Stop me if you've heard this one before: Borrower needs help. Borrower goes to foreclosure-rescue business to get help. Borrower signs documents to get or start the process of getting the mortgage refinanced, only to discover later that the foreclosure-rescue specialists were really getting the home signed over to them.
Such fraud has happened across the country, both before and after the housing market went downhill. One local case just wrapped up in Baltimore City Circuit Court with a judgment ordering the defendants to pay just over $1 million in restitution and penalties.
The business associates, Michael K. Lewis, brother Earnest Lewis, Cheryl Brooke and Winston Thomas, pleaded guilty earlier in the year to criminal charges related to dozens of foreclosure-rescue scams. Michael Lewis was sentenced to 6 1/2 years in prison, Earnest Lewis to 4 1/2 years, Brooke to almost four years and Thomas to just over three years.
The Baltimore civil case, brought by the Consumer Protection Division of the Maryland Attorney General's Office, covered 13 properties, most in the Baltimore area. Once the homeowners unwittingly signed over their properties, Earnest Lewis pulled all their equity out with a new loan and split the money with the defendants, said Bill Gruhn, chief of the Consumer Protection Division.
"Some of the homeowners have moved," he said. "Other homeowners are in their homes and we were able to facilitate settlements" with the lenders.
This is how the FBI describes the scheme:
Lewis and Thomas, a senior loan officer with a mortgage lender, told the homeowners that the 'good credit' of Earnest Lewis would be used to temporarily refinance their homes, that they had to sign their homes over to Earnest Lewis and that they could repurchase the homes in roughly one year, or once they regained their financial footing. During the interim, they could remain in their homes only by paying inflated “rent” and fees ...
Lewis, Earnest Lewis and Thomas lied to the homeowners or omitted details as to the amount of money that the homeowners would receive at settlement, what would be done with any equity in the homes and the need to file for bankruptcy protection and failed to inform the homeowners of the particulars of how the lease/buy-back program worked.In addition, in order to induce mortgage lenders to provide mortgage loans to purchase the homes, Thomas submitted false financial and employment information to mortgage lenders.
Barry Tapp, an attorney who represented the Lewises and Brooke, said their position was that they were trying to save people's homes "and it just didn't work out."
"They're probably never going to be able to pay that money back," Tapp added, noting that the federal case also ended with a hefty judgment against them.
The business advertised heavily on television in the Baltimore area, Gruhn said -- complete with Michael Lewis's daughter appearing on camera to say, "He's my daddy!" The federal indictment said the ads began in 2004, promising credit-improvement help, bankruptcy assistance and foreclosure prevention.
"If anybody ever offers to save your home from foreclosure and that involves you transferring title to them, or to anyone else, and you '[will] eventually get it back' -- that transaction's illegal," Gruhn said. "Nobody should ever enter into such a transaction."