A civil complaint was filed Tuesday against several South Florida land trust companies, related firms and their owners by the Florida Attorney General's office claiming they are making false promises to struggling homeowners.
The companies, first written about by The Palm Beach Post in June, solicit underwater homeowners through cold calls and YouTube videos to sign over their deeds to the trust, sometimes for a fee. The trust then sues the homeowner's lender to try to cancel the mortgage while setting the homeowner up on another payment plan for the home.
Tuesday's complaint, which includes an asset freeze on all defendants and an injunction against continued operations, says the land trusts induce consumers to transfer title to their homes for no consideration and to pay the firms thousands of dollars in fees for services they can't deliver.
Hundreds of Florida homeowners, including about 90 in Palm Beach County, have given their deeds to the trusts. The homes range from million-dollar waterfront mansions in Boca Raton to $60,000 condominiums west of Florida's Turnpike.
Defendants include Parkland residents Edward Cherry and Paul Gellenbeck, Lawrence Diodato of Lake Worth, Anthony Pintsopoulos, and Shane Frankovic.
The companies named are Fidelity Land Trust Co., which has a Boca Raton address in state records, Sunshine State Land Trust, August Belmont & Co., Zion Partners Irrevocable Trust, Florida Land Trust Services and Growth Capital Funding.
According to the 45-page complaint, the defendants misrepresent to homeowners that an assignment of mortgage is not good or effectual and that the mortgage is not enforceable. At the same time the trusts allegedly tell homeowners they will replace their underwater mortgage with a new affordable mortgage that has a lower principal and lower monthly payments.
The attorney general asks for restitution to all consumers who were injured in the "scheme", civil penalties and attorneys' fees.
Foreclosure defense and title attorneys have questioned the land trust operations since they began popping up last fall. They say the lawsuits depend on the banks not responding in time to challenge the trust's legal argument, thereby resulting in a default judgment that can be easily overthrown. Even if a mortgage is canceled, the homeowner still owes the debt, or note, to the bank.
But the trusts say it puts them in a better position to negotiate down the amount owed, buy the debt for pennies on the dollar, and then set the homeowner up with a new mortgage through the trust or some other payment plan.
Trust managers have been vague when asked about the details of the deals by the Post.
"We're very, very, very secretive as far as our work product," Gellenbeck, 39, said during a June interview with the Post. "I don't want the banks to understand what we do."
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