Tuesday, October 18, 2016

Real Estate Operator Accused Of Illegally Snatching Surplus Proceeds From Foreclosure Sales For Unpaid Real Estate Taxes Admits No Wrongdoing, But Agrees To Cough Up $415K+ To Settle Indiana Lawsuit; State AG Announces Restitution Distribution To 24 Aggrieved Homeowners While Setting Sights On Other Outfits Engaged In Similar Schemes

From the Office of the Indiana Attorney General:
  • Indiana Attorney General Greg Zoeller announced [] the return of more than $415,000 to Indiana homeowners victimized by a complicated tax sale scheme orchestrated by California-based 4Bridge, LLC and Colorado-based Asset Recovery, Inc.

    According to complaints filed by the Attorney General’s Office in Marion County Circuit Court this year, 4Bridge and Asset Recovery perpetrated a complicated scheme that took advantage of vulnerable Hoosiers across the State who had fallen behind in their real-estate taxes and who did not understand the tax sale process. Homeowners in Elkhart, Howard, Lake, Madison, Marion, Vanderburgh, and Vigo counties will receive a refund.

    The settlement calls for restitution totaling $418,525.97 to 24 Indiana homeowners and a permanent injunction preventing further behavior described in the complaints:
  • Violations of the Home Loan Practices Act: Concealing material information in connection with real estate transactions and engaging in real estate transactions without proper licensure.
  • Violations of the Deceptive Consumer Sales Act: Unfair, abusive, or deceptive acts, omissions, or practices in connection with consumer transactions.
  • “Rarely have we seen a scam that so brazenly exploited desperate property owners and took advantage of their lack of understanding of a complicated legal process. Victims not only lost their property but thousands of dollars rightfully owed to them,” Zoeller said.

    Consumers whose funds had already been distributed will receive monthly payments from Asset Recovery and 4Bridge made payable to, and distributed by the Attorney General’s Office. The remaining homeowners are able to claim the surplus available to them. The Marion County Circuit Court has already entered Orders directing funds to be paid to several of the affected homeowners.

    Zoeller added his office is pursuing an action against other companies he alleges conducted similar schemes across the state. Earlier this year, the Attorney General filed a lawsuit – for up to $12 million in restitution and penalties – against FLRC, LLC. / Oak Tree, LLC; and Coastal Title, Inc. Several individuals operating on behalf of the companies were named in the lawsuit as well.

    These schemes impacted at least 48 vulnerable Hoosiers in Allen, Johnson, Lake and Marion counties, attempting to swindle them out of surplus funds upwards of tens of thousands of dollars.

    “These cases have not only highlighted how homeowners were being exploited, but also assisted local officials in providing more education to citizens,” Zoeller said. “Working with county officials has been key in identifying and preventing potential fraud.”

    4Bridge and Asset Recovery’s Scheme

    When a homeowner falls behind on their property taxes, the county lists the property at tax sale. The minimum bid set for these homes is the amount owed in taxes. If the winning bid exceeds the amount of the unpaid property tax owed, the county claims the tax amount, special assessments, penalties and the costs of the auction. The original homeowner is entitled to any surplus amount beyond what may be owed to a mortgage lender. This surplus may be considered a rough equivalent to their home’s equity.

    The original homeowner then has one year to redeem the property if he or she can pay back the taxes originally owed. If the homeowner can’t pay within a year, then the bidder is awarded ownership of the property. It’s during this one-year time window that 4Bridge and Asset Recovery perpetrated the scheme.

    Using court and public records, the companies and their agents located and contacted the original homeowners whose properties had been sold at tax sales for large surplus amounts. They deceived at least 24 homeowners by making misrepresentations about their legal rights to redemption or surplus in the tax sales. The scam worked best with property owners who did not have an outstanding mortgage that would have to first be paid off with the surplus.

    By exploiting the homeowners’ unfamiliarity, 4Bridge, Asset Recovery and their agents persuaded the homeowners to sign quitclaim deeds and other legal paperwork turning over their remaining legal interest in the properties to the companies. 4Bridge and Asset Recovery, in turn, were then able to submit claims for the tax sale surplus funds that the 24 original owners would have been entitled to – in amounts ranging from $3,000 up to $53,000.

    The Attorney General’s Office through its Homeowner Protection Unit (HPU) fielded complaints about the tax sale scheme from the affected owners and from county officials, who were able to identify the potential scheme only after the deed exchanges were filed with the county offices.

    The complaint notes violations including “unfair, abusive or deceptive” conduct; “incurable deceptive acts” and that the entire scheme conducted by Asset Recovery is considered “unconscionable”. Under the settlement the companies did not admit wrongdoing but have agreed to comply with settlement terms.

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