Cleveland Real Estate News

Here is one on line  definition of the word predatory: Living by or given to exploiting or destroying others for one’s own gain. When you hear that term applied to lenders it probably paints a picture in your mind. Well now we have a story to go with that hypothetical picture. People have officially been charged with profiting by defrauding buyers and here is the PD story that explains it.

Three people have been charged with RICO style violations. They fronted money to close the deals then got that money back for themselves. They requested loan money for repairs…they got that money back too and the repairs were never done. Some of the buyers did their part to collude or participate in this fraud by accepting money from the loan officer. There were appraisers who valued the houses too high for the market and they have yet to be charged.

In April of ‘07 I wrote a post  about all the calls I had received in February of that year; calls from people who had purchased homes, mostly from one lending company. Their homes had all been valued way too high for the market when they were appraised, which translated into higher monthly payments for them than was legitimate; and more money in the pocket (commissions) for the defrauders. By the time February had come and gone, almost 30 people made contact with me. Most of them (not all but 85%) had worked with Argent Mortgage. Argent is also listed in this current case against these three people.

I knew of other examples, including someone who came to me after having purchased a house that was supposedly rented out. The ‘lender’ told this person “we work at helping people improve their credit by making monthly rental payments on time. Let us buy this house, put the title in your name, we’ll even give you some advance money up front which you can keep for landlord repairs.”  In one case, the house purchased was bought sight unseen. When the buyer and then owner finally visited the property, the house had no working staircase to the second floor, no running water, among other issues. To say this house had been grossly overvalued is an understatement.  I saw it.  Up to this point, the predators involved in this case have not yet been brought to justice however, there is legal activity pending. Oh and did I mention, no tenant ever paid any monthly rent in most of the cases involved in these schemes.  Most of the home owners who came to me in 2007 were from Bedford, Oakwood, Maple Heights.  The PD story focuses on Slavic Village.  Again, these are not isolated cases that happened only in one or two neighborhoods.  This is also the face of predatory lending.

So the next time you are at a party and the conversation turns to predatory lending, you will know a sad but true story to tell to explain that yes it really did happen.

An excerpt from the PD article explaining why the Grand Jury indictment occurred: 

Kellogg helped buyers obtain mortgage loans by submitting false income and rental information to lenders, the indictment said. Cody is accused of assisting Kellogg in the deals while Boyd is accused of providing bogus income and tax statements used to fool lenders.

Kellogg also is accused of providing down-payment money that lenders believed was paid by the buyers. The money would be immediately returned to Kellogg after the deals were completed, the indictment said.

Prosecutors said Kellogg made about $250,000 from all of the bogus deals, including broker fees, kickbacks from sellers and money for repair services that he never provided. Sellers received between $2,500 and $5,000 after buying houses through Kellogg, Miday said.

This is definitely one of the faces of predatory lending.  Peace Out - 3C

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