Feldman & Feldman, in tandem with strategic partners, is investigating claims and filing lawsuits on behalf of individuals in Texas regarding the unauthorized, predatory lending tactics of EasyKnock, Inc. and EK Real Estate Services of NY, LLC. These parties have engaged in patently false and misleading practices designed to induce Texas homeowners into highly suspect agreements jeopardizing the ownership of their constitutionally protected homestead.
Feldman & Feldman’s investigation of these companies has revealed what appear to be widespread violations of the Truth in Lending Act, 15 USC §1601 et seq., Federal Reserve Board of Regulation Z, 12 CFR §226, and the Texas Finance Code, including §305.001 and §341.001 et seq. These violations occur during the refinancing of a party’s Texas homestead through a transaction known as a “Sale-Leaseback”. Feldman & Feldman believes EasyKnock, Inc. and EK Real Estate Services of NY, LLC have violated the Texas Deceptive Trade Practices Act by participating in and/or engaging in false, misleading, and deceptive acts that were relied upon by local homeowners to their detriment.
What is a Sale-Leaseback Transaction?
Sale-Leaseback transactions are highly disfavored in Texas, especially when a transaction involves a residential homestead. These contracts are considered “pretend sales.” They involve the sale of a homeowner’s property to a lender in exchange for a portion of the equity in the residence and the right (at great expense) to lease the property back from the lending party with an option to repurchase the residence for a set price. These pretend sale transactions technically allow property owners to free up some of their equity without losing the ability to continue using the property and to potentially buy it back. However, title to the property immediately transfers to the lender, without the seller receiving the full value of his/her equity in the property in cash at closing. Instead, you become the lessee, and the buyer/lender becomes the lessor or landlord. This transaction can be extremely disadvantageous to the original homeowner because:
- They risk losing their property through an eviction proceeding and thus a place to live if they are unable to comply with the terms of the lease, including monthly lease payments that may be more than an existing mortgage;
- They lose the flexibility that comes with property ownership, such as the ability to immediately cash out all the equity in a home or to transfer the leasehold interest;
- They will likely pay higher rent than they originally did in mortgage payments;
- The interest rate is typically much much higher than what would be paid through conventional financing, and it can be more than the legal limit for home loans in Texas, which is currently 10% per annum;
- They often transfer title of their home immediately to an out of state entity and lose their residual property value.
Required Disclosures in Residential Loan Transactions
EasyKnock, Inc. and EK Real Estate Services of NY, LLC regularly extend or offer to extend consumer credit for which a finance charge may be imposed or which by written agreement, is payable in more than four installments, making them a creditor within the meaning of the Truth in Lending Act, 15 U.S.C. §1602(g) and Regulation Z §226.2(a)(17). Under Texas law, a sale-leaseback transaction is considered a “loan.” See Tex. Fin. Code §341.001(9) and (10).
EasyKnock, Inc. and EK Real Estate Services of NY, LLC have skirted basic disclosure requirements that would often protect consumers from unscrupulous loans. Among other things, the Truth In Lending Act and/or the Texas Finance Code, require that the following disclosures be given before a homeowner enters into a transaction like the one described above:
- Full disclosure of loan costs and terms;
- The right of rescission;
- Disclosing to the borrower when a mortgage is reassigned;
- Disclosure of the caps on mortgage costs; and
- Disclosure that you could lose your home and the money you have put into it if you do not meet your obligations under the loan.
Before entering into these transactions, lenders like EasyKnock, Inc. and EK Real Estate Services of NY, LLC have an obligation to be sure that residential homeowners meet the minimum standards for residential mortgages, including the ability to repay. Residential mortgage lenders like EasyKnock, Inc. and EK Real Estate Services of NY, LLC also attempt to place arbitration agreements in their contracts. Arbitration agreements are strictly prohibited by the Truth in Lending Act.
EasyKnock, Inc. and EK Real Estate Services of NY, LLC’s Legal Violations
EasyKnock, Inc. and EK Real Estate Services of NY, LLC do not provide the homeowners a Truth In Lending Disclosure Statement, nor do these entities ensure that residential homeowners meet required minimum lending standards, and as a result, violate the requirements of the Truth In Lending Act in the following ways:
- By failing to provide the required disclosures prior to the consummation of the transaction in violation of 15 U.S.C. §1638(b), §1639, and Regulation Z §226.17(b);
- By failing to make the required disclosures clearly and conspicuously in writing in violation of 15 U.S.C. §1632(a), §1639, and Regulation Z §226.17(a);
- By failing to include in the finance charges certain charges imposed by Defendants payable by Plaintiff incident to the extension of credit as required by 15 U.S.C. §1605 and Regulation Z §226.18(d);
- By failing to calculate and disclose finance charges on the amount financed per 15 U.S.C. §1606and Regulation Z §226.22;
- By failing to disclose that the homeowners had a right of rescission;
- By failing to disclose to the homeowners: “If you obtain this loan, the lender will have a mortgage on your home. You could lose your home, and any money you have put into it, if you do not meet your obligations under the loan,” as per 15 U.S.C. §1639; and
- By failing to meet the minimum standards for residential mortgage loans per 15 U.S.C. § 1639c, including the ability to repay standards and the prohibition on arbitration agreements in connection with a homeowners’ principal dwelling.
In addition, EasyKnock, Inc. and EK Real Estate Services of NY, LLC violate the DTPA when they participate in and/or engage in false, misleading, or deceptive acts that Texas homeowners relied on to their detriment, including:
- Representing that an agreement confers or involves rights, remedies, or obligations that it does not or that are prohibited by law;
- Failing to disclose information about goods and services that was known at the time of the transaction if the failure to disclose was intended to induce the consumer to enter into a transaction that the consumer would not have entered into if the information had been disclosed; and
- Causing confusion or misunderstanding about the source, sponsorship, approval or certification of goods or services by another.
Texas Predatory Lending Lawyers
Depending on the facts of your specific situation, you may have a case. Feldman & Feldman is pursuing litigation in conjunction with other firms against unscrupulous out of state lenders such as EasyKnock, Inc. and EK Real Estate Services of NY, LLC for violations of both federal and state law. We are working on behalf of our clients to preserve the constitutionally protected rights all Texas homeowners possess, and we zealously fight to protect families from losing these rights. If you or someone you know entered into an agreement with EasyKnock, Inc. and/or EK Real Estate Services of NY, LLC, please contact us so that we can review your situation to determine if you have a potential case against these lenders.