Attorney General Lisa Madigan filed lawsuits against two mortgage brokers for using unfair and deceptive marketing practices to solicit seniors for reverse mortgages.
“These companies used extremely misleading language in their advertising, sometimes even disguising their loans as government benefits that borrowers don’t have to repay,” said Madigan. Many consumers have reported that they didn’t even know these offers were for reverse mortgages or a loan of any kind added Madigan.
A lawsuit was filed in the Circuit Court of Cook County against Woodridge, Ill.-based Hartland Mortgage Centers as well as a suit in the Circuit Court of Sangamon County against Irvine, Calif.-based American Advisors Group and its company president, Reza Jahangiri.
In both lawsuits, Madigan alleges that the defendants make a series of claims that falsely imply that seniors could be eligible for lifetime monthly income or lump-sum payments that are part of government benefit programs offered to all seniors.
According to a statement from Madigan’s office, the defendants solicitation included false claims such as:
- “President Obama’s Economic Stimulus Plan Helps Seniors. If you are 62 years of age or older, you may be eligible to take advantage of an important U.S. Government Insured Program”
- “The United States Congress has authorized a Reverse Lending program you do NOT have to pay back as long as you live in your home!”
In addition, the defendants allegedly misled consumers into believing that the reverse mortgages would only be offered for a short time, with many of the defendants’ mailers including “expiration dates” said Madigan.
Further, Madigan’s suits also claim that the defendants’ deceptive marketing gave consumers the false impression that they would maintain ownership of their property. Madigan adds:
In reality, consumers who take out reverse mortgages can lose their property to foreclosure if they fail to meet the conditions and terms of the loan, including paying property taxes and properly maintaining the home.
Yes, borrowers can be foreclosed on if they fail to meet the conditions of the loan but stating that reverse mortgage borrowers lose ownership of the property is incorrect. RMD contacted Madigan’s office looking for clarification but has yet to receive a response.
In each suit, the Attorney General is asking the court to enter a permanent injunction banning the defendants from engaging in deceptive advertising and marketing in violation of Illinois law.
In addition, Madigan is asking the courts to award restitution to consumers and to order each defendant to pay a civil penalty of $50,000, additional penalties of $50,000 for each act committed with intent to defraud, an additional $10,000 penalty for each act committed against a person 65 years or older, and the costs of the investigation and prosecution of the cases.
RMD contacted AAG for comment and Reza Jahangiri, president of American Advisors Group told RMD in an email that “It is premature for us to comment as we were just made aware of the action and have not had an opportunity to review the complaint or speak with the Attorney General’s Office about its concerns.”
He added, “American Advisors Group is committed to working with the Attorney General’s Office to address their concerns and resolve this in an appropriate manner.”