What's New Miami Beach!?!

Foreclosure 'rescue' deals shackle homeowners

Homeowners who accepted help to avoid foreclosure have gone to court with claims that they were stripped of equity in their homes.

BY MATTHEW HAGGMAN

For Kayhlene Gainer, it started two years ago, with a knock on the door on a Sunday spring afternoon.

The two women who stopped by her Coconut Creek home knew the 55-year-old widow was behind on her mortgage payments and facing foreclosure.

They promised help. For a fee, they would arrange the sale of Gainer's home so that she could stay there, paying rent. With the foreclosure halted, Gainer would get credit counseling and, after a year, a new mortgage and her home back in her name. She agreed.

Now, the Broward County schoolteacher and more than a dozen other homeowners contend in interviews and court filings that two companies -- National Foreclosure Management and American Home Rescue -- promised to save them from foreclosure but sucked out their home equity through excessive fees, what they claim is a fraud known as equity stripping. Then, they say, the firms skipped out, leaving owners scrambling again to prevent foreclosure on new, higher mortgages.

George Castrataro, a Broward legal-aid attorney representing Gainer and several other alleged victims, said he found $532,000 in questionable closing expenses in a review of 12 National Foreclosure deals alone.

Florida's attorney general is investigating the two companies. Sandi Copes, attorney general spokeswoman, declined to discuss the probe, but said it's being ``pursued actively.''

Mortgage fraud that flourished along with Florida's real-estate market in the past few years has many variations -- loan applicants who fudge their income to qualify for a higher-priced home, scam brokers who flip homes among fake buyers, pocketing the mortgage proceeds. But equity stripping, regulators and lawyers say, is especially pernicious because it preys on desperate homeowners looking for any solution that will stave off foreclosure and keep them in their homes.

WARNING ON PRACTICES

U.S. AND SOME STATES

STEP INTO THE ARENA

The U.S. Department of Housing and Urban Development has warned homeowners to avoid firms specializing in foreclosure prevention, and some states have cracked down on rescue operations: New York passed legislation in February to stamp out the practice, and Massachusetts temporarily banned for-profit rescue firms. Florida has no specific law addressing foreclosure prevention.

''Conditions are perfect for foreclosure rescue scams right now,'' said Lauren Saunders, managing director of the National Consumer Law Center's Washington, D.C., office. ``It has been around for a long time, but it really blossoms when people have equity in their homes and mortgages they cannot afford.''

South Florida is fertile ground. Despite the slowdown after years of zooming prices, home values are still much higher than they were three or four years ago. This means homeowners have accumulated significant equity. Meanwhile, many South Florida homeowners took out bigger and riskier mortgages than they could handle.

One result is the proliferation of equity-stripping scams, which homeowners lawyer Castrataro, of Legal Aid Service of Broward County, calls ''an epidemic.'' Between the Plantation law office and its sister agency, Coast to Coast Legal Aid of South Florida, an average of six or seven new equitystripping cases arrive each week. The companies fingered frequently, Castrataro said: National Foreclosure and American Home Rescue.

National Foreclosure shut down last September. Wyman Roberts, its former president, declined to comment. Bernard Williams, National Foreclosure's registered agent and president of American Home Rescue, denies that the companies were doing anything wrong. ''We wanted to do the right thing by people, but that business is just like a quagmire,'' he said.

''These people come to you with problems and you resolve the problems, and then they resort to the same mind-set that got them into their problems,'' he said. ``They have bad habits and continue to have bad habits.''

HOMEOWNER PROFILE

EQUITY HAS GROWN;

SO HAVE MONEY WOES

To work, equity stripping requires a certain kind of homeowner: those who have built-up equity in their homes, yet are struggling to pay their mortgages. Kayhlene Gainer fit the bill.

She bought the five-bedroom house in Coconut Creek in 1999 for $155,400, using money from a settlement in a personal-injury lawsuit involving her late husband.

But after Gainer's daughter, Faith, went to college in 2004, tuition bills presented a big new expense. Then she had several unexpected, pricey car repairs.

''It all cost me more than I thought it would,'' Gainer said.

Enter National Foreclosure Management. The Miami Lakes firm opened in December 2004, state records show. Wyman Roberts was president. Bernard Williams, registered agent, also was a branch manager for Southeast Capital Mortgage, a brokerage that shared National Foreclosure's offices.

The firm obtained weekly lists of homes set for foreclosure from county courts. It recruited ''field analysts'' to go door-to-door, hawking its ''home saver'' program. At National Foreclosure's peak, more than 60 people fanned out into South Florida neighborhoods, Williams said.

The field analyst who knocked on Gainer's door in April 2005 was Lakeisha Marion from National Foreclosure Management. Marion later worked for American Home Rescue.

She made $4,000 each time a homeowner signed up, said Marion, who left the company after a financial dispute with Williams. She closed one to three deals a month.

On Saturdays, field analysts piled into National Foreclosure's Miami Lakes office to discuss strategy and to role-play, honing their sales skills. There ''would be people in the hallway,'' Marion said. They included teachers and even police officers, seeking to make extra money in off hours, she said.

In mailings to homeowners, the firm pledged to ensure ''that you regain full rights and ownership to your home.'' It offered to equip clients ``with the necessary tools need[ed] to improve your financial planning skills.''

For Gainer, Marion's pitch sounded heaven-sent. Marion promised to stop foreclosure proceedings and to provide more than $10,000 cash upfront, financial planning courses, and payment of her taxes and insurance for the year.

'INVESTORS' INVOLVED

NAMES AND CREDIT

ARE LOANED FOR A FEE

Once National Foreclosure found willing homeowners, it matched them with ''investors'' willing to act as buyers. These investors rarely saw the homes they were buying, but lent their names and credit for a fee, with the understanding that the original homeowner would take the home back in a year.

Some straw buyers say they were victims, too, their credit ruined because the foreclosure rescue firm told them the homeowner was making the loan payments.

Zobeida Perez of Miami was the investor who bought Gainer's home. Perez did not return calls seeking comment, but her lawyer, Charles Simon, said Perez made $5,000 for lending her name and credit to the Coconut Creek house for a year.

''She saw a way to make quick money,'' said Simon, who declined to offer further details about Perez's involvement. ``She's a victim in this. She did this innocently.''

Less than a week after meeting Marion, Gainer says, she met with Williams and Roberts at their office on Miami Lakes Drive. She recalls gold-leaf certificates on the wall, touting the home rescue program.

It all made sense to Gainer. On April 22, 2005, she signed the papers, selling her home to Perez for $298,000. Her mortgage balance: $187,791.

But Gainer didn't study her closing statement carefully. If she had, she would have noticed that much of the $108,209 profit was eaten up by fees.

Those included a line item for ''seller held mortgage,'' which she says she never took out, for $59,600. Another line item: ''3 percent sellers contribution to buyer'' for $8,940. There are two ''poc'' line items, or ''paid outside closing,'' totaling $7,556. Total fees: $76,096.

Separate settlement charges came to $24,003, 8 percent of the purchase price. A typical percentage is between 3 and 5.

Those high fees and unexplained charges are how Gainer's equity was ''stripped,'' her lawyer says.

Williams declined to comment on Gainer's specific equity-stripping claims, saying Roberts was in charge. He did say the typical fee charged at closing was $15,000.

UNWELCOME SURPRISE

SELLER SAYS PROMISES

WERE NOT FULFILLED

Disappointments came immediately. Williams and Roberts said the upfront cash initially promised wouldn't be paid because ''when they did the real figures, there was no money left,'' Gainer said.

Weeks passed, and her concerns mounted. Promised credit counseling and financial-planning courses had not been scheduled. She called Williams and Roberts, but 'they kept saying, `Someone will call you, someone will call you,' '' she said.

She gave up, but kept sending her $1,575 monthly rent to National Foreclosure.

In April 2006, a year after signing, she tried to arrange to put the house back under her name, as the agreement spelled out.

Roberts told her it would be easy, she recalled. But when she arrived in Miami Lakes for an appointment, he didn't show up, she said.

Then, in the fall of 2006, came a huge blow: a letter from National Foreclosure Management saying it was shutting down. The buyer, Perez, who had never met Gainer but legally owned her home, showed up unannounced at the schoolteacher's house. Perez said the property's mortgage had not been paid and the lender was foreclosing.

''All along, I had been making monthly payments to NFM for rent,'' Gainer said. ``Evidently, they were not paying the mortgage on it. But I had no idea what was going on because the mortgage was not in my name.''

homeowner

But getting the house back was no simple task. Now she had a mortgage bigger than $250,000 to satisfyTaxes and insurance hadn't been paid. Gainer had to buy her house again at a higher price.

Perez, meanwhile, was getting impatient. While Gainer cobbled together financing, Perez feared that foreclosure would ruin her credit. She, too, felt duped, claiming she was told that Gainer would pay the mortgage, her lawyer said. In March, she sued in Broward Circuit Court to evict Gainer and her family.

Gainer again begged Bernard Williams for help. But by then, Williams had moved to American Home Rescue. He recommended a lawyer to Gainer, but Gainer and the lawyer never spoke.

A week before her final eviction hearing, the increasingly desperate Gainer turned to the Rev. Glenn Bostic, a Broward religious and social activist she knew. Bostic, in turn, took her to visit Legal Aid Service of Broward County, where Castrataro agreed to take her case.

After the judge heard the fraud allegation, he and Perez agreed April 19 to allow Gainer more time to pay off Perez's mortgage. Two people have ''gotten screwed in this deal,'' Perez's lawyer, Simon, told the court.

CASE STILL UNFOLDING

FORMER OWNER, BUYER

WALK SEPARATE PATHS

Four months later, Gainer is still struggling to get financing together to pay the mortgage.

Perez is going to court later this month to try to enforce the settlement.

Williams said Wyman Roberts opened a home rescue operation in Tennessee for a time. It's not known where he is now.

Williams said he has gotten out of the foreclosure prevention business. He wrote to investors, field analysts and former homeowners June 23 that American Home Rescue was closing.

''Changes in the mortgage industry and the foreclosure market'' were forcing the company to ''discontinue operations,'' Williams' letter said.

He is now taking on a new real-estate venture, in a new location that has had its own share of distressed homeowners.

''I've gone to New Orleans,'' Williams said.