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Attorney general investigating fraud in foreclosure 'rescue' operation

For scores of desperate Tampa Bay homeowners, it seemed like a lifeline — Gideon Rechnitz would help bring their mortgage payments up to date and save their homes from foreclosure.

But now the Florida Attorney General's Office is investigating whether Rechnitz misrepresented himself and his St. Petersburg-based companies in a foreclosure rescue scheme that enabled him to acquire dozens of houses at below-market value.

It is one of more than 50 such investigations now under way in Florida, which ranks second nationally in foreclosures.

"The time is ripe for disreputable companies and individuals to capitalize on consumers' financial concerns," Attorney General Bill McCollum said this week, "and foreclosure rescue fraud is one of the worst manifestations of the current economic situation."

As the St. Petersburg Times reported last year, Rechnitz, 62, told homeowners that investors would buy their houses, make the payments and stop the foreclosure proceedings. The sellers could then rent back their homes with an option to repurchase them in two years.

In an interview for that story, Rechnitz said that he explained all facets of the "program" and even videotaped closings to make sure the sellers understood. But many homeowners were confused by the documents he asked them to sign and could not meet the stringent rental and buyback conditions.

Among the practices under investigation:

• Rechnitz and his companies, which include Foreclosure Prevention Corp., allegedly represented that the mortgage would remain in the homeowner's name only "for the time being" though there was no guarantee that the homeowner would ever be released from responsibility for paying the mortgage.

• Rechnitz and his companies suggested they were government-affiliated by referring to themselves as the "Department of Foreclosure Prevention."

• Fliers marketing Rechnitz's services stated there were no closing costs when in fact there were.

• Victims were unaware that the "investor" buying their property was Rechnitz himself.

Records show that nearly half of the owners who dealt with Rechnitz from 2004 to last year wound up losing their homes even though many had considerable equity. Rechnitz paid off the mortgages, sold some of the houses and has continued to rent out others.

In an e-mail to the Times on Wednesday, Rechnitz said he had been working with the Attorney General's Office for the past month. "We believe that upon their review of information not previously known to them, the investigation will be terminated," he said.

The agency also said it is trying to resolve the matter out of court. It has filed lawsuits in six other cases under the state's new Foreclosure Rescue Fraud Prevention Act, which gives homeowners the right to cancel and limits the buyback price.

The current investigation is not the first involving Rechnitz. Based on a complaint stemming from his 2006 "rescue" of a Bradenton home, the Florida Bar investigated him for allegedly preparing trust documents and taking other steps that could constitute the unauthorized practice of law. Rechnitz admitted no wrongdoing, but later signed a cease-and-desist affidavit.

In the 1980s, the Federal Trade Commission sued Rechnitz for deceptive trade practices in connection with his Timeshare Owners Foundation, which charged $295 to market timeshare units for sale. More than 22,000 owners signed up, but many complained they never got a single inquiry or the $1,000 government bond Rechnitz promised them if their unit didn't sell in a year. He admitted no wrongdoing, but agreed to refund $1.25 million to customers. He also lost his Florida real estate license.

Rechnitz currently faces two lawsuits in Sarasota County, including one by 71-year-old Yolanda Rodriguez. She claims that in 2006 Rechnitz improperly evicted her and her deaf brother from their home, which he acknowledged in a deposition was worth far more than the $150,000 Rodriguez owed on her mortgage.

Rechnitz said in the fall that his foreclosure rescue business had slowed considerably in 2008 because it was harder to find people like Rodriguez with substantial equity. But as home­owners who got 100 percent financing now struggle to renegotiate their mortgage terms, state records show he recently started a new company — Loan Modification Enterprises.

Times researcher Carolyn Edds contributed to this report. Susan Taylor Martin can be contacted at

Attorney general investigating fraud in foreclosure 'rescue' operation 06/17/09 [Last modified: Thursday, June 18, 2009 5:17pm]
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