Arthur and Joanne Taylor were days away from losing their Westville home to foreclosure when a man came knocking on the door. He had a plan to save them.
Alex Ortner and his real estate company ended up making at least $25,000 off the family in a buy-back scheme now being challenged in New Haven U.S. District Court. After getting slapped with a lawsuit filed in October by attorney Gary Sklaver, Ortner said he won’t be making the same offer to desperate homeowners anymore.
The Taylors are among a growing population of New Haven homeowners who have been put at risk of losing their homes through foreclosure. An estimated 679 New Haven homes are currently in various states of foreclosure, according to RealtyTrac, as communities across the state and country are feeing ripples of a mortgage and sub-prime lending crisis. The number of legal proceedings filed against residential homeowners jumped 85.1 percent, from 121 in the second quarter of 2006 to 224 in the second quarter of 2007, according to The Warren Group. The Independent is telling the stories behind those statistics.
The Taylors bought this spacious ranch house at 126 Whittier St. in March 2000. Tucked away in a rabbit warren of closed-circuit streets by the Yale Golf Course, it made for a peaceful suburban-style home on the outskirts of New Haven. It had an attached garage, a stone chimney and an old oak sweeping overhead. With a mortgage from the Wells Fargo bank, they bought it for $165,500.
In the fall of 2002, however, the couple started to slip behind on their mortgage payments. After drawn-out journey through foreclosure and bankruptcy court, a big sign got planted in their yard: “Foreclosure.” The sale was set for April 11, 2005.
Less than a week before the sale, Ortner and an associate came knocking on the Taylors’ door. He had a plan to save the couple from foreclosure and allow them to stay in their home.
Depending on whom you ask, what followed was either a “deceptive scheme” preying on a couple’s desperate situation, or a life-saving opportunity that came at a cost.
Deal Signed, At Honda Dealership
Here’s what happened, according to the suit:
Ortner told the Taylors that “we,” meaning he and his unnamed company, could save them from being kicked out of their home. Ortner explained that “we” would pay off the Taylors loan and the bank’s attorney fees and let the Taylors stay there while paying rent until they got their credit rating back up. “We” would have someone to help them re-establish their credit and refinance the home, Ortner allegedly said.
The next day, Ortner called the Taylors and told them to meet him at an address in Route 1 in Branford. When the Taylors arrived, they found themselves at a Honda car dealership, Brandfon Motors. Ortner was waiting with a stack of papers, which the Taylors dutifully signed.
The Taylors “did not understand the legal significance of what they were signing,” but later learned they had agreed to sell the house for $195,790 with an option to buy it back for $239,800 a year later, according to the suit.
The Taylors had escaped foreclosure. They continued living in their home, paying rent of $1,686 per month. They had been saved in the short term from the weight of back payments due to the mortgage lender.
But when they looked into refinancing their home, they were shocked to find out how much they would end up paying.
Only when the Taylors finally closed on a refinance of their home, buying it back for $233,039 in June 2006, did they realize how much Ortner and his investors, through the Whittier Road Land Trust and the Temperly Investment Group LLC, had profited.
Investors had put in $36,000 to bring the mortgage current, but got “repaid” more than twice that much — a total of $78,583, according to the suit.
Rescue “Scam”
Attorney Sklaver describes the operation as a typical “foreclosure rescue scam,” one of a wave of schemes that have emerged to defraud homeowners of the equity they have in their homes. Companies search for homes in foreclosure, then swoop in and prey on often unsophisticated homeowners “when they are most vulnerable to unfair and deceptive schemes.”
“They know these people are in many cases desperate, because they’re about to lose their home,” said Sklaver (pictured), of Licari, Walsh & Sklaver in New Haven.
After being taken to court for not making mortgage payments, homeowners typically don’t have good enough credit to refinance, so “they pretty much grab at whatever they can to save their home in the short term,” Sklaver said.
Homeowners then face massive payments if they want to buy back their homes. Many can’t afford to do so, and end up getting evicted. The Taylors were lucky — they were able to stay.
Sklaver considers Ortner’s transaction was not just a sale with buyback option, but a “disguised loan” with an exorbitant interest rate. In this case, investors advanced $36,000 towards the mortgage and were repaid $78,583 a year later, Sklaver calculated – that’s a 120 percent interest rate.
Sklaver contends the Taylors’ home sale falls under the Truth In Lending Act, which requires disclosure of certain information including the interest rate and an option to rescind. Since no such information was disclosed, his clients should be able to rescind the transaction they unwittingly fell into at the Honda dealership, Sklaver argued.
The Rescuer’s Side
Ortner, a managing partner of the Temperly Investment Group, said he does target properties in foreclosure when looking for homes to buy.He said he’s only doing families like the Taylors a favor.
“We just wanted to buy the house outright,” Ortner explained, but the Taylors begged to keep their home, “so we agreed to let them stay.”
Ortner said he’s been sued once before by homeowners in a similar buyback case. He agreed to pay a settlement, because “our paperwork wasn’t clear for our case.” This time, with the Taylors, he said he made sure “everything was made clear.”
Ortner, reached by phone, said the transaction should not be considered a loan, and the terms of the sale and buyback were clearly written out on the papers the Taylors signed.
Ortner contended his company made only $25,000 off of the couple. “We were just trying to make a fair profit.”
In exchange, argued Ortner, the Taylors emerged without a foreclosure marring their credit, and got to stay in their home. “We took care of their situation when no one else would,” said the real estate agent, who’s been in the business in Connecticut for four or five years.
The couple even thanked him at the time of the sale, Ortner said. He said he was “shocked” and “hurt a lot inside” to hear he was being sued, because “we thought we were doing them a favor.”
“Those arguments have been made for a long time,” Sklaver responded — by pawnbrokers and predatory sub-prime lenders. They’re the arguments people use when they take advantage of someone in a vulnerable place in life, Sklaver said.
Though Ortner didn’t agree he had done anything wrong, he did say the lawsuit has forced him to change his ways. When he knocks on the doors of soon-to-be-foreclosed homes, he said he no longer offers owners to buy back the house: “I can’t do that anymore, because people seem to want to sue me if I do that.”
Read previous Independent coverage of New Haven’s foreclosure crisis:
‚Ä¢ She’s One Of 1,150 In The Foreclosure Mill
‚Ä¢ Foreclosures Threaten Perrotti’s Empire
‚Ä¢ “I’m Not Going To Lay Down And Let Them Take My House”
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Renters Caught In Foreclosure King’s Fall
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.