Neighborhood Swayed by 'Liar's Loans'

Frances Darden examines mortgage documents in the living room of her home in Boston's Dorchester neighborhood, May 3, 2007. Darden was approved for nearly $900,000 in loans to buy two multi-family homes, despite the fact that she is on disability and receives just $1,800 a month. (AP Photo/Steven Senne) (Steven Senne - AP)

BOSTON -- Upstairs at Victory Chapel Church _ a cinderblock bunker converted from a long-ago Ford dealership _ the pews are reserved for praising heaven. But downstairs, in a basement rental hall, a pair of women preached of worldly wonders.

At 11 a.m. on alternating Saturdays, they set out rows of folding chairs and spread tables with urns of coffee and boxes of Dunkin' Donuts. And they offered testimony to the bounty of real estate, encouraging their growing flock to buy the wood-frame walk-ups and rowhouses surrounding this workaday stretch of Columbia Road, just down from the OJ Car Wash.

The key was trust, they told the faithful, as the voices of the practicing choir rang through the building.

Still, Valerie Hayes was a little skeptical.

"I really was thinking it would be at least a year before I'd get a mortgage," says Hayes, an executive secretary and mother of two. She was wary of borrowing because she was saddled with her own student loans.

But "on Saturday I went to the seminar," she says. By Sunday, she was preapproved to buy.

Soon after, Hayes did buy. The problem, prosecutors say, is that the women put Hayes and others into homes they couldn't possible afford. They did so by filling their loan applications with details of jobs, paychecks and bank accounts that were all so much fiction.

What happened in this church basement was no fluke; it happened elsewhere, too.

Much has been made of the very questionable lending that accompanied the rapid growth of subprime mortgages, a phenomenon that made homeowners of so many people. But less attention has been paid to the gimmickry and manipulation that delivered the loans an industry craved.

Some say this was nothing short of fraud. Those accused reject the charges. The case also raises tough questions of whether borrowers, too, should bear some responsibility.

But the bottom line is beyond dispute. Valerie Hayes can tell you about that. Just don't go looking for her at the home she bought, thanks to the women at Victory Chapel Church.

It's owned by the bank now, and there's a real estate agent's lockbox on the door.