Homeowners Say They Were Cheated of Equity
By Ovetta Wiggins
Washington Post Staff Writer
Thursday, July 12, 2007
Two months behind on her mortgage and struggling to come up with a third payment, Angele Reid knew she was headed for trouble.
She heard a radio ad about a foreclosure-recovery program offered by a local company, and she thought it was the way to keep her Oxon Hill home.
But that turned out to be far from the end of her worries.
Now Reid is part of a class-action civil lawsuit filed recently on behalf of hundreds of homeowners who say they lost millions of dollars in equity through an elaborate scheme operated by several Prince George's County businesses.
Attorneys for the plaintiffs said Metropolitan Money Store Corp. of Lanham, the main defendant, is behind a scheme that defrauded as many as 400 people in Maryland, Virginia and the District. Two couples from Prince George's filed the action in Circuit Court last month. They are seeking unspecified damages in the case, which is under state investigation.
According to the lawsuit, here is how the alleged scheme worked: Metropolitan arranged for the sale of the home to an investor known as a "straw buyer" who would borrow as much as possible against its value and then pocket the money.
Metropolitan told the plaintiffs that they could stay in their homes for a year and would be able to buy them back, according to the suit. But the defendants increased the mortgages so much that most or all of the equity was gone and the plaintiffs were unable to repurchase their properties, the lawsuit said.
"The sole motive seemed to be to enrich their lavish lifestyles as opposed to saving the homes of the vulnerable homeowners from foreclosure," said Phillip Robinson, a lawyer and executive director of Civil Justice Inc., a Baltimore nonprofit group that helped prepare the lawsuit with Legg Law Firm LLC of Frederick and the Holland Law Firm of Annapolis.
The phones at Metropolitan and defendant companies Fordham and Fordham Investment Group in Lanham have been disconnected. No one answered the phones at RTE Title and Escrow LLC in Largo or at Sussex Title LLC in Rockville, also listed as defendants.
Stan Brown, an attorney for about 20 Prince George's plaintiffs, obtained an injunction last month to stop his clients' homes from going into foreclosure.
"Metropolitan targeted people who had at least $100,000 equity in their homes," Robinson said.
As home buyers have become unable to make their mortgage payments because they received loans they could not afford or the interest rates on their adjustable-rate mortgages have risen, they have become easy prey for scam artists, consumer advocates say.
"I was supposed to be able to stay in my home for a year and then they would let me get the house back. Now I'm worried about a roof over my head," Reid said.
Alys Cohen, a lawyer with the National Consumer Law Center in Washington, said the housing market has made the climate ripe for such schemes.
"The worst part about this is that many of these people are in these positions because of abusive lending, and then to add insult to injury, they end up being taken advantage of on the back end also," Cohen said.
Robinson said most of the advertising for the mortgage foreclosure rescues was done on street signs and on radio and television stations that catered to African Americans.
As foreclosures have risen across the Washington region, Prince George's has been particularly hard hit, with more than 2,300 cases recorded this year, according to court records. That is more than in any other local jurisdiction.
State regulators did not return a phone call yesterday about the suit against Metropolitan, but a memo attached to the lawsuit from the Department of Labor, Licensing and Regulation notes that it and other government agencies were conducting a "major investigation" about the "mortgage brokering activities" at the company.
Veronica Savoy was 23 when she bought her home in Waldorf four years ago. She was paying $753 a month for her three-bedroom townhouse but began to have trouble making ends meet because of frequent layoffs from her job as a dump truck driver. She filed for bankruptcy. Then she heard about Metropolitan Money Store and signed on.
She said the company promised to keep her home from going into foreclosure and to get her a new mortgage with a lower interest rate.
Savoy and her two children are remain in the home, but the deed is no longer in her name and the equity is gone.
She "felt like everything was swept from under my feet" when she talked to Robinson and learned there were others like her, she said.
"How could people do something like this to me?" Savoy asked. "I'm still afraid that someone is going to say: 'This not your home anymore. You have to go.' "
Staff researcher Meg Smith contributed to this report.
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