We had not heard of this particular branch of legal malpractice before, but upon examination, it is a classic. Equity-stripping foreclosure fraud legal malpractice. Here’s the basic outline: homeowner gets in financial trouble, faces foreclosure. Group, including lawyers comes in, induces the homeowner to transfer ownership to avoid foreclosure. Group gets a new mortgage, re-sells through their superior ability/knowledge and disposesses the homeowner.
No surprise, there is a web site devoted to this particular problem. Read on. Q: How did they get these big-law firms to represent them????
"A foreclosure rescue lawsuit brought by a couple in a Brooklyn, New York Federal Court was settled privately by the parties involved earlier this year. The homeowners in this case brought suit against foreclosure rescue operator Principle Investors Realty, and individuals Frankie L. Freeman, Edith A. Lorick, attorneys Fred D. Way, III (remember him from yesterday’s posts) and Appolo Pitton, and Kevin Waite, who ultimately ended up with the title to the home. When the homeowners approached the operators for help in "saving" their home, they (the foreclosure rescue operator) allegedly proceeded to engage in an equity stripping, foreclosure rescue deal that ultimately forced the homeowners out of their home. According to the allegations contained in the lawsuit:
"But instead of helping the Hineses save their home, Freeman induced them to transfer their deed to his associate, defendant Edith A. Lorick ("Lorick"), who took out a new mortgage on the property that exceeded the Hines’s previous mortgage by more than $100,000; distributed the proceeds of the new mortgage to himself and his co-conspirators; and demanded monthly rental payments from the Hineses that he knew they could not afford. Unable to make the payments, the Hineses were forced to move out of their home."
According to the lawsuit, the property was ultimately sold for $100,000 more than the amount of the subsequent mortgage taken out by Lorick, and nearly $200,000 more than the payoff amount on the homeowners’ original mortgage. The homeowners allegedly only received $10,000 in the transaction.
This lawsuit brought claims (not unlike many of the claims brought in those New York cases I reported on in yesterday’s posts) against those involved for:
Equitable Mortgage (NY Real Property Law Sec. 320),
Violations of the Federal Truth In Lending Act,
Violations of the Federal Real Estate Settlement Procedures Act,
Common law fraud,
Conspiracy to commit fraud,
Violations of New York State General Business Law Sections 349 & 350 ("The Deceptive Practices Act"),
Unjust Enrichment and Constructive Trust,
Representing the homeowners in this case were attorneys from the firms Chadbourne & Parke, LLP and Patterson Belknap Webb & Tyler LLP.