Plaintiffs sue Chicago businessman and mortgage lenders for reverse mortgage scheme

Northwestern Pritzker School of Law’s Bluhm Legal Clinic is representing plaintiffs in a complaint filed yesterday in the Circuit Court of Cook County against Chicago businessman Mark Steven Diamond, his associates and multiple mortgage lenders in a reverse mortgage and mortgage loan fraud scheme that bilked homeowners out of millions of dollars. 

Diamond, a mortgage loan originator with offices in Chicago and Calumet City, and co-defendants are alleged to have engaged in a home repair and loan fraud scheme that targeted elderly Black homeowners, according to the complaint and a previously filed federal criminal indictment. 

Co-defendant lenders made mortgage loans to homeowners who either did not knowingly sign up for the loans at all, or did so after Diamond and other defendants intentionally misrepresented the terms. The lenders failed to conduct required diligence and issued the loans. Co-schemer title company representatives and lenders provided the loan checks directly to Diamond rather than the homeowners, and Diamond then pocketed the proceeds. 

The complaint seeks a declaratory judgment voiding the reverse mortgages, mortgage refinancings and mortgage loans because they were procured by fraud and lack valid consideration, in violation of the Illinois Mortgage Rescue Fraud Act. 

According to the complaint and federal indictment, Diamond targeted his victims, who had resided in their homes for decades, based on the equity in their homes, their age and their relative lack of financial sophistication. Defendants fraudulently misrepresented, among other things, the nature of the transaction, the implications of the mortgages, that the funds would be used for repair work on plaintiffs’ homes and that plaintiffs would be able to continue to reside in their homes. 

Defendant lenders had a duty to conduct diligence prior to issuing the mortgages. Diligence would have revealed loans out of proportion with the value of the homes and false liens filed by the same agents submitting the mortgage documentation. Diligence would further have revealed that in 2003, the Federal Trade Commission and the State of Illinois filed an action against Diamond for unfair or deceptive trade practices in violation of federal law and alleging Diamond routinely targeted elderly, low-income individuals who had equity in their homes. 

Subsequently, a consent decree was issued which permanently restrained and enjoined Diamond from misrepresenting or conducting sales of “any loan or other extension of credit.” It would further have revealed that in 2009, the Illinois Attorney General’s Office filed a complaint against Diamond that also resulted in a consent decree. 

Despite the fact that the plaintiffs have been adjudicated victims of Diamond’s fraud, many of their mortgages have been foreclosed upon. As a result, plaintiffs are facing eviction and homelessness due to the fraud.  

“Dozens of innocent homeowners were preyed upon and exploited not once, but twice,” said Juliet Sorensen, clinical professor of law at Northwestern Law and one of the plaintiffs’ attorneys. “First they were swindled out of the equity in their homes, then they were stuck with the bill.”