John Giuliano won a competitive foreclosure auction on a house he doesn’t want and plans to sell for a loss. It was the best he could do.
Giuliano (pictured) was the second of five bidders to show up to a Saturday auction at 36 Stanley St.
The foreclosure was brought by J.P. Morgan Chase bank, which holds the first of two mortgages on the house. Giuliano was there to represent the holder of the second mortgage, Fairfield-based investor Jennifer Rodrigues. The house’s owner, Marlene Esposito of Northford, defaulted on both mortgages.
Giuliano won the auction on behalf of Rodrigues. He said that she plans to fix the house up and sell it, to try to recoup some of the $100,000 that she lent to Esposito.
When all is said and done, she will have put some $250,000 into the property. Giuliano said he hopes to be able to sell it for $200,000.
So Rodrigues would still lose $50,000. So why bother? Because that’s less than the nearly $100,000 she would lose if someone else had won the auction.
The five-apartment building is currently unoccupied, having been abandoned seven or eight months ago. Giuliano said that there had been a homeless man squatting on the third floor.
36 Stanley St. (pictured) is at the center of a complex constellation of ownership and legal claims, with two mortgages, outstanding city taxes, a $8,800 debt for water fees, and a federal lien from the IRS.
Such complexity is not new for the owner of record, Marlene Esposito, and her husband, Andrew Esposito.
Andrew was a previous landlord in another complicated city foreclosure in 2007. That house, at 312 Greenwich Ave., had changed ownership over six times on paper, as it was shuttled back and forth in $1 transactions between Andrew, Marlene, and their limited liability corporation, Suburban Associates.
At Saturday’s auction, Giuliano complained that, because of inaction by the bank, the Espositos had the ability to keep collecting rent from their tenants if they chose, whether or not they put it towards the mortgage. The bank hadn’t been paying attention, he said, and didn’t step in to trigger “rent receivership” and take tenants’ rent directly. Thus, Giuliano argued, the Espositos had an incentive to drag the foreclosure process out, since they were still making money off the property.
The Espositos couldn’t be reached for comment to explain what how they did end up handling the property or why they lost it.
On Feb. 3, 2005, Marlene Esposito purchased the house at 36 Stanley St. for $235,000, with a $180,000 mortgage from Chase Bank. Two weeks later, ownership was transferred to Suburban Associates, LLC. According to the bank’s foreclosure suit, there were no further payments on the mortgage as of October 2006, at which point over $177,000 was still owed.
In June of 2006, according to Giuliano, Jennifer Rodrigues gave the Espositos a private mortgage of $100,000 on the property. “They were going to do some renovation,” Giuliano said. “They defaulted after six payments.”
So Giuliano showed up on Saturday to see if he could pick up the house for cheap and recover some of his boss’s investment.
Winning the auction turned out to be a more expensive proposition than Giuliano had hoped, thanks to some other suburban investors, Ed and Susan Goodwin (pictured) from Stratford. The Goodwins said that they own investment properties on Clay Street in New Haven.
The bidding began at noon, when court-appointed Attorney Lynn Pellegrino revealed the bank’s bid: $85,000. Giuliano made a bid of $86,000. Ed Goodwin countered with $87,000, and a short bidding battle began. Minutes later, Giuliano had pushed the price higher than the Goodwins could go. He won with a bid of $135,000.
“If we weren’t in so deep I wouldn’t go that high,” Giuliano said, almost apologetically, to the Goodwins. “It’ll still be a loser for us.”
“We just bid enough to try to protect our interest,” Giuliano said later. If anyone else had won the property, Rodrigues company would have lost the over $90,000 that the Espositos still owe her. The first mortgager, Chase Bank, would have had the first claim on whatever money was taken in. “Our mortgage would have been wiped out,” Giuliano said.
As Giuliano completed the paperwork with Attorney Pellegrino (at left in photo), an associate of Giuliano’s (at right in photo), who declined to give his name, complained about delays in the foreclosure process that leave open a potential for abuse. Landlords that are allowed to keep taking in rent money after they’ve defaulted on the loan have no reason to follow through with foreclosure, he said.
“They stall and stall and everybody’s ripping each other off,” the man went on. “Why does it take four years?”
Giuliano agreed that, with a huge bank that can’t keep track of all of its properties, the system can be exploited with impunity. “The incentive is you grab all the cash flow,” he said, referring to landlords pocketing rents from tenants. Then the property owner can be foreclosed on, and walk away. “He doesn’t have to pay anything,” Giuliano said.
With the right attorney, Giuliano’s associate said, a landlord can postpone foreclosure for a long time. “Bingo! Bankruptcy! That’s another nine months,” he said.
The bank can step in to collect the rent directly, Giuliano later explained, but in the case of 36 Stanley St., Chase didn’t. The bank should have “triggered rent receivership,” said. “If they did that we would’ve had this a year ago.”
Giuliano said that Rodrigues’ mortgage had a rent receivership clause, but the company’s attorney had advised them not to trigger it since it could somehow violate the bank’s mortgage. “We tried to contact the bank and have them do it,” Giuliano said. They even offered to buy the mortgage from the bank, for $110,000. “We couldn’t even get anybody with authority … You can’t reach anybody.”
Giuliano said the Rodrigues hadn’t foreclosed on the Espositos because the bank, holding the first mortgage, would have been first in line to collect any money from a foreclosure auction. “That’s the system,” he said. “You sit back and wait for it to unwind.”
If the bank had started collecting tenant rents, “that would’ve taken the incentive away from any property owner.”
Giuliano said that Rodrigues will probably put $30,000 into renovating 36 Stanley St. and then try to sell it for around $200,000. As with all foreclosure auctions, the winning purchase price will first need to be approved by a judge.
Previous Independent coverage of New Haven’s foreclosure crisis:
• This Is The Face Of Deutsche Bank
• Banks Duck City On Foreclosed Homes
• Rescue Squad Hunts For “Tipping Points”
• Still A Bargain, Foreclosure Price Zooms
• Flippers Get 2nd Shot At Fixer-Upper
• Suburban Cop Finds A City Steal
• Absentee Banklords Thwart Foreclosure Sales
• City Forecloses On 40 Lots
• Crowd Seeks Cure For “Mortgage Distress”
• Donovan: “Help Is On The Way”
• Judge Forces WPCA To Give Mom A Chance
• WPCA Uproots Tenants, Too
• Home-Rescue Squad Ignores WPCA
• Sewer Agency Unloads House
• Foreclosure Evictions Halted
• Let The Bank Have It, This Time
• Hazel St. Sale Reflects Economic Climate
• Hill Foreclosure Triggers Memories, & Prayers
• Foreclosure Fee-Slashing Judge Leaves Town
• She’ll Be Watching Deutsche Bank
• A Last Pre-Foreclosure Look At A Lifetime Past
• New Yorker Snags Foreclosed-Upon Gem
• Foreclosure Dream Goes Sour
• Judge Slashes Foreclosure Bounty
• Tax Break Saves Woman’s House
• Bank Replaces “Gunshot Alley” Landlord
• Foreclosure Bill OK’d
• Singh Seeks Home For A Song
• Foreclosure’s Neighbor Worries More About Speeding
• Networking Replaces Foreclosure at Christy’s
• Foreclosure Bargain — & Renewal — Jeopardized
• Bank Outbids Akbar; Family May Keep Home
• “So Don’t Worry About Pablo”
• Bankruptcy Postpones Foreclosure
• Next-Door Foreclosures, 53 Years Apart
• They Met On Foreclosure Way
• Little Garage Draws Big Bids
• A 2nd Chance on Lewis Street
• Foreclosure Attracts New Breed of “Specialist”
• In Foreclosures, Judge’s Hands Tied
• Home Saved From Foreclosure. Cycle, Too
• A House For Precious?
• Deutsche Bank Grabs Dixwell Condo
• Reluctant Bidder Snags F. Haven Bargain
• Well, There’s Always Powerball
• Neighbors Retrieve Home From Bank
• Somebody Has Plans For Bassett Street
• Foreclosed, the Khennavongs Leave the Santanas
• Foreclosure Steal May Be Too Good
• 2nd Foreclosure in 3 Months Dims Bright St.
• After Foreclosure, W’ville Owner Still Hopes To Sell
• He’s Not Buying, Yet
• Quiet Foreclosure on Porter Street
• 3 Minutes Too Late
• Historic Gambardella Property Foreclosed
•2 Homes Lost, 1 Gained
• “Everybody’s Got To Eat”
• More Foreclosures, More Signs
• Foreclosure Sale Benefits Archie Moore’s
• Rescue Squad Swings Into Action
• A Bidder Shows Up
• Bank Beats Tanya’s Bid
• Westville Auction Draws A Crowd
• DeStefano: Foreclosure Plan Ready
• Can They Help?
• “We Should Over-Regulate These Bastards”
• Rosa Hears of Rescues
• WPCA Grilled on Foreclosures
• WPCA’s Targets Struggle To Dig Out
• Sue The Subprimers?
• WPCA Hearing Delayed
• Megna’s “Blood Boils” at WPCA Tactics
• Goldfield Wants WPCA Answers
• 2 Days, 8 Foreclosure Suits
• WPCA Goes On Foreclosure Binge
• A Guru Weighs In
• WPCA Targets Church
• Subprime Mess Targeted
• Renters Caught In Foreclosure King’s Fall
• She’s One Of 1,150 In The Foreclosure Mill
• Foreclosures Threaten Perrotti’s Empire
•“I’m Not Going To Lay Down And Let Them Take My House”
• Struggling Couple Sues Over “Scam”
To learn about the ROOF Project, a community-wide effort to help New Haveners navigate the foreclosure crisis, click here.
The following links are to various materials and brochures designed to help homeowners avoid foreclosure.
How to prepare a complaint to the Department of Banking; Department of Banking Online Assistance Form; Connecticut Department of Banking, Avoiding Foreclosure; FDIC Consumer News; Statewide Legal Services of Connecticut, Inc; Connecticut Bar Association Lawyer Referral Service.
For lawyer referral services in New Haven, call 562-5750 or visit this website. For the Department of Social Services (DSS) Eviction Foreclosure Prevention Program (EFPP), call 211 to see which community-based organization in the state serves your town.
Click here for information on foreclosure prevention efforts from Empower New Haven.