Rescue schemes snare homeowners

Rescue schemes snare homeowners
Some homeowners who accept aid to avert foreclosures lose their homes anyway.
BY MONICA HATCHER
mhatcher@MiamiHerald.com
Sherry Miller said she signed the foreclosure assistance agreement blindly, page after page, desperately believing it was the only way to stop the sale of her home on the courthouse steps the next morning.
No sooner had she put the pen down than she was told that her Doral home would be listed for sale anyway, Miller claims. Among the flurry of pages she had signed: a deed to her home.
''It's the most horrible feeling you can imagine,'' Miller, 60, said about realizing she had signed her home away. ``It's like somebody telling you they're going to cut both your legs off.''
As rising interest rates, high energy costs and skyrocketing insurance premiums put more homeowners in danger of falling behind on their mortgages, a new crop of investors -- drawn to South Florida by soaring real estate values -- is looking to capitalize on their hard luck. As a result, consumer advocates have seen a spike in the number of homeowners losing their homes in so-called foreclosure rescue schemes.
Jeffrey Hearne, a lawyer with Legal Services of Greater Miami, which serves lower-income clients, said about two people a week show up at his door holding eviction notices after doing business with one of possibly hundreds of home-saver investors operating in Miami-Dade and Broward counties.
''It kind of comes and goes, but over the last few years, the problem has picked up significantly in Miami,'' Hearne said. 'They come to our offices saying, `I'm being evicted from my home I've owned for 30 years.' ''
Investors specializing in distressed properties are nothing new. For years, real estate agents and mortgage brokers have legally helped people avoid foreclosure -- which can badly scar a credit report and uproot people from long-held homesteads -- by selling their houses quickly or arranging refinancing.
ONE COMMON TRAIT
But foreclosure rescue schemes fall into a gray area, ranging from the questionable to the outright fraudulent. Consumer attorneys say they are seeing it all. But among the growing caseloads of rescue complaints, each has this in common -- a ploy to strip away the wealth homeowners have built in their property and pocket it for themselves.
To address the problem, the Florida Legislature passed a law this year making it unlawful to knowingly use unfair or deceptive trade practices to victimize homeowners in foreclosure. The law, which took effect Saturday, hasn't been tested.
South Florida has become extremely vulnerable to foreclosure schemes because its expanding real estate market has allowed even relatively new homeowners to quickly build equity in their homes, lawyers say. At the same time, borrowing against that equity became widespread, as individuals used it to renovate, pay down consumer debt, or invest in other properties.
James Johnson, the Florida Office of Financial Regulation's area manager of investigations who is probing several foreclosure rescue scams, said even seemingly undesirable properties have become attractive to home-savers because the amount owed on the property may be significantly less than it's now worth.
''A lot of times [owners of these properties] have lived in their houses 20 to 30 years. They might have refinanced to get cash out, and so a property that was once owned free and clear is now vulnerable because they can't afford the monthly payment on their new mortgage,'' Johnson said.
PRIME TARGETS
In most scenarios, the rescuer identifies a distressed homeowner from a list of foreclosures sold by county clerks' offices to private companies, and approaches them with an offer to stop foreclosure by refinancing or reinstating their mortgage.
Attorney Chris Benjamin, who has filed at least three foreclosure rescue complaints of late, said older people, single women and minorities are the most fiercely targeted for these services, bombarded by mailings, phone calls and visits often before realizing a lender is moving to foreclose on them.
Using high-pressure sales tactics, such as the immediate sale of their home in a courthouse auction, the investor gets the homeowner to sign a lengthy contract, which often surreptitiously includes the deed to their home, a power of attorney, or a trust agreement.
Unsophisticated homeowners, Benjamin said, enter into the agreements believing they won't have to move, but don't realize they have given the investor full authority to evict them, sell the house and take the profit.
Typically, the investor requires the homeowner to pay rent to the investor, money the investor says will go to pay the mortgage for six months to two years while the homeowner's credit is repaired enough to refinance -- a kind of lease/buyback plan.
At the end of the lease, the homeowner must be ready to buy back the house at full market value or the agreed-upon price plus often exorbitant fees. If they fall behind on their rent -- which often matches or exceeds the original mortgage payment -- the deal is off and the investor sells the property.
Many times, the homeowners lose their shirts and the homes they could otherwise have sold for a profit in South Florida's blazing real estate market.
After falling on hard times, Miller missed several months of mortgage payments and was facing foreclosure.
Receiving an avalanche of letters and phone calls from companies offering her assistance, she responded to a package from Equinamics, a Coral Gables-based company headed by investor Juan Lievano, who, she claims, promised he would save her home.
Under the agreement, Miller said she believed Lievano would pay missed payments and fees on her mortgage and stop foreclosure for a $35,000 fee. He would also continue making mortgage payments for Miller with the rent she paid him, which, she said she was told, would improve her credit to refinance the home and pay him back in six months.
Instead, Miller claims, Lievano slapped an eviction notice on her door and listed the property for sale.
Miller stalled the sale by suing Equinamics, alleging fraud, usury, deceptive and unfair trade practices and violations of truth-in-lending laws, though Lievano still holds title to her home and collects rent. The case is pending; a hearing is set for July 25.
Lievano declined several requests for comment, and his attorney did not return calls, but in court pleadings they denied Miller's accusations and claimed she fully understood the contract was a profit-sharing agreement.
Over the past five years, Equinamics has taken the titles to more than 100 homes in Miami-Dade County nearing foreclosure, court records show. And, in the past two years, Lievano sought to evict more than a dozen people, in some cases less than a year after they deeded their property to his company. They were all facing foreclosure.
NEARLY LOST HOME
Deborah and Carl Westberry of Opa-locka also got ensnared with a foreclosure rescue operation and nearly lost their home.
The couple were in default when Martell Williams from now-defunct LandRover Property Investment showed up at their home saying he could help them improve their credit to refinance their $117,000 mortgage.
Carl Westberry unknowingly, he said, signed a power of attorney to LandRover. The Westberrys began paying rent to Williams.
Then they started receiving mail in another person's name. After a few phone calls, the Westberrys discovered LandRover Investment had sold their property to someone else who had taken out a new mortgage on the home for $180,000.
Williams, the investor who had ''helped'' them, was nowhere to be found.
''We were scared. We felt like we were going to be out any day,'' said Deborah Westberry, 51. Luckily, she had not signed the power of attorney and the contract was voided. The house is back in their name, but their problems aren't over.
''I still don't feel safe in here because it's dragging on,'' Deborah Westberry said, pointing out it was unclear who would be responsible for the new, more expensive mortgage. ''I don't know who is going to pay this money back,'' she said.
Miller and the Westberrys said they wished they had known what their options were before doing business with a foreclosure rescue investor.
''I pay them rent every month, which is the same amount as my mortgage payment was,'' Miller said regretfully. ``The whole thing was so confounding. I didn't know. I was not a mortgage person.''