Homeowner Lawsuits Target Builder, Appraisers, Lender
The Columbus Dispatch reports on lawsuits in Ohio. “Add two class-action lawsuits to the challenges facing Dominion Homes. In a coincidental one-two punch, homeowners in three subdivisions filed lawsuits yesterday against the Dublin-based builder. The lawsuits, filed in different courts, could affect thousands of Dominion customers in central Ohio.”
“‘Buyers always are going to be suspicious from this day forward,’ said Delaware resident Jim Newton, the chief economic adviser for Commerce National Bank. ‘To dig out of this kind of mess is pretty tough.’”
“Clifford and Shannon Rece and Christopher and Amanda Endl, who live in separate Far West Side subdivisions, say their houses are overpriced because purchase and financing incentives were wrapped into the cost. ‘The effect of the scheme employed by Dominion Homes is to sell homes ..worth far less than the amount financed and less than the amount of the appraisal,’ says the lawsuit.”
“Residents at the subdivision in southern Delaware County filed the other lawsuit because their FHA loans were converted secretly to mortgages for borrowers with poor credit. Stephanie Stuart, Amy and Scott Rudawsky, and Michelle and Jeffrey Beard were ‘tricked into purchasing a home which lacked the resale benefits of an assumable FHA mortgage,’ Zanesville attorney Gary M. Smith wrote in the federal suit.”
“The Reces and Endls blame Dominion for the drop in home values in Galloway Ridge and the Village at Galloway Ridge. The lawsuit contends that Dominion artificially pumped up the prices of its new homes to cover enticements such as down-payment assistance and interest-rate subsidies.”
“Out of 17 sales last year in the Village at Galloway Ridge, only one homeowner made a profit. The median loss was $23,099. In Galloway Ridge, of the 38 houses that sold last year, 25 were sold because their owners fell into foreclosure or bankruptcy. Only 11 home sales showed a profit.”
“Dominion has acknowledged that property values have declined in those two subdivisions but has blamed the problem on economic forces. ‘It’s not necessarily driven by mortgage lenders or practices,’ Dominion Vice President Thomas Hart told Galloway Ridge residents on Jan. 31.”
“However, The Dispatch has received e-mails and calls from residents in 20 other Dominion subdivisions in central Ohio who said their neighborhoods also were losing value and plagued with foreclosures. Also named in the suit are appraisers and charitable organizations that give down-payment grants that are later reimbursed by Dominion. Appraiser Michael M. Baciu, whose company, is named in the suit, declined to comment.”
“The suit also accuses National City Mortgage of fraud. The Miamisburg-based lender agreed to buy FHA loans from Polaris Park borrowers but has said it returned them to Dominion when the insurance backing was denied.Dominion recently offered the residents a $2,500 settlement if they promised not to sue the company. It’s unclear whether anyone accepted.”
“Their attorney wrote that the homeowners ‘have suffered actual damages, including but not limited to the value of an assumable mortgage, a lowering of the home’s resale value due to their inability to sell a starter home to an FHA buyer, (and) lost FHA insurance premiums.’ Both cases will take months if not years to resolve.”
Thanks to the readers who sent this story in. For those who haven’t been following the Dominion story on this blog or the foreclosure blog, the original complaint was that the builder used a straw non-profit to ‘loan’ downpayments to some buyers, who then later defaulted and pulled down resale prices in the entire subdivision. It is now noteworthy that appraisers and a lender have been pulled into the suit.
Let the blame game begin!!!! We will see more of this I’m sure.
Classic litigative tactic- Sue everyone involved to get them shaking and see what what fruit will fall from the tree.
In the voice of Yoda
“so it begins, the loan wars.”
The FHA et el., deserves what they get for facilitating the rackeetering game between real estate agents, mortgage lenders, and appraisers which has been going on since the dissolution of their fee panel system in 1993. How does the “game” work? The real estate agent “blackmails” the originator by saying, if you don’t use XYZ appraisal company, which rubber-stamps my deals, I won’t bring you any more business. The mortgage lender, desperate for business is more than happy to acquiese. So the “fix” is in…
Hordes of dishonest hacks poured into the appraisal business once the government set up licensing to take advantage of the system. ANd cnce the mortgage brokers could go shopping for value, honest and ethical appraisers got hung out to dry-with many having their decades old businesses virtually distroyed. Screw these idiot homeowners. They chose to be ignorant and went along with the game. Now they can suffer the consequences.
Actually in ohio this kind of (alleged) fraud goes on all the time. Some of it is far worse and more pervasive (you should see the old folks who get bilked out of their homes by contractors “financing” the repairs they do). It is disgusting.
When they are stealing from individuals the State Government (bob taft anyone) cannot be bothered.
These guys made the mistake of (allegedly) defrauding the bank, now that will get some negative action sent your way.
Hahah,
This isn’t even close to fraud, this is BUSINESS AS USUAL. The real frauds will be much more severe than this plinky crap and clog the courts pushing this bread and butter business (fraud) disagrements into neverland. The lawyers will rush to the severe frauds and the class actions to get paid and not have time for the piddly cases. The class actions will make the lawyers rich and have the cases settled for between $2-5k on damages reaching to $100k or more. Sheeple will forget as the cases draw out for years, then we will be primed to light the bubble fuse again.
From the lawyers perspective only the large solvant builders will be suit worthy all other mom and pop (RE brokers, appraisers and mort. brokers) will not be worth litigating. Any sizable judgement will be draw out for years, combined with others and washed in bankruptcy.
Like others have said here.
“Wash, rinse & redo.”
Although I’m sure Dominion did some underhanded things here and should get slapped hard, I can’t help but shake my head at all the idiots that bought. I guess their ‘I-can’t-believe-we-can-afford-this-house’ deal wasn’t such a great deal after all.
Reminds me of the LA Times article woman from early 2005 who said she couldn’t believe people would loan her that much money so she just ‘closed her eyes and went for it’. What a perfectly fitting descriptioin.
These same greedy bag holders would be having a block party now if instead prices went up by 30%/yr. Let them rot.
I agree totally, please don’t blame someone else because you as a buyer made a dumb mistake. Did someone put a gun to their head to sign the paper? I would say not and they most likely celebrated after the closing.
—AL
I agree with all of your comments and saw this coming. Who exactly gets the brunt of the blame? The appraiser, the mortgage guy, the builder? They can all point fingers at each other and I’m sure there is plenty of fine print in the contracts that will imply that the borrowers/buyers acknowledged that they knew what they were doing. Real estate for residential homeowners isn’t technically an investment, rather a place to live and subject to up and down fluctuations in price. If the people got in over their heads, then that’s their fault. The sellers side took their risks by selling to these unqualified buyers. I don’t think it was their legal responsibility (maybe morally, but not legally) to ensure the buyers weren’t stupid. I’m sure in the future (since most people call real estate an investment now) that all real estate contracts will have the standard clause; “Past performance of real estate is no guarantee of future gains. You may lose money by investing in real estate”.
Right on!
Really, what they’re saying is that the houses aren’t selling for what they paid. All that mumbo-jumbo about inflated prices are the lawyers trying to make them sound like victims.
Unless someone held a gun to their head when they signed the contract, they looked at the house, agreed on the price, and bought it.
I’ve been living in my house in Sunnyvale, CA for 20 years and never once have I worried about what it might be worth. Who cares? Why sue if you think the price dropped? After all, if they paid that much for it, perhaps someone else will, too.
“Why sue if you think the price dropped? After all, if they paid that much for it, perhaps someone else will, too.”
Great point. How could one ever prove that they lost money because the value of their property fell; after all, if they kept their house on the market indefinitely, maybe, just maybe, another sucker would come along who was willing to pay the same ridiculous price they did, or more!
I live in ohio and everybody should take a deep breath and go read the article, I have actually been following this story and many like it.
There is a reason Ohio leads the nation in forclosures and has for a while.
Our state government is controlled by the republican party and has completely sold out to the Mortgage industry up to and including outright fraud. The city of Cleveland tried to enact a predatory lending act that got completely squashed at the state level.
Dominion (and others) Have been pulling this crap for a while.
Columbus expereinces 3% of appreciation a year, these arent “greedy flippers” these are poor dumb saps just trying to get in on the ground floor of the american dream. Don’t project OC, the Bay, pheonix, boston, NYC, vegas, or FLorida onto Columbus ohio. These people lived in these houses.
http://www.dispatch.com/reports-story.php?story=dispatch/2005/09/18/20050918-A1-00.html
real good article out of the Columbus dispatch discussing Ohio’s forclosure problem.
Nobody is flipping house in ohio for profit (unless you mean the old-style flipping where you buy a delapidated old house and sink some money in to it and HOPE to make 10% on your efforts). We have declining popluation and industry shutting down left and right. Appreciation what the hell is that. Anybody here from Michigan could probably say the same thing.
Here is a choice quote
“Driven by a weak economy, foreclosures are fueled by aggressive mortgage brokers, appraisers and others who profit regardless of whether the loans ultimately succeed or fail, a Dispatch investigation found.
State oversight is tepid. Brokers are paying less in fines even as state officials document more wrongdoing. Millions in state licensing fees, meant for enforcement, have been spent instead on keeping the state budget afloat.
Borrowers in Ohio are especially vulnerable because the state hides from consumers key information about brokers, doesn’t require appraisers to be licensed and doesn’t cover mortgage lending under a law prohibiting deceptive sales practices. “
Maybe so, but you can’t tell me that these buyers weren’t expecting to make fast, juicy profits on those homes.
If they didn’t flip, they’d just as well tap a HELOC for a new SUV or vacation. Let them rot.
That is exactly what I am telling you.
Call somebody up in Detroit and ask them how much money they expect to make flipping a house.
When you see the US losing manufacturing jobs, where do you think they are being lost from?
What part of “there is no appreciation here” dont you understand. No flipping no Helocs (unless you have been in place for 10 years) People leaving. Good jobs leaving being replaced with McJobs.
Go buy a nice house in a suburb of cleveland, say rocky river (been rated the # 1 suberb many times over the last decade) or beechwood, or shaker heights Rocky river’s zip code is 44116. go use zillow to look at the purchase history of any house sold more than once in the last 10 years and do the math.
you are lucky to get 3% a year in an OUTSTANDING neigborhood with great schools, low taxes (relatively speaking), and no crime.
Columbus is MAYBE slightly better than Cleveland (I use cleveland as an example because I have the most knowledge of it)
These people just wanted a place to live. and got phucked. You think things are bad in Cali or Pheonix or Florida or Vegas or NYC with what mortgage brokers, appraisers, realtors are allowed to get away with??? come to Ohio you aint seen nothing yet.
here read this again real slowly
“Driven by a weak economy, foreclosures are fueled by aggressive mortgage brokers, appraisers and others who profit regardless of whether the loans ultimately succeed or fail, a Dispatch investigation found.
State oversight is tepid. Brokers are paying less in fines even as state officials document more wrongdoing. Millions in state licensing fees, meant for enforcement, have been spent instead on keeping the state budget afloat.
Borrowers in Ohio are especially vulnerable because the state hides from consumers key information about brokers, doesn’t require appraisers to be licensed and doesn’t cover mortgage lending under a law prohibiting deceptive sales practices. “
I’ll ditto Kennybabes comments, since there are many frequent readers of this blog who aren’t familiar with RE in the Great Lakes states right now (I live in Dublin, OH, btw).
At the moment, it’s hard to tell whether home building has slowed (winter will slow it down anyway), but there are MANY of these new developments, Dominion and others, which stand only partially occupied. Rather creepy, really. If any flipping has occurred in this area, it was turning existing condos over, from around 2001-2 to 2004; the wave of sales in those has peaked and gone (using my own observations as a data point).
I have not dealt with Dominion personally, so I won’t comment on their dealings, but am rather surprised that the Dispatch is getting off its fat ass and actually chasing down something interesting for once.
“…Ohio … doesn’t require appraisers to be licensed…”
Oh, my God….
No, I don’t think they were. Here in the middle of America, most of us have not been conditioned to expect insane appreciation rates or sales prices, or to become real estate millionaires overnight.
To me it looks like what happened were two things:
First there were people qualifying for houses when they shouldn’t have been, plain and simple. These people were at higher risk for defaulting. Add in a lot of funny business to get loans and down payments in the first place.
Second, people were deliberately overcharged for the houses they bought. If nothing else, they were quite upside down from day one, but didn’t know it until they had to sell. Hence the average (median) check a seller had to bring to closing was $23K. $23K may be no big deal to people on the coasts, but I’ll bet we’re talking about much more modestly priced homes, where the truth coming out in comps means being upside down for a long time. In this case, it appears that was the result of systematic and deliberate fraud.
Let me add on that I am not saying that the buyers may not be victums of their own stupidity/greed/failure to read the fine-print. I think their point is that even if they were, there still was deception on the home builder’s/sellers part.
It will be interesting to see if this starts any trends or copycats elsewhere.
Galloway ridge (one of the dominion subdivisions in qustsion) is in the 43223 zip code sombody with better tools can do better research
http://www.city-data.com/zips/43223.html
here are some highlights of what you find there.
Median price asked for vacant for-sale houses in 2000: $63,100
Median house value for:
* White Non-Hispanic householders: $69,600
* Black or African American householders: $66,500
* American Indian or Alaska Native householders: $46,400
* Asian householders: $93,800
* Two or more races householders: $75,200
* Hispanic or Latino householders: $71,900
go to realtor.com and put in that zip code, you get 25 pages of listings. I went to page 22 and found this house
# Single Family Property
# Area: COLS/FRA CO E I-270 & VALLEYVIEW
# County: Franklin
# Subdivision: SENECA WOODS
# Year Built: 1995
# 3 total bedroom(s)
# 3 total bath(s)
# 3 total full bath(s)
# Approximately 1764 sq. ft.
# Type: Single Family
listed for 133,500 on a 1/3 of an acre lot
Oh yes people getting all excited about flipping. take a deep breath and read the actual articles and stop projecting stuff you see in the OC or the bay area or florida or AZ onto columbus ohio. There aint no flipping here.
for anyone who doesnt want to do the math that works out to $75 a square foot.
not 175
not 275
not 375
not 1075
but $75 a square foot….NOBODY is flipping (except the old style meaning of the word where you buy a shitbox and use sweat equity to wring some profit out of it) houses in Columbus (or anywhere else in Ohio) for money
No they’re not trying to flip, they’re trying to buy more than they can afford. It’s going on here in CO too. We’re the middle ground between the Midwest and the bubbly coast. It’s not so much flippers and investers driving our prices up, it’s people spending 35 years of earnings to buy a house on a 30 year loan. It’s people just plain and simple trying to live beyond their means.
Actually if you go read the articles pertaining to this particular situation it is (allegedly) pretty much straight up fraud.
I am not saying that people stretching beyond their means does not happen (and possibly even in this case) but go read up on these guys. Go read the whole series of articles by the Columbus dispatch (Broken Dreams I believe). And it is not just this company—THERE IS BASICALLY NO REGULATION OVER ANY OF THE PLAYERS INVOLVED.
READ THIS ALOUD
“State oversight is tepid. Brokers are paying less in fines even as state officials document more wrongdoing. Millions in state licensing fees, meant for enforcement, have been spent instead on keeping the state budget afloat.
Borrowers in Ohio are especially vulnerable because the state hides from consumers key information about brokers, doesn’t require appraisers to be licensed and doesn’t cover mortgage lending under a law prohibiting deceptive sales practices. “
To the ‘bottomfisherman’:
I live in Columbus and have been closely following the Dominion Homes story since it broke last September. I know several families that live in the housing development central to the class-action suit filed against Dominion Homes. Hence I have investigated the specifications of the suit beyond daily reading of newspaper articles about it.
The principal defendants in the suit are several. Most are wholly owned companies controlled by Dominion Homes. Significant among them are the appraisal company, the title company, and the finance company fronting the mortgage money.
Anyone dealing with Dominion Homes in pursuit of the ‘American Dream’ of owning a home, must pass thru a gauntlet of self-serving functionaries whose only interest is to protect their jobs by selling Dominion homes: To anyone they can, by any means available.
The gauntlet starts with the sales agent and ends at closing with the buyers facing a formidable array of suits whose only interest is (and has been all along) ensuring the sale of a Dominion home.
Trust, between a buyer and a seller has always been an unstated part of any sales transaction. I.E. I trust that what I’m buying from you is reliable, dependable and will serve me as advertised; I trust that this soda I bought from a vending machine has been properly manufactured, bottled, and securely capped; I trust that the home I’m buying from you (while expensive!) is well built, fairly priced and will hold its value over time.
There are many builders in the Central-Ohio area building homes, condos, apartments, etc. Why, then, are the statistics revealed in the Columbus Dispatch articles last September concerning foreclosures and bankruptcies in Columbus, dominated by one Central-Ohio builder - Dominon Homes?
How, with all the thousands of homes sold in and around Columbus since 1999, did Dominion unexplicably come to sell to the overwhelming majority of the ‘greedy bag holders’ (your description of the home buyers) who purchased houses in and around Columbus? The majority of these buyers were buying their first home for their family; they were not interested in flipping their home for fun and easy profit.
How is it that the only builder plaqued by record foreclosure rates is Dominion? Why not Builder A, or Builder B? Did they all sell to people who were independently wealthy and didn’t need a mortgage? Maybe they only sold to immigrant families who pool their money to pay for the home only one of them purchased? (It happens here all the time!)
Maybe these other builders do a better job of screening the prospective buyers for financial solvency prior to selling them a home.
Maybe these other builders don’t offer ‘creative financing plans’ to guarantee the sale of their product, regardless of the current and future financial solvency of the buyer.
Maybe these other builders price their products based on the true value of the product, not on inflated prices that hide various components of the ‘creative financing arrangement’.
Maybe, just maybe, the other builders are running a business based on ethics and integrity. (What a novel idea!)
The class action suits filed in Central Ohio do not allege trivial indifference to the law. The charges are significant and include:
fraud (via numerous actions and concealments), negligent misrepresentation, unjust enrichment (of Dominion Homes, Inc., obviously), violations of Ohio Revised Code, and (last but not least) predatory lending.
Due diligence, you say! Caveat emptor, you say! Prepare yourself with research, and investigation, and counsel with an attorney! Many who have been foreclosed and are facing foreclosure went to their closing with legal representation. It did not stop them from being taken in by deceptive sales practices.
It has taken a veritable battery of lawyers to process all the paper work generated at the closings of the complaintants in the law suits. Specialists all, it took several weeks for them to make a determination as to how MANY different violations of law (and ethics) were involved with Dominion’s activities.
To expect a first-time home buyer to be fluent in all aspects of home-buying-procedures and -legalese (or a single attorney, for that matter) takes one beyond the norm of reality.
Does the name ‘Enron’ ring a bell?
Well, Dominion Homes has positioned itself to be the Enron of home building in Ohio. The fradulent practices of this company are endemic to the way they do business. Not just in Columbus, but all over Ohio. Not just in Ohio, but the three other states adjacent to Ohio where they also build homes.
If you were an honest, reputable company, would you offer a $2,500 check to someone who purchased one of your homes (via an FHA loan) as an enticement for them not to sue you because they discovered (via their own investigation) that their supposed-FHA loan was NEVER ACCEPTED by HUD and was subsequently sold to another lender without notification to the mortgagee that the loan had been sold and that the FHA insurance they thought they had was, in fact, non-existent. (Oh, by the way, the mortgage payments they had been making since day-one-of-ownership included fees to cover the cost of the FHA insurance they never really had.)
In my mind, an honest, reputable company, beset by fraudulent claims of improper conduct and law-breaking would fight the allegation for as long as it took, in as many venues as needed, to clear the name and reputation of the company.
However, Dominion took another route to fight the allegations. They offered the ‘$2,500 buy out’. Oh, yeah! I forgot to mention that they offered forty-four buy-outs! Seems they scamed forty-four persons/families who purchsed condo-style homes in a development north of Columbus.
The $2,500 offer rang a bell with the folks that alleged the impropriety in handling their loans. They sued. Theirs was the SECOND class action suit filed against Dominion Homes on Tuesday, February 21.
The snow ball has only begun rolling down the Domion Homes mountain. HUD and the Attorney General for the State of Ohio have both completed ’surprise audits’ of Dominion Homes books and records. These audits were initiated last fall. Results are pending and due to be announced in the next month or so. The Columbus Dispatch newspaper, who ran the initial expose last fall, has indicated that both HUD and the Attorney General are poised to file suit against Dominion Homes, Inc.
With the investigative and legal resources available to HUD and the State of Ohio, one can only wonder what they will allege in their suits.
I stumbled onto this blog while researching information on Dominion Homes.
What I found, especially under the moniker of ‘bottomfisherman’, are folks who delight in disparaging those who use the American legal system to overcome situations created not by their own doing, but by the fraudulent activities of a company and its employees whose only goal was to make as much money as possible by selling as many homes as possible by any means available (legal and otherwise) to as many unsuspecting buyers as came through the door each day.
GIven the flippant tone of your entries, and the attitude exuded by those entries, your moniker of ‘bottomfisherman’ is right on. My guess is that you don’t need a pole to catch the fish at that level: you should just be able to lean to one side and pick one up.
In response to your posting… I’m one of the “idiots” who purchased one of those homes. The package that Dominion sold to those of us “original residents” was marketed as a great way to own your home at a low interest rate and then turn around and sell it for a profit in order to purchase a better home. During the building process Dominion made changes to my home plan and had them approved by the city without my approval. I was out of the country away on business when the building of these changes took place and could not get out of the build contract without losing almost $11,000.00 so I went ahead with the home. Many other promises that Dominion made about the subdivision never came to fruition - like walking trails, a real park and other ammenities that we homeowners felt would increase our property value in Galloway Ridge. I waited patiently for them to make good on all of these promises - they did not. Unfortunately, after the loss of my job, I could no longer make that $1900.00 a month mortgage and could not refinance either. I tried for two years to sell my home which was appraised at $204,000.00 for a pittance of 170,000.00 - no takers - not even close. I had to foreclose and file for bankruptcy. This “idiot” would like to see that other homeowners are not take advantage of in this same way.
Signed,
“Just another idiot”
class action scks- China is laughing at us
REALITY TIMES says dump that 2nd home NOW !!!
roflow http://realtytimes.com/rtcpages/20060222_freeze.htm
My favorite quote from the Realty Times article:
There’s no better way to get a buyer to fall in love with your property than to bed them for a weekend.
Unless, of course, you’re not good in the sack
Don’t forget the KY jelly!
the scary part:
of the 38 houses that sold last year, 25 were sold because their owners fell into foreclosure or bankruptcy.
OUCH
The theory the plaintiffs appear to be using in this case is a little different than the others we have seen. I like it. It’s woth a shot.
People here continue to place too much faith in these class-action lawsuits. The odds that litigation will (1) make the buyers whole; or (2) bring down the large homebuilders/mortgage lenders are essentially nil.
Don’t expect to see KB or Washington Mutual “brought to their knees” by lawsuits. It could happen, but it is not likely at all. And obviously, someone who paid $800k for a McMansion on an income of $80k, and financed the purchase via a neg-am I/O sucicide loan, isn’t going to be saved by a lawsuit.
This particular piece of litigation, however, uses a novel theory that is sort of interesting. I like it. I don’t know that they will prevail, but they are using an interesting theory that is worth taking a close look at.
You are right. The big lenders have thought about this scenario years ago and are well protected by clever lawyers and their schemes. There is a small chance that some of them became carried away with the boom bonanza. The MBS markets and insurance w/ gov’t bailout protection are the real bag holders here.
Bottom line is this type of litigation is greatly entertaining, I want a piece of it (I’m a real estate attorney), and it will lead to a pullback from the lenders and builders.
I really hate this stuff. These people wouldn’t be suing if they’d flipped these shitboxes out for profit. They’d be bragging about what astute investors their are.
I screwed up this morning and entered the wrong sale price in a stock I was selling. Took a 70 cent hit I didn’t need to take. Guess I’ll sue the broker for the loss I incurred as a result of my own stupidity.
ot/txchick,
I remember reading that you trade for a living, and man, I gotta admire that…it’s tough to stay with it these days…back in the 90’s, all you had to do was throw a dart and you’d make money. I do just a little bit, nothing too serious, because I lack the expertise and time…so, good luck to you…market looks scary to me right now!
It does to me too which is why I am almost 100% loaded with June - Sept index puts. Looking for one push to get the buy stops at 1295 - 1300 s&p to put the rest on.
OT: Did you see the Dallas Observer article a few weeks ago on the Addison company that makes software for day traders and other market timers? Would be curious of your opinion on it.
Yeah, um, regardless of whatever iniquity the builder, appraiser, finance company, plumber, etc., may have committed, these people are basically suing because their “sure thing” turned out not to be such a sure thing.
The publicity will only decrease the house values even more.
It will be interesting to see what comes out in discovery. A lot of the plantiffs may be wishing their loan applications didn’t get a closer look.
Great Point! The builder’s lawyers will eat a lot of them alive.
As I understand the articles, it sounds like sour grapes on the buyers part. The Columbus Dispatch from last December gives a fairly good summary of events. As posted by txchick above the buyers would not be complaining if the prices had gone up. Also to be FHA the loans had to be under $237,500, at the time of these purchases FHA 30 yr fixed were 5.75 and 1 yr FHA ARMS were 4.75%. (FHA requires uopfront mortgage insurance Premium of 1.5% + Monthly Insurance Premium of .5 %). Nobody is complaining about the interest rate - and a non FHA mortgage is often quite better for the borrower. In 10 years I ahve seen one FHA mortgage assumed - the assumer had to put down $40,000 to assume.
“Dominion tells a different story. When the FHA financing was denied, the company paid National City nearly $1 million to convert Polaris Park mortgages into uninsured loans.
The payment covered the 41 home buyers with closed loans and about 25 others who had not finalized their sales.
The payment, Hart said, was made to offset losses if any of the uninsured mortgages went to foreclosure.
“The whole thing was a $900,000-plus loss to us. That was the consequence of not getting FHA approval,” Hart said. “There’s no guarantee you’re going to get FHA. There’s nothing illegal about it. I’m very satisfied that we did the right thing.”
Dominion executives said they had a signed contract with National City to convert the loans. A loan-purchase agreement shown to The Dispatch outlined the terms of National City’s purchase of FHA loans. It did not mention changing the loans or transferring them.
http://tinyurl.com/qcflm
This is what will happen everywhere, buyers suing sellers, home inspectors, lenders, etc. In the early-mid 90’s in SoCal, buyers sued all the time. When the value of your home is falling, those small defects in the home that the inspector missed become lawsuits against everyone involved. As agents, half our working hours were spent discussing diclosure and how to fill out a transfer disclosure statement so that the buyers had nothing to complain about after the close. You should have seen the boiler plate disclosures that came about during that time, they were hilariously absurd in their detail.
I see we have a winner(s) of the Powerball in Nebraska. Guess there will be a bubble in Lincoln, Neb homes in a day or two. LOL
What do you want to bet that all that money is gone within 2 years or less.
Why not invest it in condos in Maimi. I hear they have great selection there now!
As much as we want the buyers to take the fall in their own decisions, the facilitators also need to learn a lesson. Perhaps in the future this will wane predatory lending and pump and dump properties. If they get away scott free, they will continue to manipulate the public for their own profit.
Caveat emptor. And the same goes for any sheep who buy the HB stocks on today’s mysterious rally, which flies in the face of recent precautionary advice in the WSJ and other financial news sources:
http://tinyurl.com/m5kwh
ROTFLMFHO
Stephanie Stuart, Amy and Scott Rudawsky, and Michelle and Jeffrey Beard were ‘tricked into purchasing a home which lacked the resale benefits of an assumable FHA mortgage … ‘
Tricked into purchasing a home? Didn’t this argument go down in flames during the last downturn? Why hasn’t this been tried before and resulted in some kind of useful precedent, or better yet legislation?
Tricked into the actual decision to purchase? or led to believe that the mortgage they were signing for was an FHA mortgqage when it was not?
why do people comment without reading the article???? The buyers were told they were getting FHA mortgages, their documents said they were FHA mortgages, but when the mortgages were sent to FHA, FHA wouldn’t endorse them because they didn’t meet the program guidelines. No one told the buyers.
What I don’t understand is the “assumability” issue. Either the loan documents themselves had a due-on-sale clause, in which case there was duplicity from the beginning, because FHA won’t ever accept those, or there was an “assumability” clause, or the docs were silent which in most states (granted I don’t know Ohio in particular) means that they were assumable. Whether or not the loans were FHA doesn’t directly translate into assumability, the wording in the loan docs translates into assumability or non-assumability. There’s something here that I’m missing.
The FHA assumability issue that led to the 2nd lawsuit is based on the fact Dominion told the buyers they were getting an FHA loan.
The buyers signed all the proper paper work at closing.
The loand were forwarded to HUD, but HUD declined to take the loans because the development in which the houses (condos) were located is located next to Interstate 71, a major north/south highway through Columbus. The loans were declined because of the level of noise generated by the traffic on the freeway.
How this ‘noise’ issue was ever placed into United States code has never been revealed. But, since HUD refused the loans, Dominion had to do something so they sold the loans to another lender which in turn canceled the assumability option and the FHA insurance the buyers thought they were getting. Their mortgages were calclulated to include fees for the FHA insurance.
Since no one told the buyers anything about HUD bypassing the loans, no one made any effort to recalc the monthly payments minus the cost of the insurance.
Oh, one for Kennybabe: Galloway Ridge is NOT in Zipcode 43223.
Do your research on 43119, Galloway, Ohio.
I know because G.R. is in the first zipcode south of me.
I live in Louisville,Kentucky and I have contacted our local news investigators to check into Dominion Homes. We have currently as of 4-28-06 15 Preforeclosures,7Foreclosures and 4 Bankruptcies in my Hunters Creek Subdivison. We have someone checking into our homes because we were told that I homes are NOT insulated and Dominion violated A Federal Housing Code. There has been a house for sale for over a year. The new owners are now for a thrid time bringing the price down. We were told we were NOT allowed to rent our homes out because this is a HOMEOWNER Subdivison ONLY,yet there’s t 12 homes rented out and 6 more For Rent signs up,which we are not allowed to have in the yard. We are only allowed a FOR SALE sign. I don’t agree we should have to pay HomeOwners dues when we have to share our subdivison with renters,who by the way are not checked out as in background checks,only their credit is checked and we’ve had MANY issues with a few renters in my area. They seem to think they do not have to follow the rules because they rent and do not own. There is a loss between $10,000-$20,000 when homes were appraised. They are not appraising for what Dominion claimed they are worth. I wish I knew this ahead of time I would have ran as fast as I could the other way! We’ve been DOOPED into these homes! NEVER buy one. RUN FAST AWAY from Dominion Homes or anyone associated with them!
“Driven by a weak economy, foreclosures are fueled by aggressive mortgage brokers, appraisers and others who profit regardless of whether the loans ultimately succeed or fail, a Dispatch investigation found.
Convenient, but wrong. Caveat Emptor applies, as always. I’m willing to believe that most of the poor saps who “tried to get in on the ground floor of the American dream” (cough) were not flippers. Still, they clearly failed to do a thorough due dilligence on what they’d signed up for, and got in over their heads. The mortage brokers, realtors, and others of their ilk were the “enablers” in this tale of woe, but the BUYERS bear full responsibility and accountability for their actions and gullability — and the consequences of same. Fools and their money….
“Driven by a weak economy, foreclosures are fueled by aggressive mortgage brokers, appraisers and others who profit regardless of whether the loans ultimately succeed or fail, a Dispatch investigation found.
Convenient, but wrong. Caveat Emptor applies, as always. I’m willing to believe that most of the poor saps who “tried to get in on the ground floor of the American dream” (cough) were not flippers. Still, they clearly failed to do a thorough due dilligence on what they’d signed up for, and got in over their heads. The mortage brokers, realtors, and others of their ilk were the “enablers” in this tale of woe, but the BUYERS bear full responsibility and accountability for their actions and gullability — and the consequences of same. Fools and their money….