SO:II -* Cul-de-Sac, oder wie frau in Amerika über den Tisch gezogen wird:

verfasst von Emerald, 17.10.2004, 18:04

-->da kann auch der neueste Krimi weggelegt werden, einfach unglaublich,passt
aber zum heutigen Posting: America you love it - or you hate it!

Losing Your Dream Home to mortgage Fraud

October 17, 2004

Losing Your Dream Home
By JOSH BARBANEL

MARGARET WRAGG, a retired school aide, found the home of her dreams on Martense Court, a quiet cul-de-sac just a block from a teeming stretch of Flatbush Avenue in Brooklyn. It was a classic brick attached house, two stories tall and 18 feet wide, with a front porch with an iron railing, a backyard and even a few surviving original details, like dark wood, patches of decorative plaster work and stained glass.

She bought the house even though she hadn't originally set out to be an owner. She had lived in the same apartment for 25 years on Church Avenue, a few blocks away, and when her landlord told her she would have to move out because he was selling the building, she wanted to rent again. But looking at the classified ads, her eyes drifted to an advertisement offering"the home of your dreams," and she began her journey to home ownership.

Now, two years later, she says that dream has turned into something else — endless stress, heartache and sleepless nights — as she experiences the dark side of the real estate boom in America.

Her life savings have been depleted, she now says in a lawsuit, by a house she could never afford, appraised at far more than it was worth, with two mortgages she should never have qualified for, with carrying costs more than double her income. She worries about whether to pay the utility bill or pay for necessities. She has a stack of packing cartons in case she has to move out.

She blames the mortgage company, the appraiser, the lawyer who represented her, and United Homes L.L.C., of Briarwood, Queens, the company that owned the home, placed the ad, and arranged almost everything about the closing."I trusted them, because I had never done this before and I didn't know any better," she said bitterly, as she sat in an overstuffed chair in her living room.

In a federal lawsuit, Ms. Wragg says she was the victim of fraud and racial discrimination in a classic case of what's known as housing"flipping." Her opponents say that she was treated fairly and is blaming them for her mistakes, including taking a mortgage she could not afford. It is, in short, a case study in what many housing experts say is an increase in complaints of housing fraud, abusive and predatory lending practices, phony appraisals and even outright thefts of deeds, as home prices have soared and interest rates have fallen.

Although it has not been determined whether there was fraud or other wrongdoing in her case, higher home prices make any house fraud more lucrative, because there is more money involved, and the booming market provides homeowners with more equity that can be stripped away through predatory lending schemes, often in poor and minority neighborhoods where homeowners and first-time purchasers may be too trusting and uninformed.

Last month, the F.B.I. said that the number of complaints about mortgage fraud it received had more than doubled in the last few years. In the 2001 fiscal year, it received 5,623 complaints, compared with 12,134 in the first nine months of the current fiscal year.

In New York, State Attorney General Eliot Spitzer is investigating allegations of abusive practices by appraisers used to justify higher prices, including allegations that a pattern of fraudulent appraisals is driving housing prices higher in some neighborhoods, including Jamaica, Queens, and parts of Bedford-Stuyvesant, Brooklyn.

Real estate professionals who have been accused of unethical or fraudulent practices say that they are being punished for providing services in minority communities where they are expanding housing opportunities.

"We live in a funny world when you try to create programs to help poor people to own their own homes, and you get something like this," said William J. Unroch, a lawyer defending the Olympia Mortgage Corporation in a pending federal lawsuit charging the company with fraud and discrimination in connection with the sale of a home in Bedford-Stuyvesant.

Sometimes, buyers are too naïve. In Queens, Divine T. Fayez-Olabi, his wife, Michell, and their six children say they were too trusting and as a result were evicted in the middle of winter from their semiattached white-shingled home on 147th Drive in Rosedale, Queens, just a few blocks from Kennedy International Airport.

Facing the possibility of foreclosure, they say they signed their house over to an investor, James D. Mayfield, who they say was supposedly going to help them keep their home, by co-signing their mortgage. They are now in court to get their house back, but Gary J. Wachtel, Mr. Mayfield's lawyer, said that it was a completely routine real estate transaction, and that his client was still owed $40,000 by the couple.

Mr. Fayez-Olabi, a salesman for communication and copier companies, said he had sought help from a mortgage broker to refinance his mortgage when he was out of work after the World Trade Center attack. In a court filing, Mr. Fayez-Olabi said that on the day of the scheduled mortgage closing, he was told there was a problem with his credit, and instead of a simple closing on a refinancing, Mr. Mayfield had agreed to"hold his mortgage" for one year.

He said a lawyer at the closing was introduced to him by the mortgage broker and by Mr. Mayfield as his attorney. The attorney asked him to fill out blank documents because she was in a hurry."Just sign the papers and don't worry about anything," she told him, according to his statement.

Later, transfer documents showed that the lawyer, Gail Cromer, was Mr. Mayfield's attorney, and Mr. Fayez-Olabi said he never saw the papers again until he was in court facing imminent eviction.

Mr. Fayez-Olabi said that at first he found almost no one, including a lawyer he hired early on, to believe his story, which he said required the cooperation of almost everyone in the room that day: the lawyer, the buyer, the mortgage broker and the closing agent, all named in his lawsuit.

Then he found that Ms. Cromer, the lawyer at the closing, was indicted and accused of being a ringleader of a group of 17 people including lawyers, a broker and a title closer, in a scheme to defraud mortgage banks by holding sham closings. Charges against her are still pending, and she and her lawyer did not return telephone calls for comment.

Now, as his family lives in a basement of the home of a member of his church, Mr. Fayez-Olabi is pursuing litigation in State Supreme Court in Queens trying to win back his house on the grounds of fraud.

He has so far found several mysterious documents in the court papers to support his allegations. He has received nearly identical photocopies of the same sales contract he was supposed to have signed, one provided by Mr. Mayfield, the other by Mr. Mayfield's bank, with different signatures for him and his wife.

And he has found copies of two bank checks in closing documents provided by the bank, showing payments of $75,000 to him at the closing, which he said he never received. He said that a bank manager at a Fleet Bank, which issued the checks, gave him a printout suggesting that the checks were forgeries, since the same check numbers were used in smaller money orders. A spokesman for Fleet said that the bank was attempting to assess whether the checks were legitimate.

So far, Mr. Fayez-Olabi said, he has spent $30,000 and owes $50,000 more in legal fees. His lawyer withdrew from the case, and he is searching for a new one.

He said that no judge has ever ruled on the merits of his fraud complaints, and that his case was in jeopardy because he failed to respond to court papers which he says were sent to an incorrect address after his eviction.

Mr. Wachtel tells another story. He said the papers that Mr. Fayez-Olabi signed allowed the family to lease back their house for one year, with an option to buy it back. They failed to pay the rent and were evicted after the year, he said. He said Mr. Fayez-Olabi acknowledged these facts in a court stipulation negotiated by Mr. Fayez-Olabi's first lawyer.

Mr. Fayez-Olabi"had his day in court and lost," Mr. Wachtel said.

Sarah Ludwig, founder and executive director of the Neighborhood Economic Development Advocacy Project, who has spent years documenting and mapping cases of housing fraud in the city, said the case of the Fayez-Olabis and others like it"break the heart."

"They feel horrible about themselves; how could they have been so stupid, they say," she said."And nobody wants to take these cases because they are so complicated."

Sometimes the gap between a buyer's income and the mortgage carrying charges is astonishing. In Brooklyn, Nicola Adonis was able to purchase a newly rebuilt four-story two-family red-brick home on St. Andrews Place for $409,000 two years ago even though she said she provided employment records showing she earned $7,000 the previous year as a employee at a McDonald's restaurant, while her husband, a street peddler, sold hats.

She said a broker at a company known as American Dream Real Estate of Brooklyn had arranged everything, including a lawyer for her and two mortgages on the house. Now Ms. Adonis has filed for bankruptcy protection to stave off a mortgage foreclosure. She said she received two loans totaling $388,000 from a mortgage bank, Cambridge Home Capital, which, she said, had monthly carrying charges of $3,500, or about half her annual income at the time. She said she never misled anyone about her income.

The rent on the upstairs unit was supposed to cover nearly half the carrying charge, but Ms. Adonis said that a leak in a defective roof made the apartment unrentable for many months.

Seth Kramer, president of Cambridge Home Capital, in Great Neck, N.Y., said that the mortgage application signed by Ms. Adonis showed an income of about $7,000 a month — not a year — or more than $80,000 a year, and that it appeared Ms. Adonis had misled the bank.

The bank confirmed that she worked at McDonald's but it never verified her income, Mr. Kramer said, because she obtained a"non-verification" mortgage. In exchange for a higher interest rate, the bank does not verify the income. She in turn said she turned over her W-2 earnings statement at a meeting with her broker and the bank representative.

In the case of Ms. Wragg, who bought her dream house near Flatbush Avenue, she and her legal services lawyers say that she was ensnared in a scheme of the type that the F.B.I. has described as a common pattern of mortgage fraud —"property flipping" — in which properties were bought and resold at high prices, supported by excessive appraisals, and often resulting in foreclosure.

It was only at the closing that Ms. Wragg understood that the carrying costs of her two loans, including a $60,000 second mortgage with a 12.5 percent interest rate, totaled $3,367 a month at a time when, she said, her income, from a small city pension and Social Security, was $830 a month.

The salesman at United Homes, she said, told her she would be able to rent the separate apartment they had renovated on her second floor for $1,500 a month to a tenant with federal rent subsidies. But even subtracting that from the monthly carrying costs, she would have to pay $1,867 out of her own pocket, or about $2.25 in mortgage payments for every $1 in income each month.

Then she found that she was unable to collect even the $1,500 in federally subsidized rental income that was forecast. She said United Homes found a tenant to rent it for $1,300, $200 less than predicted. But she said the tenant soon stopped paying rent, when the tenant discovered that United Homes had not obtained a certificate of occupancy to make the second floor apartment legal. United Homes said that it had never claimed that the building was a legal two-family.

Finally, she discovered that her house had been sold for $180,000 in August 2002, and then resold to United Homes three weeks later for $230,000. Three months later, after a quick renovation, she purchased it for $399,000. An appraisal commissioned at the time found this value fair, but a second appraisal commissioned later by Ms. Wragg's lawyers found that the value at the time was only $250,000.

Ms. Wragg's lawyers, Josh Zinner and Brigitte Amiri of the Foreclosure Prevention Project of South Brooklyn Legal Services, say that property flipping cases almost always involve"one-stop shops" — real estate offices that target first-time home buyers and convince them that the offices can do everything, including arranging for financing and lawyers for the buyers.

In Ms. Wragg's case, they said, the section of the mortgage application showing income was left blank, since the mortgage bank used a special kind of mortgage known as a"no document" loan where home buyers are not required to show their income.

The foreclosure project filed two separate lawsuits in Federal District Court in Brooklyn, accusing United Homes, and the others involved in the transactions, of fraud, deceptive practices and racial discrimination for targeting members of minority groups.

One suit focuses on Ms. Wragg, while the second involves Sandra C. Barkley, a civil servant, who paid $359,000 for a small two-story house faced with aluminum siding on Hancock Street in Bedford-Stuyvesant, on a block of larger, more stately brownstones.

"I kept asking, what was it going to cost?" she said."What was the mortgage going to be? And they said, `Don't worry, you can afford it.'"

But Yaron Hershko, the owner of United Homes, said that the allegations against him were baseless. He said that he has receipts showing he spent more than $100,000 on quality renovations on each house, and had never told Ms. Wragg that her house was a legal two-family house.

He said that the two suits were the only homeowner lawsuits against his company.

Rising real estate values have made the homes more valuable today than when they were bought, and Mr. Hershko said he had offered to purchase the houses from the women and reimburse them for their costs.

"I offered to buy them back," he said,"but they want more."


*)Cul-de-sac wurde für sie zur Sackgasse ihres Lebens.........

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• SO:II -* Cul-de-Sac, oder wie frau in Amerika über den Tisch gezogen wird: - Emerald, 17.10.2004, 18:04