Gov. Blagojevich announces shutdown of major mortgage rescue scam

CHICAGO - Governor Rod R. Blagojevich announced today that state regulators shut down a "mortgage rescue" scam that defrauded vulnerable Chicago metropolitan area residents of their homes. The alleged scheme preyed on homeowners at risk of foreclosure and conned them into signing over the title and any earned equity from their properties, allowing investors to purchase the homes at a fraction of their market value.

"It's unthinkable that any business would exploit people's vulnerability and use it to cheat them out of their most valuable asset. Not only is it appalling from a moral standpoint, but it's illegal. For any lender out there who might think they can get away with that kind of fraud, let this regulatory action serve as a reminder that we will not tolerate violations of our consumer protection laws," said Gov. Blagojevich.

In a series of complaints filed this week, IDFPR charged that Mutual Trust, Charles White and seven title insurance agencies worked together to defraud unwary homeowners. Each of these entities has the right to an administrative hearing on the charges before the Department's actions are final.

Following the Governor's direction to aggressively enforce consumer protections, the Illinois Department of Financial and Professional Regulation (IDFPR) this week issued an emergency suspension of the loan originator registration of Charles T. White, Jr., and revoked the license of Mutual Trust Funding Corporation. IDFPR shut down seven title insurance agencies being charged with complicity in the "mortgage rescue" operation.

IDFPR alleged that in his capacity as a loan originator at Mutual Trust, Charles White approached homeowners facing imminent foreclosure and offered to find an investor who would borrow the money from Mutual Trust to purchase the property prior to foreclosure. Homeowners were told the new investor would then lease the home back to them while they attempted to regain their financial footing, and were promised that the new investor would repay the delinquent mortgage account and eventually resell the property back to them.

Instead of keeping the promise to repay delinquent mortgages and allow the original homeowners to re-purchase their properties, IDFPR found that up to $1.5 million of the loans arranged by Charles White through Mutual Trust, which should have been paid to the original lenders and previous owners, were diverted to a real estate management company called "Eyes Have Not Seen," owned by Mr. White.

Further, documents detailing disbursements to previous lenders and current owners, which should have been notarized and filed with appropriate state, federal and financial offices had been tampered with to show that the new owner was in fact Mr. White, through his company "Eyes Have Not Seen."

These fraudulent transactions could not have been completed and the money could not have been siphoned to Mr. White's company without the explicit and active participation of the seven title agencies closed earlier this week. All seven of the title agencies are owned in part by Mr. Christy Jepson and/or by Patricia Jepson (his wife). The companies are: All American Title Agency, EJF Title Agency, Palatine Title Agency, Popular Title Agency, Senior Title Agency, Skyline Title Agency, LLC, and Title Zone.

IDFPR also charged that Mr. White failed to disclose to his customers that he maintained a financial interest in one of the seven interconnected title agencies shut down earlier this week, Title Zone. Elnora White, Mr. White's grandmother, is a 30% owner of Title Zone, and All American owns the remaining 70% of Title Zone. Mr. White is the executor of Ms. White's estate. Additionally, the Department found that Mr. White used these companies exclusively when closing mortgages relating to his ‘rescue' transactions.

"Illinois consumers have the right to know that when they do business with companies licensed by our state, they will receive the best possible service by ethical and appropriately trained professionals," said Dean Martinez, Secretary, Financial and Professional Regulation. "We will use all the tools available to us to discipline companies which violate the laws and regulations designed to protect Illinois homebuyers and help homeowners retain their properties."

IDFPR recommends that homeowners in financial difficulty should first talk to their mortgage lender to explain the situation and to see if the loan can be restructured or refinanced. If the lender is not responsive, an owner should consider selling the house or engaging the services of a reputable real estate firm.

Regardless of the circumstances for selling or refinancing a home, it is extremely important that homeowners:

1) Read everything before signing and get all "promises" in writing. Verify all the figures at the closing for accuracy and completeness. Some schemers will offer to complete paperwork for the homeowner or ask that he or she sign a stack of documents, supposedly to secure a new mortgage. Victims later learn they signed a quit-claim deed to their home;

2) Be wary if a foreclosure "rescuer" or mortgage "broker" discourages the homeowner from contacting the mortgage company or an attorney;

3) Never sign a contract under pressure and never sign away ownership of property. Remember, signing over the property deed to someone else does not necessarily relieve the original owner of his or her obligation to repay the loan.

4) Ask a trusted family member, attorney or a financial professional to review paperwork before signing.

Copies of the complaints filed by IDFPR against the title companies, residential mortgage broker and loan originator are available at www.idfpr.com. Consumers with questions can contact Harry Stirmell, Supervisor of the Title Insurance Section, at 217-558-7009.

Last May, the Governor took action to protect vulnerable homeowners from fraudulent actions by unscrupulous "mortgage rescue" firms. The Governor signed legislation to give homeowners new rights when dealing with companies that offer financial assistance to help them save their homes from foreclosure.

The legislation guarantees that homeowners will receive a substantial portion of their equity in the home from the companies, and creates new disclosure requirements from "mortgage rescue" companies and guarantees that the homeowner will receive a substantial portion of the equity in the home.

Throughout his administration, Gov. Blagojevich has taken numerous other actions to assist homebuyers and protect consumers.

• Reducing the number of high-risk home loans: In August 2003, the Governor signed the High Risk Home Loan Act to protect consumers from predatory mortgage lending practices. As a result of the Act, the state has seen both a reduction in the number of high-risk home loans and a change in lenders' business practices so they are no longer offering high-risk loans as defined in the Act.

• Protecting homebuyers in at-risk communities from predatory lenders: In July 2005, Gov. Blagojevich signed into law HB 4050 that provides borrowers with critical information on home loans and helps state regulators and law enforcement track and crack down on dishonest lenders.

• Regulating the payday loan industry: In June 2005, the Governor signed into law the Payday Loan Reform Act that for the first time regulates the payday loan industry in Illinois and strengthens protections to consumers. Among its provisions, the groundbreaking legislation limits the interest that can be charged for each loan to $15.50 per $100, sets caps on total loan amounts, and prevents borrowers from having more than two loans at a time.

• Giving homebuyers easy access to accurate information about their properties: In August 2005, Gov. Blagojevich signed three bills to help homebuyers and homeowners obtain access to accurate and important information about their properties: House Bill 1428, which requires lenders to notify homebuyers of accurate and timely property tax payment from the buyer's escrow account; House Bill 2462, which requires property tax exemption information to be included on the seller's transfer declaration; and House Bill 2594, which requires home repair contracts to increase consumer awareness of contract clauses that waive the homeowner's right to trial by jury for repair disputes.

• Protecting homebuyers from discrimination: In 2005, Gov. Blagojevich announced a Fair Housing program to help protect homebuyers against discrimination in housing. The Illinois Department of Human Rights and other agencies conduct training seminars around the state to inform homebuyers, tenants, landlords, property owners, advertisers, housing advocates, and community organizations about Illinois' anti-discrimination laws.

• Helping first-time homebuyers: In 2005, Gov. Blagojevich launched the I-Loan mortgage program, providing one more option for low and moderate-income residents who want to purchase their first home by offering an interest rate that is approximately a half percent below the market rate.