A federal court jury has awarded $243,200 in damages to two District residents who lost their Northeast home in an alleged areawide loan fraud scheme.
Daniel and LaShavio Faison won the award last week after charging a Virginia mortgage broker with fraud and misrepresentation in arranging a home loan that cost them their house at 1841 North Capitol St. NE.
The Faisons said they were pleased with the verdict, but expressed concern about the prospects of collecting the award because the brokerage firm has gone out of business.
"That will be another battle," said LaShavio Faison, 34, a clerical worker for a local department store.
The decision concluded the first trial in a larger case that was the subject of a Federal Trade Commission action in March. The FTC filed a complaint in U.S. District Court here charging two local mortgage brokers with misrepresenting loan terms to Washington-area borrowers and causing them to lose their homes, declare bankruptcy or seek refinancing.
According to the FTC complaint, Nationwide Mortgage Corp. and Community Mortgage Corp. used "unfair or deceptive" tactics to induce more than 100 local borrowers to use their homes as collateral for one-year loans that required balloon payments of up to $72,800 at the end of the year.
Nationwide Mortgage Corp. no longer exists, but had operated offices in Annandale, Alexandria and Falls Church. It is not related to Nationwide Lending Group Inc. of Rockville or Nationwide Lending Co. of McLean. Community Mortgage Corp. is a privately owned company based in Annandale.
The Faison case was one of numerous private actions that have been filed by individual borrowers against the same mortgage brokers. While other parties have reached out-of-court settlements, the Faisons were the first borrowers to go to trial and the first to win a jury award.
In July 1982, the Faisons, needing money for household repairs and other bills, took out a $14,000 second mortgage, arranged by Nationwide. However, they received only $7,324.94 in cash after broker's and attorney's fees were subtracted, according to court documents.
Although their promissory note said the interest rate on the loan was 18 percent per annum, the eventual rate was about 75 percent per annum, said the Faisons' attorney, James L. Blair, basing that estimate on the amount the couple paid for the money they received.
The Faisons said they expected the one-year loan to be automatically converted to a long-term loan. They paid $210 a month for one year. But no long-term loan was arranged, and they were informed in July 1983 that the $14,000 note was due.
The investor who had purchased the note foreclosed on the house a month later. Although the residence is valued at $65,000, it was sold at auction for $16,000, according to court documents.
Daniel Faison, 36, a D.C. firefighter, continues to live there with the couple's two sons, but now pays rent of $425 a month to the new owner. He used to pay $375 a month on his first mortgage.
The Faisons' suit charged that they were induced into the loan through "fraud and misrepresentation," through activities that violated the D.C. Consumer Protection Procedures Act and through legal malpractice.
"They went out of their way to flim-flam us, and they did a good job," said LaShavio Faison, explaining why they signed the loan documents. "Everyone we dealt with were professional people. We had the utmost respect for them, and they took advantage of that."
Named as defendants in the case were Norman C. Tillette of Alexandria, president of Nationwide Mortgage; Richard Boddie of Falls Church, hired by Nationwide to serve as settlement attorney for the loan; Joseph Hayman of Silver Spring, who acted as an agent of Nationwide; Walter L. Waters of Upper Marlboro, a coworker of Daniel Faison who introduced him to Hayman and collected a commission; and David Brandt of Alexandria, who purchased the note from Nationwide and foreclosed on the house.
Nationwide and Tillette did not present a defense during the trial. The court entered a default judgment against both, and the jury found them liable for damages worth $210,000. The other defendants were found liable for lesser amounts totaling $33,200.
"The real problem is collecting," said Blair, the Faisons' attorney, who added that Tillette may have no money. He said they may have better chances collecting the smaller damage amounts from the other defendants.
Tillette and Boddie did not return phone calls, and Boddie's attorney refused to comment. Hayman and Waters could not be reached yesterday.
Brandt said he "did nothing wrong," that he only purchased a note originated by Nationwide and never met the Faisons or the other defendants before the trial. Brandt said he "never made any misrepresentations" to anybody about the terms of the loan and expected the Faisons to make the $14,000 balloon payment. "They agreed to pay it," he said.
The FTC is seeking restitution for those borrowers who do not win damages through private action. The agency is trying to recover at least the loan fees, which could total $1.2 million.
The FTC does not yet have a trial date, and is in the early stages of gathering and reviewing documents and interviewing the individuals involved, a staff attorney said.
Blair, the Faisons' attorney, who has five other related cases, said the FTC's involvement "definitely helps. It shows the borrowers that the federal government thinks this practice is outrageous."
The FTC has more power and greater resources than a private lawyer to gather information in the complex case, which creates a larger body of information for the private suits to draw on, Blair said.
Concurrently, the Faison verdict helps the FTC's case, said Susan Bonamici, an FTC attorney. "It helps us that a jury has recognized that this conduct violates the law," she said.
However, Bonamici also expressed concern about collecting any damages. If the Faisons collect what they are owed, there is less money for the FTC to recover, she said.