Novice Homebuyers Left Facing Foreclosure Despite Having Made All Their Payments As Builder Allegedly Fails To Pay Off Construction Loan

In Brownsville, Texas, KGBT-TV Channel 4 reports:

• Nearly 30 families in Brownsville may soon be homeless. Their entire subdivision will be auctioned off is less than two weeks. Residents at the Northeast Estates subdivision in Brownsville received a letter letting them know their properties will be auctioned off by Cameron County [...].

• "Out of 180 about 80 one going to be auctioned off it appears," Francisco Gonzales told Action 4 News. "This section was never notified of any type of pending land issues or anything of that sort we found out by mere chance."

• According to court documents, developer Landmark Valley Homes did not pay Inter National Bank in McAllen for dozens of lots at the subdivision and in total they owe a little more than $4 million dollars.(1)

For the story, see Nearly 30 Brownsville families to lose their homes.

See also KRGV-TV Channel 5: Some Brownsville Families Fighting for Their Homes.

For story follow-up, see KRGV-TV Channel 5: Brownsville Neighborhood Saved:

• Folks who live in a Brownsville neighborhood say a sale to auction off their properties was canceled. Attorney Alex Begum stepped in to help. He spoke with the manager of Inter National Bank in McAllen and came to an agreement. The bank will take over the balances owed by Landmark Valley Homes.

• The home building company put dozens of families in a bind, by not paying a $4 million debt. The majority of homes will be re-financed. About 50 homes in the North East Estate subdivision were set to be auctioned off [...]. However, the foreclosure sale has been stopped. Begum says he represented 26 people free of charge. He worked to get a global agreement that would keep everyone's home safe.

(1) My surmise is that the builder used a land contract/contract for deed arrangement with each of the unwitting homebuyers where they agree to make a downpayment and subsequent monthly payments directly to the builder. The builder, in turn, transfers possession of the homes to each of them subject to his gigantic construction (or possibly, acquisition) mortgage that's owed to the bank and agrees (either explicitly or implicitly) to apply the payments collected from the buyers to said loan until fully paid, at which point each homebuyer gets the home title. They, in all likelihood, were unfamiliar with real estate transactions, presumably failed to obtain a title search and title insurance protection, and were all caught flat-footed when the builder decided to pocket their payments, stiff the bank, and allow the lender to foreclose on the land out from under everyone.