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Wednesday, June 11, 2008 | Late last year, 20-year-old Emy Palacios signed up for a program she thought would help her keep the house she owned with her mother and shared with her two younger siblings.
After a couple of housemates moved out of the house last fall, Palacios had called her lender to explain that she and her mom couldn’t make their monthly payments. The bank said she could sell her house at a loss — a short sale — and Palacios set that plan in motion.
But soon after, she heard from a real estate agent about a program that promised to shield the house from foreclosure and allow her family to stay in their home. Palacios called to find out more. She signed over the deed of her home to the program’s operators, who said an antiquated government land grant program would shelter her home from foreclosure, at a seminar in December and cancelled the short sale. She made six monthly payments of $1,500 to “rent” her home.
“I really thought it was going to help me,” she said.
But instead of helping, the program she paid a total of $9,000 for did nothing to keep Palacios and her family — including a very pregnant aunt — from being evicted from their home and losing it to foreclosure. They gave up their dog, and secured an apartment only because a friend worked at a complex that agreed to rent them a unit without taking their foreclosure-marred credit into consideration. The day after they moved into the apartment, Palacios’ aunt gave birth. And within that same week, Palacios finished her final exams for the semester of classes at MiraCosta College.
Prosecutors say the program she signed up for is nothing more than a scam to bilk desperate homeowners.
Palacios’ story is the tale of a 20-year-old who trusted people who said they would help her, who tried to research the program and who was assured her family could stay in the house. And now her story is the story of a 20-year-old whose credit has been marred by the black mark of foreclosure. In choosing the land grant program, she cancelled the short sale that would have lessened that mark in order to take part in an alleged sham that ended up costing her family its home and $9,000 in fees.
As San Diego’s housing market careened downward over the last two years, homeowners like Palacios were so desperate to keep their homes that they signed them over to strangers in seminars. Palacios is among hundreds of homeowners in San Diego and surrounding counties who participated in the program. Scores have already lost their homes. Five individuals were charged criminally by the district attorney last month, and a civil complaint has been filed against the same defendants by the attorney general.
Under the alleged scam, homeowners in foreclosure attended seminars and filled out paperwork to deed over their homes to the defendants’ companies — Federal Land Grant Co., Land Grant Services and KBS Resources.
Under the banner of an old land grant program last used during the Mexican-American war, the agents allegedly promised to help homeowners facing foreclosure to keep their homes. The agents said signing the homes over to a government program would shield them from the banks and, in four years, the homeowners could reclaim their homes, according to prosecutors. All the while, they’d be able to stay in the homes.
To participate in the program, homeowners signed over the deeds to their houses and were allegedly asked to pay either an upfront $10,000 fee or monthly “rents” based on a rent-calculating website. Sometimes, presentations at seminars were made in English, and translated for the homeowners into Spanish, officials said.
Three weeks after the law enforcement bust, victims are still grappling with the lines they believed and the people they trusted.
When Palacios heard Hutchings had been arrested, she started calling all of the numbers she had for her contacts in the company. Palacios’s contact at the company was a man named Joel Garcia who has not been charged by law enforcement. Garcia did not return a telephone call for comment.
“I was calling and it was just ringing and ringing,” she said. “That’s when I said, ‘Crap, we’re in trouble.’”
With a foreclosure on her credit, after becoming a homeowner at age 18, Palacios said she’s hurt that her efforts to help her family survive financially were taken advantage of. Palacios said Garcia had even talked about helping her get a job with the company once. And when she’d asked him about the legitimacy of the program, he told her the program was on the up and up, adding his final proof: “I don’t look good behind bars.”
“It’s pretty sad that you can’t trust anybody,” Palacios said. “He said that he wouldn’t do that to me. He convinced me.”
Palacios shared her story around a table in the front of the Rio Grande Taco Shop in Vista on Monday, leafing through a stack of paperwork and showing documents to a Vista-based real estate and mortgage broker, Patricia Villanueva. Palacios was seeking help from Villanueva, who, after the law enforcement bust, found that several of her clients hadn’t yet heard that the land grant companies had been shut down.
Some were continuing to make rent payments on their homes, writing checks to people who have not been arrested or formally charged. Some were writing checks to R&I Properties, a Murrieta-based property management company. Rose Napoli, the property manager there, did not return calls for comment.
“The investigation is ongoing and whether people are continuing to take money is something we’ll be looking at closely,” said Mike Groch, economic crimes division chief for the district attorney.
Villanueva printed a letter in Spanish informing victims of the criminal charges and offering to help affected homeowners sort out what to do next. By late last week, she’d sent out a batch of 50 letters to a portion of the 400 identified participants in the program.
Another of the homeowners at the taco shop, Blaz Camaro, said he’d lived in his home for 10 years, and he’s refused to leave despite receiving formal eviction notices because his home has been reclaimed by the lender. He signed over his deed earlier this year to the program. But he said he believed that unless he handed over his physical mortgage documents, he hadn’t surrendered his ownership.
In more than an hour of vehement conversation in Spanish on Monday, Villanueva convinced him that he would lose his house and be locked out by the sheriff if he didn’t find a new place to live. She helped him complete a form to send to law enforcement claiming his $6,000 in lost money.
“I’m very, very sad,” Villanueva said Camaro told her in Spanish as he left. “I’m leaving because I don’t want to cry.”
Villanueva said it was heartbreaking for her that for Camaro and Palacios at least, it’s too late to do anything to help them keep their homes. The bank has already taken them back. When homeowners are in an earlier stage of foreclosure, they can request modifications to the payments or other terms of their loan, or can try to sell the house for less than they owe.
Villanueva had set up such a sale for Alvano Maldanado in January for his house in Vista.
But a couple of months ago, inside Maldanado’s three-bedroom, two-bathroom house, on Apollo Drive in Vista, Diego Gil spoke of a way out.
Gil was a real estate guru for Latinos in North County, a man whose website touted a wealth plan that hinged on owning real estate. He spoke with Maldanado about his trouble making payments on his house. Maldanado had listed the house as a short sale in January, but really didn’t want to sell it.
Gil told Maldanado there was a way for Maldanado, his wife Alejandra and three kids to keep their house. Convinced, the construction worker attended one of Gil’s seminars, deeded over his house to a private company, and made a $1,900 payment to “rent” his own house.
But after that one payment, Villanueva convinced him the program wouldn’t work. And so he went to talk with Gil, telling him he wanted out. Gil protested, trying to convince him otherwise, Maldanado said, and said he couldn’t refund the $1,900. But Maldanado was happy enough to get his deed back. Gil told him he’d lose his house without the program, Maldanado said. But Maldanado wasn’t convinced.
“We knew that something was wrong,” he said. “Just like a feeling.”
Gil’s attorney, Peter Liss, said his client was fed the same lines that the homeowners were by another of the defendants, the alleged ringleader, William Hutchings.
“I’m convinced that Mr. Gil had no bad intent,” Liss said. “Mr. Hutchings was the brains of this company, convincing everyone, including Mr. Gil, that this was a legitimate means of foreclosure avoidance.
“He had a very unsophisticated understanding of the program,” Liss said of his client, Gil. “I don’t think that he intended on scamming anyone.”
An attorney for Hutchings did not return calls for comment.
Still, because the program didn’t actually shield houses from foreclosure, Maldanado might have lost his home had Villanueva not intervened.
For a few months, Villanueva has told her clients to be very careful of the papers they sign and the money they pay to people to save their homes from foreclosure. The networking among the families and friends in the Latino population is strong and powerful, she said. And, she said, the land grant associates would pay $1,000 referral fees for every new homeowner a client could bring to a seminar. And so one family member who fell prey to the alleged scam would tell another, and so on, until the rooms where the seminars were held would fill up, time after time.
“If these people lose their homes, it hurts us all,” Villanueva said.