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June 07, 2023

Real estate firm accused of obtaining mortgages without Pa. homeowners knowing allegedly did same in N.J.

New Jersey Attorney General Matthew Platkin filed a lawsuit against MV Realty Tuesday; the company was sued by Pennsylvania and Florida officials last year

Real Estate Lawsuits
MV Realty New Jersey Matt Donders/Unsplash

MV Realty, a Florida-based real estate firm, has been sued by the New Jersey Attorney General's Office for allegedly misleading customers by obtaining mortgages on 1,250 New Jersey properties without homeowners' knowledge.

A Florida-based real estate firm, which has already been sued by multiple state prosecutors, is the subject of a new lawsuit filed Tuesday by New Jersey Attorney General Matthew Platkin.

MV Realty is accused of misleading homeowners and obtaining mortgages on their homes without their knowledge. In December, then-Pennsylvania Attorney General Josh Shapiro filed a lawsuit against the firm, alleging it obtained mortgages on at least 1,000 Pennsylvania homes without homeowners' knowledge or understanding; more than 500 of those mortgages were obtained against Philadelphians.

Platkin's lawsuit claims MV Realty does not have the license required to engage in mortgage lending in New Jersey, and that its agents have rendered contracts "unconscionable" by charging interest in excess of the state's permitted rate. At least 1,250 New Jersey homes — the majority of which are single-family homes, condos or townhomes that operate as a primary residence — have been targeted by what Platkin and other New Jersey officials described as a "predatory" scheme filled with "grossly unfair contractual obligations."

"This company misled consumers about the true nature of its product," said Platkin. "MV Realty sold its product as free money when it was really a loan secured by what is often consumers' most valuable asset, their home. Deceiving and profiting from homeowners by making false promises is abusive and won't be tolerated." 

Allegedly, the company has offered homeowners $300-$5,000 in upfront cash in exchange for the exclusive listing rights to their homes should they choose to put them on the market — and then took out liens on the properties and enforced hidden contractual terms. The brokerage markets its Homeowner Benefit Program in 33 states, including New Jersey and Pennsylvania.

The HBP is a mortgage loan that gives MV Realty the exclusive right to list a property for 40 years, saddling homeowners with an expensive termination fee if they attempt to get out of the agreement, according to Platkin's lawsuit. As part of its sales pitch, MV Realty assures customers that they pay nothing to the firm unless they choose to put their homes on the market. 

Under the terms of an MV Realty contract, the company imposes a fee — 3% of the home's market value — on any transfer of ownership on the property during the 40-year term, according to the lawsuit. The fee applies even if the homeowner asks to cancel the agreement or if the home is lost due to foreclosure. As part of the agreement, homeowners' heirs would inherit the contractual obligations. The fees are owed even if MV Realty plays no role in the transfer of the property, the lawsuit claims. 

For example, one married couple mentioned in the new lawsuit signed an agreement with MV Realty in exchange for $1,100. When they tried to list their home, an MV Realty agent never showed up to their appointment and did not respond to follow-up calls. When they listed their home and quickly sold it with another company, they received an $11,000 early termination fee to remove the lien before the sale. 

Many customers do not receive copies of the contract prior to signing, the lawsuit claims. Instead, MV Reality typically sends notaries to their homes with documents that homeowners are expected to quickly sign, often without significant time to review. 

Philly residents had no idea that MV Realty obtained mortgages on their properties until they received written notices from the city's Department of Records. When they contacted MV Realty after receiving those notices, the company assured them that the liens were not actually mortgage loans, but rather memorandums that served as "public notice of the homeowners' obligations under the HBP agreement."

An MV Realty contract allows the firm to secure a "memorandum of benefit," which operates as a mortgage loan or lien against the property. While the brokerage assures customers that the memorandum is not a lien, MV Realty has sued multiple homeowners in New Jersey Superior Court to enforce what their own filings with the County Clerk's Office describe as "equitable liens" against the properties.

The new lawsuit takes particular issue with MV Realty's marketing and advertising to 
New Jersey homeowners: typically Google or Facebook ads claiming the HBP is "more than a stimulus," a "loyalty program" and a "loan alternative" with no debt. The lawsuit also alleges that MV Realty has made unsolicited telephone calls to New Jersey residents despite not being registered as a telemarketer in the state.

Platkin's office wants the court to cancel MV Realty's certificate of formation in New Jersey, discharge all liens placed on properties, restore all money or property to the impacted homeowners, direct MV Realty to pay civil penalties and rescind all agreements made with MV Realty in New Jersey.

"This company uses deceptive practices to take advantage of homeowners by misleading them into agreements with the promise of free money and then profits by collecting fees from consumers who accidentally or unknowingly breach the agreement terms,"
said Marlene Caride, commissioner of New Jersey's Department of Banking and Insurance. "The Department is taking action to hold the company accountable for its egregious acts."

A spokesperson for The Future Listing Purchasers Association, a real estate trade organization, said that they were disappointed by the action taken against MV Realty by the Attorney General's Office, adding that it's "shameful that an alternative to traditional real estate relationships that directly benefits New Jersey homeowners is somehow being presented as abusive or deceptive." 

"As in other states, those pushing for action by the AG and lawmakers in New Jersey have a large stake in stopping a new business model that threatens their bottom-line profits," the spokesperson said. "It's clear special interests are manipulating the state to stem innovation and consumer choice and we hope to see the AG recognize this. We look forward to working with policymakers to address concerns and continue this valuable program as an option to homeowners across the state." 

Florida was the first state to file a lawsuit against MV Realty for its "complex and deceptive scheme that attempts to skirt existing Florida law with the goal of swindling consumers out of their home equity," according to court documents filed by the Florida Attorney General's Office in November.

Pennsylvania prosecutors want MV Realty to pay full restitution to all homeowners impacted by the HBP, strike all mortgages on Pennsylvania 
real estate, stop entering into agreements with Pennsylvanians and pay civil penalties. That lawsuit is pending, according to a spokesperson for the Attorney General’s Office.