Chicago-Area Foreclosure Rescue Operator Peddling Sale Leaseback Programs Targeted In Multiple Lawsuits, Illinois AG Probe

In Chicago, Illinois, the Chicago Tribune reports:

• The accusations that have piled up against Eliseo Carrillo run counter to the image the Chicago entrepreneur cultivated as a champion of Latino immigrants. As the housing market weakened in recent years, Carrillo's smiling face appeared on billboards throughout the city's Mexican-American neighborhoods. Spanish-language TV commercials featuring Mexican music and Carrillo wearing a stylish cowboy hat promised that his real estate companies — all using the name "Protecta" — were friends and guardians of immigrants in need.

• But after signing what they believed were loan papers to save their homes from foreclosure, at least four of his struggling clients have filed lawsuits alleging that they were misled into surrendering the deeds to their homes in complex "mortgage rescue" schemes they didn't understand.(1)

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• Protecta, which Carrillo has shut down, and two other companies he directs — Loan Negotiator and Cairo Holdings — are being investigated by the Illinois attorney general's consumer fraud division. A spokeswoman for the attorney general confirmed the probe of Carrillo's companies but declined to discuss specifics. Carrillo and his companies also have been targeted by at least a dozen lawsuits since 2006, including the four filed by clients regarding Protecta schemes in which third parties "lent" their credit to distressed homeowners by assuming ownership and taking out a new mortgage in exchange for a profit, with the original homeowner paying rent to cover that second mortgage.

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• Lea Weems, an attorney with the Legal Assistance Foundation of Metropolitan Chicago,(2) which represents [one screwed over homeowner], said her nonprofit organization has been looking into nearly 70 cases of alleged mortgage rescue fraud involving a variety of operations. Referring to Protecta, she added: "This one is particularly egregious."(3)

For more, see Mortgage 'rescuer' preyed on immigrants, clients allege (Immigrants sue and say they were misled into surrendering deeds to their homes).

(1) According to the story, the mortgage lawsuits depict Carrillo, 36, as a "scam" operator, savvy in the arcane laws governing real estate transactions, who saw profit in the thousands of troubled home mortgages taken out by immigrants less likely to understand the complicated English-language legal documents and less prone to speak out if something went awry. A few of the clients were in the country illegally, making them even more vulnerable, according to attorneys and community activists, the story states. Two suits are described by the story:

• In a federal suit, Rafaela Moreno claimed she was steered by Carrillo into signing over the deed to her house in a $10 quit-claim transaction after he allegedly promised to fix her credit. A new loan taken out by an investor on the house paid off her $120,000 mortgage balance. It also earned Carrillo a bank check for $86,320.The next year, Moreno was allowed to repurchase the home, but for $250,000 — more than twice what she owed on the first mortgage, according to court documents. In a 2008 settlement of Moreno's lawsuit, Carrillo agreed to pay Moreno $62,500 in compensation for her losses. He paid nearly half that amount but stopped payments late last year, court documents show.

• Yet another lawsuit, filed last year by Carmen Macias, tells a similar tale, accusing Protecta and its agents of "stealing" her Southwest Side home after she thought she was refinancing her mortgage in 2006. Instead, the suit claims, the deed was transferred to an investor. Protecta earned $1,800 in fees, while another real estate company with whom Carrillo had had a partnership received $38,000, according to closing documents.

(2) According to its website, the non-profit law firm Legal Assistance Foundation of Metropolitan Chicago has provided free civil legal assistance to tens of thousands of low-income and elderly individuals in Chicago and suburban Cook County for over 40 years.

(3) Innocent straw buyers were reportedly also lured into the scam under the belief that they can participate in helping homeowners facing foreclosure and get paid for it at the same time. Two Protecta investors interviewed by the Tribune described the "sale leaseback" programs Carrillo pitched to help immigrants in financial trouble. From the story:

• In the arrangement, the investors expected to collect monthly payments from the original homeowners. But in [two] cases, the rent payments went to Protecta, their lawsuits say. Carrillo confirmed that Protecta did handle the rent payments but said it was merely to help document them.

• One investor, who spoke on the condition of anonymity because he's in the country illegally, was a maintenance man who wound up owning four houses besides his own, according to closing documents naming Protecta as the broker. Though the man said he initially profited about $20,000, all four of the houses now are in foreclosure proceedings. In loan documents recorded by a Protecta agent, the man's monthly income was reported to be $7,200 — more than twice the $3,400 per month his pay stubs at the time say he earned — which made it easier for him to qualify for the loans. "If he would have explained this is how it would happen, we would never have done it," said the investor, who is named as a defendant in one case. "I never wanted to cause pain to those families, nor mine."

• The second investor, Sergio Villegas, received a profit of $12,438 in one Protecta-arranged transaction, according to court documents. Several properties under his name now are in foreclosure proceedings or were taken over by a bank. "My credit is ruined," Villegas said. "All of this has been very bad."