Mortgage broker goes bankrupt, seeks mortgage modification as taxpayers face mounting bailout bills
The house at 2225 Gough Street finally sold for $170,000 on June 7. Its new owner, Marek Tarasiewicz, declined to talk about the purchase, but a person familiar with the transaction says that the house--fully renovated several years ago and formerly mortgaged for nearly $500,000--is now "trashed," devoid of fixtures and appliances and in need, once again, of a substantial overhaul.
The once grand Patterson Park home is just one more foreclosure in a sea of them, but the circumstances surrounding it illustrate some hidden aspects of the financial crisis still roiling the country.
The home's former owner, Bayardo Alvarez, moved out in October 2008 with his life partner, mortgage broker Joshua S. Goldberg. The couple took up residence at 2818 Guilford Ave. in Charles Village and opened a flower shop there ("Shells Hocked," Mobtown Beat, Jan. 13, 2010). To finance that home's purchase Goldberg took out a $363,000 mortgage. He apparently made no payments; the bank instituted foreclosure in October 2009--but Goldberg claims in court papers that he is now in line for a modification of that mortgage.
Goldberg's financial life is a jumble of mixed messages. On Jan. 5, he filed for bankruptcy protection, right about the time a flier was distributed announcing the "merger" of his family's business, Worthington Mortgage Group, with Christensen Financial Inc. of Longwood, Fla.
"Our highly skilled team of mortgage professionals has over 40 years of cumulative experience, and can help you make intelligent decisions to shape your financial future," the flier, over the signatures of Ilene, Marty, and Joshua Goldberg, reads in part, along with the promise of "Over Equity Loans, to 125 [percent] of the value of your home." Ilene and Marty Goldberg are Florida residents and Worthington Mortgage Group's owners.
The letter was misleading at best, according to Carol Christensen, Christensen Financial's co-owner. "There is no connection whatsoever between Worthington . . . and Christensen Financial," she writes in an e-mail. "If Josh sent a flier saying there was a merger of the two companies, it was done without my knowledge or consent."
Joshua Goldberg did pass a background check and was employed by Christensen, a mortgage brokerage with branch offices in many states, for about seven weeks, she writes: "He became an employee of Christensen Financial on 2/10/2010, and was terminated on 4/2/2010. Details of his termination are confidential."
In a phone interview, Marty Goldberg confirms "a short, unpleasant relationship with" Christensen and says Worthington Mortgage is still a going concern in Maryland. As for his son's financial dealings, "You're going to have to talk with him about it," he says, before abruptly hanging up.
In response to a voicemail, Joshua Goldberg requested that the newspaper not contact him again. His bankruptcy lawyer has not responded to questions e-mailed to him after a short telephone interview.
As an employee of Worthington Mortgage, Joshua Goldberg arranged financing and notarized documents for a series of transactions City Paper analyzed in the summer of 2008 ("Shell Game," Feature, Oct. 1, 2008). Those deals, in which a group of neighbors traded and sold one another houses at inflated prices while claiming in some cases to be relatives, have all ended in foreclosure, costing lenders--or their taxpayer-backed insurers--more than $1.4 million so far. Many of the loans were originated by Taylor, Bean, and Whitaker Mortgage Corporation, a Central Florida company that became one of the largest loan suppliers to Freddie Mac, the government-sponsored corporation that Congress chartered in 1970 to help stabilize the mortgage market and promote home ownership.
Taylor Bean went out of business last summer amid a criminal investigation. FBI agents arrested its founder, Lee Farkas, on June 15 on a 16-count, $1.9 billion fraud indictment alleging that he hid losses at the company since 2002 and tried to steal more than $500 million from the TARP--the $700 billion Troubled Asset Relief Program hastily devised in the fall of 2008 as the financial system teetered on the brink of insolvency. Farkas was jailed for more than a week before posting a $2 million bail, according to the Ocala Star-Banner.
Taylor Bean's failure brought down Colonial Bank of Alabama in the sixth largest bank failure in U.S. history. Freddie Mac, which guaranteed the shoddy and sometimes fraudulent loans underwritten by Taylor Bean, was placed in "conservatorship" in September 2008. In a regulatory filing this spring it estimated its exposure to TBW and Colonial Bank at nearly $1.4 billion. The Congressional Budget Office has estimated potential taxpayer losses in Freddie, along with its larger sister company, Fannie Mae, at $400 billion.
Fraud appears to have played a substantial role in the bad loans now weighing on Fannie and Freddie. In June, the FBI published a report saying that mortgage fraud increased again in 2009, along with law enforcement efforts to combat it. The now-annual report on mortgage fraud is based on an array of sources and trend indicators, and it found that Maryland is a top 15 state for mortgage fraud. The private Mortgage Asset Research Institute (MARI) tracks "suspicious activity reports" and other indications of fraud in the mortgage industry, and discovered that appraisal fraud jumped noticeably in 2009--and that the Baltimore-Washington area was in the top five: "Fifty-nine percent of reported fraud in 2009 was attributed to application fraud, followed by appraisal/valuation (33 percent), and tax return/financial statement (26 percent) fraud. MARI indicates that overall, 75 percent of 2009 loans reported with appraisal fraud included some form of value inflation."
According to MARI reporting, "Collusion among insiders, employees, and consumers is highly effective in times of recession because everyone has something to gain in times of desperation."
The role of Joshua Goldberg and his associates in the collapse of Taylor Bean and the losses at Freddie Mac is certainly small. And he has not been charged with any crime, nor sanctioned by any regulatory body. But his bankruptcy filing and its aftermath raise new questions about how the mortgage system has worked since the crisis hit, and whether the fixes--such as the federally backed Home Affordable Modification Program (HAMP)--are targeting the borrowers most likely to make their modified payments.
In his bankruptcy filing, Goldberg claimed he earned just $9,000 in 2008 and $15,000 in 2009, working for Idearc, which appears to be an online marketing company. He did not mention any income from either the Floral Contempo (although he is listed on that company's web site as "General Manager and Event Coordinator") or Worthington Mortgage.
Along with monthly expenses exceeding $5,000, Goldberg claimed debts of more than $500,000, including a $60,000 personal loan from Kenneth Koehler, the east side landlord who, with Goldberg's help, unloaded several dilapidated rowhouses for about triple their value to salon owner George Agelakis, who immediately defaulted.
Goldberg's bankruptcy was discharged in May, including the unsecured debt to Koehler, but there is a single pending matter.
In March, through his lawyer, William Wood, Goldberg filed a "motion for authority to incur secured debt for purpose of modifying the terms of the existing mortgage and notice of opportunity to object." The motion says Wells Fargo holds the note on the Guilford Avenue house and has offered to modify the now $402,560.12 debt into a 30-year fixed mortgage at 5.125 percent, for a monthly payment of $2,684.85--about $27 more each month than Goldberg's original loan, on which he has apparently missed every payment.
Mark Devan, one of several substitute trustees in the home's foreclosure, says he can't comment on any foreclosure or modification effort due to confidentiality agreements with the lenders. (A Wells Fargo spokesperson was also unable to explain this situation.) Goldberg's bankruptcy lawyer, Wood, is no more forthcoming. "What is this in reference to?" he asks a reporter when reached by phone. "Is this for an article? I'm not sure he'd want me to talk to you about this." Wood promises to consult with Goldberg, but does not respond to follow-up e-mail or phone messages.
Asked if he has any idea how Josh Goldberg could have obtained a $363,000 mortgage in late 2008--as the larger financial crisis blossomed--with only a $9,000 annual income, Marty Goldberg says, "No. He did not get that mortgage through us."
Goldberg is scheduled to be in federal bankruptcy court for a hearing on his loan modification on July 9.
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