Connecticut Predatory Lending Scammers Prosecuted—Hope for Foreclosure Victims
When applying for loans to purchase a home, most people don’t expect to be led toward almost certain foreclosure down the line—but that’s exactly what Connecticut officials are claiming happened in a recently uncovered Connecticut scheme. On September 5, Connecticut Attorney General Richard Blumenthal announced a lawsuit against a group of institutions he claims are responsible for implementing a “pervasive predatory lending scheme” targeting potential homeowners. The “scheme,” according to a Blumenthal, was multi-layered and thorough, and has left many of its victims facing foreclosure.
According to the Attorney General’s office, the institutions behind the scam (real estate companies, lenders, and attorneys) sought out first-time homebuyers “who spoke little or no English,” and capitalized on their lack of experience. The scheme operated by luring in the potential buyers with empty promises of profits to be yielded from various aspects of the property. They then offered services such as performing general maintenance, seeking out renters, collecting rent, and paying mortgages and taxes on the properties. Naturally, none of these was fulfilled. The defendants presented inflated property values, offered mortgages which contained hidden costs, and falsified bank and employment records to make the potential homebuyers appear eligible for loans much too expensive for their means—in short, setting them up for foreclosure down the road.
Perhaps most disturbing were the techniques used to ensure the success of this scam: the defendants worked together to make sure their victims had no escape from the scam—and no means of discovering it until it was too late. They reportedly advised consumers against outside consultations for home appraisals and referred them to only the institutions involved. Consumers were thus “financially battered and blindsided,” and are now left to deal with the consequences—bad credit ratings and foreclosure.
Blumenthal sees this scandal as only the beginning of a difficult time for the real estate and lending industry. He and Commissioner of the State Department of Consumer Protection Jerry Farrell hope, with this lawsuit, to send a message of intolerance for predatory lending in the state of Connecticut. This message is echoed by Connecticut Senator Chris Dodd, who hopes to counteract an anticipated “tidal wave of foreclosures” with new legislation meant to crack down on predatory lending.
So what does Blumenthal seek to accomplish with his legal action? According to his statement, a lot. He hopes to get “money back to consumers” and issue “severe penalties for practices that undermine an entire industry,” noting that the ultimate victims of schemes like this one include not only the individuals and families directly affected by predatory lenders and foreclosures, but also the economic well-being of the entire region.