Homeowners facing foreclosure trusted company's strategy

 

Homeowners facing foreclosure trusted company's strategy

TAMPA --

When homeowners couldn't pay their mortgage any longer, scores turned to 78-year-old Tampa businessman Elton Marcus for help.
His company, Marc Associates, offered to take the properties off their hands. He'd buy the homes, intending to resell them within two or three years and pay off the previous homeowner's loan. In the meantime, he'd rent the home and use the money to pay their monthly mortgage payment.
Some sellers walked away with their equity in the home. Others say they received little or nothing.
It's a business model Marcus says has worked for decades. Then the housing bust hit.
Marcus acknowledged he stopped making mortgage payments when times got tough. Now some of those homeowners are finding out they're still on the hook for the mortgage, years after they thought they avoided foreclosure.
Marcus or his company was named in 239 foreclosure suits, according to court records reviewed by The Tampa Tribune. The majority is since 2000, but some date back to the late 1980s.
"Am I to blame for what happened to the market?" Marcus said.
Original homeowners aren't the only ones complaining.
Some renters Marcus placed in the homes say they had leases with the option to purchase and say their dreams were cut short when the bank foreclosed. Meanwhile, some investors who Marcus persuaded to take out second and third mortgages saw their investments wiped out by foreclosures.
The investors, usually friends of friends, agreed to loan money to Marcus in exchange for second or third mortgages. The company used the cash to buy more homes or fund mortgages for buyers, Marcus said.
Marcus said he's been in business for 30 years and varied his buying and selling techniques as the real estate market changed through the years.
He says he's not doing anything wrong.
"If I'm scamming people, has it been a scam this whole time?" he said.
The way Marcus sees it, he's helped hundreds reach their dreams of homeownership and hundreds more get out of sticky financial dilemmas. In the process, Marcus said he's helped a lot of people make a lot of money – including himself.
"I'm the guy on the white horse in shining armor," said Marcus, a thin, frail-looking man with an office full of stacks of paperwork, many files on homes he says he's keeping banks from taking back.
When the real estate market fell apart, so did Marcus' money-making business.
"I lost money, too," he said. "I've lost everything. I work all day, every day, trying to make money to pay my investors. I'm one of the few who stays in this crazy game."
Marcus said he hasn't paid a mortgage payment on his personal home in three years. Indymac Federal Bank filed a foreclosure suit against him in late 2008. Marcus bought the home in 2000.
As real estate values fell, Marcus said he could no longer collect enough money in rent to pay all the mortgages and his employees. Since the foreclosure process often takes years in Florida, Marcus said it was a no-brainer deciding who not to pay.
"Who's the lender to me, versus someone who is a personal friend, investor and needs the money more than the lenders?" he said.
The Tampa Tribune found hundreds of Marcus' deals in some stage of foreclosure. The Better Business Bureau and the Florida Attorney General's Office have received complaints about Marc Associates over the years. The attorney general's office is currently reviewing eight complaints, said Jennifer Meale, spokeswoman for the office.
The Tribune heard or reviewed complaints for about a dozen homeowners, renters or investors who said they feel taken advantage of by Marc Associates. They all had similar accounts.
Consider one home in Plant City. Three families lost the same house.
Four years ago, Jaye and Darleen Webster were falling behind on mortgage payments on their investment home when they received a post card in the mail about Marcus' business.
"It seemed perfect," Jaye Webster said.
The pair agreed to sell the home to Marc Associates. It was worth about $230,000 at the time. They walked away with $43,000 in equity, but the mortgage remained in their name, and the lender was not notified of the sale.
Marcus was a director at the title company that closed the deal, International Closings, Inc. It is now defunct.
The contract, reviewed by the Tribune, said the company would pay the mortgage payments until the home was sold.
Webster said he thought it had been taken care of. "I never heard anything about it."
Then late last year, Webster received a strange Facebook message about the home. A man renting the house, Terry Cannon, wrote that the home was in foreclosure. Webster and Cannon, along with Marc Associates were named in the lawsuit.
Even though Marc Associates acquires the deed in such transactions, it has to give it back to the bank in a foreclosure.
Marcus acknowledges that most lenders require homeowners to pay off their loan when they sell the property. But Marcus told the Tribune he has no obligation to notify loan holders he's buying the home.
Webster discovered Marcus had stopped paying the mortgage and told the Tribune he was instead paying an investor with a third mortgage on the property.
But that investor's records, reviewed by the Tribune, show only five payments were received on his $60,000 mortgage.
"I had no idea I was a third mortgage holder," said Joe DeFranco, the investor. "I would have never agreed to that, never."
But Marcus said he had conversations at the time with DeFranco and recalls telling him he would be a third mortgage holder.
DeFranco and his wife, Margie, loaned money on two mortgages and had success. So they loaned cash on two more. They say both ended badly.
In early January, Wells Fargo foreclosed on the home. DeFranco said he tried to buy the house to protect the mortgage he held on the property. But the bank wouldn't discuss the deal because it had no record of DeFranco's mortgage, he said.
In a home foreclosure, a second or third mortgage is typically wiped out by the first. The DeFrancos were left with no collateral on their loan.
Marcus blames the market: "You don't blame a broker when you lose money on a stock."
Before Cannon moved into the home, Marcus said he sold the property to a different buyer. But he took it back when the buyer failed to make mortgage payments to his company. He said that sale fulfilled his contractual agreement with Webster, the original owner. The contract said he would make payments until the property was resold.
Cannon, his wife and four children then began renting the home, hoping to one day own it. They had a lease with an option to purchase the home for $225,000.
"We kept getting letters from banks in the mail, addressed to the company," Cannon said. "When I would call, they said to forward it to the office or throw it away. They would say, 'It's nothing.'"
Cannon said he had been told by Marcus' employees that 35 percent of his rent would go toward owning the home – money gone now.
"This was our dream," Cannon said. "We were so happy there."
Marcus, however, disputes Cannon's account. "(Cannon) was not hurt here."
Marcus first provided the Tribune a signed lease-option contract with Cannon and pointed to a clause that states that rent doesn't go toward the purchase price. Five days later, however, he said he didn't authorize that contract and said, "Someone forged my signature."
Wells Fargo spokeswoman Vickee Adams told the Tribune the bank had never heard of Marc Associates and had no knowledge of the deal with the homeowner, the renter's arrangement or the third mortgage.
"This is very unfortunate," Adams said. "We appreciate having this matter brought to our attention.  We immediately investigated our customer's concerns and we believe that this situation warrants further research."
The Tribune supplied the information on Webster's deal to Doug Pollock, an Orlando-based investigator who looks into problematic mortgages for banks. Pollock, who is not connected to this case, said he's not aware of any laws that would prohibit Marcus' business strategy.
"It may not be illegal, but it's slimy," Pollock said. "But if you're willing to sign over your property, you're just flat out of luck."
Marcus said he's on the up and up.
"I stay here to help my investors," Marcus said. "Now, I couldn't help [everyone], but I sure am helping a lot of people."
State records show Marc Associates has been "inactive" since last fall.
However, Marcus said he continues to work on the homes for which he or the company holds deeds.
He still searches for homes to buy, he said, but purchases in his wife's name. He said he does this because he doesn't want to put deeds in his name due to judgments against him. Marcus said his wife, Carmela Marcus, "has no real estate knowledge," and that he handles the day-to-day work of the business.
The business model has changed, too.
Instead of buying homes and not paying off the mortgage right away, Marcus said they buy homes for cash so the original owner's mortgage can be settled at closing.
A sign outside Marcus' 601 N. Lois Ave. office reads, "$1,000 Down Homes. 7% Owner Financing."
Source http://www2.tbo.com/