Predatory Lending Case Featured in the Wall Street Journal
February 25, 2009
Seton Hall Law’s Center for Social Justice often fulfills its mission by utilizing the media to expose unethical and exploitative practices in such areas as immigration, urban housing and education. In this case, The Wall Street Journal exposed a predatory lending scam that preys on homeowners in difficult circumstances.
In the fall of 2008, CSJ Professors Linda Fisher and Chinh Le filed third-party claims in foreclosure against real-estate investors and their associates who offered to purchase the home of the Webbs, an elderly couple on the verge of losing their Montclair, NJ home of many years , after they fell behind on their mortgage payments. The practice, known as “foreclosure rescue,” entails a sale-leaseback arrangement whereby the investors offer to purchase the home, pay the mortgage, and rent the home to the owners so they can continue to live in the house and eventually, repay the investors to reclaim their home.
Within a year of the sale, the investors themselves defaulted on the mortgage, putting the Webbs on the verge of eviction despite their monthly rental payments. The CSJ team was able to vacate a default judgment and intervene in the foreclosure, enabling the Webbs to remain in their home while the claims are litigated. The paper trail of the investors’ purchase reveal that the mortgage lender gave the mortgage despite the investors’ weak credit and highly leveraged real estate holdings. The national coordinator of the Federal Trade Commission’s Foreclosure Rescue Fraud Project commented on foreclosure rescue: “People are desperate and willing to consider things they were never willing to consider before.”The CSJ pleading and the press release that followed brought this case to the attention of The Wall Street Journal.
Seton Hall Law Center for Social Justice Files Class Action Suit against Essex County Real Estate Developers
June 30, 2008 - Professors Linda Fisher and Jenny-Brooke Condon in the Center for Social Justice have filed a class-action lawsuit alleging a widespread practice of illegal property-flipping and real estate fraud by various individuals and entities in the greater Newark area. Taking advantage of the real-estate boom and relaxed lending standards of earlier in this decade, Defendants Maurice Bethea and his companies Blu Financial, Born Asiatic and Greenfield Asset Holdings lured over a 150 people into a real estate investment scheme that led to great profit for Bethea, but foreclosure and ruined credit for the individual purchasers.
The scheme involved deceiving financially unsophisticated low- and moderate income individuals into buying homes in Newark, Irvington, East Orange and Orange as investment properties. Using the purchasers’ good credit scores as bait, Blu worked with dishonest mortgage brokers and appraisers to obtain mortgage funding in excess of the homes’ value. Blu purchased the buildings at a low price, partially renovated them and resold them to the unsuspecting purchasers at prices far greater than their actual worth. Falsely promising that they would find tenants for the properties and that the rental income would easily allow the purchasers to make their mortgage payments, Blu representatives manipulated class members into buying the properties, but they invariably failed to carry through on their promises and the
purchasers fell into default and foreclosure.
The named plaintiff, Melvin Gibson, is a truck driver for relief operations throughout North America. He was forced to file for bankruptcy after losing his life savings as a result of Blu’s deceptive practices.
This lawsuit is not the first case that the Center for Social Justice has filed against Blu Financial. In April of 2007, Professors Fisher and Michael Barbosa filed the first of approximately a dozen third-party complaints against Blu in foreclosure actions, alleging that Blu’s fraudulent and deceptive practices caused the Center’s clients to fall into default and foreclosure on their mortgages. Scores of Blu victims have contacted the Center since that time, each of them repeating similar stories about Blu’s deceptive practices.
Dozens of Seton Hall law students assisted with research and drafting of the complaint. Recent graduates Carolyn Dellatore, Nicole Figliolina, Jason Hawrylak, and Ben Zilbergeld prepared the class action complaint under the supervision of Professors Fisher and Condon. 1L’s Derek Pahigiannis and Taylor Ward assisted with final edits and filing. Marshall Kolba, Esq. worked with Center faculty as a volunteer attorney, providing valuable advice and assistance.