$1M mortgage mess: No English? No income? No problem!
How a single mother in public housing got a million in mortgages
By Laura Crimaldi | Sunday, May 18, 2008 | bostonherald.com | Local Coverage
Photo by Mark Garfinkel
During the frenzied days of no-down-payment loans and cursory credit checks in the early 2000s, two out-of-state lenders gave more than $1 million in mortgages to a Dorchester woman who lives in public housing and barely speaks English, the Herald has learned.
The loans, originated by New Jersey-based Equity One Inc. and the now-defunct Meritage Mortgage Corp., foreclosed last year, making 243-245 Washington St. and 16 Dacia St. among the 233 foreclosures to hit Dorchester in 2007, city and land records show.
The foreclosures have also left the borrower, Angela M. Torres, 47, a mother of two who speaks only Spanish, in financial ruin and under scrutiny from the Boston Housing Authority, which subsidizes her Dorchester apartment.
“I have nothing,” Torres told the Herald in Spanish last week. “I don’t have a business. I don’t have a car. I don’t have a house. I don’t have anything.”
Torres said a Boston real estate broker, Eloy C. Mariluz, helped her buy the properties. Mariluz said he had nothing to do with the loans, even though he took a commission on the property sales.
“I don’t deal with mortgages,” said Mariluz, 49, who has no office and earned 3 to 5 percent on the sales. “I remember at that time companies gave 100 percent financing. They know better now.”
Since the foreclosures, Torres was nearly evicted on Oct. 11 from her BHA apartment on Maryland Street for nonpayment of $961 in rent, Housing Court records show. On January 4, U.S. Bankruptcy Court Judge Robert Somma granted her Chapter 7 bankruptcy protection, federal records show.
Following an inquiry from the Herald, a BHA spokeswoman said the agency is considering civil action against Torres and has notified the office of U.S. Attorney Michael J. Sullivan.
“These are very serious allegations - the public housing program is designed to provide affordable housing for poor and working poor families,” said BHA spokeswoman Lydia Agro in an e-mail. “If these allegations prove to be true, we would consider them to be a very serious violation of the public trust.”
The episode is but one amid the flurry of predatory and unscrupulous lending practices that prevailed during the mortgage boom. On Friday, federal authorities announced the indictment of 11 Boston lawyers, mortgage brokers and others who allegedly engaged in a $10.6 million mortgage-fraud scheme that employed straw buyers to buy properties in Boston, Quincy, Cohasset and Brockton at inflated prices. Many of the properties are foreclosed, blighting stretches of neighborhoods.
“It’s horrible. It reminds you that it’s a fragile thing creating and protecting an urban community,” said Steve Meacham, a tenant organizer with City Life/Vida Urbana, which is a member of the Massachusetts Alliance Against Predatory Lending. “You’re really playing with fire.”
Classic ‘straw’ buyer
Vincent M. Valvo, group publisher at The Warren Group, which publishes real estate and financial news, said Torres’ circumstances fit the bill of a common and illicit straw buyer scheme.
“This sounds like a classic case of a straw-man purchaser,” said Valvo. “You have to wonder how a public housing tenant who can’t pay her own rent manages on her own to get four high-value loans in the span of two years.”
Suffolk County land records show that Torres acquired her first property, 243-245 Washington St., on Oct. 1, 2003.
The property, which comprises a land parcel and a three-unit brick apartment building, sold for $489,000 and was mortgaged with 100 percent financing from two loans from Meritage, land records show. The mortgaged amounts were $97,800 and $391,200.
The property deed indicates Torres was living in an apartment at 113 Bunker Hill St. in Charlestown at the time of the purchase. That unit is located in a BHA project. Eight months later, on June 23, 2004, Torres purchased 16 Dacia St. for $700,000, Suffolk County land records show. The property, which consists of a first-floor store and four residential units, was financed with a $530,250 loan from Equity One, according to the mortgage filed at the Suffolk Registry of Deeds.
At least eight people lived in the property when it foreclosed on March 30, 2007, according to city inspectional records. Last week, Mayor Thomas M. Menino dispatched his Foreclosure Intervention Team to Dacia Street because of the high concentration of foreclosure activity there.
Four months after the Dacia Street purchase, on Nov. 9, 2004, Torres was granted another pair of loans from Meritage for $116,800 and $467,200 on her Washington Street property, land records show. These mortgages wiped out the debt on the initial notes, which were valued at $489,000.
The original loans granted to Torres are tangled in the netherworld of hundreds of thousands of mortgages that were bundled as securities and resold on Wall Street during the subprime lending boom. The market’s collapse is now rocking the global economy.
Meritage, which gave Torres loans for $489,000 and $584,000 in 2003 and 2004, has no employees and is being liquidated by the Federal Deposit Insurance Corporation (FDIC), a spokesman said. The subprime lender collapsed after its parent company, NetBank of Alpharetta, Ga., was closed by the Office of Thrift Supervision on Sept. 28, 2007, said FDIC spokesman Andrew Gray.
The $530,250 loan given by Equity One in June 2004 was sold two months later to Bayview Loan Servicing LLC of Miami, Fla., said Juan Carlos Cruz, a spokesman for Banco Popular, Equity’s parent company. An attorney for Bayview declined comment in an e-mail.
Equity One Commercial spokesman Michael Walsh said that mortgage was a commercial loan. He said the issuance of those loans are not based on the borrower’s personal finances.
“It has nothing to do with someone’s personal assets,” said Walsh. He said Equity makes underwriting decisions for commercial loans based on the property’s appraisal, whether leases are in place and whether the building is occupied.
The mortgage that Torres signed and initialed is written in English. Cruz said that Equity makes sure that borrowers understand what they are doing “no matter what language it is.”
“I don’t know that she does or she doesn’t speak English,” said Walsh. “It sounded the way it was being twisted that we’re trying to take advantage. That’s not what we’re doing.”
Ran a small flower shop
Speaking to the Herald, Torres said that she had a small business in South Boston, Angela Flowers, when she bought the properties. She said Mariluz, who is her friend’s brother, didn’t have the credit to get the necessary loans.
“It’s my credit. In reality, the house is not mine,” Torres said. She appeared confused by the mortgages she signed, telling a reporter, “You know more than me.”
Attorney John H. Molloy, Torres’ bankruptcy lawyer, said he does not know how or where she obtained her mortgages.
“I have no idea as to why they did what they did,” Molloy said.
Mariluz said he received a commission of three to five percent from the seller on both sales and collected a “small fee” for collecting rents and managing the properties.
“I didn’t do the paperwork. I just find the property, I do the sale. I do management sometimes,” said Mariluz. “I have nothing to do with mortgages.”
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