Madigan files suits against mortgage brokers

Nick Rees Feb. 8, 2010, 5:37pm


CHICAGO (Legal Newsline) - Lawsuits have been filed by Illinois Attorney General Lisa Madigan against two mortgage brokers alleged to have used unfair and deceptive marketing practices in soliciting reverse mortgages to seniors.

The lawsuits name Hartland Mortgage Centers Inc, based in Woodridge, Ill., and the Irvine, Calif.-based American Advisors Group Inc. and company president Reza Jahangiri.

"These companies used extremely misleading language in their advertising, sometimes even disguising their loans as government benefits that borrowers don't have to repay," Madigan said.

"Many consumers have reported that they didn't even know these offers were for reverse mortgages or a loan of any kind. That is unacceptable.

"Reverse mortgages are complex loans that should be taken out only after a consumer has had an opportunity to carefully consider his or her financial future and consult with a qualified housing counselor."

Reverse mortgages, in certain instances, can allow older homeowners to continue to live in their homes. Unlike traditional mortgages, however, borrowers in a reverse mortgage receive money based upon their home's value, the amount of equity in the home and the borrower's age.

Proceeds from a reverse mortgage are payable in a lump sum, in monthly installments or as a line of credit to draw upon.

Strict terms and conditions in reverse mortgages require the borrower to repay the loan upon certain conditions being met, including when the last surviving borrower dies, sells or moves out of their homes or when the owner allows the property to deteriorate and fails to repair it.

Both lawsuits allege that the defendants targeted seniors to take out Home Equity Conversion Mortgages, commonly called reverse mortgages, which allow homeowners who are 62 years of age or older to borrow money against the equity in their home.

Madigan alleges that the defendants employed a wide range of deceptive marketing tactics, including direct-mail solicitations that falsely implied to seniors that they could be eligible for lifetime monthly income or lump-sum payments as part of government benefit programs offered to all seniors.

The offer was actually for loans that would eventually have to be repaid, Madigan says.

Madigan's suit asks the court to enter permanent injunctions against both companies to ban them from engaging in deceptive advertising and marketing in violation of Illinois law.

Restitution is also sought on behalf of consumers as well as an order for each defendants to pay civil penalties of $50,000 with additional penalties of $50,000 for each act committed with intent to defraud and a $10,000 penalty for each act committed against a person 65 years or older.

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