Rhode Island Attorney General Sues Real Estate Broker Over Alleged Foreclosure “Bait and Switch” Scheme

The Rhode Island Attorney General, Peter Neronha, has filed a lawsuit against prominent real estate broker Kyle Seyboth and several of his associates, accusing them of orchestrating a deceptive “foreclosure rescue” scheme that preyed on vulnerable homeowners.

The complaint, filed in Providence County Superior Court, alleges that the defendants exploited financially distressed homeowners, including targeting individuals who had limited English proficiency. In doing so Seyboth and his associates were able to fraudulently acquire properties at below-market prices.

Among the cases highlighted in the complaint is the Delva family, a Haitian couple who had owned their home in Providence for nearly 30 years. Although the couple kept up with payments, they would go on to fall behind on their $61,000 mortgage.

In mid-2023, the family was approached by individuals representing Seyboth’s businesses. According to the allegations, the family was told they would be entering a refinancing agreement. However, the Delvas instead signed over ownership of their $450,000 home to Seyboth’s company, Preferred Property Solutions. The couple’s daughter says when they showed up to sign the bogus refinancing documents, a translator was not provided as asked by the family.

The lawsuit goes on to say that despite the transfer of ownership, Seyboth’s firm, Red Balloon Capital, continued to collect payments from the Delvas under what the family believed was a legitimate mortgage agreement. After about a year of making payments, the property was put up for sale for its full value, locking the family out of their long-held home.

The lawsuit was filed under Rhode Island’s Unfair and Deceptive Trade Practices Act (DTPA) and accuses the defendants of misleading homeowners, failing to provide adequate language translation services, and taking advantage of the Delvas’ financial struggles and their limited English proficiency for the defendants’ monetary gain.

Attorney General Neronha condemned the alleged actions, stating, “As alleged, the defendants deceived and took advantage of a Rhode Island family in danger of losing their home, preying on their financial desperation and limited knowledge of the English language.”

Neronha continued, “The alleged behavior exposes the depths to which some people will sink in order to turn a buck, robbing the Delvas of the place they called home for decades. And more broadly, it’s news to no one that we have a severe housing crisis on our hands, and this alleged behavior only exacerbates our housing problems, forcing families already in financial distress onto the streets.”

The lawsuit seeks to void the property transfer, restoring ownership to the Delvas, as well as to impose financial penalties and injunctive relief to prevent similar conduct in the future. Until a preliminary injunctionpreliminary injunctionA preliminary injunction is a temporary court order issued before a case is finally decided that requires a party to take or stop an action while the litigation continues. Federal courts generally consider the likelihood of success, irreparable harm, the balance of equities, and the public interest before granting one.Read more → hearing occurs, Seyboth and his associates have agreed to halt the sale of the Delvas’ home and end communication with the Delvas.

Predatory practices in real estate that target communities with fewer resources or limited access to legal assistance are not new, especially in states like Rhode Island where housing shortages pose real-world economic concerns. To compete against these predatory practices, updates were made to Rhode Island’s DTPA in 2021 to help bolster consumer protections, making it easier to hold businesses accountable for unfair or deceptive practices.