After two years of litigation, ending with a trial, Sandra Gustafson owns her home free and clear of a mortgage

SAINT PAUL, MINNESOTA — The Foreclosure Relief Law Project won a major victory this week in a prolonged equity stripping lawsuit. After a two day trial, the Court ordered that the homeowner now owns her home free and clear of a mortgage.

Almost two years ago, Ms. Sandra Gustafson approached the Foreclosure Relief Law Project because she was facing eviction from the home she has owned for almost 20 years. Ms. Gustafson was the victim of an elaborate equity stripping scheme orchestrated by a now-defunct company called Midwest Equity Consultants. Midwest Equity linked homeowners in foreclosure with “investors.” An investor purchased Ms. Gustafson’s house and immediately sold it back to her on a contract for deed. Per the terms of the contract for deed, Ms. Gustafson was to refinance her home after 15 months. As is true with most equity stripping transactions, Ms. Gustafson was in no position to refinance her property, leaving her on the brink of eviction, as well as the loss of her $125,000 in equity to the “investors.” 

“This case is ground-breaking,” said Jane Bowman, attorney with the Foreclosure Relief Law Project that brought the case. “This ruling holds those accountable who get tangled up in an illegal equity stripping transaction.  When things go awry, the parties who orchestrate and fund the scheme cannot seek to minimize their losses by going after the equity-stripping victim.”

In previous hearings before the Court, the Plaintiff successfully argued that Midwest Equity and the investors violated various provisions of Minnesota’s equity stripping laws. The Court also agreed with the Plaintiff that the mortgage that financed the transaction was void, because it violated state law and public policy. 

At trial, the bank that financed the transaction asked the Court to force Ms. Gustafson to repay the bank for its loss. The Court held that there was no legal basis to do so and denied the bank’s request. 

Ms. Gustafson was represented by Jane Bowman and Mark Ireland.  The Foreclosure Relief Law Project is a program of the Housing Preservation Project (HPP).  HPP is a non-profit law firm dedicated to preserving and expanding the supply of affordable housing.