Anthony Schwartz and two businesses he controlled have been given a cease-and-desist order and assessed $250,000 in fines for selling interests in foreclosed homes seized in a complex foreclosure rescue scheme. Schwartz, who owned REI Exchange, LLC and TMG Ventures, Inc. in the Portland, Oregon area, raised nearly $850,000 by convincing buyers to purchase fractional interests in real estate land trusts from the sale of homes seized from owners unable to repay their loans.
Schwartz, who was not licensed to sell securities, falsely represented that the unusual, unsecured investments were safe. In addition to the fines, Schwartz is prohibited from raising capital, formally or informally, from other individuals for use or investment on their behalf.
Under a series of complex legal documents, Schwartz lent money to struggling homeowners, some facing imminent foreclosure. In exchange for the home’s title, Schwartz made payments on behalf of the homeowner but would take the home when the homeowner failed to repay the loan. Schwartz claimed the right to seize and sell a house and then pocket, in some cases,significant equity.
The Mortgage Rescue Fraud Protection Act of 2008 protects homeowners from such foreclosure rescue schemes by requiring those who purchase a homeowner’s equity in order to avoid foreclosure to ensure the homeowner has the ability to buy back the home and entitling the homeowner to a share of the proceeds if the home is resold quickly. Schwartz’s activities occurred before the law took effect.
The Department of Justice recently took action against a California firm, USMAC Law Group, for violating the Mortgage Rescue Fraud Protection Act by collecting advance fees for loan modifications and using misleading advertising. DCBS and DOJ are working collaboratively with the Oregon Legislature and consumer groups to help protect distressed homeowners.