Earlier this month, the attorney general’s office in Florida sued real estate brokerage MV Realty for what it called a “complex and deceptive scheme” involving the company’s Homeowner Benefit Program.
Now, attorneys general Josh Shapiro in Pennsylvania and Maura Healey in Massachusetts have also filed lawsuits against MV Realty and its founder, Amanda Zachman.
The Homeowner Benefit Program gives homeowners $300 to $5,000 in cash as a loan alternative, which is an integral part of the Homeowner Benefit Agreement (HBA).
The Massachusetts attorney general accused MV Realty of using the program to target low-income and elderly consumers in immediate need of cash. Ads included phrases such as “Remember, because it’s not a loan, there is NO repayment” and “you NEVER repay these funds.”
“MV Realty conceals in its marketing and sales processes material terms including its ability to foreclose on the home, that the company only acts as a “non-agent facilitator,” and that if the heirs won’t assume the agreement after a homeowner’s death, MV Realty can foreclose,” according to the Massachusetts suit.
“A non-agent facilitator is a type of transaction broker that owes no duty of loyalty to the seller, has no obligation to seek the highest price the market will bear, and owes no duty of confidentiality to the seller,” the complaint reads.
The lawsuits allege that MV Realty misled and confused homeowners through this program because the contracts also required them to give the brokerage exclusive rights to sell their properties for a period of 40 years.
“As presented to consumers, it entitles MV Realty to a ‘commission’ payment of at least ten times the advance when the homes are sold,” the lawsuit filed in Massachusetts reads.
If a homeowner lists their property for sale during the 40-year term and fails to use MV Realty as its listing broker, or in the case of a home foreclosure or cancellation of the deal, the brokerage would demand 3% of the property’s value, according to the contract.
In addition, the program also allows MV Realty to place a lien on the home, making it difficult for homeowners to access home equity through refinancing, reverse mortgages and home equity lines of credit.
Pennsylvania-based real estate brokers do not typically take a mortgage lien on their clients’ property before providing services, but what MV Realty is accused of doing is not disclosing these terms to consumers upfront.
The Massachusetts lawsuit states the brokerage’s website made no reference to a lien or mortgage.
In the FAQ section of its website, MV Realty states under the question, “Do you file a lien on my house?”:
“No, we file a memorandum. The purpose of the memorandum is to serve public notice of the homeowner’s obligations under the HBP agreement.”
The Attorney General in Florida stated that these liens are illegal under Florida law. MV Realty made more than 9,123 public record filings that might “cloud” homeowners’ titles and Hillsborough County is one of the counties with a high number of public record filings, according to the attorney general’s office. At least 588 people in northeast Florida and southeast Georgia have signed up to the program.
The Commonwealth of Pennsylvania believes MV Realty’s practices are in violation of the Unfair Trade Practices and Consumer Protection Law and calls for civil penalties against the brokerage.
“Pennsylvania homeowners are falling victim to MV Realty’s calculated deception in hiding the terms of the Homeowner Benefit Program,” said Pennsylvania AG Shapiro. “MV Realty is a scam that exploits Pennsylvanians in vulnerable financial situations, and my Office isn’t buying it. My Office will protect homeowners’ most important asset– the value of their real estate.”
The Pennsylvania lawsuit notes that 1,000 mortgages are tied to MV Realty and estimate there could be more.
Through the court order in Pennsylvania, the suit seeks restitution for people who suffered losses, and wants the company to strike all mortgages recorded in every county, refrain from further contracts with Pennsylvania-based consumers, pay $1,000 in civil penalties for each violation of a consumer, and pay $3,000 for every violation where the consumer is 60 years or older.
The lawsuit filed in Massachusetts accuses MV Realty of falsely marketing the HBA to consumers as a “loan alternative.” Based on the complaint’s interpretation, it is a method of paying homeowners a median cash advance of $1,150 in exchange for the homeowners’ agreement to give the brokerage rights to sell their homes for a 40-year term.
“The HBA is secured by a power of sale mortgage on the homeowner’s property, which permits non-judicial foreclosure in the event of a breach,” the lawsuit says. “Based on the terms of the HBA and MV’s business model, MV is a financial institution pedaling a usurious financial instrument while masquerading as a real estate brokerage firm.”
The Massachusetts AG also alleges that the company uses deceptive marketing techniques, including mortgaging homeowners’ properties, which violates Massachusetts laws.
The AG’s office filed for a temporary restraining order and preliminary injunction to ban the brokerage from offering further contracts to consumers in the state.
“MV Realty’s business model and contract terms are unconscionable, targeting elderly and financially vulnerable homeowners who are short on cash, only to leave them with agreements they don’t understand and can’t get out of,” said AG Healey. “We are suing to get homeowners out of these contracts, protect our residents from this scheme, and stop this predatory company from doing any more business here in Massachusetts.”
The lawsuit seeks a civil penalty of $5,000 for each violation, as well as costs of investigation and litigation of the violations, and reasonable attorneys’ fees, plus payment to consumers in the amount of their actual costs and damages, and other “equitable” costs.
MV Realty has sold more than 500 HBAs to Massachusetts homeowners.