Lee buyers claim fraud
A Miami couple says a mortgage company affiliated with Fort Myers-based First Home Builders altered information to enhance their financing application without their knowing it, jacking up the value of their residence and length of time the husband had been at his job...Officials with K. Hovnanian Enterprises, the parent company of First Home, said their own employees did nothing wrong and the mortgage company, Builders Mortgage LLC, is the responsibility of Wells Fargo — Hovnanian’s partner and 51 percent owner in the joint venture.

Lee buyers claim fraud
Mortgage firm denies manipulation, says couple trying to break deal

By Dick Hogan
April 15, 2007
A Miami couple says a mortgage company affiliated with Fort Myers-based First Home Builders altered information to enhance their financing application without their knowing it, jacking up the value of their residence and length of time the husband had been at his job.

Increasing the home value and job stability would enhance someone’s chances of getting the loans required to purchase real estate.

Officials with K. Hovnanian Enterprises, the parent company of First Home, said their own employees did nothing wrong and the mortgage company, Builders Mortgage LLC, is the responsibility of Wells Fargo — Hovnanian’s partner and 51 percent owner in the joint venture.

But David Martin, the Builders loan officer who handled the couple’s application, said Friday, “I’d like to refer all questions to Hovnanian’s legal staff,” specifically general counsel Peter Reinhart.

The couple, Cedrick Walta and his wife, Sandra Chen-Walta, tried three lenders but weren’t able to find one that would finance the three Cape Coral houses they signed up to buy from First Home in July 2005 with a down payment of $12,500 on loans totaling $766,382.

“We can’t get a loan and so we can’t close on the homes,” Chen-Walta said.

In a March 6 e-mail to Chen-Walta, Martin said he would submit an application to a lender so the Waltas could buy the houses. The Waltas declined, however, because of the alleged altered paperwork submitted at the July 2005 meeting.

The Waltas said they didn’t notice until going through paperwork after the meeting that alterations had taken place. “We decided we weren’t going to use them because of the fraud they perpetrated on us,” Chen-Walta said.

Larry Sorsby, chief financial officer for Red Bank, N.J.-based Hovnanian — which bought First Home in August 2005 — said the Waltas and others in similar circumstances are crying over spilt milk and should honor their obligations.

“What’s happening in the Fort Myers market is we’ve had an unprecedented fall in the real estate market in a year’s course of time. These individuals were bullish on the real estate market; now they’re trying to find some way not to proceed with the transaction because of an unanticipated drop in prices.”

He noted the Waltas successfully purchased three other First Home houses before getting into trouble with the three now at issue.

But Marc Savitt, vice president of the National Association of Realtors, said he’s reviewed the documents for the Waltas’ case.

“This is clearly abusive lending,” he said.

The changes in the loan application, he said, only make sense as an attempt to improve the apparent financial situation of the couple to improve the chances of their getting the loan. “That was all to better qualify.”

Savitt said he’s spoken with about 20 people in the Fort Myers area who were victims of predatory lending, and the situation here is “the worst I’ve seen in years.”

His role in the association is to investigate situations like this and try to get back people’s money, Savitt said.

But Sorsby said Savitt’s motives are not altruistic in attacking builder-affiliated operations like Builders Mortgage — which are not mortgage brokers.

“Mr. Savitt has a definite agenda,” Sorsby said. “His trade association has had a stated agenda for a number of years because they reduce the amount of business for mortgage brokers.”

It’s unlikely the changes in the application would have affected the Waltas’ “no document” loan, which didn’t require accompanying documentation, Sorsby said, despite “allegations that someone consciously or unconsciously made a mistake.”

Deal not easily broken

Meanwhile, Hovnanian faces an increasing number of people who, like the Waltas, say a clause in their contract gives them the right to deed back the house to the builder if the buyer can’t close.

Richard Inglis, a Fort Myers-based attorney who represents some people with that clause, said “My phone’s been ringing off the hook” with people trying to get out of their contracts on that basis.

But Sorsby said they shouldn’t assume Hovnanian will roll over easily in such situations.

“When you take our agreement as a whole, we’re extremely confident we have no obligation to repurchase these homes” in most cases, he said.

Besides, he said, in many cases, “We’re lowering the price at which they’re contractually obligated to pay us.”

The Waltas, for example, had the price of their three houses reduced $136,000.

In any event, Sorsby said, “We’ve had the document in the entirety reviewed by three independent law firms and each of them agrees that First Home has the option to purchase the home but no obligation.”

Still, some buyers say they were led to believe the provision would save them if they found themselves unable to get financing or handle the added debt.

Michael Neisser, for example, said he had a good job in the rental car field two years ago when he agreed to buy a First Home house in Cape Coral house for $383,000.

But now he works as a Comcast cable technician and has so much debt he can’t qualify for a loan even though he still has a good credit rating.

“When is enough enough?” he asked. “If they didn’t want that in the contract they shouldn’t have put that in. We’re caught between a rock and a hard place.”

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