Los Angeles Retiree Alleges Fraud In Suit To Unwind Foreclosure Rescue Deal

The Los Angeles Times reported some time back on the story of one victim of a foreclosure rescue deal. The story reports:

• When Eddie Baker Jr. retired in 2000, he found himself struggling to make the $1,100 monthly payments on his three-bedroom Los Angeles home and eventually fell behind on the $205,000 mortgage. Facing foreclosure, Baker, a devout Christian, prayed for assistance. And in June 2005, his prayers seemingly were answered in the form of an offer to help save him from foreclosure and credit ruin. But that offer turned into a nightmare instead. In May of this year, attorneys for Baker, 69, filed a civil suit in Los Angeles Superior Court against several co-defendants, alleging fraud related to the retired photo technician losing title to his home.

***

• [A]ccording to the court documents filed in May, defendant Timothy Barnett would assume Baker's home loan, pay the outstanding mortgage debts, maintain and restore Baker's credit and advance him $12,000. For doing this, Barnett would take control of the property and hold title for three years. In return, Baker agreed to pay Barnett about $1,000 a month for three years. Baker said Barnett promised to transfer the title back to him at the end of the third year, the documents assert. [Baker's attorney] said her client unknowingly signed away the rights to his home and his most valuable asset (currently valued at about $600,000, according to online valuation provider Zillow.com) to Barnett for $226,000.

Court documents stated that Barnett represented himself as a "man of God." Over time, trust was built, so when Barnett allegedly asked him to sign and initial the mountainous stack of documents, the trusting retiree signed without question.

According to Baker's attorney, Barnett then sold the home for $285,000. The home was then subsequently sold twice more between October 2005 and March 2007, once for $440,000 and once for $560,000, and refinanced multiple times without Baker's knowledge, despite Baker's right to buy back the property. At last check, the home is in foreclosure.

The following area Los Angeles-area consumer advocates commented for the story:

• Maritza Gutierrez, a supervising investigator for the Los Angeles County Department of Consumer Affairs' real estate fraud unit, said that from April to June, her section recorded about 50 cases involving alleged foreclosure scams.

• Cynthia Reed, Baker's attorney, said Public Counsel has about a dozen cases of alleged foreclosure fraud pending. "Two years ago, maybe we had one," she added. The pro bono group provides free legal services to residents who can't afford private representation.

• Equity thieves will offer people facing foreclosure a short-term loan to cover their debts or agree to refinance the loan, said Manuel Duran, an attorney with Duran & Flanagan in Los Angeles who has served as prosecutor in foreclosure scam cases. [...] "Many of my clients say they heard about foreclosure scams on TV but trusted the guy anyway. But when this happens, their equity gets stolen. In many cases, we can unwind the loan," Duran added.

Reportedly, Barnett pleaded no contest in 1997 to multiple felonies and was sentenced to state prison for defrauding over 20 people out of their money and their homes over a period of eight years. Most were elderly. For more, see It's scam season (Scrambling to avoid foreclosure, more owners are falling prey to rescue fraud).

For more on equity stripping scams, generally, see DREAMS FORECLOSED: The Rampant Theft of Americans' Homes Through Equity-stripping Foreclosure 'Rescue' Scams (4.61 MB approx.).