On March 7, 2025, Arizona’s Attorney General (AG) filed a lawsuit against numerous individuals and companies accused of orchestrating a widespread equity-stripping scheme.  The alleged scheme is typical: bad actors target distressed homeowners to steal their equity.  The ploy included door knockers pretending to be representatives of charitable organizations to help homeowners avoid foreclosure and save their homes.  In fact, it was just a sham to gain the homeowners’ trust, trick them into selling their home for significantly less than market value, and then evict the people from their homes.  Unfortunately, criminals looking to defraud homeowners is not new.

What is new though is the AG bringing racketeering claims against title companies and law firms accused of facilitating and profiting from the illegal scheme.  The AG asserts the title companies had actual knowledge of the fraudulent scheme but continued to close their transactions to generate revenue.  One title company allegedly knew of the scheme because numerous, angry homeowners had called, complaining they had been forced to move out of their homes.  The fact that the homeowners were lawfully evicted or forced to sell was no defense because the title company allegedly knew default judgments against the distressed homeowners were only obtained because they could not afford legal representation (which was part of the scheme).

The other title company allegedly favored the fraudsters by allowing them to pick the notary, following their instruction to never contact the homeowner/seller in the transaction, and obtaining paid releases for invalid, recorded, purchase contracts.  The AG also asserts that “subject to” or “wrap” loan transactions on FHA and VA loans are illegal yet the title company closed dozens of them for the fraudsters.

The lawsuit alleges attorneys also conspired in the scheme for profit.  “Lawyers were used to threaten homeowners with lawsuits, follow through with those threats by filing lawsuits, defend numerous lawsuits, defend the scammers from investigators and angry judges, and evict homeowners.”  More specifically, the AG alleges the attorneys knew the fraudsters’ purchase contracts were invalid but still sought to legally enforce them in court.  Other attorneys evicted the homeowners based on invalid purchase agreements or legally unenforceable leaseback agreements.

In short, the AG filed suit against title companies and attorneys for illegally conducting an enterprise with the bad actors, working toward the common goal of stripping victims of their equity.  The lawsuit should be a cautionary tale to real estate professionals, including REALTORS®, to be weary of transactions that are unfair to one party or appear dishonest.

            Click here to read the Arizona Attorney General press release.

            Click here to read the Complaint.

Aaron M. Green, Esq., a licensed Arizona attorney, is the General Counsel for the Arizona Association of REALTORS®.  This article is of a general nature and reflects only the opinion of the author at the time it was drafted.  It is not intended as definitive legal advice, and you should not act upon it without seeking independent legal counsel.