Attorney General Neronha files lawsuit against real estate broker following deceptive “foreclosure rescue” scheme

Attorney General Neronha files lawsuit against real estate broker following deceptive "foreclosure rescue" scheme

Published on Wednesday, November 13, 2024

Attorney General Peter F. Neronha today announced the filing of a lawsuit against local real estate broker, Kyle Seyboth, and associated defendants, alleging they violated Rhode Island's Unfair and Deceptive Trade Practices Act (DTPA).

As alleged in the complaint, filed in Providence County Superior Court, Seyboth and associated defendants deceived homeowners with limited English proficiency by executing a "foreclosure rescue" scheme where the homeowners believed they were refinancing their mortgage when in fact they were executing paperwork for the sale of their home for significantly less than market value. The Attorney General is seeking civil penalties and injunctive relief, including voiding the sale and returning the home to the original owners.

"As alleged, the defendants deceived and took advantage of a Rhode Island family in danger of losing their home, preying on their financial desperation and limited knowledge of the English Language," said Attorney General Neronha. "The alleged behavior exposes the depths to which some people will sink in order to turn a buck, robbing the Delvas of the place they called home for decades. And more broadly, it's news to no one that we have a severe housing crisis on our hands, and this alleged behavior only exacerbates our housing problems, forcing families already in financial distress onto the streets."

"As tragic as this case is, I am hopeful that the Delvas will see their home returned to them, and grateful that we have the DTPA as a tool to hold accountable these types of bad actors," continued Attorney General Neronha. "Finally, I hope this story reaches other Rhode Islanders who have experienced unlawful real estate transactions, as we stand ready and willing to investigate and prosecute those who make a living off of swindling others out of their homes."

Consumers who believe they may have been victims of "foreclosure rescue" schemes, or other types of unlawful real estate transactions, are encouraged to contact the Attorney General's Office by calling 401-274-4400 or completing an online complaint form.

Deceptive Sales Tactics

As alleged in the complaint, the defendants engaged in a "foreclosure rescue" scheme, which combines elements of two common scams specifically identified by the Federal Deposit Insurance Corporation (FDIC): repurchase scams and refinance scams. The defendants allegedly engaged in these scams by inviting untrained and unlicensed individuals to exploit the financial distress of their friends, families, and neighbors when faced with a foreclosure or tax sale. As alleged, self-described "foreclosure runners" identify properties listed for foreclosure sales and target the financially distressed homeowners with misleading or incorrect information about foreclosures and unfair or deceptive offers to prevent foreclosure.

In this case, as alleged, Jean Marie and Marie Delva are older Haitian immigrants with limited English proficiency who have resided in their Providence home for nearly 30 years. As of May 2023, the Delvas fell into default on their mortgage and owed roughly $61,000 to Wells Fargo. Their home had a market value of approximately $450,000. Had the home proceeded to a foreclosure sale, the Delva family would have received the surplus funds from the sale, or roughly $385,000.

As alleged in the complaint, in June 2023, an associate of Seyboth approached Marie Delva outside her home, asking for how much Marie would sell. Marie expressed interest in reverse mortgages, and the associate gave Marie her business card, telling her that someone would follow up. Shortly after, on June 9, 2023, Seyboth's associate Lowell Williams texted Joana Delva, Marie's daughter, proposing a plan in which Williams and Preferred Property Solutions would add their names to the title, pay off the existing mortgage balance, develop a new mortgage payment plan, and then transfer sole ownership back to the Delvas.

As further alleged, the Delvas met with an attorney who was associated with the defendants on July 24, 2023. At the meeting, the attorney allegedly presented the Delvas with a series of documents that the family believed to be a refinancing agreement. Unbeknownst to them, the documents fully transferred the title of their home to Preferred Property Solutions. Additionally, the defendants did not provide interpretation or translation services as allegedly requested. The Delvas proceeded to make mortgage payments to Seyboth's company Red Balloon Capital for the next year, believing they had refinanced their mortgage.

Finally, on or around July 3, 2024, Seyboth listed the home for sale for $450,000.

As a result of the Attorney General's complaint, the defendants have since agreed to take the home off the market and to leave its current occupants undisturbed, until at least a hearing on the Office's motion for a preliminary injunction.

Deceptive Trade Practices Act

In 2021, Attorney General Neronha worked with the General Assembly to pass legislation that restored the authority of the Office of the Attorney General to protect Rhode Island consumers against violations of the DTPA. Other efforts led by the Attorney General under the newly-strengthened DTPA include a lawsuit against a solar companyfor allegedly scamming Rhode Islanders, a suit against a contractor for alleged unlawful behavior, halting a Certificate of Good Standing scheme, as well as other investigations.

Special Assistant Attorney General Jordan Mickman, Chief of the Civil Rights Unit and Special Assistant Attorneys General Riley O'Brien and Leonard Giarrano handled the matter on behalf of the Office of the Attorney General.

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