowner facing increasing financial
distress, and eventually, eviction.
Madigan's second lawsuit, filed today in Cook County
Circuit Court, targets distressed property purchasers who have
taken advantage of Illinois families. At the news conference,
Madigan was joined by two of the alleged victims whose stories
lead to the lawsuit and clearly illustrate the devastation caused
by these schemes.
Tangie Chaffin, a single mother who works as a data entry
clerk for the Chicago Police Department, began having problems in
2004 paying her monthly mortgage payments of $650 when a court
temporarily lowered her child support. In desperation, Chaffin
turned to Advantage Mortgage Consulting, Inc., which told her
that while it could not refinance her home, it could save her
home by allowing her to rent her own home with the option to buy
it back. With very little explanation, Chaffin signed incomplete
and blank paperwork, including a Power of Attorney Form, Joint
Venture Agreement, Warranty Deed and Articles of Agreement for
On December 14, 2004, a real estate closing occurred without
Chaffin. By use of the Power of Attorney, her property was
conveyed to two alleged "investors" for $179,000.
Platinum Investment Group, LLC, a company affiliated with
Advantage, received $47,535.02 from the transaction; Advantage
received $8,300 in "fees;" and First Chicago Real
Estate Group, LLC, a Chicago real estate brokerage firm, received
$8,000. Although Chaffin had $76,000 in equity, she received only
$7,092 and eventually lost her home.
The Balderas family, like Tangie Chaffin, also allegedly was
victimized by Platinum, Advantage and First Chicago Real Estate
Group. Since 1996, Martha Balderas, her husband, Alejandro
Balderas, and their three children have lived in their home at
4550 W. 84 th Pl. In April 2005, the Balderas met with
representatives of Advantage to discuss refinancing their home or
obtaining a $1,500 loan to bring their home out of foreclosure.
Advantage told Martha and Alejandro Balderas that it was unable
to assist them but referred them to its affiliated company,
According to the allegations in Madigan's lawsuit, on
April 27, the Balderas met with an Advantage and Platinum
employee David Chacon and Suellen Carpenter of First Chicago Real
Estate Group, LLC. Chacon told the Balderas that because Platinum
worked with investors, it could refinance their home for a period
of one to two years, with the Balderas having the option of
refinancing with Platinum at the end of that time. Chacon and
Carpenter told the Balderas that they would sign a "land
contract," which guaranteed that they would not lose their
home. Chacon and Carpenter also told the Balderas to sign blank
and incomplete paperwork, which included Power of Attorney Forms,
Joint Venture Agreement and Articles of Agreement for Deed.
According to the allegations in the lawsuit, on April 28,
Martha Balderas called Chacon to cancel the deal. Chacon told her
it was too late to cancel the transaction. Martha Balderas stated
that she and her husband wanted to be present at the closing.
Despite her request, the Balderas were not aware of and did not
attend a real estate closing on May 17. By use of the Power of
Attorney, the Balderas home was conveyed to an alleged investor
for $172,000. Platinum received $38,322.21 from the transaction;
Advantage received $1,905; and First Chicago Real Estate Group,
LLC, received $9,820. Platinum's attorney received $1,500
in attorney's fees and $701.25 in abstract or title search
fees. Although the Balderas had $77,000 in equity in their home,
they received only $9,880 and are now threatened with
Madigan has named several defendants in a lawsuit involving
Chaffin and Balderas along with other alleged victims, including
Platinum Investment Group, LLC, Advantage Mortgage Consulting,
Inc., Christopher Bidigare, individually and as member of
Platinum Investment Group, LLC., and General Manager of Advantage
Mortgage Consulting, Inc., First Chicago Real Estate Group, LLC,
Suellen Carpenter, individually as member of First Chicago Real
Estate Group, LLC, and David Chacon, individually and as agent of
Platinum and Advantage.
In the complaint, Madigan alleges that the defendants engaged
in mortgage foreclosure rescue fraud. The homeowners in this
lawsuit have lost a total of $469,000.
To prevent distressed property purchasers from victimizing
others, the legislation would provide numerous protections for
homeowners by requiring that (1) distressed property purchasers
must provide homeowners a written contract that lays out all the
terms of the sale and makes it clear that the home is actually
being sold; (2) the homeowner has the right to cancel the
contract for five business days after it is executed by all
parties; (3) prior to sale of the property, the purchaser must
make a determination that the homeowner has the ability to make
rental payments and buy the house back; (4) the purchaser must
pay the homeowner at least 82 percent of the fair market value of
the home at the time of the sale and may not include fees as part
of the payment; (5) a homeowner who remains in the home under a
rental agreement has the right to cancel the rental agreement at
any time; (6) and the purchaser must record the purchase contract
with the county recorder of deeds so that any subsequent
purchaser is put on notice.
"These protections are critical," Madigan said.
"Our goal is to keep scam artists out of peoples'
lives and keep people in their homes."
At the news conference, Madigan also was expected to be joined
by State Sen. Donne Trotter and State Rep. Connie Howard. Ald.
Rev. Shirley Coleman and Ald. Latasha Thomas also were
Additionally, Madigan was expected to be joined by William
McNary of Citizen Action Illinois, Daniel Lindsey of the Lawyers
Assistance Fund, as well as representatives of the Southwest
Organizing Project, Voices for Illinois Children, the National
Center on Poverty Law, AARP, ACORN and the South Austin