Homeowners say they expected lower mortgage payments but lost their homes instead
By Fred Schulte
This is the fifth and final installment in an investigative series on the federal government's loan modification program.
On a cool evening in early November 2014, a Rolls Royce pulled up to Joseph Clarke’s modest home in Brooklyn, New York. Two men stepped out, approached the front door and bluntly announced they were the property’s new owners.
Clarke, 65, and his wife, Jacqueline Knights, 64, were stunned. Just hours earlier, Clarke had been at the offices of a local foreclosure “rescue” firm where a lawyer handed him papers to sign — documents Clarke, who had lost income due to an injury, said he believed would save his home of 15 years from being taken over by the bank.
Instead, the owners of the firm tricked him into authorizing a short sale of the property to a company they also ran, Clarke and Knights alleged in a lawsuit filed last year.
“I took what they said for granted,” Clarke said in an interview. He said he was told the lawyer was present to represent his interests, which he trusted.
“I assumed they knew what they were doing,” said Clarke, a retired driver for United Parcel Service.
Since the nation’s housing bubble burst nearly a decade ago, tens of thousands of distressed homeowners have alleged they were cheated by foreclosure-prevention and mortgage-reduction firms, in which attorneys often have played pivotal roles.
A Center for Public Integrity investigation links tens of millions of dollars in consumer losses to firms that participated in a government-backed mortgage-reduction program called loan modification. Over the years, many schemes have apparently targeted minorities, charging thousands of dollars for help in reducing their mortgage payments or for other services the firms never delivered.
The scams continue to this day.
In Brooklyn, alleged abuses of the federal loan-modification initiative have proven even more costly — in some cases taking peoples’ homes.
One group of foreclosure specialists in the New York area, where housing prices have soared, has been singled out for allegedly targeting minorities and immigrant homeowners with financial troubles and wresting away their property through short-sale scams or other fraudulent deed transfers.
“There’s kind of an insatiable thirst for property in New York City. It can’t be quenched,” said Jennifer Eisenberg, a staff attorney with South Brooklyn Legal Services, who represents Clarke and Knights in their court battle.
The couple is suing Homeowner Assistance Services of New York and related companies. Their case is one of more than a dozen civil suits filed by aggrieved homeowners since 2013 that allege wrongdoing by the foreclosure group or its associates.
Three men associated with Homeowner Assistance Services and its related companies, such as Launch Development LLC, also are facing criminal charges.
Amir Meiri, Mario Alvarenga and lawyer Rajesh Maddiwar were indicted in May 2015 by a federal grand jury in New York on conspiracy to commit wire fraud, money laundering, conspiracy to commit bank fraud and telemarketing fraud charges. All have pleaded not guilty. Three others associated with Launch Development have also been charged in the case.
Real estate developer Meiri, who has lived in a $4.8 million home in Great Neck, New York, began trolling for the property of less fortunate homeowners as early as January 2013, according to an FBI complaint filed to support the criminal case. It says Meiri instructed Launch Development employees to search online for distressed properties in Brooklyn, Queens and the Bronx on propertysharks.com, a website that provides ownership and financial details on residential and commercial properties.
Launch Development then sent owners mailers offering foreclosure relief services using the letterhead of Homeowner Assistance Services of New York, or HASNY. Telemarketers followed up by inviting the homeowners to a meeting at HASNY offices in the Hollis neighborhood of Queens to hear more about steps to avoid foreclosure.
HASNY also pitched its services on a website that said: “Homeowners unable to make their mortgage payments can look for alternatives to avoid foreclosure. … Let us work on your situation and preserve your dream of homeownership.”
One of the “alternatives” HASNY touted was loan modification, created by federal officials in 2009 to encourage lenders to voluntarily reduce mortgage payments to a more affordable level.
Federal officials expected loan modification to keep millions of Americans from losing their homes. But almost from the start, the program has been marred by scam artists who charged thousands of dollars for services they never delivered.
Since 2010, the Lawyers’ Committee for Civil Rights Under Law has collected more than 46,000 complaints alleging losses topping $100 million from scams, which often attracted customers through misleading, if not downright false, promises made by telemarketers, deceptive mailings or websites. Losses have been the highest in minority communities, complaint data show.
Federal prosecutors allege that HASNY and its affiliates dangled the possibility of a loan modification to lure many homeowners whose property they later made their own.
The FBI complaint cites the experience of a woman who thought she was applying for a loan modification at HASNY’s office in Hollis, but wound up selling her home to Launch Development.
The woman, who is identified only as “Victim-4,” had fallen behind on mortgage payments on her Brooklyn home and in December 2013 asked HASNY to arrange a loan modification.
After a meeting in early 2014 at the HASNY offices she met Rajesh Maddiwar, who was said to be there to act as her attorney. The woman signed papers, some of which were blank, which Maddiwar allegedly told her was “normal and typical” for loan modifications, according to the FBI.
In actuality, she had just sold her home to Launch Development for about $335,000. That’s less than half of what she paid in October 2006, according to the FBI, which added that the woman moved out in August 2014, after the new owners began eviction proceedings.
Just how many people lost their homes is not clear. The FBI found, however, that Launch Development had targeted 219 properties in the Bronx, Brooklyn and Queens by filing bogus Uniform Commercial Code liens indicating that the homeowners owed the company a debt. This was done to discourage the property’s sale to any party but Launch Development, authorities said.
The government’s forfeiture motion says that at least 58 properties were obtained as part of the scam, including the 9,400-square-foot home in Great Neck and the HASNY office building in Hollis. The forfeiture motion seeks those properties, or the proceeds from their sale. Seventeen of the properties were sold for nearly $9 million, according to the government.
‘I Got Tricked’
Joseph Clarke bought the two-story frame house on East 95th Street in Canarsie, a neighborhood in southeastern Brooklyn, in 1999. He liked the off-street parking, good-sized backyard and the upstairs apartment. That’s a common feature in neighborhoods where many owners rely on tenants to help with hefty mortgage payments.
But in early February 2013, Clarke was in default on the mortgage and threatened with foreclosure. He said he was unable to get a stable tenant and had an injury that kept him off the job, cutting his income.
In late 2013, Clarke took a call from a HASNY representative who claimed she could help him refinance his loan and stay in the house. He said he felt comfortable dealing with the woman because he could tell from her accent that she also was of Guyanese descent.
But after months of reviewing paperwork he submitted, HASNY told him that his “credit was shot,” according to the lawsuit, and his “best option” would be a short sale. Clarke said he was told he could “buy back” the property and would never have to leave.
In November 2014, Clarke signed forms in HASNY’s conference room, documents that he said he didn’t understand. What he signed turned out to be a deal to sell his property for $210,000, according to the suit.
He had never met lawyer Elliot Bakst, who was said to be there representing Clarke’s interests, nor did the lawyer offer to answer any questions. According to the lawsuit, Bakst didn’t explain to Clarke what he was signing and told him he “wouldn’t need copies of these documents.”
About a month after the closing on Clarke’s home, the Supreme Court of New York suspended Bakst from practicing law for misconduct involving other unrelated real estate transactions. He has since been disbarred.
A few hours after the closing, when the two men first showed up at his door, Clarke realized his mistake.
“When the guy comes and says he’s the new owner, that’s when I realized I got tricked,” Clarke said in an interview.
Clarke said the men told him he could buy the house back in 90 days with a down payment of $20,000. When he refused to sign more papers, the men said he would have to move out within 10 days or start paying rent of $5,600 a month, an impossibly high figure.
During the next few months, neighbors saw the Rolls Royce and a Lamborghini parked outside with men watching the home, according to the complaint.
Clark and his wife, Knights, said the new owners stepped up harassment to pressure them to move out, but they refused. At one point, four men tried to change the locks on an interior door, but three of them left after Knights called the police.
A man who remained told police the home had new owners. When police asked to see the deed to the property, and neither the man nor Knights could immediately produce it, officers advised Knights to contact an attorney and told the man to leave, according to the lawsuit.
Eviction papers were served on the couple in February 2015. In April 2015, Clarke obtained a temporary restraining order blocking the eviction, but the title to the home is still in dispute.
“Ever since then we have been afraid that we will be forced out of our home, with no place to live. Our home is our only asset and an important source of income,” Clarke wrote in a discrimination complaint he filed in April of this year with the U.S. Department of Housing and Urban Development.
Clarke’s lawyers at South Brooklyn Legal Services argue the case reflects a pattern of “obtaining title to homes through a pattern of deception and fraud.” The suit seeks to invalidate the sale by claiming it was fraudulent.
Clarke never would have signed the papers had he known it could have led to an eviction. Attorney Bakst never explained that simple fact, according to the complaint, and his presence was “nothing more than a sham to lend an appearance of legitimacy to a fraudulent scheme,” according to the suit.
Other suits against Launch Development make similar accusations, such as the case filed by Milton Shaw, also an immigrant from Guyana, who lost a brownstone in Bedford-Stuyvesant.
In early 2014, Shaw, then 66 and an unemployed bindery worker, thought he would lose his home to foreclosure.
HASNY promised him he could “re-establish” his mortgage, according to the suit. Instead, he signed documents that sold the property for $350,000 to Launch Development. At the time, his home was worth about $850,000, and Shaw owed about $615,000 on the mortgage. But the short sale wiped out the equity, according to the suit.
Shaw also said he was put at ease by the presence of Maddiwar, the attorney charged in the criminal case.
According to the lawsuit, Maddiwar kept passing documents to Shaw for his signature, but “did not explain the nature or consequences of these documents.”
Maddiwar’s attorney, Michael L. Soshnick, had no comment. Soshnick said in a January court hearing that Maddiwar’s arrest had “devastated his law practice … and we just want him to be vindicated as quickly as possible.”
Other property owners caught in the same circumstances are keeping an eye on the criminal case, though they aren’t sure how it will end for them.
Federal prosecutors filed legal papers in May seeking the forfeiture of dozens of properties owned by the firm, including homes they took from Clarke and Shaw.
Nicholas Biase, a spokesman for the U.S. Attorney’s Office in New York, said prosecutors contend the properties on the forfeiture list were “fraudulently acquired.” In an email, Biase wrote: “We decline comment on what would happen to them — other than that, if the government prevails, the properties would be forfeited.” He said the case is set for trial in early 2017.
Clarke said he hopes that if the government gets the deed to the house, officials will give it back to him.
“After 17 years in that house, it’s a part of me,” Clarke said.
- Originally appeared at Publicintegrity.org