House buyers settle suits

Tentative agreement in two `flipping' cases is worth $5.8 million

110 dwellings included

Some people to get reduced mortgages, others to receive cash

February 18, 2000|By John B. O'Donnell | John B. O'Donnell,SUN STAFF

A tentative settlement of two lawsuits over the sale of 110 Baltimore houses at inflated prices was announced yesterday, marking the first widespread relief for buyers since an epidemic of property flipping began here five years ago.

The deal is worth $5.8 million, said Andre R. Weitzman, the attorney for the homebuyers.

"There are probably 20 times this many victims of mortgage scams and flipping in the city," said Ken Strong, who heads the Southeast Community Organization, which has been trying to combat flipping in East Baltimore. "This establishes a model for other lawyers to bring suits."

The settlement gives reduced mortgages to buyers who want to stay in their homes and can qualify for the new loans, and modest cash payments to those who move.

Weitzman said that three dozen lawyers for most of the defendants had agreed to sign settlement documents next week. Two defense lawyers confirmed the agreement.

Eighty-two plaintiffs are parties to a suit filed in January 1998 against Robert L. Beeman, a Wilmington, Del., man who sold them their homes, and lenders, mortgage brokers, appraisers, lawyers, settlement companies and others involved in the sales.

The suit charged that Beeman would pay $5,000 to $20,000 for decaying, sometimes vacant, rowhouses, perform modest repairs, obtain inflated appraisals, and resell the houses within weeks or months for prices ranging from $68,500 to $85,000 to unsophisticated first-time homebuyers, often single mothers with children. Buyers were asked to make a down payment of $500.

Weitzman said reappraisals showed that the houses were worth an average of $30,000.

Beeman and others involved in his transactions are under investigation by federal prosecutors and U.S. postal inspectors.

The second suit, filed in May 1998 and including 28 people who bought houses from Walter and Linda Duersch, named many of the defendants in the Beeman suit.

Weitzman said that while the Duersches have not agreed to settle, others named in that lawsuit have. One appraiser in the Beeman suit also has declined to settle.

The settlement doesn't end the lawsuits, Weitzman said, because he will seek "further relief" from the defendants who have not settled.

Terms of settlement

Weitzman said that the settlement provides that lenders will give each buyer a "credit repair letter" aimed at wiping out any damage on their credit reports caused by the mortgages. He said most of the money in the settlement involves mortgage debt reduction of $4.1 million and a waiver of $1.1 million in monthly payments dating back to spring 1998, when lenders agreed to suspend those payments.

The cash settlement to some of the plaintiffs will total $197,250, while Weitzman's fee will be $437,750.

Under terms of the settlement, lenders have agreed to accept reduced amounts to pay off the inflated mortgages.

Owners who want to keep their houses will have to obtain new mortgages based on the reappraised value of the houses. Some of them may not qualify for loans and will have to leave their houses.

Weitzman said that about 70 of the 110 owners are expected to get new loans and remain in the houses. Some have left; others are expected to leave, some because they will be unable to obtain new financing.

Good news for some

He said the owners who refinance will see their indebtedness reduced an average of $27,000 and their monthly mortgage payments cut from $600 to $300.

"The families that persevered and stayed in their homes -- many are going to land on their feet," said Strong, the head of SECO. "All in all, I'm very pleased."

Carl Cleary, a housing counselor with Southeast Development Inc., a companion organization to SECO, is working with the homeowners to obtain new financing. He said that in some cases, the homeowners will end up with $10,000 to $15,000 in equity once they sign new mortgages.

First Mariner Bank has agreed to provide mortgages to qualified owners. The Abell Foundation will guarantee repayment of some of the First Mariner loans, said Robert C. Embry, who heads the foundation.

Cleary said he expects First Mariner loans to include some funds for repairs to the houses.

$2,000 payment

The owners who decided to walk away from the houses have been told they will receive up to $2,000, an amount that some find inadequate.

"That's the real problem in this," said Cleary, the housing counselor. "The move-outs really did get a bad end to this. there's a tough story."

Weitzman said the $2,000 has "been discussed with them for a very long time. There just isn't enough cash to increase that benefit."

Weitzman said that 11 of the homeowners lost their houses or refinanced with other lenders.

One of the losers was Yvonne Peaks, the lead plaintiff in the Beeman suit. Peaks, a nursing assistant at a nursing home, paid $83,000 for 211 N. Montford Ave. in 1997, two months after Beeman had bought the vacant house for $15,000.

Two months after she moved in, the house partially collapsed while a city crew demolished the house next door. Peaks' house, too, was demolished.

Peaks expressed satisfaction that the case is nearing an end but is waiting to find out what the settlement will mean to her. She said she's been told she will have to move from her rented house because the mortgage holder has foreclosed.

She wants to rent another house with the idea of eventually buying.

"It's been really devastating to me and my family," she said of the ordeal triggered by the city demolition crew in June 1997.

Tabatha Evans, a 27-year-old mother of two, bought a house from Beeman in the 2400 block of E. Fayette St. with Supplemental Security Income of about $1,000 a month for herself and a son. She hopes to qualify for a new loan so she can stay in the house and do some repair work.

"It's cool that they're finally settling," she said.

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