The Victim Who Wasn't There
Investors, mortgage fraud may complicate city's suit against Wells Fargo
The most famous example of Wells Fargo Bank's allegedly predatory Baltimore lending practices stands at 2520 Shirley Ave., in the city's Greenspring neighborhood.
"This house ain't nothing but a rat hotel. You know, that's all it is, nothing but a rat hotel," Stephen Faison, who lives next door to the trash-strewn hulk, told a CNN camera for a June 11 broadcast. "Don't nobody even live here."
Faison stands in for all the victims not just the city of Baltimore and its taxpayers, but the struggling homeowners who have seen their neighborhoods sink into decay, crime, and despair. He filed an affidavit in the city's landmark lawsuit against Wells Fargo Bank, joining the neighbors of seven other Wells Fargo foreclosures, who say the bank's practices have blighted the city's poorer neighborhoods. Those affidavits now stand at the center of the city's damage claim.
But missing from the case, so far at least, are stories from the homeowners who Wells foreclosed on. The owner of 2520 Shirley Ave., for example, would seem to have an interesting story to tell. Property records say his name is Balvinder Singh, and he is also the owner of 3726 Beehler Ave., another of the dilapidated houses about which neighbors filed affidavits in the case. So this one alleged victim of Wells Fargo's predatory lending accounts for a quarter of the city's most detailed examples of the bank's alleged malfeasance.
But Singh does not fit into the lawsuit's narrative frame:
· He is not African-American and was not an owner-occupant of any of the five Baltimore homes he bought in 2004 and 2005.
· He appears to be part of a mortgage-fraud scheme that stretches across four states and involves a politically connected representative of New York's Sikh community.
· It's possible that Balvinder Singh doesn't even exist.
Baltimore's suit against Wells Fargo, filed in January 2008, garnered nationwide attention; news stories appearing in daily papers and business journals from Massachusetts to San Francisco all presented the same narrative: Wells Fargo targeted predominately African-American neighborhoods for high-interest, predatory subprime loans that were, in the words of Baltimore's lawyers, "designed to fail." These toxic loans led to foreclosures, and those foreclosures damaged already-fragile low-income neighborhoods, which forced the city to expend "tens of millions of dollars" dispatching police, boarding up vacant properties, cleaning trash, and according to a sworn statement by Jason Hessler, Baltimore Housing's acting director of code enforcement, demolishing some derelict buildings that were allegedly made so by Wells Fargo's cynical and cruel corporate practices.
Sensational allegations by two former Wells Fargo insiders, Beth Jacobson and Tony Paschal, contribute to the theory. Jacobson, a former loan officer who says she earned more than $700,000 in one year, stated that she and others in her office were "riding the stagecoach to hell" by targeting African-Americans for high-cost loans and that this was corporate policy rewarded by lavish perks.
At a Jan. 8, 2008, press conference announcing the lawsuit, Mayor Sheila Dixon decried the fate of those unfortunate enough to have taken a Wells Fargo loan during the past decade, claiming that because of predatory-lending practices, "we have a whole different generation, a whole different set of people who are homeless as a result of foreclosures."
Asked during that press conference what percentage of Wells Fargo foreclosures in Baltimore were real-estate investors, John Relman, the city's lead attorney, brushed the question aside. "For the most part," he said, "when you look at the data, you have home owners."
However, according to a series of spreadsheets the city submitted on April 6, depicting properties Wells Fargo began foreclosure on between 2005 and the end of 2008, more than 28 percent of the properties were owned by investors. The city had placed tax liens on at least 108 of them for failure to register as a rental unit.
The tax-lien data certainly understates the percentage of this sample that were owned by investors. Singh's 2520 Shirley Ave., for example, was not among those cited for failure to register as a rental property, although Singh requested that the tax bills for that house be sent to an address in Lakewood, N.J., a 170-mile drive from Baltimore City.
On Jan. 19, 2005, Singh purchased 2520 Shirley Ave. for $58,000 from a company called Meher Realty and Management, LLC. Meher had bought the empty house just eight months before that for $25,725. No building permits have been pulled for repairs or upgrades on this house since at least 2002, city records indicate. Singh borrowed $51,840 from Wells Fargo to buy Shirley Avenue.
The other four Baltimore City houses Singh bought and lost—1605 E. 28th St., 3117 Sumter Ave., and two on the 3700 block of Beehler Avenue—follow a similar pattern. Singh bought them all from Meher weeks or months after Meher had bought them. In each deal, Singh paid more than twice what Meher had paid. In all, it appears that Meher Realty and Management grossed more than $160,000 just by flipping houses to Balvinder Singh. More than $110,000 of that was financed by Wells Fargo.
Singh illustrates how just a few investors can figure into many foreclosures. At a June 29 hearing, Wells Fargo's lawyer said that nine of the 10 homes Baltimore City offered as examples in the case were actually owned by investors, not home owners.
Baltimore City Solicitor George Nilson says the percentage of investors among the Wells Fargo foreclosures is irrelevant to the city's case. He points to U.S. District Judge Benson Legg's ruling, which allowed the city's case to go forward, as proof.
"If a lender targets the African-American community and neighborhoods that are predominately African-American," says Nilson, "and takes African-Americans--whether they are buying a property to live in or buying a property to rent out--and they engage in the kind of practices that Wells engaged in, they are just as in violation of the Fair Housing Act."
But Wells Fargo has also argued that the city's wounds are "self-inflicted" by poor policy choices that have left tens of thousands of houses vacant, and some residents agree, citing weak code enforcement and other courtesies for investors.
"It's as though the city thinks that bad investment, destructive investment, is better than none at all," says Carol Ott, a Pigtown activist whose neighborhood has three Wells Fargo foreclosures included in the lawsuit, at least two of which are investor-owned. "It's sick. It's certainly not helping these communities, the people who live here, when the house that's next to you is caving in."
Ott does not excuse predatory lending, but she believes Baltimore's problems are more complex than the city leaders depict. "I totally think that the Wells Fargo, the redlining--it's horrible," Ott says. "But these houses have been vacant for years and years--that's not Wells Fargo's fault."
Robert Strupp, director of research and policy of the Community Law Center, a nonprofit that has been working on issues related to the foreclosure crisis, says the preponderance of investors among those foreclosed by Wells Fargo in Baltimore should not harm the city's claim.
"In either case, when they go into foreclosure there is a negative consequence to the community," Strupp says, "and I don't see how it diminishes the city's claims in so far as the financial distress and increased obligations to the city if they show that these investors are part of a protected class."
Indeed, the suit could turn on the investor class. Baltimore has charged that the bank held "wealth-building seminars," often with the sponsorship of African-American pastors, in order to market its subprime loans. The recent housing boom attracted legions of naïve and undercapitalized would-be land barons, many of whom were hustled in one way or another by the gray-market industry of home-flipping gurus and "real-estate schools." Since September 2004, the FBI had warned government officials of a nation-wide mortgage fraud "epidemic." Baltimore appears to have suffered its share, although enforcement actions are spotty.
Strupp and others have sought tighter regulation of the flipping industry in order to curb abusive practices. But Baltimore City's leaders, despite the city's epic fleecing at the hands of fraudsters during the flipping scandals of the late 1990s, have done little to tighten regulation of the real-estate industry. In its 2005 final report, the city's "Flipping and Predatory Lending Task Force," assembled in the wake of the earlier scandal, declared flipping activity had been reduced by 77 percent, based on a computerized sampling of nearly 18,000 property transactions that occurred between May 27, 2003, and April 14, 2004.
Just days after the task force's cutoff date, Meher Realty & Management, LLC began buying houses in Baltimore, flipping five of them to Balvinder Singh for double or more what it paid.
City Paper could not locate Balvinder Singh. The New Jersey address he gave belongs to someone else, and a local Balvinder Singh, who lives in Dundalk in a house that is not subject to foreclosure, would not speak to a reporter. That Balvinder Singh's signature differs from the one who signed the loans that went to foreclosure.
Not everyone involved in the 2520 Shirley Ave. sale has disappeared, however.
One of the principals of Meher Realty, Dr. P. Singh Sabharwal of New Rochelle, N.Y., is under federal indictment in New Jersey, charged with conspiracy to commit wire fraud.
According to the indictment and affidavits in support of search warrants in that case, Sabharwal, with his sons Upinderpal and Jaipreet, ran a mortgage-fraud scheme between March 2004 and April 2005, buying homes in New Jersey, New York, and Connecticut and then reselling them to fictitious buyers, whom they equipped with fake W-2 forms and jobs at companies they controlled, one of which they ran from their garage. On behalf of one such buyer, "Surinder Singh," the Sabharwal's allegedly submitted a bogus Social Security number, a "counterfeit New York driver's license," and fraudulent account statements from the stock brokerage Smith Barney, according to court records.
The New Jersey case does not mention any Maryland properties, nor has Sabharwal's partner in Meher Realty, Gagan Sahni, been charged with any crime in Maryland or New Jersey. Sahni could not be reached for comment. The U.S. Attorney's office in New Jersey would not talk about the Sabharwal case and the family's connection to the Baltimore foreclosures.
The Sabharwal case has not received much attention in the media, but it may be newsworthy. Dr. Sabharwal founded Asia Online, a now-defunct publisher of Indian news, and has been described in news accounts as a "prominent New York developer." Sabharwal is a political player, having contributed to the campaigns of New York Sen. Charles Schumer (D), Pennsylvania's Arlen Specter (D), former U.S. Rep. Richard Gephardt (D), during his presidential bid, and the Democratic Senatorial Campaign Committee. His one-time driver and personal assistant, Rajesh Chugh, rose to become a key fundraiser for former New Jersey Gov. Jim McGreevey (D). In 2002 Sabharwal presented Secretary of State Hillary Clinton with a plaque on behalf of the Sikh Organization of New York; someone living in his house and sharing his last name donated $2,300 to Clinton's campaign fund in 2007, according to campaign records.
The sons have pleaded not guilty and were released on $1.5 million bail. Although the charges were filed in September 2008, Dr. Sabharwal has not yet appeared in court, and is believed to be in India. An online advertisement placed in April on behalf of one of his businesses, SAAB Group Inc., USA, indicates that he is going into the multi-level marketing business. Neither Dr. Sabharwal nor his sons' attorney returned calls for comment.
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