Swindling cases multiply as homeowners grow desperate
El Diario/La Prensa/New America Media, Investigation, Eva Sanchis, Posted: Feb 10, 2010
Editor’s Note: This story, which originally appeared in El Diaro/La Prensa, was produced as part of NAM’s Stimulus Watch coverage and was funded with a grant from the Open Society Institute. It is part two of a three-part series. You can read part one here.
Maria Jacome stands in front of her home
which was saved from foreclosure. Ph: Eva SanchisNew York – Maria Jacome, an Ecuadorian migrant, attributes the rescue of her home at 890 Bushwick Avenue to the president and the Virgin.
“I am blessed by God and President Obama because without their help I would have been unable to get out of this situation,” says Jacome, who was about to lose the house where her family has lived since 1985, when she could not meet the payments last year.
Jacome, 68, prayed for months to the Virgin for help. Her prayers were answered in March with a miracle, when President Barack Obama announced a $75 billion plan for banks to ease the mortgages of up to four million homeowners in distress.
“When I heard the news that Mr. Obama was going to help homeowners, I thought to myself: This is my chance!” Jacome recalls.
However, she suddenly ran into another obstacle: a broker she knew called her and offered to help with the application process in exchange for $4,500. Another person, who works for a lender in Bushwick, made her a similar offer.
“If I didn’t have $2,800 to pay the mortgage, where would I find $5,000?” says Jacome, who was fortunate to find a housing counselor who helped her modify her mortgage free of charge.
There are dozens of legitimate counselors in the city that do this process for free, and it is usually the homeowners who pay for this kind of help who end up as victims of fraud, according to experts.
“Companies that offer to modify mortgages and ask for large sums of money in advance are rarely legitimate: they usually do nothing for the people from whom they take money,” says Mike Mastman, a housing counselor of Grow Brooklyn, a Bushwick-based non-profit affiliated to the Brooklyn Cooperative.
Scam artists proliferate in Bushwick
stealing the wealth of the community. Ph: Eva Sanchis.In this Brooklyn neighborhood, where foreclosures became an epidemic, opportunists are making a killing. Many offer them help from President Obama’s mortgage rescue plans in exchange for thousands of dollars, and vanish once they receive the money.
“The scammers are saying we’re legitimate, we’ll help you apply for the modification program, the ‘Obama Plan,’ and they use all the catchy phrases that are caught on through the news, and people trust them, because they trust the federal government,” says Mastman.
Eduardo Torres, a housing counselor from Flatbush Development Corporation, says that several of his clients have paid $7,500 in these “modification” scams.
“The government information is there, but they use the same government language, the same words, to confuse people,” says housing counselor Tadelloj Johnson, from the Center for NYC Neighborhoods (CNYCN), which coordinates and supports the efforts of more than 20 city non-profits that offer homeowners free advice. “They act as though they represent the federal government and even include logos from federal government agencies in their brochures.”
Among those who fell victims to these practices is the Ortiz family, Jacome’s neighbors.
Last May, when they were two months behind in their mortgage payments, the Ortiz received a letter from the so-called Alliance Mortgage Modification Agency. It stated that it was a “foreclosure stimulus update” and offered help to modify their mortgage in exchange for $2,000: they offered to reduce their mortgage interest rate (6.1%) to fixed rates as low as 1%, and to talk to their lender so that they would not have to make payments for six months.
“They said in six weeks I should see a difference,” recalls Ramona Ortiz, whose family has lived in the same three-story house for almost 40 years. “You know it’s impossible, but when you are in desperate need everything seems possible”.
Ortiz discovered everything was a fraud when she received a letter from her bank demanding an overdue mortgage payment of five moths. A foreclosure process was already under way. (In New York State, this process typically starts after the homeowner is more than 90 days behind on her mortgage payments.)
The association that tricked Ortiz used several aliases and a fake Washington, D.C., address, has an unknown location and nearly 60 claims filed against it in the Better Business Bureau.
When Ortiz called the company and complained, they sent her a package back with her documents, urging her to send them to her lender, following a few instructions that they provided.
“They told me to fight it: We’ll prepare you to fight, they said, and you take it from there,” she recalls them saying to her.
Within the last two years, the U.S. Attorney from the Eastern District of New York, which covers Brooklyn, as well as the Brooklyn District Attorney, have devoted specific resources to tackle mortgage fraud, resulting in the prosecution of dozens of cases. The New York State Attorney General has also opened his own investigations into the “foreclosure rescue” industry, and last August filed a lawsuit against Amerimod, accused of having cheated thousands of homeowners, many of them Spanish-speaking, to whom they offered contracts only in English.
“The scams are as varied as ingenuity allows, just when we thought we have seen every variety, we see something new,” says Richard Farrell, chief of the new Real State Fraud unit at the offices of the Brooklyn DA Charles Hynes.
“We still have people forging deeds, powers of attorney, selling buildings to straw buyers,” says Farrell. “Anything that can be forged is forged: W-2, bank statements, you name it.”
In the Bushwick neighborhood, where more than 1,598 foreclosure processes have started from 2006 to date, “stop foreclosure” signs posted by swindlers are common. They also frequently leave business letters or cards in the mailboxes of their potential victims.
Herman de Jesús, a senior program associate at NEDAP, whose mission is to eliminate discriminatory economic practices, says that identifying these victims is easy because information on mortgage payment defaults is public.
“You can pay a specialized company to compile a list of homeowners who are running behind in their payments or, if you know the address of the house you are interested in, you can find this information in the New York City databases,” says De Jesús.
Authorities also recommend mistrusting Bushwick posted signs that offer “cash 4 house.” It’s a common fraud scheme: a property is bought for less than its value and resold shortly afterwards at an inflated price, generally using a straw buyer with fake documents, according to authorities. Then, swindlers receive a new loan they don’t pay.
Jacome says that she has received dozens of letters offering cash for her house. On one occasion, a man standing outside her house offered her $100,000, but she rejected the offer because her two-story house was valued at $650,000 before the housing market collapsed, and she, a daughter and a granddaughter are still living in it.
“He offered me $100,000 and I just smiled at him and told him: No, thank you, my house is not on sale. What a nerve he had to offer me $100,000!” Jacome says.
The area councilwoman, Diana Reyna, says that in the 70’s and 80’s, during the decades of poverty and crime following the 1977 blackout, homeowners in the area were also harassed.
“My parents went through the same thing,” Reyna says. “Many homeowners had to put up ‘Not for sale’ signs on their homes so they would be left alone,” she recalls.
Mike Hickey, executive director for CNYCN, explained that swindlers take advantage of the fact that the organizations giving free advice to homeowners are overwhelmed.
“It’s simple math: there will be 20,000 notices of foreclosure in NYC this year, and we are currently equipped to work with maybe 6,000 of those homeowners,” says Hickey.
Hickey explains that another problem is the modest results obtained so far from the mortgage modification plan announced by president Obama last March. The CNYCN estimates that of the 1,800 loan modification packages it submitted, only a quarter has been accepted to begin a trial period of several months before a modification can be final.
“The intention of the program to encourage modifications is really failing lots of people’s expectations,” Hickey says.
De Jesús, of NEDAP, says that housing counselors feel powerless because they can’t compete with swindlers.
“For each homeowner we manage to advise, ten are swindled,” he says.