Foreclosure ‘Rescue’ Firm To Pay $1.2 Million To Arizona Victims
Homeowners lost their homes thanks to firm’s ‘help’
A company offering a foreclosure rescue service in Arizona violated the state’s Consumer Fraud Act, an Arizona judge ruled, ordering Virtual Realty Funding Company (VRF) and its owner Kenneth D. Perkins to pay $1.2 million in restitution and civil penalties.
In 2005, the Arizona Attorney General’s Office filed a consumer protection lawsuit against VRF after receiving multiple consumer complaints. The company advertised that it could help homeowners who were behind in their mortgage payments avoid losing their homes.
In fact, state said the transactions offered by VRF were structured so that homeowners would transfer title to VRF or sell the home to a business associate of the company.
“This case represents the worst in our community,” Arizona Attorney General Terry Goddard said. “This company took advantage of homeowners desperate to save their homes from foreclosure and deceived them into turning over their homes.”
“The Department of Financial Institutions applauds this court’s order,” said DFI Superintendent Felecia Rotellini said. “The message is clear: Obey the law or you will be held responsible.”
According to court documents, although neither VRF nor Perkins were licensed by the Department of Financial Institutions as mortgage brokers or bankers, VRF lent money to more than 60 homeowners facing foreclosure or in need of money.
It designed the loans, which it called reverse sales, to evade laws protecting mortgage borrowers by structuring them as an outright sale of the property by the borrower, who then rented back the home with an option to repurchase it.
The reverse sale agreements required homeowners to rent back their homes from VRF for a monthly amount equal to the monthly mortgage payment plus an additional charge. In the case of one homeowner, the monthly mortgage payment was $613 and the additional charge was $157, making a monthly rental payment of $770.
In return for “helping” the homeowners keep their homes, VRF agreed to transfer title back to the homeowner through a warranty deed if the homeowner met specific conditions.
Those conditions included the payment of all rent on time (and prior to a specified date, payment to VRF for bringing the mortgage current), unspecified escrow fees and a “funding fee,” which was at times as high as $9,000. If homeowners were late on a rental payment or unable to repay the loan and funding fee within two years, they could lose their homes and any equity in them.
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