The state of Illinois is suing the nation's largest privately held firm that maintains foreclosed homes, alleging it illegally broke into the occupied homes of people behind on their mortgage payments or in foreclosure, locked them out and removed their belongings.
The lawsuit against Safeguard Properties LLC, filed Monday by Illinois Attorney General Lisa Madigan in Cook County Circuit Court, also charges that firms subcontracted by Safeguard to inspect and secure properties wrongly told homeowners and renters that they could not live in their homes during the foreclosure process.
Madigan's office said more than 200 Illinois residents have complained that Safeguard removed personal property from their homes, including a tenant's asthma pumps.
"This has been going on since the foreclosure crisis began," Madigan said. "It's still going on today, and it's not going on just in the state of Illinois, but across the country."
Lawsuits by consumers have been brought against Safeguard in several states in the past few years, but Illinois is the first state to ask for civil penalties. It also seeks to revoke the company's business license and permanently bar it from doing business in the state.
The company, based in Valley View, Ohio, said it plans to "vigorously defend" itself against the lawsuit, said company spokeswoman Diane Fusco.
Under Illinois law, homeowners who have defaulted on their mortgage or are in foreclosure can remain in their homes until the court-supervised foreclosure process is completed and a judge has entered an order of possession against them. Also, tenants living in rental buildings in foreclosure are allowed to stay in them until the lease expires, even if the foreclosure process has been completed and the building has been repossessed.
"Despite these legal protections, Safeguard has ignored and severely curtailed the rights of occupants of at-risk properties, properties in foreclosure and (bank-owned) properties by illegally breaking into homes, removing occupants' personal property, locking out occupants, turning off utilities for legally occupied property, refusing to allow re-entry into these properties, and making coercive and deceptive representations to legal occupants," the lawsuit charges.
Among consumers cited in the suit is Mark Fencke, who fell behind on mortgage payments on his Cook County home in summer 2008, after losing his job. In early 2009, Fencke, a reserve member of the U.S. armed forces, was trying to negotiate a short sale of his home.
While at military training, according to the complaint, Safeguard broke into his home, shut off utilities, changed the locks and damaged the home. Safeguard did not reimburse him for damages or for the days he was without water and electrical and gas service.
The suit charges that Safeguard does not properly train its subcontractors.
"Safeguard or its subcontractors often deem property to be vacant despite clear signs that the property is not vacant, such as a barking dog inside the home, a car in the driveway, garbage cans placed outside for pickup, a neighbor's statement that the property is occupied or even the actual presence of a legal occupant in the home when the subcontractors arrive at the property," the suit states.
"Safeguard, at the end of the day, is responsible for the work their contractors do," Madigan said.
In an email responding to the allegations, Fusco said contractors are instructed that if they see evidence that a property is occupied, they are to leave and immediately report the occupancy.
"Safeguard's vendors undergo thorough training and credentialing. We background check the principals of our vendor companies and require them to perform background checks on their crews," Fusco said. "We monitor and audit them for compliance with all requirements."
Representatives of Safeguard will be in Chicago in early November. The company is sponsoring a two-day industry conference on property preservation issues in mortgage servicing.
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