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Tuesday, 03 April 2007

Mortgage scheme steals dream, home, credit
While the U.S. Senate looks for someone to blame for a national mortgage meltdown, Brenda Brown sits in her hotel room wondering if she'll ever be able to buy another home. Brown, branch manager at Security Finance in Conway, says she is the victim of a mortgage scheme in which manufactured home dealer Glenn Vaught promised he could get her a new home despite her past credit problems...Chris Orlando, a spokesman for Argent Mortgage, said the lender "is investigating what appears to be a concerted effort to deceive the company" and that Argent will help customers who have been victims of fraud. Argent is the company that loaned the money for Brown's home, but the lender has since sold the loan to another finance company.

Buyers lose more than cash
Mortgage scheme steals dream, home, credit

By David Wren
The Sun News
"I really don't want this to happen to anyone else," Brenda Brown says while standing in her lot off Yellow Dog Court in Horry County. Brown said she thought she was buying a lot and home that would have been ready at the beginning of the year, but by February she discovered she was the victim of mortgage fraud.

While the U.S. Senate looks for someone to blame for a national mortgage meltdown, Brenda Brown sits in her hotel room wondering if she'll ever be able to buy another home.

Brown, branch manager at Security Finance in Conway, says she is the victim of a mortgage scheme in which manufactured home dealer Glenn Vaught promised he could get her a new home despite her past credit problems.

Brown says Vaught, owner of the now-closed G&E Home Center in Conway, helped her sign up for a $129,000 mortgage in November so he could place a factory order for her home.

Brown qualified for the mortgage and the money was sent to Vaught's office. However, Vaught never placed the home order.

Vaught has since left town, and Brown is responsible for making monthly mortgage payments she can't afford for a home that doesn't exist.

"My life is totally destroyed," said Brown, who moved into the Value Place hotel on U.S. 501 in January, after the lease expired for an apartment she was renting while waiting for Vaught to order her home.

Vaught, who lives in Effingham, could not be reached for comment. He closed his Conway dealership last month, and his business telephone and cell phone numbers have been disconnected.

Chris Orlando, a spokesman for Argent Mortgage, said the lender "is investigating what appears to be a concerted effort to deceive the company" and that Argent will help customers who have been victims of fraud. Argent is the company that loaned the money for Brown's home, but the lender has since sold the loan to another finance company.

Orlando said Argent will buy back a mortgage if it is shown to be fraudulent, and then "will take appropriate steps to assist customers" who have been victimized.

"We have a zero tolerance for fraud," Orlando said. "When we discover a vendor who is involved in fraudulent activity, we take decisive action up to and including civil and criminal action."

An uncontrolled, unregulated subprime mortgage market has led to a national spike in home foreclosures, experts say, and the Senate Banking Committee held hearings Thursday to find possible solutions to the problem, which threatens the nation's stock markets and economy.

That unbridled atmosphere made it easier for some home sellers to make fraudulent mortgages. Brown says that is what happened to her.

Brown is paying $960 a month for her hotel room and another $80 a month for a place to store the furniture she hoped to put in her new home.

The mortgage company also wants $1,004 a month for the home Vaught never ordered, and the company's debt collectors are calling Brown trying to get her to pay.

Brown borrowed the February mortgage payment, but doesn't know how she will pay this month's bill.

The mortgage shows up on Brown's credit report, and the liability keeps her from qualifying for another loan that could help her move into an apartment.

Loan companies "look at my expenses and see that house payment and figure I don't have enough income for another loan," Brown said. "All I make is going to pay for the hotel and storage. I can't save enough for the deposits I need to rent an apartment."

Brown said her trusting nature and dream of owning a home at almost any price caused her to put too much faith in Vaught.

"It's a case where you want something so much that you're willing to put it all on the line because this man is promising to give you the American dream," Brown said. "He's taking advantage of the American dream that most people have."

Allegations and lawsuits

Susan Brown, who is no relation to Brenda Brown, learned something was wrong with the mortgage Vaught helped her get after she returned to Myrtle Beach from Christmas vacation.

"That's when I found out my bank account had been frozen," she said.

The account was frozen after Decision One Mortgage Co. questioned bank officials about documents related to a $173,600 loan Susan Brown received on Nov. 29. Those documents showed Susan Brown had $50,000 in her checking account.

"The bank officer told them, 'No, she only has $6.40 in her account,'" Susan Brown said. "I was pretty scared, because I thought I was going to get in trouble for something I hadn't even known about."

Decision One has filed a lawsuit against Vaught, alleging that he and mortgage broker Mike Fortenberry falsified financial documents - including Susan Brown's bank statements - to obtain five home loans totaling $794,300.

Decision One claims in court documents that Vaught and Fortenberry pocketed the money instead of buying homes for the five buyers.

Vaught denies the Decision One allegations in a court filing and says Fortenberry is to blame for the alleged fraud.

Fortenberry, who lives in Tennessee, could not be reached for comment. He has not filed a response to the Decision One lawsuit.

Decision One did not sue any of the home buyers and the mortgage company has canceled their loans so they will not be held responsible for the payments.

Decision One spokeswoman Kate Durham said she cannot comment on pending legal matters.

Susan Brown's $173,600 loan was paid to Vaught when the mortgage closed on Nov. 29, according to court documents.

Susan Brown said a Decision One employee told her the alleged mortgage fraud scheme started to unravel about a month later, when a mortgage company representative drove by one of Vaught's sites and saw there was no home on the property.

Decision One canceled all pending loans involving Vaught and started reviewing Susan Brown's loan and four other mortgages Vaught had helped buyers obtain, according to court documents.

Vaught is facing several other lawsuits from buyers who say he falsified financial information on their loans, sold them defective homes or obtained mortgages for homes that do not exist.

Popular Financial Services Inc., for example, alleges Vaught obtained five mortgages totaling $770,600 for nonexistent homes. Vaught denies the allegations in the court filing.

No court date has been set for the Decision One and Popular Financial lawsuits. Both mortgage companies are asking in their lawsuits for unspecified actual and punitive damages.

In addition to the civil lawsuits, mortgage fraud is a federal crime punishable by up to 20 years in prison and a $250,000 fine for each occurrence.

"I hope [Vaught] goes to jail because he's hurt a lot of people," Susan Brown said. "I thought I was getting a home, and now I have to start all over."

Susan Brown said she isn't sure she will be able to buy another home because Vaught hurt her credit rating by running her credit report numerous times while trying to find a lender to approve her loan.

"I just don't trust anybody now," she said.

Subprime mortgages

How the subprime mortgage sector spun so far out of control, fostering an atmosphere where fraud and abuse could thrive, is an issue the Senate Banking Committee grappled with during last week's hearing in Washington, D.C.

Among the answers: Weak laws regulating home sellers and mortgage brokers combined with finance companies willing to make risky loans, often without any regard for a buyer's ability to pay back the money.

Subprime mortgage lenders have targeted Horry County manufactured home buyers since the late 1990s, often promoting loans requiring little or no documentation of a buyer's financial standing.

An ongoing investigation by The Sun News shows some area home sellers and mortgage brokers take advantage of the loose lending criteria by including misleading financial information, such as inflated salary figures and falsified down payments on buyers' loan applications.

The fraudulent information helps unqualified buyers get loans for homes that often are sold for much more than they are worth. Misleading property appraisals often are used to back up the inflated home prices.

Subprime lenders rarely verify the appraisals or the information on such loan applications because they are eager to make high-interest loans.

Many buyers inevitably fall behind on loan payments and lose their homes to foreclosure.

It's often at that point that lenders learn about the fraud, because homes they financed for six figures now sell for far less at foreclosure auctions.

The fallout has been painful, with subprime lenders struggling to survive as more buyers default on their mortgages.

For example, Wells Fargo & Co. announced last week that it is cutting 500 jobs in its subprime mortgage division because of the decaying market. Most of the cutbacks are centered in South Carolina, Arizona and California.

The Sun News' mortgage fraud investigation focused on the Laurel Woods subdivision off S.C. 707, where at least 132 families in the 369-site neighborhood have lost their homes to foreclosure since 1999, including 22 in the past 15 months. That is the highest foreclosure rate for any Horry County neighborhood.

Such a high foreclosure rate can devastate a community, real estate experts say, causing home values to plummet and crime to increase as homes sit empty or the neighborhood becomes more transient.

The newspaper's investigation showed fraudulent loan documents were used to sell many Laurel Woods homes, leading state regulators to permanently revoke sales licenses for three Laurel Woods home sellers - Randy Conner, Henry Curtiss and Michael Roy - who had been accused of fraud.

Two other home sellers, Jack Barnhill and Karl Moser, also had their sales licenses permanently revoked as a result of the newspaper's investigation.

Nationally, about 2.2 million people with subprime loans - those with higher interest rates than conventional mortgages - are at risk of losing their homes, according to testimony during last week's Senate hearing.

Jeannie Soles of Conway says she considers herself lucky because the loan she tried to get through Vaught never was finalized.

"I gave him $1,000 for a down payment, but the loan never went to a closing," Soles said. "Now, his office is gone and the phone is disconnected. I very seriously doubt that I'll ever get my money back, but hopefully I will."

Soles said Vaught claimed on loan documents that she was making a $34,000 down payment for a manufactured home in the Wisteria Woods neighborhood off S.C. 701 in Conway.

"All I ever gave him was $1,000. I never made any other down payment," she said.

The mortgage company approved her for a $130,000 loan based on financial documents that Vaught provided.

Soles said the experience has soured her on buying a new home, and that she and her husband probably will continue renting a place to live.

"We're kind of weary about dealing with home sellers," she said.

"We'll just stay where we are instead of having to deal with more headaches."

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