Company behind controversial real estate deal facing bankruptcy and legal action in Illinois

CHICAGO (CBS) – The company behind a controversial real estate deal, signing up hundreds of Chicago area homeowners now faces Chapter 11 bankruptcy and possible disciplinary action in Illinois.

The deal

MV Realty began signing up Chicago area homeowners in September 2020. A CBS 2 analysis of deed records found 658 properties with a Memorandum of Homeowner Benefit Agreement (HBA) attached to them in Chicago and seven counties surrounding the city.

Here's how the deal worked. MV Realty provided money upfront to the homeowner. In exchange, the homeowner agreed to use the company as its real estate agent/broker should they decide to sell their home.

However, many homeowners have said they did not understand all of the details of the contract which included the agreement lasting for 40 years, the right to assess an early termination fee should the homeowner want to get out of the contract and the contract remaining in force even after the homeowner's death.

MV Realty now faces lawsuits from seven Attorneys General, including Indiana's. Many of those complaints claim the HBA is a lien and accuse the company of deceptive business practices that targeted vulnerable homeowners.

Illinois homeowner struggles

Homeowners like Frank McEntee. He lives in a house he has already paid off.

Retired and living on a fixed income, when the MV Realty HBA offer came up in 2022, he thought it sounded like a good deal., too good to pass up.

"We sat down and signed the papers," said McEntee.

Nearly two years later he still has plans to get back to his photography hobby and develop decades worth of old film he has stashed away in boxes.

He also wants to fix up his house that badly needs repairs, including the ceiling with a huge hole in it.

But he needs more money to do those things. Money, he thought he could get from a reverse mortgage.

"I have high equity in the house, have a great credit score," said McEntee.

But that application hit a shocking snag with the lender.

"They told me there was a lien on my house generated by MV Realty."

In the summer of 2022 he learned the HBA, filed with the Cook County Recorder of Deeds, was clouding his title.

"It's painful."

And, then he discovered more about MV Realty that he wishes he had known before he signed the HBA.

"I googled the company, and I was like, 'Oh crap.'"

He said the lender told him the reverse mortgage was denied because of the HBA. McEntee then tried getting in touch with MV Realty. He has spent months making phone calls and visiting county offices trying to do what he can to get out of this contract. But he is not getting any answers.

MV Realty legal hurdles

In September 2023, MV Realty and its subsidiaries including MV Realty Illinois, LLC filed for Chapter 11 bankruptcy.

Through documents filed in that case, CBS 2 learned MV Realty had 709 properties in Illinois with HBAs at that time.

Another document reveals pending litigation involving the Illinois Department of Financial and Professional Regulation (IDFPR), the state department that licenses real estate agents and brokers.

MV Realty, the company is licensed by the state. So is Amanda Zachman. She was a former Big Brother contestant who is one of the founders of MV Realty and is a licensed real estate agent in several states including Illinois.

The IDFPR complaint accuses of MV Realty and Zachman of "dishonest dealings" in signing up homeowners under those HBAs. It also claims MV Realty "engaged in dishonorable, unethical, or unprofessional conduct" to "deceive, defraud, or harm the public."

The 11-count complaint is seeking disciplinary action against the company and Zachman including the suspension or revocation of their licenses and a possible $25,000 fine for each violation of state real estate law.

The IDFPR complaint notes MV Realty signed up more than 750 HBAs during the time they operated here.

Seven state Attorneys General have filed lawsuits against MV Realty making similar claims about deceit and dishonesty in the company's Homeowner Benefit Program. Indiana is one of those states.

However, the Illinois Attorney General has not yet taken any legal action. CBS 2 has asked the office what it is doing to protect consumers. An office spokesperson has only responded that it has no updates at this time.

It appears the office is looking into the company because an Assistant Attorney General with the office's Consumer Protection unit asked MV Realty CEO Antony Mitchell a few questions during a November 2023 341 Creditors Hearing in the bankruptcy case.

Williams wanted to know more about how MV Realty got the names of potential homeowners to target and eventually sign up for HBAs.

Mitchell had previously explained they used financing to buy leads. From those leads, he told Williams, they separated out homeowners who had at least 40% equity in their homes and were looking to use some of that equity to get cash out.

Williams also asked Mitchell about the breakdown of revenue generated post-bankruptcy filing by home sales commissions and early termination fees. Mitchell didn't have the information available to answer that at that hearing.

Hope for homeowners?

During the 5-hour bankruptcy hearing, Mitchell said the company stopped signing up HBAs by the end of 2022, when Florida filed its lawsuit. He said the company continues to operate as a real estate broker and can sell any of the 34-thousand properties currently under HBAs, if the homeowner decides to put their home up for sale.

MV Realty filed a reorganization plan with the bankruptcy court on February 2, 2024. The details offer some potential relief and ways out of the HBAs.

Under the plan, MV Realty will implement an "HBA Adjudication Program" which includes the following:

• Within 30 days of the effective date of the plan, written notice will be sent to all HBA parties which details the 40-year term, the 3% termination fee, events constituting a breach and the fact that a mem or mortgage has been filed including a copy of the filing. The notice will be approved by the bankruptcy court.
• The notice will give the homeowner the option of opting in to the adjudication program for 120 days during which the homeowner can choose to rescind the HBA for cause, meaning there's evidence the homeowner tried to cancel the contract within 3 days following the signing of the HBA but couldn't, the homeowner was incapacitated or incompetent at the time the HBA was executed; the homeowner was fraudulently induced into signing the HBA or other circumstances justifying the rescission of the HBA.
• A review committee made up a company member, an HBA committee member, and an independent member.  If the committee allows a rescission of the HBA no fees will be collected. If it does not, the homeowner will get 30 days to appeal the decision.
• If the homeowner does not opt in to the HBA Adjudication Program, they shall remain bound to the terms of the HBA.

A CBS 2 review of Cook County deed records in January 2024 shows that MV Realty has already terminated the HBAs for several homeowners since our first investigation in July.

In addition, the reorganization plan allows for changes involving current HBAs.

• Annual notices will be sent to all homeowners reminding them of the terms of their HBA.
• A database will be created so real estate agents can determine if an HBA exists on a property to avoid a situation where the property is sold and breaches the terms of the HBA.
• After 6 months of MV Realty attempting to sell a home and being unsuccessful, the homeowner currently has 2 months to try on their own with a different realtor. That 2 months will be extended to a single 4 month-period.
• If a homeowner is trying to refinance, get a home equity loan or similar transaction, the company will offer both subordination or termination with subsequent refiling if permitted.
•  No early termination fees will be required in the event of a homeowner's death; a foreclosure of the property; a bona fide inter-family transfer of the property.
• No foreclosure proceeding will not be pursued in connection with the breach of an HBA.

Mitchell said the company is relying on at least 60% of existing HBAs in states where there are no lawsuits, to keep the company financially afloat. The company has never been profitable. And it owes at least two investors more than $50 million. The largest of those is Monroe Capital, a Chicago-based investment company that infused MV Realty with $40 million in July 2021.

On February 3, an order was entered in the MV Realty Bankruptcy case, extending the deadline of HBA holders to file proofs of claim until April 1, 2024.  

The new company

Who will manage the reorganized company? Antony Michell will remain CEO. Amanda Zachman will remain a Broker. Both will be paid $22,180 per month, according to bankruptcy court documents. That's $266,000 a year. Less pay for Mitchell who now makes $350,000. More money for Zachman who got a $50,000 raise the month before the bankruptcy filing, bringing her salary to $200,000 a year.

Frank McEntee, who's struggling to find the funds he needs to repair his home and enjoy retirement said if the company would terminate his HBA, at no cost, it could be life changing. "Completely," he said through tears, "You have no idea."