MortgageReal Estate

New York sues rent-to-own operator Vision Property Management for predatory lending

Claims company operated “illegal, unlicensed mortgage-lending business”

Back in 2017, Vision Property Management, one of the nation’s largest operators of rent-to-own homes, ran into some legal trouble in Wisconsin for allegedly using “misleading and deceiving business practices to induce Wisconsin consumers to lease, rent, or purchase uninhabitable properties.”

Now, the company is facing similar accusations from a new state that happens to boast one of the most active state-level financial regulators in the country – New York.

The New York Department of Financial Services and New York Attorney General Letitia James announced recently that the state is suing Vision Property Management and the company’s CEO, Alex Szkaradek, for allegedly operating an “illegal, unlicensed mortgage-lending business profiting from predatory subprime home loans at the expense of some of the most vulnerable New Yorkers.”

In a lawsuit filed last week in the Southern District of New York, the state claimed that the Vision Property Management defrauded more than 100 New Yorkers by leasing them dilapidated properties and offering them the chance to buy the house in the future.

According to the state, Vision buys “severely distressed properties and markets them at a substantial markup with high-cost, interest rates — in the range of 10% to 25% — to consumers without making any repairs or renovations, passing those costs to the consumer.”

The state’s claims are similar to Wisconsin’s, which claimed VPM requires the tenants to pay the upfront costs to rehabilitate the property, pay all the overdue taxes, and resolve any outstanding building code violations associated with the property.

But, according to Wisconsin, if the tenant does not remedy those issues within a short period of time, VPM evicts the tenant and “repeats the cycle by renting the uninhabitable property to yet another Wisconsin consumer.”

In its lawsuit, New York claims that VPM’s business model targets “vulnerable customers” by dangling the “American Dream” of homeownership in front of them, thereby enabling the company to trick the customers into signing up for a subprime loan.

The state’s complaint alleges that Vision “does not fully disclose to consumers the many unsafe conditions that it knows exist at the properties and the repairs that will need to be made.”

According to the state, Vision’s marketing portrays the company as a “consumer-friendly alternative to irresponsible financial institutions, claiming that its ‘unique’ business model is their path to homeownership.”

But, the state claims that in reality, Vision’s business model “makes profits with little risk by skirting consumer protections and financial regulations and trapping vulnerable consumers, including the disabled, elderly and others living on fixed income, with high-cost mortgages and uninhabitable homes.”

In its complaint, the state presents several examples of VPM’s own property inspection reports, which describe the disrepair of certain properties in terms like:

  • “[H]ouse in really poor condition, some windows broke[n] or missing, walls basement filled with so much debris and holes in almost every wall and black mold chimney leaking water … dog feces in one bedroom.”
     
  • “All floors, trim, windows, roof worn and in poor shape.  Some missing copper fixtures, wires.  Bathroom gutted.  Rear ceiling damaged…Overall poor condition.”
     
  • “The black mold problem is out of control at this home and may fail HUD requirements and o[u]r standards.  This home would cost more in repairs, mold remediation, remodeling, and asbestos removal than current value of home.  I cannot advise putting up this home to be leased out to consumers.”

In the state’s eyes, Vision’s business model is a “form of predatory subprime seller financing.”

Additionally, the state claims the “high cost of the loans combined with the cost of repairs set consumers up to fail; and Vision routinely evicted consumers who had invested substantial sums of money in repairs without offering them the foreclosure protections to which they were entitled.”

According to the state’s data, Vision made approximately 150 loans that qualify as subprime loans under New York law, most of which also qualify as high-cost loans under New York law, but state claims that the the company never complied with requirements of New York Banking Law in regards to those loans.

“Vision’s data indicates that over 40% of the seller-financing agreements it signed with New York consumers ended in an eviction or surrender of the property,” New York claims.

The state claims that VPM’s practices are “deceptive, unfair and abusive under federal law, as well as deceptive, illegal and fraudulent” under New York state law.

“For nearly a decade, Vision put profits above people — fraudulently targeting, preying upon, and exploiting aspiring homeowners, including people with disabilities, the elderly, and those living on fixed income,” James said in a statement.

“These deceptive and abusive practices have trapped New Yorkers in mold-infested, dilapidated homes, and wrongfully placed the onus on consumers to pay the price,” James continued. “This behavior is unacceptable, which is why my office is aggressively prosecuting Vision and will do the same against any company or individual that tries to defraud New Yorkers.”

The state is seeking restitution and/or damages for the New Yorkers affected by Vision’s practices. Beyond that, New York is seeking to permanently forbid Vision, its affiliates, and Szkaradek from engaging in any of the following conduct in New York:

  • Deceptive, unlawful, unfair and abusive practices such as disguising seller-financed loans as leases with option to purchase agreements
     
  • Any form of unlicensed mortgage lending or mortgage origination activity
     
  • Any form of residential property rental or leasing
     
  • Collecting any payment from a New York consumer under a seller-financed mortgage, including lease with option to purchase agreements, among other relief

“As alleged in the complaint, Vision swindled vulnerable New Yorkers who wanted nothing more than the American dream of homeownership but instead got distressed properties with unsafe, squalid conditions and high-interest, predatory loans,” NYDFS Superintendent Linda Lacewell said in a statement.

“We took this action to protect New York consumers by putting an end to these illegal, predatory and unconscionable business practices and holding Vision and its CEO accountable under New York State law and applicable federal laws,” Lacewell added. “I am proud of the exemplary work of the DFS colleagues who investigated Vision’s activities for over two years, analyzed thousands of documents, and who worked to protect New Yorkers and bring this company to justice.”

HousingWire attempted to contact VPM for comment on New York’s allegations, but as of publication time, the company has not yet responded. This article will be updated should the company respond.

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