Grand Rapids Couple In Foreclosure Accuse Equity Stripper Of Pocketing Home Equity, Defaulting On Mortgage; Cops Investigate

In Grand Rapids, Michigan, WOOD-TV Channel 8 reports:

• Jason and Tricia Wise were losing their home on Grand Rapids' northwest side when they got a mailer from a company called Canal Street Financial. "It was one of the first letters we got that actually said, 'we're interested in saving your home,'" Jason Wise said. But it didn't turn out that way. "Basically they got a mortgage and robbed all the equity out of our home and then never made those payments and then waited for the bank to foreclose and kick us out of our house," Wise laments.

***

• The Wises deeded their house for $1 to a company called Wells Financial, operated by an employee of Canal Street. Then Wells Financial deeded the house to Canal Street's boss, Norman Long. Long, using another corporate identity, NTW Investments, sold the house back to the Wises on a land contract which had them making monthly payments of $719 until the total amount was paid off, at which time they would get back the deed to the house.

• But Norman Long had a secret. He had his own deal to make money off the house, unknown to the Wise family. He got a new mortgage on the house for $119,000, paid off their old mortgage of $86,000, and pocketed the $33,000 difference. In addition, Long was receiving the Wises faithful monthly payments on their land contract.

• "For the next two years we make all of our payments and we think everything is fine, that we're rebuilding our credit," Jason Wise said. But what he didn't know is that, despite all that income, Long didn't make the payments on his mortgage. That lender foreclosed and the Wises were back where they started with an even bigger payoff needed to save their home.

***

• A Grand Rapids police detective and a US Postal Inspector are investigating to see if they can charge Long with a crime.(1)

For more, see Secret deal leaves family facing foreclosure - again (go here for video).

Editor's Note:

Arguably, the transaction described in this report could constitute an equitable mortgage. In that case, the homeowners who were screwed out of their home title would still be considered the owners of the property.

Further, because the Wises remained in possession of the home throughout the entire relevant period, and were in possession when the bank made the mortgage loan to Long, it is arguable that the mortgage lender making the $119,000 mortgage was on notice of any property rights the Wise's could establish, and consequently, would not be entitled to bonafide purchaser status - thereby making their mortgagee's interest in the home inferior to the Wise's (at least to the extent that the $119,000 loan exceeded the $86,000 balance on the existing mortgage that was paid off). Essentially, a case could be made that it's the bank that loaned the $119,000 that would be screwed out of $33,000 - not the Wises.

For examples of what a lawsuit against a foreclosure rescue operator looks like, one that asserts equitable mortgage and usury, see:

• Moore v. Cycon Enterprises, Inc. (a Michigan foreclosure rescue case),
• Commonwealth of Massachusetts vs. Sohmer (a Massachusetts foreclosure rescue case).

Go here for information on equitable mortgages in Michigan. Go here for information on bonafide purchaser case law in Michigan.

Go here for a recent post in which this scenario was played out.

(1) Go here for Criminal Prosecutions Of Foreclosure Rescue Operators, Refinancing & Other Deed & Equity Scams.