FORT LAUDERDALE, Fla. – Jan. 26, 2007 – To a financially strapped homeowner terrified by the prospect of foreclosure, it sounds like an escape plan: temporarily transfer title of the property to a foreclosure rescue firm, which pays the mortgage and allows you to rent the house. The company promises that after six months or a year you can regain ownership.
But it’s not always that simple. Terms of these deals are difficult for struggling homeowners to meet. And real estate experts say savvy firms often prey on elderly or low-income owners who are not sophisticated in financial matters.
For many, these agreements can cost them their homes and their equity because they don’t understand what they are signing.
It’s a “severe” problem that’s likely to worsen as the number of foreclosures rises, said Elizabeth Renuart, an attorney at the National Consumer Law Center in Boston who studies rescue schemes.
South Florida, which was one of the nation’s hottest real estate markets until last year, now has some of the highest foreclosure rates. According to a study of 100 metropolitan areas by California-based RealtyTrac, Fort Lauderdale had the second-highest rate of homes in some stage of foreclosure in the July-September period, trailing only Detroit. Miami was No. 4 and the Palm Beach area ranked No. 13.
Leo Tucker, of Lauderdale Lakes, thought he could save his home by cutting a deal with Real Estate Depot, a Boca Raton company.
Tucker claims that Real Estate Depot and one of its business partners, David Lievano, have been trying to take his three-bedroom, two-bath house since offering him a rescue plan in 2003. Tucker, 42, is suing to recover the home and the equity in it.
Alan Crane, a Boca Raton lawyer representing Real Estate Depot and Lievano, said Tucker willingly transferred the house to Real Estate Depot and signed a clearly labeled sale contract. Real Estate Depot’s intention was to buy the house from Tucker, Crane said.
Tucker’s case is one of a dozen, including three involving Real Estate Depot, that lawyer James Bonfiglio, of West Palm Beach, is handling against so-called foreclosure rescue firms.
Tucker, a delivery truck driver, went through a costly divorce in 2002, fell behind on his $1,000 monthly mortgage payments and was filing for bankruptcy.
In July 2003, a week or two before a bank-ordered foreclosure auction was to take place, Tucker received a letter from Real Estate Depot saying he could avoid foreclosure and bankruptcy. Foreclosure sale information is available at county courthouses and on various Web sites specializing in such information.
The letter, according to Tucker, said Real Estate Depot could save his home.
Tucker said Lievano came to his house a day or two before the scheduled foreclosure auction. “I was desperate,” Tucker said. “I wasn’t thinking, and I didn’t have a lawyer read my paperwork. I was just glad I was going to save my house.”
Tucker could have tried to sell the house, but, like many homeowners, he felt a strong emotional attachment to it. He had been living in it since 1987, when he bought the property for $78,000.
Real Estate Depot took ownership of the house at a sale price of $100,500 and rented it to Tucker for $1,550 per month, with an option to buy it back for $135,000. Tucker made the $1,550 payments for six months, but stopped after he went to a mortgage broker about refinancing and was told he was no longer the owner. “I was thinking it was still mine,” he said.
A month later, Real Estate Depot filed suit to evict Tucker and his mother, Amylue Tucker, who also lives in the house. After consulting a real estate lawyer, Tucker filed for bankruptcy, which froze the eviction proceedings and has allowed him to stay in the home.
Real Estate Depot’s president, Alan Klasfeld, could not be reached for comment despite several phone calls. Attorney Crane said the company does not consider itself a foreclosure rescue firm. “Real Estate Depot buys, sells and leases real property,” he said.
Many homeowners can’t afford to hire a lawyer and don’t know how to go about getting free legal help. What’s more, such cases are difficult to win in Florida, real estate lawyers say, because judges in the state tend to enforce what’s written in a contract.
A signed contract is at the center of Eleanor Mitchell’s dispute with National Foreclosure Management Inc. over her three-bedroom Miami Shores home.
Mitchell, 57, said she heard about National Foreclosure through an advertisement on a gospel radio station in Miami. She wanted to get equity out of the house, but said she ended up signing a warranty deed that transferred ownership to a straw buyer representing National Foreclosure. “I didn’t know what was going on,” she said.
In a Miami-Dade County lawsuit, Mitchell claims she was “financially distressed, unsophisticated in business and legal matters, and unrepresented by independent legal counsel” when she and her mother, Carrie Saunders, who co-owned the house, signed the papers. Mitchell is suing for damages and to have the title transferred back. Mitchell and Saunders have been able to stay in the home while the dispute continues.
National Foreclosure, which had operated out of Miami Lakes when Mitchell sought its help, has since moved out of its office. A phone number for an office National Foreclosure had in Memphis, Tenn., has been disconnected, and the company’s owners could not be reached for comment. Despite several attempts, Lerone Thurston, a Miami Lakes lawyer representing National Foreclosure in the suit, could not be reached for comment.
Because rescue firms have signed contracts to support their arguments, legal strategy is crucial for homeowners.
Bonfiglio is arguing that Tucker retained ownership because the deal was not a legitimate sale and lease. “After he signed the paper, he stayed in the house,” Bonfiglio said. “There was nothing that would indicate that my client was anything but the owner.”
Real Estate Depot paid $13,104 to make the mortgage current and about $10,000 for repairs, Crane said.
“That’s not something mortgage companies do,” he said. “Landlords do that.”
Copyright © 2007, South Florida Sun-Sentinel, Ian Katz. Distributed by McClatchy-Tribune Business News.
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