Tuesday, November 16, 2010
According to state investigators, the defendants contacted former property owners who lacked knowledge about real estate transactions and offered to buy their owner-financed mortgages. Court documents indicate the defendants would offer to pay landowners up-front cash in exchange for their owner-financed mortgagesand therefore the right to receive monthly mortgage payments. Some of the former property owners were retirement-aged. State investigators believe they were targeted because they were likely to be enticed by the promise of up-front cash rather than a 20 to 30-year payment stream.
Under Texas law, it is generally legal to purchase and sell interests in real property, including the rights of owner-financed mortgages. However, the defendants are charged with perpetrating a complex scheme that relied upon obscure contractual provisions to defraud former property owners with little or no financial or legal expertise.
For example, one former property owner had previously sold his property to a buyer, who still owed $76,500 under the terms of the owner-financed mortgage. The defendants offered to pay the former property owner $30,000 cash in exchange for the right to receive the full $76,500 in future mortgage payments. Once the former property owner agreed to the $30,000 offer, the defendants drew up a contract and had the underlying property appraised. Unbeknownst to the former property owner, the contract provided that the defendant’s cash purchase price would be reduced if the property’s appraisal amount was less than the purchase amountdespite the fact that the mortgage would still yield the same amount of money regardless of the property value.
After learning that he would be paid the lower appraised amountrather than the original $30,000 agreed-upon pricethe former property owner attempted to reject the deal. In response, the defendants filed a lawsuit against the former property owner in an attempt to force him to accept the lower amount of money. At one point, defendants Enhance and Templeton had as many as 75 lawsuits on file in the Lubbock County District Court. According to state investigators, the scheme orchestrated by Enhance and Templeton was specifically designed to defraud individuals who lacked knowledge or experience about complex real estate transactions. The State’s enforcement action alleges that the defendants’ dealings with the former property owners were not only deceptivebut that they violated Texas property laws.
In addition to restitution for affected property owners, the State is seeking civil penalties of up to $20,000 for each violation of the Texas Deceptive Trade Practices Act.
Property owners who believe they have been deceived by similar fraudulent business practices should call the Office of the Attorney General’s toll-free complaint line at (800) 252-8011 or file a complaint online at www.texasattorneygeneral.gov.
Texans may learn more about buying a home and avoiding pitfalls and scams by reading the Office of the Attorney General’s online bulletin, Avoiding Home-Buying Pitfalls and Scams at http://www.texasattorneygeneral.gov/AG_Publications/pdfs/home_buying.pdf.