Court Allows Lawsuit Against Foreclosure Rescue Operator To Continue; Says Sale Leaseback May Be An Equitable Mortgage

In a lawsuit filed by a financially strapped homeowner against a foreclosure rescue operator to void a sale leaseback of a home that was entered into with the operator, a Virginia Federal Court recently refused to dismiss the homeowners claims under the Federal Truth In Lending Act ("TILA") and related statutes.

The operator requested a dismissal of the TILA claims on the basis that the foreclosure rescue transaction in question was a sale leaseback and did not involve a consumer debt or formal mortgage agreement. The court observed that the State of Virginia recognizes the "equitable mortgage" doctrine, and recognized that the substance of the foreclosure rescue transaction could well be considered an equitable mortgage under Virginia law. If the sale leaseback is recharacterized as an "equitable mortgage", the transaction could be subject to the TILA and related claims. Accordingly, the court rejected the operator's request to dismiss the homeowner's TILA claims, and is allowing the case to proceed.

The homeowner is represented by the firm Bullock & Cooper, Virginia Beach, Virginia. For a copy of the decision, see Opinion & Order - Clemons v. Home Savers, LLC.

For the longer version of this post, see Virginia Federal Court Says Sale Leaseback May Be A Mortgage, Denies Motion To Dismiss TILA Claims.

For more on equity stripping scams, generally, see DREAMS FORECLOSED: The Rampant Theft of Americans' Homes Through Equity-stripping Foreclosure 'Rescue' Scams (4.61 MB approx.). equitable mortgage yak