Court awards $700,000 to victim of foreclosure rescue scam

Protective law helps pave the way for recent judgments

July 19, 2010|By Lorraine Mirabella, The Baltimore Sun

A Maryland law designed to protect homeowners from so-called foreclosure rescue scams has paved the way for recent judgments in favor of property owners, including one of the largest for more than $700,000 to an Ellicott City woman.

Susan Spicer, the homeowner, won her case late last month in Baltimore County Circuit Court against foreclosure consultant New Town Properties LLC and lender Royal Financial Services Inc. Her lawsuit accused the Owings Mills companies and principal Robert Hurd of stealing the equity in her home through a scam.

In typical foreclosure rescue scams, which became more common during the recent housing boom and bust, homeowners facing foreclosure with equity in their homes are tricked into turning over the title to their properties, often believing they can pay rent temporarily then regain title. Spicer's lawsuit was filed under the Protection of Homeowners in Foreclosure Act, passed several years ago.

Philip Robinson, executive director of Civil Justice Inc. in Baltimore, said the foreclosure law appears to have helped reduce the frequency of rescue scams which, along with stricter lending practices and falling home prices, left less equity for scammers to target.

According to Spicer's complaint, New Town and Royal Financial violated the state law by promising to allow her to stay in her foreclosed home — in which she had far more equity than her $40,000 mortgage debt — if she temporarily deeded the property to the lender while paying rent.

But the lender sold the home for $265,000, reaping a $225,000 profit, and leaving Spicer with no equity, according to court documents. The new owner evicted Spicer, who now lives in a basement apartment.

When contacted by telephone at mortgage lending and consulting company Lion Financial Corp., at the same address as Royal Financial, Hurd declined to comment. In court documents, he denied ever having an agreement to return the property to Spicer.

"What happened to my client was classic," said Jane Santoni, a consumer protection attorney representing Spicer. "People say, 'Oh, my God. I'll lose my house.' They're in a desperate situation. If it weren't for this statute, it would have been much more difficult to get a judgment."

Royal Financial's mortgage lender license has been revoked by the state commissioner of financial regulation, who found the company violated the state law in a separate foreclosure rescue scheme.

In that case, according to court documents, Hurd offered to refinance a defaulted loan for homeowners Woodrow Boyd Jr. and his wife, Cheryl, and then hours before the foreclosure sale, told them he couldn't refinance but could instead buy the home and lease it back to them.

A Baltimore County circuit judge in 2007 found Hurd in violation of the foreclosure protection law, and the couple got their house back with a new mortgage in their name, said Robinson, an attorney for the Boyds. Last month, the couple was awarded more than $104,000 in damages in a separate court case, he said.

It's likely that other kinds of real estate scams will crop up, Robinson said.

"We haven't seen what the new scam will be," he said. "Whether it's flipping or illegal mortgage broker fees or illegal real estate partnerships with kickbacks, the folks that want to break the law are going to figure out a way to make money on real estate. We need to stay ahead and send a signal that if you cross the line you'll be liable."

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