The State of New Jersey has reached a $2.8 million settlement with Florida-based MV Realty that resolves claims of deceptive lending in the company’s so-called “Homeowner Benefit Agreements” (HBAs).
MV Realty provided “financially distressed” homeowners with an upfront cash payment if they sign an HBA with the company becoming the exclusive real estate listing agent when the homeowner decides to sell. The upfront payments were usually about 0.3% of the home’s value.
However, the contract included “early termination fees” if the consumers sought to sell or transfer their homes. The fees can cost tens of thousands of dollars. The contract also included a “memorandum” that restricted the consumer’s ability to sell or refinance for decades. If the homeowner dies, the 40-year agreement is extended to the heirs. And if either the homeowner or the heirs list the home with another agent, MV Realty becomes entitled to 3% of the sale price.
More than 1,200 New Jersey residents entered into HBAs, including 140 who paid early termination fees ranging from $575 to $42,000 to get out of them.
MV Realty was accused of violating New Jersey’s Consumer Fraud Act and regulations governing general advertising, and the telemarketing do not call regulations. The settlement, which included agreements with company principals, forces the company to stop entering into HBAs with New Jersey consumers, cease enforcing existing HBAs in the state – including recovering or attempting to recover any early termination fee or other payment for any alleged breach of an HBA – and to file terminations of MV Realty’s liens on homeowners’ properties.
As part of the settlement, the defendants were assessed a $1.5 million civil penalty and required to pay $1.3 million in restitution to fully reimburse homeowners who paid early termination fees.
“This settlement underscores New Jersey’s commitment to halting unscrupulous business practices in our state and providing justice to consumers affected by the unlawful conduct,” said Elizabeth M. Harris, acting director of the New Jersey Division of Consumer Affairs. “Any company doing business in New Jersey must abide by our consumer protection laws or face significant consequences.”
