State alleges home aid ruse

Complaint says foreclosure advice victimized owners

November 02, 2007|By Lorraine Mirabella | Lorraine Mirabella,SUN REPORTER

At a time of rising foreclosures in Maryland, the state's attorney general is moving to put a stop to what he describes as a scheme that victimizes homeowners desperate to keep their houses.

Attorney General Douglas F. Gansler's office has filed a complaint against a group of individuals and companies it alleges promised to help people threatened with the loss of their home but instead tried to take title and strip equity from the property by charging undisclosed fees.

The homeowners, some of whom expected to stay on as tenants and eventually buy back the homes, were then charged rents well above the previous mortgage payments, according to the complaint filed in Baltimore Circuit Court.

The attorney general's office said the defendants' actions violate state laws designed to protect consumers and homeowners facing foreclosure.

An investigation has turned up about 10 victims of the alleged scheme, all of whom owned homes in Baltimore City or Harford, Baltimore, Montgomery and Talbot counties, said Scott Bailey, an assistant attorney general in the Consumer Protection Division.

"They're facing foreclosure and trying to find anyone who could help them," Bailey said. "The outcome we want is for the homeowner victims to get title back to the property."

Named as defendants in the Oct. 24 complaint are Michael K. Lewis of Upper Marlboro; Earnest Lewis of Washington; Cheryl Lynn Brooke of Upper Marlboro; Winston Thomas of Beltsville and two companies, In the House Technology Inc. and Cornerstone Title & Escrow.

"Our concern is ... there is a possibility that this may become even more widespread because of the number of foreclosures," Bailey said. "That number is going up ... and there might be a greater possibility of more foreclosure-rescue scammers coming into the market."

Foreclosures, already on the rise in a weakened housing market, have escalated sharply in recent months in the wake of the subprime mortgage blow-up. Filings rose 30 percent nationwide during the three months ending Sept. 30, compared with the April-June quarter, tracking firm RealtyTrac reported yesterday.

In Maryland, filings jumped more than 66 percent from the previous quarter and more than 500 percent from a year earlier, according to RealtyTrac.

Bailey said several alleged victims had responded to television advertisements that featured Lewis offering to help people out of financial difficulties.

Karen Milton, a mechanic and security guard who had owned a townhouse in Edgewood since 1999, saw Lewis' advertisement and went to meet with him. Heavily in debt, she was won over by his plan. She said Michael Lewis told her his brother Earnest would buy her home for a price that would allow her to pay off her mortgage and other debts and leave her $40,000 cash. She would then rent the home and eventually buy it back. But Milton said, immediately after settlement, Lewis told her she needed to sign over her $40,000 check to pay additional fees.

Then she learned her rent would be $1,263 a month, more than double her previous $524 monthly mortgage payment. When she could no longer make payments after months of struggling, she was notified that Earnest Lewis' lender was foreclosing and she would need to move out by Oct. 25. The state attorney general's office said it was able to halt the foreclosure, but Milton said she is afraid to move back in. She has put her furniture in storage and is living with her sister.

"It's been rough. It's overwhelming," Milton said. "I'm hoping [the state] is able to get my house back to me ... or to have my equity back so I can go somewhere, at least to be able to start all over."

Michael Lewis said he and Earnest were lured into trying to help bail out credit-poor homeowners who were unable to refinance their loans. "This was a good deed gone wrong," Michael Lewis said. Lewis said he runs an office that helps clients straighten out their finances and get started running home-based businesses to boost their income.

Lewis said his brother was approached by Winston Thomas, another defendant and a mortgage broker, and asked to use his good credit rating to get loans and buy homes owned by some of Michael Lewis' clients. The homeowners would pay rent, then buy the house from Earnest Lewis after a year.

Michael Lewis said the strapped homeowners agreed to abide by Lewis' "financial diet," pay bills regularly and meet with him twice a month. But homeowners failed to follow his advice, he said, and ran into trouble.

Earnest Lewis could not be reached yesterday. Winston Thomas did not return calls to his home. Attorney Robert Gittins, who represents Cornerstone Title & Escrow Inc. in Laurel, said the company had just received the complaint and was reviewing it and did not have a comment.

lorraine.mirabella@baltsun.com

Sun reporter June Arney contributed to this article.

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