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Whistle-blower backs alleged victims claims of mortgage fraud

Posted on February 13 By MLP Blog

Second of two parts

The familiar Century 21 logo lent instant credibility, but their alleged victims say that’s where the legitimacy ended.

Inside the Edison Park East strip plaza office and a title company office elsewhere, they say they were conned into real estate deals they would soon come to regret.

Trinity Century 21 Realty co-owners Sotirios “Steve” Gertzas and Radomir “Erik” Ivanovich, along with appraisers and title company employees with whom they have worked, are defendants in several lawsuits in St. Joseph County courts alleging mortgage fraud.

The plaintiffs include Nicholas Avgerinos, an elderly man who was looking for a safe retirement investment, and Barbara Clayton, a retiree who had had trouble selling her South Bend home and saw Trinity Century 21 as a welcome way out.

Others hoping to become real estate “investors” say they have been ruined by Gertzas and Ivanovich but do not think suing them will do any good.

Avgerinos, 78, who came to trust Gertzas after meeting him at St. Andrews Greek Orthodox Church, was the first to go public with his complaints when he filed suit in April.

Avgerinos, who had run a hearing aid business before he retired and had no experience with real estate investing, says Gertzas approached him in February with an offer to sell him 12 South Bend properties for $49,000 each — and Avgerinos would not have to invest any of his own money, according to court records.

Gertzas and Ivanovich pledged to find tenants for the properties and make the mortgage payments with the rental income.

Avgerinos agreed to the deal, claiming in his lawsuit that his judgment was clouded because he had recently suffered heart problems and undergone quadruple bypass surgery.

According to the suit, Gertzas and/or Ivanovich then persuaded appraisers to certify that the properties were worth far more than their actual value, up to $80,000 for a house at 920 Sherman St., for example.

At closing, lending companies cut checks based on those inflated appraisals, and Gertzas and Ivanovich fraudulently pocketed some $273,000 — the difference between the bogus appraisal amounts and the lower prices that property sellers were willing to accept, the suit alleges.

Gertzas and Ivanovich collected most of this cash by creating fictitious repair invoices from companies that exist only on paper, claiming those entities made repairs to the homes that were never made, the suit alleges.

On the contrary, Avgerinos says he was forced to invest thousands of dollars in renovations and repairs to rent the homes out.

“In essence, the defendants used the plaintiff as a pawn in their fraudulent scheme, making promises that were not fulfilled in order to induce the plaintiff to take on debt and be stuck with houses which he did not want to own and mortgages which were each for more than the value of the individual properties,” the lawsuit claims.

Neither Gertzas, Ivanovich, nor their attorney, Donald Wertheimer, could be reached for comment. A woman who answered the phone at the Trinity Century 21 office said Gertzas was in Greece indefinitely, while Ivanovich was on vacation until Wednesday. She said she would be speaking later that day with Ivanovich and would give him a reporter’s message.

Wertheimer declined to comment.

Insider blows whistle

Sandy Mavracic, former officer manager for Trinity Century 21, declined The Tribune’s request for an interview. But in a sworn affidavit filed on behalf of Avgerinos in his case, she provided details of how the scheme worked, confirming Avgerinos’ claims.

When she first started working there, she thought it was a legitimate business, she said. But after a few months, she realized that Ivanovich and Gertzas, through several companies they had formed, were in the business of buying houses at depressed prices, securing very high appraisals and recruiting “investors” who had high enough credit scores to qualify for mortgage loans — all the while knowing the investors could not afford to keep up the payments.

In addition to taking money fraudulently, Ivanovich and Gertzas paid cash “kickbacks” to some investors for each property they agreed to put in their name, Mavracic wrote in court documents.

“However, the principals of Trinity Century 21 Realty frequently found ways to even prevent the customer from receiving his or her portion of the kickback. Then one or more of the Trinity companies kept all of the kickback.”

Through “intimidation, threats and fear of losing their jobs,” Gertzas and Ivanovich also pressured their own employees to place mortgage loans in their names, according to another affidavit that Teresa Lamirand, former broker and Realtor for Trinity Century 21, filed on Avgerinos’ behalf.

“Some of these Realtors were new and unsophisticated,” Lamirand wrote. “Others knew what they were doing, but needed the money.”

Mavracic stated she frequently saw Ivanovich fabricate documents to convince mortgage companies of an investor’s creditworthiness, including creating fictitious employers for the investors.

While Gertzas was in Greece for three months in the fall of 2005, Mavracic said she decided to take a closer look at some of the transactions that he and Ivanovich had insisted she “keep under lock and key.”

“It was during this time that I started to understand the full importance and effect of what they were doing and how they were doing it,” she wrote. “I also started to understand that some of the people who I had gotten to know as investors were getting seriously hurt by this scheme.”

Mavracic wrote that Ivanovich and Gertzas took the most advantage of Avgerinos, and she felt sorry for him because “he was a very pleasant elderly man who I suspected had no clue as to how he had been scammed.”

In 2005 alone, Ivanovich’s and Gertzas’ companies made more than $1 million through the scheme, she stated.

Avgerinos and the defendants have since reached an out-of-court settlement, and the terms are confidential, said Avgerinos’ attorney, Lee Korzan.

Documents telling

In a more recent case, Barbara Clayton, 65, is suing Ivanovich and Gertzas, along with one of their brokers, Debra Young; Ivanovich’s mortgage company, Mill Lake Mortgage; Title Express Inc., a Fort Wayne-based company with an office in Osceola; and Kayci Mueller, a local Title Express employee.

Clayton had wanted to downsize by selling her home at 1010 W. Rose St. in South Bend and moving into an Osceola trailer park. After another Realtor, listing her house for about $40,000, had been unable to sell it for more than a year, Young and another Trinity Century 21 broker, Gina Stone, approached Clayton with an offer to sell her home, according to the lawsuit.

Clayton agreed, telling the women that she needed to sell it for at least $35,000, plus enough money to pay off a $5,000 home equity loan Clayton had taken out. A couple of weeks later, Young returned with what seemed to be good news: They had found a buyer.

But when it came time to close on the sale at the Osceola Title Express office, Clayton says she was shorted some $2,000, an amount Young offered to pay out of her own pocket. Clayton also says she was not allowed to have copies of the sales documents but was told she would receive them later in the mail. She was hurried into signing the documents and trusted Young and Mueller, the Title Express employee, according to her suit.

When Clayton finally obtained the sales documents later after contacting another Title Express employee, she was shocked to learn that she had sold the home for $81,000. She later received a tax form from the Internal Revenue Service confirming that amount, meaning she will have to pay a much higher capital gains tax than she should have, said her attorney, Douglas Small.

Young admitted to Clayton that more than $23,000 from the lender was paid to A&A Restoration for “repairs” that were never made, according to Clayton’s suit. A&A Restoration is a company that exists on paper only. Young told Clayton that she set up the company at Ivanovich’s direction.

Young repeatedly called Clayton and tearfully begged her not to pursue any legal claim or otherwise report what occurred with the transaction, Clayton’s suit claims. Young said Ivanovich had told her she would be the one left to “hang,” and if she lost her broker’s license, she would be unable to afford medication for her daughter’s diabetes, the suit states.

Young did not return calls seeking comment.

Clayton has declined interview requests. Small said he does not normally speak with the news media about cases that are still under litigation, but he feels it is appropriate to do so in this case because it could serve the public good.

Because Young told Clayton that the Trinity group has orchestrated the alleged scam with other buyers and sellers, in South Bend, Mishawaka, Michigan City and Benton Harbor, Small said he will ask St. Joseph Superior Judge William Means to certify her lawsuit as a class-action complaint.

That means others could easily sign on as plaintiffs.

Small said the Trinity group should be forced to provide him copies of all sales transactions they have handled, and he will use those documents to identify other potential victims.

“I would expect that a lot of people don’t know this ever happened to them,” Small said. “I’m concerned other people are going to be victimized by this conduct.”

The other side

The man who bought Clayton’s house and is now living in it, Darvis Jones, also says he was duped in the deal.

Jones, a 35-year-old Chicago native who wants to be a real estate investor, says he has bought three homes through Ivanovich: the one he is living in, one across the street, and one at 1033 Beale St. He owes a total of about $217,000 on the three mortgages, but because of the inflated appraisals, figures the homes are worth only about $90,000 combined.

Jones said Ivanovich tells investors they will need no down payment and will receive $5,000 to $10,000 cash to fix up each house. Although that cash actually is generated through the bogus appraisal, Ivanovich tells the investor that it comes from the seller because the seller is so eager to be rid of the property, Jones said.

Ivanovich pledges to help the investor find tenants whose rent payments will be more than enough to make the mortgage payments, Jones said.

But even if tenants are found, the homes are typically in such poor shape that the cash runs out before all the needed work is done. After the investor pays property taxes and insurance, little profit is left each month, Jones said.

The investor then buys another property for a new infusion of cash to finish the work.

“That’s how he gets you, because you will always be buying your next house to catch up, but you can never catch up,” Jones said.

Jones said he knows a man who has bought 15 houses through Ivanovich. He must buy a new one each month and cannot afford to stop now, Jones said.

Jones figures if he can work three jobs, paying at least $1,000 a month on each mortgage, he could pay them off in 15 years. But he also will need to refinance them at some point to obtain lower interest rates, which will extend the mortgage payoff dates once again.

Didn’t Jones wonder why he was taking out an $81,000 loan to buy a rundown house in a marginal neighborhood? He didn’t know that until it was too late, he said.

Jones said when he asked for copies of paperwork at closing, like Clayton, he was told he would receive them later in the mail. When they never came, he finally called New Century, the lender, which mailed the documents to him.

Even after seeing the 1010 Rose St. home had been mortgaged for $81,000, he thought things were legitimate because he had come from Chicago, where real estate prices are so much higher.

But when he ultimately realized that investment properties in South Bend were selling for as little as $9,000, he knew the appraisal had been falsified.

Jones said he also was later surprised to receive pre-approval letters from lenders regarding properties he had never seen or heard of. It turned out that Ivanovich and his associates, using Mill Lake Mortgage, had submitted the applications without his knowledge, he said.

Jones said Ivanovich leads an opulent lifestyle, with fancy cars and frequent trips to the Caribbean, where he also is starting up a real estate investment company.

In her affidavit, Mavracic said Gertzas told her that he realized the scheme ultimately would unravel, but he was not worried because his errors and omissions insurance, comparable to malpractice insurance for doctors, would cover the losses.

Jones, whose father was a Chicago police officer, said he never expected to be conned so easily.

“I didn’t know enough about mortgages,” he said. “You can be street-smart but you have to damn near be a banker to figure out what (Ivanovich) is doing.”

His advice for people who want to flip houses for profit, as is glamorized in several hot cable television shows such as “Flip This House” and “Property Ladder”?

“Do your research,” Jones said. “Do your research, because when you hear about a $5,000 deal and you can make this every week, it sounds good but you have to look at the long term. When it comes down to the bottom line, that’s your name on that paper and your name on that mortgage. You’re going to be responsible for it until the day you die.”

Found here.

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