In a Landscape of Predatory Loans, One Homeowner Fights Back

We’ve heard a lot of stories about predatory lenders and unscrupulous practices in the real estate business. But amid all these stories, one company stands out: it’s called United Homes. They’ve boasted they’ve sold thousands of homes in the poorest sections of New York City in the past 15 years. Huge numbers have gone into foreclosure, and now lawyers allege the company suckered people into buying defective homes for way more than they were worth. WNYC’s Ailsa Chang reports on the story of one victim who’s fighting back.

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REPORTER: Sandra Barkley is typical of a lot of people in danger of losing their homes right now. She trusted a real estate company out to make a quick buck and bought a house she couldn’t afford. But Barkley’s different – she’s suing. She’s still in the middle of the battle, and no one’s sure who’s going to win. But so far, she’s still living in the white, three-storey house she bought six years ago in Bedford-Stuyvesant.

REPORTER: Her granddaughters don’t understand the legal fight going on around them. They say they love living here. Now they have their own yard to play basketball.

REPORTER: Barkley’s a city employee supporting a daughter and two grandkids. When she was almost 50, a friend of hers – another single mom – introduced her to a man representing United Homes. Her friend said of course Barkley could afford a house if she could. And the man agreed – without even asking how much Barkley made. She spent only a day looking at homes with the agent, and this one – at 557 Hancock Street – was the third one she saw.

BARKLEY: I remember us going in, and I was captivated by the first floor here because of the hardwood floor, and I’m like, wow, I kind of like this.

REPORTER: United Homes is what many housing advocacy groups call a one-stop shop. These companies provide inexperienced buyers with a salesperson, an appraiser, a lender and a lawyer – all in one package. It’s not illegal – but there’s a potential for a conflict of interest. Many tell their customers it would be more expensive lining up all those folks separately – so, they say, “stick with us, and you’ll save money.”

BARKLEY: I grew up in the South, I came to New York. You grow up with this trust factor. You trust people. Not second-guessing – just “okay, alright.”

REPORTER: Barkley found out her friend got a thousand dollars for referring her to United homes. I called the company’s owner, Yaron Hershco, but he refused to talk to me. So here’s how Barkley and her lawyers tell the rest of the story. The day she saw the house with the broker, she checked it out for only a half hour. She kept asking, “Well, how much will this house cost?”

BARKLEY: The only thing he said was, “You can afford it.” And I said, “But how much does it cost?.... Don’t worry, you can afford it.”

REPORTER: United Homes scheduled the closing two days later – which is unbelievably fast. She tried to delay the closing, so she could consult an outside lawyer, but they wouldn’t reschedule. When she showed up at the closing, it was the first time United Homes asked for proof of her income. And she learned the mortgage was going to be 70 percent of that income. Barkley remembers telling the lawyer provided to her she didn’t understand any of the papers she was signing.

BARKLEY: He said don’t worry, you’re going to get copies of all these papers. You don’t have to read it. I’ve gone though it, so just sign it.

REPORTER: Barkley says she tried to cancel the purchase the next day, but United Homes told her that was impossible. They assured her that she’d be able to make money by renting out the third floor for 1600 a month. So, Barkley and her family moved in. Right away, she realized the house was in really bad shape. Her daughter Krystal remembers seeing the backyard for the first time.

KRYSTAL: Junkyard. I mean, that’s the best way I could describe it. You imagine everything that has to be done to a home to prepare for people to move in, and imagine the scraps left from it. And instead of a garbage bag, they used a backyard.

REPORTER: That wasn’t all. One of the showers wouldn’t turn on. Only one of five radiators actually worked. And then the floors – those beautiful hardwood floors – they weren’t level, causing the furniture to lean and sometimes fall. And every time it rained, the basement and front entrance would flood.

BARKLEY: You see that pipe running down the side? Believe it or not, I went on top of the roof, and I laid down, and I helped put down the drain on top of the house.

REPORTER: Barkley started draining her savings – almost 20 thousand dollars – to make repairs. And, the highest rent she ever got for her third floor was 1200, not 16. So Barkley started falling behind on her mortgage payments. She worried the house wasn’t worth what she paid, so she hired an appraiser one day. And it turned out her home was worth almost a hundred thousand dollars less than what United Homes charged her. She was so upset, she went to a community meeting about foreclosures, met a lawyer and decided to sue United Homes.

BARKLEY: People will prey on you. And I’m not saying it’s only minorities. Because I was approached by an African-American, so people prey on people. They just prey on that weakness, so if you don’t know or if you’re trusting, “Okay, well, toot! We got one!”

REPORTER: Navid Vazire is one of the staff attorneys at South Brooklyn Legal Services. They’ve filed six lawsuits against United Homes, including Sandra Barkley’s. He says buying a house is a really complicated transaction, and a lot of one-stop shop victims are pressured to trust everyone involved – especially the lawyers.

VAZIRE: They were the ones who were able to make people feel comfortable going through with something they didn’t understand. I mean, none of us really would understand a complex transaction that we have no expertise in, and so we rely on somebody else to do that.

REPORTER: Vazire says the lawyers never told Barkley their relationship with United Homes. He also discovered United Homes bought Barkley’s house at a foreclosure auction for 153 thousand dollars, and just three months later, sold it to her for 200 thousand dollars more than that. He says that’s common. One-stop shops will often buy homes in poor condition, make hasty repairs, and then sell – or flip – the house just months after at a huge mark-up. But Barkley says she ultimately blames herself.

BARKLEY: How can you have been so naïve? Why you just take things at face value? I really did a tearing-to-pieces of myself. It took a lot out of me. And it hurts me – excuse me. It was really heart-wrenching.

REPORTER: It’s been reported that United Homes is going out of business. But its website is still active, the company’s still registered with the Department of State, and when you walk into its office in Briarwood, Queens, it still looks open.

REPORTER: What’s your name?

BROWN: Which name you want?.... Anthony.

REPORTER: Anthony what?

BROWN: Brown…

REPORTER: Brown wouldn’t say exactly what he did for United Homes. He laughed and said he’s the plumber. But he talked at length about New York City’s housing market and spoke frankly about why so many low-income buyers sign on to mortgages they can’t afford.

BROWN: If somebody tell you you can’t have that because it costs a certain amount of money, but everybody else has it, you gonna end up wanting it. It’s human nature. You always want to have something you can’t have.

REPORTER: Most of the houses United Homes sold were in poor minority neighborhoods like Bed-Stuy, East New York and Jamaica. According to “The Gotham Gazette,” more than a fourth of those houses went into foreclosure between 2002 and 2006. That’s astronomical, compared to the overall foreclosure rate for New York City in 2008, which was less than one percent.

BARKLEY: This is my little flower garden …. And those are my tulips back here.

REPORTER: Sandra Barkley hasn’t made her mortgage payments since 2004, but her lawsuit has put foreclosure on hold. That’s meant more time to garden, and plant her favorite flowers – something she never got to do before owning her own yard.

BARKLEY: Every year, they come up and I’m like, “Oh my tulips are up! Look! My flowers are up!” After the winter, you know, the cold and you think, even through the cold, the snow and all the harsh winter we have, you look and “Oh, there’s spring’s coming. It’s just around the corner.” So that’s what those tulips represent to me. A new beginning. Spring. We springing into something new.

REPORTER: Barkley’s hopeful about her lawsuit – she’s suing for damages and wants her mortgage written down to the actual value of her home. But if she loses, she could lose the house – and then, she’ll join the 50-some homes on her street alone now facing foreclosure. For WNYC, I’m Ailsa Chang.