Forest Park `flipping' suit settled

Woman to receive mortgage reduction

September 11, 2001|By John B. O'Donnell | John B. O'Donnell,SUN STAFF

A Baltimore woman has won settlement of a suit she filed after paying $65,000 for a dilapidated Forest Park house that the seller had just bought for $15,000.

The settlement, reached days before a jury trial was to begin last week in Baltimore Circuit Court, includes a reduction in Ingrid Simon's mortgage from $52,000 to $30,000, said Andre Weitzman, her attorney.

After filing her suit, which contended that the house was overvalued, Simon obtained another appraisal, which said the house was worth $32,000 when she bought it.

Simon, 39, was a $7-an-hour security guard when she bought the four-bedroom frame house in May 1998 from River Mortgage Inc. and its president, Chuck Famous. Five weeks earlier, River had paid $15,000 for the house.

In September 1999, a month after she was featured in a Sun article about property flipping, Simon sued individuals and companies involved in her deal.

Records show that, operating through River Mortgage, Famous flipped about 80 city houses between March 1996 and the end of 1998. He paid an average of $10,200 and sold them for an average of $47,400.

Simon said Famous had promised to sell her the house for $39,000 and that the $52,000 mortgage was designed to provide $13,000 for repairs, but that the price ended up at $65,000 without repair money. The mortgage carried an interest rate of 11.5 percent that could rise to 18 percent -- but never go lower.

Alleged `kickback'

Simon claimed in her suit that the lender, Tandem National Mortgage Inc. of Utah, paid the local mortgage broker, Home Funding Corp., a $520 "kickback" for delivering Simon's loan at a higher interest rate than Tandem offered other borrowers.

Tandem sold Simon's loan to PCFS Financial Services Inc. of Cincinnati, which was also named as a defendant.

Tandem and Home Funding are defunct.

Kathryn Miller Goldman, attorney for Tandem and PCFS, confirmed that Simon's mortgage will be changed but said a confidentially agreement prevented discussion of other details of the settlement.

She said she understands that the interest rate on the retooled mortgage will be fixed at 11.5 percent.

Simon claimed there were several irregularities in her home purchase:

Famous asked her to write a check for $6,257.35 -- money she didn't have -- and then promised that it would not be cashed. After the payment was recorded in documents that detailed the sale, the uncashed check came back to her in the mail.

She was also told to sign a second mortgage for $14,000 payable to Famous' company. Famous never tried to collect on that mortgage or another one he had her sign. A second mortgage -- an assurance to the main mortgage lender that others are putting money into the deal -- is a standard feature of many flipping deals and buyers are rarely asked to make payments.

Released from 2nd mortgage

As part of the settlement, Famous released Simon from the second mortgage, Weitzman said. Famous did not respond to a message seeking comment.

Simon said her loan application, filled out by Home Funding, inflated her monthly income and savings. In an affidavit, she claimed that Famous handled the loan for Home Funding.

Simon stopped making monthly payments on the $52,000 mortgage about the time the suit was filed two years ago, Weitzman and Goldman said, and she won't have to make up those payments.

With the reduction of the mortgage to $30,000, Simon's monthly payments will drop from more than $500 to about $300 before taxes and insurance.

Simon expressed relief at the settlement, saying, "It's been two long years."

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