Madigan sues over upfront fees

Bryan Cohen Jul. 27, 2011, 1:58pm


CHICAGO (Legal Newsline) - Illinois Attorney General Lisa Madigan filed a lawsuit on Wednesday against two Chicago companies for allegedly charging consumers upfront fees in mortgage rescue schemes.

Madigan filed suit against Avatar Realty Group. Inc., formerly known as Monroe Realty & Financial Enterprises Inc. and Monroe Realty Corporation, and Arthur Monroe, its president. Madigan also filed a separate lawsuit against Skyline Capital and Rahul Shah, the company's president. The companies allegedly charged 40 consumers more than $61,000 in upfront fees that resulted in little, if any, help to stay in their homes.

The lawsuits seek to shut the businesses down and obtain restitution for the affected consumers.

"Financially strapped homeowners are often desperate for help, but anytime a purported mortgage 'rescue' firm requires an upfront fee, warning bells should sound. These fees are prohibited in Illinois," Madigan said. "Too often the only thing these so-called businesses accomplish is to take money from already struggling homeowners."

Madigan alleges that the defendants advertised to homeowners that they could negotiate with their mortgage lender to obtain a loan modification, but the businesses instead illegally charged the distressed homeowners upfront payments for the alleged services for little to no work to modify the mortgages. The failure of the businesses to perform any services on behalf of these homeowners often left consumers at an even greater risk of losing their homes to foreclosure.

In her lawsuit against Chicago-based Avatar Realty, Madigan alleges that Monroe solicited the Polish population in Chicago, advertising loan modification help in newspapers and on radio shows within that community. Monroe allegedly lied to consumers repeatedly on his ability to negotiate with their lenders while instructing homeowners to stop paying their monthly mortgage payment in order to give him better negotiating leverage. Homeowners in the Illinois counties of Boone, Cook, DuPage and Lake reportedly lost more than $37,000 in upfront fees to Monroe.

In her lawsuit against the Chicago-based Skyline Capital, Madigan alleges that the company charged consumers upfront fees ranging from $1,500 to $2,000 for help obtaining a modification. The company contracts provided for full refunds if the company failed to obtain the modification, but the victims of the alleged scheme told Madigan's office they never received refunds for the lack of services. Homeowners in the Illinois counties of DuPage, Kendall, Cook, McHenry and Will reported losses of over $23,000.

Both lawsuits allege that the defendants' fraudulent tactics violate Illinois' Mortgage Rescue Fraud Act and Consumer Fraud Act, the former of which prohibits companies from requiring upfront payment from consumers prior to completing all the terms of a mortgage rescue contract. The law also requires that a business fully discloses to a homeowner the exact terms and nature of the proposed rescue services and the homeowner's right to cancel the contract.

Madigan's lawsuits seek to shut down the businesses and bar the defendants from providing mortgage rescue services in the state. Madigan is also seeking restitution for consumers and to order each defendant to pay a civil penalty of $50,000 and additional penalties of $50,000 for each act committed with intent to defraud.

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