Three States Are Suing Over Alleged Fast-Cash Scam

MV Realty has an offer for cash-strapped homeowners: Forget payday loans, which frequently start borrowers down the road to financial ruin, and instead take cash in the neighborhood of $1,000 from MV and never have to pay it back.

The catch: For 40 years, the homeowners are required to use MV Realty as their real estate broker when they decide to sell.

The contract says it’s enforceable even if the homeowner dies. There’s one escape hatch. If they want to get out of the deal, the owner or their family would have to cough up cash equal to 6% of the home’s sales price or market value — as determined by MV. That means that on a $1,000 payment, based on MV’s own estimates, they would have to pay MV roughly $10,000.

MV calls it its Homeowner Benefit Program. The company has signed up 30,000 customers in at least 33 states, according to the lawsuit and other sources.

Through the program, MV told Forbes it has paid about $40 million to homeowners. Based on documents Forbes has seen and guidance from experts, that implies MV would stand to make commissions of around $400 million at the current value of the homes encumbered by the agreements. MV didn’t dispute that number.

It’s a strange arrangement, but whether it’s a scam will be determined by the legal system. Lawsuits filed late last year by the attorneys general of Florida, Massachusetts and Pennsylvania allege that MV used deceptive practices to make what they say are predatory loans disguised as real estate service agreements. MV said it vigorously disputes the allegations and will prevail in the litigation.

The Delray Beach, Florida-based MV Realty has colorful roots on Wall Street, where its unique business model was concocted. Its founder, Amanda Zachman — then known as Amanda Zuckerman — was a former star of TV’s Big Brother who became the reality show’s villain when she was captured on video making racist remarks. MV is currently under fire not only from states that claim it’s skirting usury laws to take advantage of desperate homeowners, but from lawmakers in Philadelphia who’ve taken notice that MV’s clients in the city are disproportionately Black.

MV has also drawn the attention of three Democratic U.S. senators who asked the Federal Trade Commission and the Consumer Financial Protection Bureau to determine whether federal laws are being violated.

“MV Realty, and companies like it, take tens of thousands of dollars from homeowners in exchange for a minimal upfront payment,” said the December 21 letter signed by Sherrod Brown of Ohio, Minnesota’s Tina Smith and Ron Wyden of Oregon. “By advertising these agreements as a ‘loan alternative,’ companies are attempting to avoid the legal limitations on lending while in essence charging borrowers onerous rates. Sadly, exclusive listing companies are now a national problem, affecting consumers across state lines.”

If a homeowner can stay put for 40-plus years and refrain from selling until, say, 2063, MV won’t be paid a cent, a risk the company takes, MV told Forbes.

MV is in discussions with the three states that are suing, CEO Tony Mitchell said in a statement to Forbes. “We are fully committed to working with them to address any concerns and to clarify recent misconceptions about our business practices,” he said in response to Forbes’ questions. “We believe MV Realty’s business practices comply with state laws in every community where we operate. Nonetheless, we continue to look for ways to improve transparency, simplify our agreements and provide additional disclosure and consumer protections. It is our desire and intent to be completely transparent with customers, policymakers and regulators.”

MV’s unique business model originated on Wall Street, where David Schiff, a former partner at Perella Weinberg Partners and the founder of Innovatus Capital Partners, had been toying with the idea of packaging revenue generated by realtor commissions and selling it to investors, according to a 2018 complaint filed by MV Realty against Innovatus. Schiff didn’t realize the idea had been patented in 2008.

According to the complaint, Schiff discussed the idea in 2017 with Mitchell, MV’s CEO, and MV’s part owner Jonathan Neuman. It would become MV’s Homeowner Benefit Program even though the deal with Schiff’s firm was never finalized and MV’s revenue was never packaged and sold to investors.

Why the deal with Schiff, and Innovatus, fell through and whether MV should have been able to continue with Schiff’s proposal without his involvement has been the subject of years of litigation. MV has continued with the program, at least partly, because it was able to show that the idea wasn’t originally Schiff’s. Through a spokesperson, Innovatus declined to comment. Innovatus is not being accused of any wrongdoing.

Without Innovatus’ backing, MV turned to 777 Partners, a Miami-based investment firm, to help secure the cash it needed to sign up homeowners, according to a lawsuit filed by Innovatus against 777 Partners. A spokesperson for 777 Partners told Forbes that the firm is no longer “involved with” MV Realty.

One question that remains unanswered is why Schiff chose to work with MV Realty in the first place. A complaint filed as part of a lawsuit between the two companies shows that he and/or Innovatus had a prior business relationship with Mitchell and Neuman of MV. Neuman’s past probably should have raised red flags.

When Neuman was an officer at finance firm Imperial Holdings in 2011, his office in Boca Raton, Florida, was raided by the FBI over suspected insurance fraud. Neuman was never charged, but he and another former Imperial employee, who at one time was also an owner of MV Realty, were the subjects of a years-long investigation. Mitchell, MV’s current CEO, was CEO of Imperial Holdings at the time. At one point, according to the company, Mitchell was also a target of the investigation.A company filing from the time of Neuman’s resignation from Imperial in 2012 shows the firm was forced to shutter its premium finance business, which made up more than 58% of its sales in 2011, and pay an $8 million fine to resolve fraud allegations. In 2016, The Street reported that the U.S. Attorney sought a civil forfeiture of $6.5 million from Neuman and other former Imperial employees and that Imperial Holdings “paid the forfeiture as part of its indemnification agreements with the former employees.”

Through a spokesperson, MV said that Neuman has “never been an officer or employee” of MV. “With regard to his past employment, there was an investigation of Imperial Holdings that resulted in a payment and civil settlement by the company,” the spokesperson said. “Mr. Neuman was never charged with any wrongdoing, never admitted any wrongdoing, and never paid anything. That matter was concluded over seven years ago.”

What remain sticking points in the Homeowner Benefit Program for borrower advocates are whether the payments to homeowners constitute loans — MV says they’re not — and the four-decade duration of the contract.

Binding homeowners to a certain realtor years before they need the service, and doing it in exchange for a financial rescue, is taking unfair advantage, Sarah Mancini, an attorney with the National Consumer Law Center, told Forbes.

“Deciding who to list your home with is a big decision,” Mancini said. “MV Realty is finding people who are financially distressed and giving them money rather than saying, ‘Let me tell you why I can sell your home for the highest value.’ A lot of people being targeted don’t even want to sell their house. This transaction looks like a loan to me in so many ways.”

It’s a loan that comes with “terms that would make a loan shark blush,” Kerry Smith, an attorney for Community Legal Services in Philadelphia who has been assisting clients with MV-related cases, told Forbes.

Most states have laws limiting the interest rates that can be charged on loans. In effect, MV’s agreements all but guaranteed a 10x payment either through the commissions generated by a future sale of the home or by collecting on termination payments from homeowners. That kind of return for MV would typically exceed legal limits for loans.

MV disputes that payments made to homeowners constitute loans. According to consumer advocates, it’s one of MV’s primary pitches, and the phrase “not a loan” features prominently on the firm’s website. Instead, in a satisfaction mortgage agreement viewed by Forbes, MV refers to the payment as a “debt secured by the above-mentioned Mortgage.”

MV argues that because the homeowner is never under any obligation to sell, no repayment is ever required. While that’s true, the 40-year term of the agreement makes it exceedingly unlikely that any owner wouldn’t eventually have to engage with MV.

For Mancini and others, there’s another issue. The contract terms include triggers that wouldn’t usually involve the sale of a property. One example Mancini cites is what happens in the case of the death of a homeowner. According to the agreement, the estate’s heirs would have ten days to notify MV Realty of the change in ownership and either acknowledge the deal or pay the early termination fee.

“No heirs are even going to know about this within the ten-day window to avoid the early termination fee,” Mancini told Forbes.Through a spokesperson, MV disputed that such an event would constitute a “trigger event.”

In addition, lawmakers at a December 14 Philadelphia City Council meeting heard testimony from multiple consumer advocates detailing what they believed to be an intention on MV’s part to target Black homeowners.

Through a spokesperson, MV strongly denied that it targets Black homeowners and said it has no knowledge of the race or ethnicity of its clients.

Targeting Black homeowners is a harsh claim. The Reinvestment Fund, a Philadelphia-based community service organization, says it has the data to back it up.

At the council meeting, Ira Goldstein, the Reinvestment Fund’s president of policy solutions, presented findings that showed 69% of MV’s deals within the city were made to Black homeowners, who make up just 37% of all homeowners in Philadelphia. And Philly wasn’t an anomaly. Research across four other Pennsylvania counties yielded similar results, Goldstein said.

It’s a finding that takes on new meaning for anyone familiar with the past of MV founder Amanda Zachman. Zachman, previously known as Amanda Zuckerman, starred on the 15th season of the reality TV show Big Brother. Zachman is well known for her stint on the show for her racially insensitive comments. One six-and-a-half minute clip collection titled “Amanda Zuckerman: Social Justice Warrior,” starts with Zachman saying “being accused to be racist is a serious, serious deal” before cutting to a scene where she says she’s taken “like 14 Puerto Rican showers.” Zachman is now MV’s chief sales officer, according to her bio on the company website, which touts her role in creating the Homeowner Benefit Program but doesn’t mention Big Brother.

Goldstein said there was the possibility that if the Reinvestment Fund were able to account for homeowners’ income levels, some of the racial disparity might go away. However, he doesn’t think it would change much.

“I don’t know if they’re actively targeting Black homeowners or if it’s the result of an algorithm,” Goldstein told Forbes. “But if you look at the data in Philadelphia, MV is disproportionately working its way into Black neighborhoods. That doesn’t happen by accident.”