State Joins Inquiry Of Unusual Loans
By Shannon Behnken of The Tampa Tribune
Published: March 5, 2008
TAMPA - Hundreds of peculiar home sales and foreclosures clustered in low-income neighborhoods in south St. Petersburg have attracted the attention of the Florida Department of Law Enforcement.
The deals involved unusual mortgages uncovered last summer in a Tampa Tribune investigative report. The sales are tied to a real estate investment program run by a local businessman. Several buyers complained to local police that they bought the properties at inflated values.
Ellen Wilcox, an investigator with FDLE, said the case recently was referred to her by the St. Petersburg Police Department, which turned over a spreadsheet of addresses.
"We're looking into it," Wilcox said.
Amid record foreclosures and a crumbling housing market, FDLE and other law enforcement agencies are increasingly investigating problem mortgages, particularly those that involve large sums of cash back at closing.
That's because the housing downturn is revealing a landscape of creative loans gone bad, and lenders are reporting those to investigators, Wilcox said.
"The complaints are pouring in and the problems are affecting the overall economy," she said.
The St. Petersburg case involves 303 property transactions. A group of 65 real estate investors went through a no-money-down investment program to purchase the homes over a five-year period.
Buyers said they looked past unusually structured settlement documents that allowed third parties to collect thousands at their closings in order to make money in Florida's real estate boom.
Those buyers now complain they overpaid and that the companies that arranged the deals either didn't do promised renovations or delivered shoddy work. When the Tribune's story ran in July, 160 of the homes were in foreclosure. Since then, 38 more have joined them, bringing the foreclosure total to 65 percent of the sales. Lenders are left on the hook for millions of dollars in failed loans.
The investment program was run by four companies owned by Tampa businessman Joseph F. Daniele.
Over a week's period, the Tribune left numerous messages for the attorney who represented Daniele in July, Ryan Griffin, of Johnson, Pope, Boker, Ruppel & Burns in Clearwater. On Wednesday, Griffin indicated he would like to comment about the story but did not provide his comment in time for publication. Daniele, who runs Titan Development Group LLC, told the Tribune in July that there was nothing wrong with his business practices. He blamed buyers for failing to manage their investment properties.
The Tribune's investigation found:
Settlement documents indicate buyers consistently made $15,000 to $25,000 down payments, even though buyers said they did not bring any money to the table. Misrepresenting funding to lenders is against federal law.
In 11 cases in which The Tribune obtained settlement documents, prices included a total of $272,716 paid to companies Daniele operated. Daniele said the money was used to pay for repairs, but a seller and some buyers disputed this.
Most buyers interviewed said promised repairs weren't always made and work was shoddy, even though documents show Daniele's companies received thousands of dollars, as much as $35,010, for example, at one closing. Daniele said the money was to repay him for work done before the sale.
One lender confirmed to the Tribune that it received a sales contract with a higher sales price than the one turned in to a real estate broker. It is against federal law to withhold or misrepresent information that could influence a lender's decision to fund a loan.
Buyers told the Tribune they were encouraged by Daniele and his staff to buy as many homes as they qualified for and to purchase them quickly. Some said they signed stacks of mortgage documents in parking lots and restaurants, such as Dunkin Donuts.
Some of the buyers said their documents were blank when they signed. Others said they asked about discrepancies, such as the down payments, and were told the money was coming out of Daniele's companies' proceeds.
Some properties the investors purchased went into foreclosure several times, as buyers bought and sold homes among themselves. The neighborhood, which had problems with crime before, has continued to deteriorate, and many of these homes are now vacant and owned by lenders, said Tom DeYampert, the city's manager of housing and urban development.
Happy Then, Upset Now
A handful of buyers interviewed for July's story said at the time they were reasonably happy with their investments, but that has changed. Three of those buyers are now in foreclosure on a combined 18 properties.
One of the buyers, Marisol Napoleon, said renovations did not meet her expectations, and one of her houses ended up "falling apart." She couldn't keep the homes rented, she said, because they needed more improvements than she could afford to complete. She said she now thinks she paid too much for the properties.
Another buyer, Jay Pasqualichio, said he now thinks he paid too much for his 12 properties. Since the real estate market has tanked, he also owes much more on the homes than their current value.
"I'm not trying to put all the blame on other people," Pasqualichio said. "I know I signed the documents. But I hope people who see these ads and hear these types of pitches, will really do their homework... I now see I was clueless."
Few of Daniele's buyers met him. Instead, they worked with a real estate agent and company employees. Some buyers were persistent and talked with Daniele on the phone or through e-mail. They said they were impressed with his knowledge of real estate investing.
The Picture Of Success
Daniele got his start in his hometown of Akron, Ohio. A seven-page pamphlet titled "Our Goal is to Help Investors Reach Financial Independence" paints Daniele as the picture of success: a college dropout who purchased his first home in 1994 using credit cards. Three years later, he had 160 rental properties in Ohio.
Daniele developed the Titan company, according to the brochure, to rehab homes in Ohio, the Tampa Bay area, Jacksonville and North Carolina, then sell them to other investors.
After moving to the Tampa area, Daniele built a 12,000-square-foot home in Odessa's upscale Stillwater neighborhood in 2004. He sold the home for $2.7 million in 2005 and built a home at 4118 Causeway Vista, his primary residence and the address of his four companies. That home is valued at $1.5 million, according to property tax records.
Since July, two companies owned by Daniele have sold 14 properties in Pinellas County.
Meanwhile, Daniele is fighting allegations that he and some investors in his program misrepresented loan documents in Ohio. ABN Amro Mortgage Group sued him and others in 2005. In the suit, the lender called Daniele "the primary architect of the scheme" involving hundreds of homes that went into foreclosure and left the lender with millions of dollars in loan losses.
The case is still in court, but public documents show Daniele has tried to make a deal with the lender to testify at trial against other defendants. In exchange, the lender would drop him from the case, according to a proposed consent judgment, filed in November.
In that document, Daniele said, "any judgment for the amounts sought against him or his corporations would likely precipitate bankruptcy filings."
The judgment has not been signed by the judge, public records show, and the judge's assistant said the case is still in discovery.
In St. Petersburg, more homes sold through Daniele's companies have fallen into foreclosure, and some investors are barely making their mortgage payments.
Kevin Smith, of the Economic Crimes Division in St. Petersburg, said complicated financial cases move slowly and are difficult to investigate. It took six months to gather enough information to turn over the case to FDLE.
As far as FDLE is concerned, the number of transactions isn't as important as the strength of the evidence. Wilcox, the investigator with FDLE, said she doesn't know whether any of the loan documents Daniele's investors signed were structured improperly, but said her agency will review them.
"There's no way any investigation can look into all those transactions," she said. "We investigate the best loans that would make the best criminal case."
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