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Predatory Developers Are Using Federal Funds and HUD Houses to Subsidize Their Schemes
It was Annette Taylor's dream to start a family daycare in her home. Pictures of her 14 grandchildren adorn every surface in her living room--from the top of the television to the end tables to the coffee table. So in 1998, when her daughter turned her on to real-estate agent Allen Becker, who sold houses in her Park Heights neighborhood that were within her price range, she thought she had found a way to make her dream a reality.
What she didn't know was that Becker--who owned, bought, or sold more than 190 properties in the city and county during 2001, many of them in her 21215 zip code in the lower Park Heights neighborhood--has been cited repeatedly for housing violations and is notorious for engaging in dubious real estate practices.
Taylor is one of several homeowners who have bought houses from Becker only to find themselves stuck with problems like leaking ceilings, sewage problems, and lead paint. On Dec. 13, the Baltimore City Flipping and Predatory Lending Task Force held a meeting devoted to concerns over the practices of Becker and other real-estate businessmen like him.
"Our big gripe with people like Becker is that they buy many properties from [the U.S. Department of Housing and Urban Development] for low amounts, then do minimal rehab," says Diane Cipollone, director of research and policy at the Community Law Center. The minimally rehabbed houses are sold to unwitting buyers who end up pouring thousands into repairs and maintenance. "He preys on low-income areas which often have a vulnerable clientele. He gets [Federal Housing Administration] loans because a lender knows that loan is insured. And FHA does not require an independent home inspection."
When people are sucked into bad real-estate deals, Cipollone says, the result is often bankruptcy, foreclosure, and increasing numbers of vacant and abandoned houses in struggling neighborhoods. Since such predatory real-estate practices usually victimize individuals with little house-purchasing experience and low or modest incomes, discussions at the Dec. 13 meeting focused on finding ways to better regulate property transactions and educating consumers about real-estate scams.
Taylor bought her Beaufort Avenue residence with an FHA-insured loan. Becker sold her the property for $45,000 after buying it for $18,900 and doing what she later realized were just "cosmetic repairs."
Taylor says the elderly woman who lived next door also bought her house from Becker. The house was recently foreclosed, and the woman is now renting an apartment. Taylor's neighbor to the left bought her house from Becker for $45,000 after Becker bought it for $14,700. Now the house is "falling down around her," Taylor says, because the foundation has eroded, partly due to termites.
Taylor says she is a cautious consumer. Usually, she says, she is assertive and skeptical, especially when it comes to things that sound too good to be true--like the house Becker had tried to sell her. But her husband, Reginald Taylor, was eager to purchase a house and put renting and lax landlords behind them. He wanted a home in which he and his wife could grow old. Taylor says Becker approached Reginald when she was not home and convinced him to sign the papers for the house without her consent.
"My husband signing the papers almost caused our marriage to break up," says Taylor. But the papers were signed, and despite her reservations they completed the purchase.
After they moved into the house, they reserved one room for the grandchildren. The room is a child's oasis, decorated with bunk beds, flourishing colors, and miniature tables and chairs. It is the one room left in the house that doesn't yet seem to have fallen into disrepair.
Across the hall is a room that smells of mildew. Plaster is falling from the walls, and there is obvious rain damage to the floor and walls. The gutters need to be replaced, so the window is lined with towels to catch the rain before it falls to the first floor and further damages the kitchen--which also has major leaks.
"When it rains it feels as if you're outside," Taylor says of the kitchen. Rain pours through the ceiling and has damaged the floor and walls. She says Becker patched holes in the ceiling before she bought the property so the water damage was not apparent.
The bedroom and the kitchen aren't the only rooms ravaged by rain: The basement floods with water, covering the entire floor. This, in turn, damages the furnace, which Taylor says she fixes several times a year because she and her husband can't afford a new one, which would cost around $3,500.
Rain isn't the Taylors' only problem: Termites have eaten away the front porch railing, which now dangles by a slight piece of wood. In the bathroom, the shower wall is being held together with electric tape. The new stove Becker promised them with the purchase of the home broke after three months. The same thing happened with the new refrigerator and the washing machine.
"The house has been a real pain in the butt," says Taylor. "We keep wondering what is going to happen next."
The dining room is still livable, but that's only because friends did $2,000 worth of repairs to keep it in shape. When the repairman came to work on the room, he chipped some paint off a wall, tested it, and found it was filled with lead. She says Becker guaranteed that the house was lead-free; in reality, the existing lead paint was simply covered over with numerous coats of lead-free paint. The presence of lead destroyed her dream of running a daycare center in her own home until she has the lead paint completely removed--a process that could cost thousands of dollars.
"He had all of this patched up good when we bought it," she says. "He told us we wouldn't have to fix up this house for 10 years."
Becker did not return calls to City Paper for comment on this story, but his lawyer, Alleck Resnick, vouched for Becker's business practices.
"He delivers a very decent product," says Resnick. "A lot of these homes that are renovated are very old, so they may have some problems." He had no further comment.
In October 2001, the Community Law Center issued a report entitled, "Spotlighting Unethical Real Estate Practices in the Park Heights Community: A Review of Allen Becker's Real Estate Transactions" and submitted it to the U.S. Department of Housing and Urban Development. The center noted that many of the properties Becker has bought, and perhaps flipped, have been purchased using FHA mortgages. Taylor's home is one of several mentioned in the report.
Also listed in the report is a property at 5112 Cordelia Ave., bought by Becker in 1999 for $4,500 and resold for $49,500 at the end of that same year. Becker also bought a property at 3610 Lucille Ave. for $6,500 in 1998 and resold it for $42,500 two years later. He bought 4908 Palmer Ave. in April 1999 for $4,500 and sold it in 2001 for $43,000. Because these houses were sold so quickly at such inflated prices, the law center's report says, they may be "over-valued, and over-appraised." In addition, the report indicates that many of these properties did not have city building permits, which are necessary to rehab a property. Without the permits, says Cippolone, it would be impossible for Becker to do more than cosmetic repairs to the properties.
"For substantial rehab work to be done, involving thousands of dollars, a permit [would be] needed," she asserts.
The Community Law Center says it found "disturbing patterns of housing code violations, housing court actions, vacant houses, and foreclosures" at many of Becker's properties and said, "despite the record of foreclosures upon FHA-insured houses sold by Mr. Becker, he still is able to purchase HUD properties and resell or rent them."
HUD answered the Community Law Center's report on May 23, 2002 with a draft report of its own. It noted that, of 129 FHA-insured mortgages obtained by homeowners to purchase Becker properties, 57 were foreclosed. According to the report, by the end of 2001 the total amount in claims HUD paid out to make up for the foreclosures on Becker homes was $2,714,868.22.
At the Flipping and Predatory Lending Task Force meeting, coordinator Kenneth Strong asked whether Becker would be barred from purchasing HUD houses due to his poor track record. To date, Becker has made 12 appearances in city Housing Court for failing to abate numerous housing-code violations. (HUD keeps a list of landlords and real estate agents it will not do business with; the agency can bar someone for up to five years). Engram A. Lloyd --director of the Homeownership Center at the U.S. Dept. of HUD--said that HUD will continue to research Becker and examine default rates on properties he has sold. In the meantime, Becker can continue to do business as usual.
Katherine Baker lives a few streets down from Taylor on Wilern Avenue. Becker bought the property she now lives in on July 13, 1999 for $12,500 and sold it to her the next year for $40,500 on Oct. 6, 2000.
Baker, who lives with her daughter and her newborn grandchild, has a hole in her ceiling at the bottom of her staircase where water pours out whenever someone takes a shower in the bathroom above. In her contract, Becker promised her fences in her front and back yards, a new washer, dryer, refrigerator, and stove. The washer overflows with water every time she uses it, the dryer has yet to be connected, and when she received the refrigerator, it had to be replaced two weeks later.
Meanwhile, Annette Taylor still hasn't given up on her dream of running a daycare. But she has had to start running it out of her daughter's home because hers will not pass inspection. Last month she had to replace her kitchen floor because termites had eaten it so badly that the floor was starting to come away from the wall. But Taylor says she's not moving out of the house she has worked so hard on.
"I am determined I am going to stay here," Taylor says. "I put too much money in this house. I have to stay."
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