                                    2016 IL App (1st) 143592

                                          No. 1-14-3592


                                                                            FIFTH DIVISION
                                                                            March 31, 2016


                                    IN THE
                        APPELLATE COURT OF ILLINOIS
                           FIRST JUDICIAL DISTRICT
______________________________________________________________________________

THE PEOPLE ex rel. LISA MADIGAN, Attorney       )
General of Illinois,                            )     Appeal from the
                                                )     Circuit Court of
     Plaintiff-Appellee,                        )     Cook County.
                                                )
     v.                                         )     No. 11 CH 33666
                                                )
MATTHEW WILDERMUTH, GEORGE KLEANTHIS, )
Individually and as Managing Member of Legal    )
Modification Network, LLC, and LEGAL            )
MODIFICATION NETWORK, LLC,                      )     Honorable
                                                )     Diane J. Larsen,
     Defendants-Appellants.                     )     Judge Presiding.
______________________________________________________________________________

       JUSTICE LAMPKIN delivered the judgment of the court, with opinion.
       Presiding Justice Reyes and Justice Gordon concurred in the judgment and opinion.


                                          OPINION

¶1     This appeal presents a certified question that deals with the pleading requirements for the

Attorney General of Illinois for a claim under section 3-102(B) of the Illinois Human Rights Act

(Act) (775 ILCS 5/3-102(B) (West 2010)). Specifically the Attorney General filed a complaint

alleging, inter alia, that defendants Matthew Wildermuth, George Kleanthis, and Legal

Modification Network, LLC (LMN) violated section 3-102(B) of the Act by engaging in a real

estate transaction and, because of unlawful discrimination, altering the terms, conditions, or
No. 1-14-3592


privileges of the real estate transaction or the furnishing of facilities or services in connection

therewith. The Attorney General also alleged the defendants intentionally targeted their predatory

practices against minorities by aiming their advertising at African-Americans and Latinos. The

circuit court denied defendants’ motion to dismiss this claim. After also denying defendants’

motion to reconsider, the court certified the following question for interlocutory appeal under

Illinois Supreme Court Rule 308 (eff. Feb. 26, 2010):

       “Whether the State may claim a violation under the [Act] pursuant to a reverse

       redlining theory where it did not allege that the defendant acted as a mortgage

       lender.”

¶2     For the reasons that follow, we answer the certified question in the affirmative.

¶3                                     I. BACKGROUND

¶4     The Attorney General filed its original complaint against defendants in September 2011

and subsequently filed a four-count fourth-amended complaint, which alleged the defendants had

engaged in a course of conduct that violated several statutory and regulatory provisions. Count IV,

(which is the only count that concerns us here) alleged that defendants Wildermuth, an attorney,

and Kleanthis, a veteran of the real estate business and the sole managing member of LMN,

engaged in acts and practices that violated section 3-102(B) of the Act and constituted a pattern

and practice of discrimination when they partnered to offer loan modification services to Illinois

consumers. Eventually, LMN ceased functioning and Wildermuth and Kleanthis provided the loan

modification services through Wildermuth’s law offices. The Attorney General alleged defendants

engaged in “real estate transactions” as defined by section 3-101(B) of the Act by claiming to

negotiate loan modifications and short sales on behalf of their clients.



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No. 1-14-3592


¶5     The Attorney General alleged that after the collapse of the housing market, the federal

government largely created the loan modification market through a number of programs designed

to assist delinquent and underwater homeowners avoid foreclosure. However, unscrupulous

private, for-profit enterprises proliferated and seized on consumer confusion and desperation,

often targeted minority homeowners, and falsely offered guarantees on loan modifications and

charged exorbitant and nonrefundable fees for services the enterprises could not perform.

¶6     The Attorney General alleged defendants advertised on radio that they would succeed

where other loan modification providers had failed, help consumers save their homes and obtain

significant reductions on their monthly mortgage payments, and obtain modifications for

consumers within a short time frame. Consumers who contacted defendants were scheduled for

meetings with nonattorneys at defendants’ Woodridge, Illinois office and given aggressive sales

pitches. Defendants’ intake and sales staff made unreasonable assurances about defendants’

likelihood of successfully modifying the consumers’ mortgage loans, including promises to reduce

the consumers’ monthly mortgage payments by a specific amount and in a specific period of time.

However, despite their broad assurances, defendants’ services consisted primarily of merely filling

out and submitting the paperwork to apply for a traditional affordable home loan modification

program.

¶7     The Attorney General alleged defendants failed to provide any of the disclosures and

notices mandated by the Illinois Mortgage Rescue Fraud Act (765 ILCS 940/1-1 et seq. (West

2010)) or the federal Mortgage Assistance Relief Services Rule (12 C.F.R. § 1015.1 et seq. (2012))

and charged consumers nonrefundable fees that ranged from $3,000 to $5,000, which often

exceeded the consumers’ monthly mortgage payments. The consumers paid the fees in advance of

receiving services and were led to believe that a portion of their payments would be refunded if

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No. 1-14-3592


defendants failed to obtain a loan modification. Defendants routinely required and accepted

advance payments from consumers whom defendants knew were not eligible for loan

modifications because defendants knew the consumers did not meet the basic eligibility

requirements under the affordable home loan modification program. When defendants obtained

loan modifications for consumers, the modifications often were either inconsistent with the

promised terms or not obtained within the promised time frame. When defendants were not able to

obtain a loan modification, they would suggest listing the consumer’s property as a short sale.

When a consumer requested a refund, in most cases defendants refused to tender a refund.

¶8     The Attorney General alleged defendants intentionally discriminated in the furnishing of

facilities or services in connection with real estate transactions on the basis of race and national

origin by targeting the African-American and Latino communities. Defendants’ actions in

targeting disproportionately subjected African-American and Latino homeowners to defendants’

fraudulent scheme and resulted in the loss of thousands of dollars and, in many cases, the loss of

homes. Defendants’ discriminatory acts involving targeting included: (1) the exclusive

advertisement of their services through radio stations known to have a predominantly Latino or

African-American audience; and (2) the use of a well-known radio personality in the

African-American community to promote defendants’ services, which were carelessly or never

performed. Defendants’ scheme affected African-American and Latino homeowners who, in an

effort to save their homes, gave defendants thousands of dollars without receiving any of the

benefits defendants claimed to be able to provide.

¶9     Defendants moved to dismiss count IV of the fourth-amended complaint under section

2-615 of the Code of Civil Procedure (735 ILCS 5/2-615 (West 2012)), asserting the complaint

failed to state a violation of section 3-102(B) of the Act because Wildermuth rendered legal

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No. 1-14-3592


services and was not engaging in real estate transactions as defined in the Act. Defendants also

asserted the Attorney General failed to allege facts showing that defendants treated

African-Americans or Latinos differently than other groups.

¶ 10   In response, the Attorney General asserted defendants engaged in real estate transactions

within the meaning of the Act when they negotiated loan modifications and short sales on behalf of

consumers. Furthermore, the Attorney General, citing reverse redlining cases involving the federal

fair housing statute, asserted it was not necessary to show disparate treatment or impact because

the Attorney General alleged facts showing direct evidence that defendants intentionally targeted

predatory practices against minorities, specifically, radio advertising aimed at African-Americans

and Latinos.

¶ 11   The trial court denied defendants’ motion to dismiss, concluding they functioned as

mortgage brokers when they conducted short sale negotiations and sought loan modifications.

Thereafter, defendants moved the court to reconsider the denial or certify a question to this court

for interlocutory review. The trial court denied the motion to reconsider but certified for review the

following question:

                “Whether the State may claim a violation under the [Act] pursuant to a

       reverse redlining theory where it did not allege that the defendant acted as a

       mortgage lender.”

Over the Attorney General’s objection, this court granted defendants’ application for leave

to appeal.

¶ 12                                   II. ANALYSIS

¶ 13   Illinois Supreme Court Rule 308 (eff. Feb. 26, 2010) allows for a permissive appeal of an

interlocutory order certified by the trial court involving a question of law as to which there is

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No. 1-14-3592


substantial ground for difference of opinion and where an immediate appeal may materially

advance the ultimate termination of the litigation. Brookbank v. Olson, 389 Ill. App. 3d 683, 685

(2009). However, the rule was not intended to be a mechanism for expedited review of an order

that merely applies the law to the facts of a particular case. Walker v. Carnival Cruise Lines, Inc.,

383 Ill. App. 3d 129, 133 (2008); Morrissey v. City of Chicago, 334 Ill. App. 3d 251, 258 (2002).

Nor does it permit us to review the propriety of the order entered by the lower court. Walker, 383

Ill. App. 3d at 133. Rather, we limit our review to answering the specific question certified by the

trial court to which we apply a de novo standard of review. See Moore v. Chicago Park District,

2012 IL 112788, ¶ 9.

¶ 14   The fundamental rule of statutory construction is to ascertain and give effect to the

legislature’s intent. DeLuna v. Burciaga, 223 Ill. 2d 49, 59 (2006). The language of the statute is

the best indication of legislative intent, and we give that language its plain and ordinary meaning.

Ready v. United/Goedecke Services, Inc., 232 Ill. 2d 369, 375 (2008). In determining the plain

meaning of a statute’s terms, we consider the statute in its entirety, keeping in mind the subject it

addresses, and the apparent intent of the legislature in enacting the statute. Ready, 232 Ill. 2d at

375. We may not depart from the plain language of the statute by reading into it exceptions,

limitations, or conditions that conflict with the express legislative intent. Town & Country

Utilities, Inc. v. Illinois Pollution Control Board, 225 Ill. 2d 103, 117 (2007). “[A] court should not

attempt to read a statute other than in the manner in which it was written.” Ultsch v. Illinois

Municipal Retirement Fund, 226 Ill. 2d 169, 190 (2007).

¶ 15   The Act states that it is the public policy of Illinois to “secure for all individuals within

Illinois the freedom from discrimination against any individual because of his or her race, color,

religion, sex, national origin, ancestry, age, order of protection status, marital status, physical or

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No. 1-14-3592


mental disability, military status, sexual orientation, pregnancy, or unfavorable discharge from

military service in connection with employment, real estate transactions, access to financial credit,

and the availability of public accommodations.” 775 ILCS 5/1-102 (West 2014). Because the Act

is remedial legislation, it must be construed liberally to give effect to its purposes. Arlington Park

Race Track Corp. v. Human Rights Comm’n, 199 Ill. App. 3d 698, 703 (1990). Illinois courts

interpreting the terms of section 3-102(B) of the Act have looked to federal case law interpreting

comparable provisions the federal Fair Housing Act (FHA) (42 U.S.C. §§ 3601-3631 (2006)), and

other civil rights statutes. See Szkoda v. Human Rights Comm’n, 302 Ill. App. 3d 532, 539-40

(1998) (examining relevant federal law to determine what constitutes sexual harassment under

section 3-102(B) of the Act, which has close parallels to section 3604 of the FHA).

¶ 16   Section 3-102(B) of the Act states, in relevant part, as follows:

       “Civil Rights Violations; Real Estate Transactions. It is a civil rights violation for

       an owner or any other person engaging in a real estate transaction, or for a real

       estate broker or salesman, because of unlawful discrimination or familial status, to

                ***

                (B) Terms. Alter the terms, conditions or privileges of a real estate

       transaction or in the furnishing of facilities or services in connection therewith[.]”

       775 ILCS 5/3-102(B) (West 2010).

¶ 17   Section 3-101 of the Act contains the following definitions:

                “(B) Real Estate Transaction. ‘Real estate transaction’ includes the sale,

       exchange, rental or lease of real property. ‘Real estate transaction’ also includes the

       brokering or appraising of residential real property and the making or purchasing of

       loans or providing other financial assistance:

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No. 1-14-3592


                (1) for purchasing, constructing, improving, repairing or maintaining a

       dwelling; or

                (2) secured by residential real estate.

                ***

                (D) Real Estate Broker or Salesman. “Real estate broker or salesman”

       means a person, whether licensed or not, who, for or with the expectation of

       receiving a consideration, lists, sells, purchases, exchanges, rents, or leases real

       property, or who negotiates or attempts to negotiate any of these activities, or who

       holds himself or herself out as engaged in these.” 775 ILCS 5/3-101(B), (D) (West

       2010).

¶ 18   Because we are limiting our review to the certified question, we discuss only the

parties’ arguments on appeal that are relevant to the certified question. Defendants contend

the conduct alleged by the Attorney General does not technically constitute reverse

redlining because defendants did not extend credit or influence the terms and conditions of

credit to the consumers in the first instance. According to defendants, reverse redlining is a

viable theory where the alleged discriminator controlled or influenced the terms and

conditions under which borrowers were extended credit and those terms and conditions

were predatory and unfair. Defendants, however, represented homeowners who had

already procured credit to obtain their homes and to whom no new credit was extended.

¶ 19   To support their argument, defendants cite federal cases involving actions under the

FHA against mortgage companies that have described redlining as “ ‘the practice of

denying the extension of credit to specific geographic areas due to the income, race, or

ethnicity of its residents.’ ” Hargraves v. Capital City Mortgage Corp., 140 F. Supp. 2d 7,

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No. 1-14-3592


20 (D.D.C. 2000) (quoting United Cos. Lending Corp. v. Sargeant, 20 F. Supp. 2d 192, 203

n.5 (D. Mass. 1998)). The term “redlining” is derived from the actual practice of drawing a

red line around designated areas in which credit is to be denied. Sargeant, 20 F. Supp. 2d at

203 n.5. Reverse redlining has been described as “ ‘the practice of extending credit on

unfair terms to those same communities.’ ” Hargraves, 140 F. Supp. 2d at 20 (quoting

Sargeant, 20 F. Supp. 2d at 203 n.5).

¶ 20   Defendants argue that in order to allege discrimination under the Act pursuant to a

reverse redlining theory, the Attorney General must establish that defendants (1) engaged

in lending practices and loan terms that were predatory and unfair, and (2) either

intentionally targeted the consumers because of their race, or that the defendants’ lending

practices had a disparate impact on the basis of race. Defendants contend the Attorney

General cannot meet this pleading requirement because the alleged misconduct fails to

establish that defendants extended credit to any consumer and, thus, the Attorney General

cannot show that defendants targeted a certain class of consumers to whom defendants

extended credit on materially less favorable terms.

¶ 21   Furthermore, defendants argue the Attorney General failed to allege they extended credit to

any consumer or had the opportunity to affect the terms of credit through which the consumers

obtained or refinanced their residential property in any way. Defendants contend that they are not

mortgage brokers and their representation of delinquent borrowers does not constitute “engaging

in real estate transactions” pursuant to section 3-102(B) of the Act. Although the Attorney General

alleged defendants claimed to negotiate loan modifications and short sales on behalf of clients,

defendants argue the Attorney General failed to allege any facts to suggest defendants acted in the

capacity of a mortgage broker. Defendants also argue that the conduct alleged by the Attorney

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No. 1-14-3592


General does not bring defendants within the section 3-101(B) definition of a real estate

transaction.

¶ 22   The Attorney General argues this court should answer the certified question in the

affirmative because it alleged defendants targeted distressed African-American and Latino

homeowners for predatory practices with regard to mortgage loan modification services and

section 3-102(B) of the Act encompasses conduct other than mortgage lending, including the

negotiation and procurement of loan modifications and short sales.

¶ 23   The Attorney General argues defendants fall within the term “real estate broker or

salesman” pursuant to section 3-101(D) of the Act because they held themselves out as negotiating

and procuring short sales and loan modifications. According to defendants’ customer agreements

with the consumers, defendants stated that they would pursue various loss mitigation options,

including loan restructuring and short sale payoffs. When defendants could not obtain loan

modifications for their consumer clients, defendants generally suggested that the clients list the

property for a short sale, which is a sale of real property for less than the amount of encumbrances

on the property with the consent of the lien holders who are willing to accept less than what they

are owed. See In re Fabbro, 411 B.R. 407, 413 n.7 (Bankr. D. Utah 2009). The Attorney General

also argues defendants’ conduct of negotiating loan modifications puts them within the section

3-101(D) definition of a real estate broker because a mortgage conveys an interest in real property

to the mortgage lender to secure the debt created by the mortgage loan, so defendants, therefore,

were negotiating sales of interests in real property.

¶ 24   The sole distinct issue raised in this interlocutory appeal is whether the Attorney General

may claim a violation under the Act pursuant to a reverse redlining theory where the Attorney

General did not allege that the defendants acted as mortgage lenders. Neither the Attorney General

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No. 1-14-3592


nor defendants direct this court to, and this court is unaware of, any existing controlling law on this

issue.

¶ 25     Section 3-102 of the Act requires that the entity alleged to have violated this section be

either “a real estate broker or salesman” or “an owner or any other person engaging in a real estate

transaction.” 775 ILCS 5/3-102 (West 2010). Furthermore, the term real estate transaction, in

addition to meaning “the sale, exchange, rental or lease of real property, *** also includes the

brokering or appraising of residential real property and the making or purchasing of loans or

providing other financial assistance *** for purchasing, constructing, improving, repairing or

maintaining a dwelling ***.” 775 ILCS 5/3-101(B)(1) (West 2010). The plain language of the

statute does not require a defendant alleged to have violated section 3-102 to be a mortgage lender.

To the contrary, the plain language of this section merely requires that the entity engage in a real

estate transaction, which includes “providing other financial assistance *** for maintaining a

dwelling.” 775 ILCS 5/3-101(B)(1) (West 2010).

¶ 26     The Attorney General’s amended complaint alleged that defendants offered loan

modification services to consumers and utilized government programs that were designed to help

delinquent and underwater homeowners avoid foreclosure. Defendants, however, allegedly made

unreasonable assurances to clients about the likelihood of success in modifying the clients’ home

mortgage loans, carelessly or never performed the touted services, and charged the clients

exorbitant and nonrefundable fees for services of little or no value. Furthermore, the Attorney

General alleged defendants, because of unlawful discrimination, altered the terms, conditions or

privileges in the furnishing of facilities or services in connection with real estate transactions.

¶ 27     Clearly, defendants’ alleged conduct interfered with consumers’ ability to obtain a

particular type of financial assistance—residential loan modifications—for maintaining their

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No. 1-14-3592


homes against the risk of foreclosure. This conduct may be construed as providing other financial

assistance for maintaining a dwelling, especially in light of the allegation that defendants charged

consumers fees in connection with these services. The term other financial assistance is not

specifically defined in the Act, and section 3-102 does not require “other financial assistance” to

be in the form of a mortgage loan or otherwise. The Attorney General’s allegations concerning

defendants’ residential loan modification services are neither too far removed from transactions in

the residential real estate market nor lacking any connection to the financing of residential real

estate. Construing the Act—which is remedial legislation—liberally, we conclude that defendants’

alleged conduct brings them within the section 3-101 definition of a real estate transaction as

providing other financial assistance for maintaining a dwelling, and the section 3-102(B)

requirement concerning the furnishing of facilities or services in connection with a real estate

transaction that alters the terms, conditions or privileges of such a transaction based on unlawful

discrimination.

¶ 28   We find support for this position by looking to persuasive federal case law interpreting a

comparable provision of the FHA—section 3605 of the FHA—which closely parallels the

language of sections 3-101 and 3-102(B) of the Act. See Szkoda, 302 Ill. App. 3d at 539-40.

Federal courts have discussed the meaning of financial assistance in the context of section 3605 of

the FHA. The Seventh Circuit held that property or casualty insurance did not constitute financial

assistance because “[i]nsurers do not subsidize their customers or act as channels through which

public agencies extend subsidies.” National Ass’n for the Advancement of Colored People v.

American Family Mutual Insurance Co., 978 F.2d 287, 297 (7th Cir. 1992). In United States v.

Massachusetts Industrial Finance Agency, 910 F. Supp. 21, 28-29 (Mass. Dist. Ct. 1996), the court

held that a quasi-public agency’s action of channeling the proceeds from tax-exempt bonds to

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No. 1-14-3592


qualifying applicant organizations was extending financial assistance to those applicants.

Consistent with both American Family and Massachusetts Industrial, defendants here, although

admittedly not quasi-government agencies, hold themselves out as a channel through which relief

flows in the form of residential loan modifications via government programs designed to help

delinquent and underwater homeowners avoid foreclosures. The terms financial assistance in

section 3605 of the FHA and other financial assistance in section 3-101(B) of the Act are very

similar, and we find that the discussions of financial assistance in American Family and

Massachusetts Industrial support our conclusion that defendants’ alleged loan modification

conduct brings them within the section 3-101 definition of a real estate transaction as providing

other financial assistance for maintaining a dwelling.

¶ 29   Furthermore, in Eva v. Midwest National Mortgage Banc, Inc., 143 F. Supp. 2d 862 (N.D.

Ohio 2001), the plaintiffs, female borrowers, alleged, inter alia, that defendants, which included a

mortgage lender, its employees or agents, and a corporation—U.S. Mortgage Reduction, Inc.

(USMR), violated section 3605 of the FHA by engaging in a pattern or practice of predatory and

sexually discriminatory lending related to the refinancing of homes already owned by the

plaintiffs. Defendant USMR moved to dismiss the claim against it, arguing, inter alia, that section

3605 of the FHA applied to mortgage lenders, bankers, mortgage arrangers and creditors, but did

not apply to entities like USMR, which was a separate entity that merely managed and marketed a

program utilized by the other defendants in their alleged predatory, discriminatory, and fraudulent

mortgage refinancing scheme that extracted excessive funds from the plaintiffs. Id. at 872, 875,

878, 888-89. Specifically, USMR, according to the plaintiffs’ allegations, had signed the plaintiffs

up for the program and imposed transaction fees every time the plaintiffs made a mortgage

payment. Id.

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 ¶ 30 The Eva court rejected USMR’s argument, finding that the plain language of section 3605

of the FHA did not “require a defendant to be a mortgage lender, banker, mortgage arranger or

creditor,” but “[to] the contrary, *** merely require[d] that the entity conduct business which

‘includes engaging in residential real estate-related transactions.’ ” (Emphasis in original.) Id. at

889 (quoting 42 U.S.C. § 3605 (2000)). In addition, the court concluded that the term residential

real estate-related transaction included the conduct of “providing other financial assistance for

maintaining a dwelling,” and applied to USMR’s management of the program utilized by the

lender and the other defendants. Id. (citing 42 U.S.C. §§ 3605(b)(1)(A)-(B) (2000)).

¶ 31   We find that the relevant provisions of the FHA discussed in Eva are very similar to

sections 3-101 and 3-102(B) of the Act, and the alleged misconduct of defendant USMR in Eva

has close parallels to the alleged misconduct of defendants’ in the instant case. Accordingly, we

reject the premise that a section 3-102(B) claim against a defendant must allege the defendant was

a mortgage lender.

¶ 32   The interlocutory appeal question also asks whether the Attorney General must allege that

defendants acted as mortgage lenders because the Attorney General utilized a reverse redlining

theory to allege defendants engaged in unlawful discrimination by intentionally targeting on the

basis of race. This issue arises because the Attorney General utilized the reverse redlining theory,

i.e., the intentional targeting of African-Americans and Latinos, instead of pleading facts to show

unlawful discrimination by defendants based on their practices having a disparate impact on the

basis of race. See Hargraves, 140 F. Supp. 2d at 20 (a claim against the defendant mortgage

lenders for violating the FHA must show that (1) the defendants’ lending practices and loan terms

were unfair and predatory, and (2) the defendants either intentionally targeted on the basis of race

or there was a disparate impact on the basis of race).

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¶ 33   Defendants assert that although reverse redlining is a viable theory when the alleged

discriminator controlled or influenced the terms and conditions under which borrowers were

extended credit, reverse redlining is not applicable to situations where no new credit was extended

to homeowners who had already procured credit to purchase their homes. To support this

assertion, defendants cite federal cases analyzing reverse redlining theories of discrimination that

involved claims of FHA violations against mortgage lenders extending credit to borrowers. In

those cases, reverse redlining was described as the practice of extending credit on unfair terms to

specific geographical areas due to the income, race or ethnicity of the communities’ residents. See

id.

¶ 34   We reject defendants’ assertion that the reverse redlining theory for proving discrimination

narrowly applies only to instances involving the extension of credit. Federal courts have addressed

cases that utilized the redlining or reverse redlining theories to allege discrimination in the context

of claims pursuant to the FHA involving the issuance and cancellation of property insurance

policies. See Nationwide Mutual Insurance Co. v. Cisneros, 52 F.3d 1351 (6th Cir. 1995);

American Family Mutual Insurance Co., 978 F.2d at 298. Furthermore, permitting evidence of

intentional targeting in the context of residential loan modification services as an alternative to

evidence of disparate treatment or impact is in keeping with the Act’s multiple aims of forbidding

practices that make housing unavailable to persons on a discriminatory basis as well as

discriminatory terms and conditions with respect to housing that is provided. The Act would

provide little vindication to the policy of nondiscrimination in housing if it prohibited

discrimination against individuals seeking a home or credit to purchase a home, but then

subsequently gave free reign to entities to discriminate against these same individuals seeking loan

modification services in order to avoid foreclosure. In the context of section 3-102 of the Act,

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reverse redlining is not strictly limited to the practice of mortgage lending; rather it more broadly

encompasses the conduct of engaging in predatory practices with respect to services related to real

estate transactions, as that term is broadly defined in section 3-101(D) of the Act, and directing

those predatory practices against members of minority groups.

¶ 35   Defendants cite Davis v. Wells Fargo Bank, 685 F. Supp. 2d 838 (N.D. Ill. 2010), to

support the proposition that they cannot be liable under section 3-102(B) of the Act because the

court in that case construed the similar language of section 3605 of the FHA as applying only to

transactions involving the making or purchasing of loans. In Davis, the plaintiff was the victim of

a predatory mortgage in 1999; in 2007, a jury found that her loan was based on fraud and awarded

her a judgment against her original lender. Id. at 840-41. The plaintiff, however, was unable to

collect the judgment after the original lender went out of business. See Estate of Davis v. Wells

Fargo Bank, 633 F.3d 529, 533 (7th Cir. 2011). Meanwhile, the plaintiff’s loan was eventually

assigned to a new lender and was serviced by a new loan servicer, and a foreclosure proceeding

was initiated against the plaintiff when she failed to make her monthly payments. Davis, 685 F.

Supp. 2d at 840. Thereafter, the plaintiff sued the new lender and loan servicer, alleging, inter alia,

that they violated section 3605 of the FHA by attempting to foreclose on her home and demanding

repayment of the loan and related fees despite a court finding that the loan was fraudulent. Id.

¶ 36   The district court granted summary judgment in favor of the defendant loan lender and

servicer, stating that the plaintiff failed to present any legal argument to support her section 3605

claim. Id. at 844. The district court then noted that the defendants did not directly enter into or

refuse to enter into any loan with the plaintiff and summarily concluded that section “3605 applies

only to transactions involving the ‘making or purchasing of loans.’ ” Id. (quoting 42 U.S.C.

§ 3605(a) (2006) and citing two unpublished district court cases). In reaching this conclusion, the

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No. 1-14-3592


district court failed to discuss or analyze the specific language of section 3605 that provides an

entity may be liable for providing other financial assistance for improving, repairing, or

maintaining a dwelling. See 42 U.S.C. § 3605(b)(1)(a) (2006). When the Seventh Circuit affirmed

the judgment of the district court on appeal, the Seventh Circuit did not review the district court’s

decision concerning the plaintiff’s section 3605 claim because she had abandoned any section

3605 claim. Estate of Davis, 633 F.3d at 539 n.3.

¶ 37   This court is not bound by the federal district court’s holding in Davis, and it does not

change our analysis. The Davis court did not address the statutory language concerning providing

other financial assistance for maintaining a dwelling, which is central to our holding in the instant

case. Furthermore, Davis is inapposite because the plaintiff forfeited her section 3605 claim and

the defendants did not directly engage in any transaction with her, either for the original mortgage

or the refinanced mortgage, and their involvement with her occurred merely in the context of a

foreclosure proceeding years after other entities had procured the fraudulent loan. Here, in

contrast, the Attorney General alleged that defendants directly engaged in real estate transactions

with consumers by intentionally targeting minority homeowners for residential loan modification

services, by giving the homeowners aggressive sales pitches and unreasonable assurances about

defendants’ ability to successfully modify the homeowners’ loans, and by charging exorbitant and

nonrefundable fees for services of little or no value.

¶ 38   We hold that the Attorney General may claim a violation under the Act pursuant to

a reverse redlining theory even though the Attorney General did not allege that defendants

acted as mortgage lenders because the concept of reverse redlining is not strictly limited to

situations involving mortgage lending and section 3-102(B) of the Act broadly

encompasses conduct other than mortgage lending, including the loan modification

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services that defendants offered. Accordingly, we answer the trial court’s certified question

in the affirmative.

¶ 39                                  III. CONCLUSION

¶ 40   For the foregoing reasons, we answer the certified question in the affirmative.

¶ 41   Certified question answered; cause remanded.




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