Beginning in 1994, defendant Gene Percudani ran radio and television advertisements for the “Why-Rent” program that offered homes in the Pocono region of Pennsylvania for “$1,000 down and monthly payments of $685”. When individuals reached out, they received a letter confirming the promise of homes for the advertised pricing. However, defendant Percudani’s companies allegedly sold homes to plaintiffs at values inflated by 35-45% and pocketed the difference.
Meanwhile, Chase Manhattan Mortgage Corp. allegedly agreed to knowingly purchase the loan from the Percudani defendants at the inflated price and hold the note for the required period of time before selling it to Fannie Mae or Freddie Mac. Through this scheme, the Chase defendants were able to receive the original principal of the loan, an additional premium, and a monthly servicing fee for servicing the loan, securing an inflated return on investment.
Through the scheme, customers did not learn the actual mortgage payment would be significantly higher than the “good faith” estimate that was provided for 13 months, allowing Chase to offload the mortgage from their books. Many customers faced foreclosure and others had no choice but to continue paying off their mortgages at inflated costs to avoid losing their homes.
Plaintiffs alleged that the defendants were involved in a conspiracy to lure first-time home buyers from the New York Metropolitan Area and sell them homes whose value was knowingly inflated well above their fair market value. Plaintiffs alleged that the defendants’ conduct violated the Racketeer Influenced and Corrupt Organizations Act (“RICO”) and state consumer fraud laws designed to curtail such conduct. A settlement agreement of $300,000 was reached in 2009 and signed by both parties in September of 2010.*
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*Prior results do not guarantee or predict a similar outcome with respect to any future matter.