Ms. Galloway. Photo: Karen Mafundikwa.
Black homeowners in Brooklyn’s hot market today must navigate deed theft, fraud and various scams to hold on to their homes, even during this pandemic.
Others are facing the threat of foreclosure when the moratorium on foreclosures ends in January. The threat of foreclosure brings dubious foreclosure rescue scams of all types. Many go to the courts, hoping for a respite, but generally there is little help in the courts and there are not enough legal service providers to go around to help the many people in Brooklyn with legal issues regarding their homes.
“Something is not correct in the courts,” was the pained comment of Deidre Galloway, 72, discussing her five year long battle over the deed to her home.
Her fight in the court has been paused by the pandemic, but is ever present in her mind. Ms. Galloway has lived in Brooklyn for 70 years. Her parents, were African American teachers from North Carolina, who moved to Brooklyn when she was just two years old. They bought a house in Bed-Stuy and raised a family. By the time Ms. Galloway was starting high school in 1963, they bought a second home, a six bedroom house on a tree-lined block of stately townhouses in Clinton Hill.
Ms. Galloway says, “It was nothing but doctors and lawyers. You couldn’t buy a home on this block if you were of color.” Her mother surpassed redlining by buying the home from the Catholic Diocese. She recalls, “We were one of the first two Black families.” As an adult, she lived elsewhere in Brooklyn with her own family, but in 1992, she returned to live at the Clinton Hill home which remains in her family. She lived there happily until 2016, when she received a text message from a man named Earl. “He said he had bought out the rights to my property,” she recalls. She learned that her nephew Lloyd Plummer had sold Earl his stake in the property. Lloyd was an heir to his deceased mother’s estate—Ms. Galloway’s sister—which was being wrapped up at the Surrogate’s Court in Brooklyn.
Soon after that text, Earl filed a lawsuit in Federal Court to force Ms. Galloway to sell the house, so that he could collect on his portion of the property. On the first day of court, her nephew Lloyd appeared and told the judge: “Earl promised to pay me $210,000, but he never did.” Ms. Galloway believed since the contract was not met, it would have been regarded as null and void; however Earl pressed on, and the judge allowed the case to proceed—and for the home, now valued at $4.9 million, to be sold. Earl’s only proof of a contract was a print out of text messages from her nephew saying, “When are you gonna give me the money?” In the beginning, Earl had a lawyer, Ms. Galloway did not. She was retired and couldn’t afford one.
Soaring demand for single-family homes in Brooklyn, have forced prices upwards. The average sales price passed $1 million in 2018. Median sales reached $808,000. Homes in Black neighborhoods of Bed-Stuy, Crown Heights and Prospect Lefferts Gardens — are the second most in-demand in the borough. These are all communities where for several decades, the homeowners were mostly African Americans with roots in the South, or immigrants from the Caribbean. With the heightened demand for homes in Central Brooklyn, homeowners became bombarded by predators, and speculators seeking homes and land to build luxury apartment buildings.
Jay Inwald, Director of Foreclosure Prevention at Legal Services NYC says that his agency has encountered a variety of scams used against homeowners in Brooklyn including deed theft, partition scams, foreclosure rescue scams, sham foreclosure prevention representation, and short sale scams. Partition scams such as the one Ms. Galloway has been subjected to, are one of the most popular. In these situations with jointly held property, relatives living out of town are often targeted. Some victims report that a relative who may be on drugs or with mental health issues or other challenges is targeted; or one co-owner is induced to sell his or her share for absurdly low price. The purchaser then attempts to force a partition sale in order to pocket the equity.
At the same time that home prices have been increasing, Black homeownership in New York City has declined by 10% over the last decade. According to the 2020 Census, the borough of Brooklyn and New York City outpaced both New York State and the nation in population growth. Census statistics show that Brooklyn’s population grew by nine percent to 2.7 million, and it remains the most populous borough in New York city. It now equals Chicago, the third largest city in the US, in population size. However, Brooklyn’s Black population declined substantially over the past decade, by nearly 70,000, from 799,066 to 729,696, going from 31.9 percent to 26.7 percent. In stark contrast, Brooklyn’s non-Hispanic white population increased by 75,000 in the same time period.
Black communities in Central Brooklyn and smaller enclaves in Flatbush and Canarsie survived redlining, when the US government denied them access to mortgages, like almost all Black neighborhoods in the country. Despite redlining, being underbanked and underserved, Central Brooklyn became the epicenter of Black homeownership in New York City, followed closely by South East Queens.
Richard Rigaud’s aunt, Exumene, died in 2006 without a will, leaving a majestic three-story sandstone townhouse on Eastern Parkway, a tree-lined boulevard in Brooklyn. She had paid off her mortgage years earlier. Rigaud had spent a lot of time around his two aunts who lived in this house in the 1970s and 1980s. He lived only a few blocks away; he remained close. After she passed away, the property was locked up for years but Rigaud continued to maintain it. At the time he knew nothing about the process when someone dies. Later, he learned that he could file for adverse possession and claim the home.
In 2015, he went to court to inquire about the estate. That was when he learned that that there was a deed theft of the home. The deed to Exumene’s house, worth about $1 million, was transferred out of her name to a fictitious person, two years after she passed away. The records say that person sold the house to investors behind a Limited Liability Company (LLC). Rigaud went to several attorneys but could not afford the $500 per hour fees that some charged. Non-profit legal service providers were stretched thin and could not take his case. The LLCs who now had their name on his aunt’s house got a mortgage on the property, then they foreclosed on the mortgage. The mortgage was then rolled over from one LLC to another LLC, six times over the course of several years. All the LLCs had the same members; same owners. But Rigaud had still retained possession of the house and he fought the new holders of the deed, beginning in 2015 . At one court appearance, the holders of the LLC and his lawyer offered Rigaud $10,000 to disappear and forget about his aunt’s house. Things came to a head in late 2019. He was representing himself and the deed holders had an attorney. He lost the case. The holders of the deed went to housing court and got an eviction notice against Rigaud and took possession of the house.
Homeowners or potential heirs who encounter deed theft can only pursue the matter in civil court. They may get lucky and have the district attorney or attorney general indict the culprits, but more often than not they are left to pursue lengthy court battles. Now, if they are contacted early, the Sheriff’s office can put a hold on the property so that the deed thieves cannot secure a mortgage. The Office of the Sheriff, NYC Department of Finance reports that there were 2,397 deed thefts between 2014 to 2019. The law was changed in 2020, making it harder to steal a deed. Nevertheless, since 2020, there were 367 reported deed thefts with 157 incidents in Brooklyn. In the past five years, the Brooklyn District Attorney’s office secured 20 deed fraud indictments against 32 defendants covering 56 properties. Of those, 11 cases involving 23 defendants ended with convictions. This is a drop in the ocean relative to the number of deed frauds in Black communities in Brooklyn.
Pandemic Slows Wheels of Justice:
Yolande I. Nicholson, an attorney in private practice who works in consumer protection for homeowners, says, “There are cases at the Brooklyn District Attorney’s office going back 10 years. Homeowners have nowhere to go. You write documents and you argue before the court and it falls on deaf ears. This is the climate.” Other attorneys at the non-profit legal providers say there are very few cases that the district attorney has prosecuted although these are cases of fraud.
Speaking to the publication CityLimits, City Sheriff Joseph Fucito said that over the past six years, his investigations resulted in the arrest of 49 suspects tied to fraudulent property documents, with the total value of those properties in excess of $48 million. But due to the pandemic, courts and juries have been paused and the process to justice has slowed. It has become more arduous to interview witnesses, dragging the process out. “In the present landscape, deed fraud is an onerous crime to investigate and the more hurdles we face the longer it takes to successfully complete an investigation,” said Fucito.
The pandemic slowed down Ms. Galloway’s fight to remove Earl from her deed. When the courts shut down, she could no longer conduct the legal research she used to do on the court’s computers. She was used to attending court in person and she did not attend important virtual court hearings, mostly due to her unfamiliarity with the process; she almost missed some actions seeking to push the judge towards a sale of her home.
Within weeks of Mr. Rigaud losing his case in January 2020, within weeks the pandemic started, shutting down New York City and the courts. He is just beginning to prepare to resume his legal battle. The setback forced him to remove all of his aunt Exumene’s furniture and personal effects which had been in the house since her death in 2006.
People like Ms. Galloway, Mr. Rigaud and many others could benefit from resources to assist with their long-drawn battles. New York’s Attorney General Letitia James created a fund of $800,000 to create awareness about deed theft and the multiple scams in Brooklyn. Various attempts to get more information on the results of this program proved fruitless.
Many homeowners in foreclosure are contending with alleged fraud. Most of the current foreclosures in the courts in Brooklyn are private equity investors who bought the loans from HUD, Fannie Mae and Freddie Mac, according to Yolande I. Nicholson, “Investors buy the loan expecting the borrower to default so that they can collect the property. In the meantime, through the loans, the equity is stripped from the property so that the homeowner gets nothing out of their home,” Nicholson said. These loans typically started off with low interest, but after two to three years, payments would increase dramatically, sometimes even by 50%. This shift in subprime lending led more borrowers to refinance their home every two to three years, which resulted in stripping them of their equity.
Some Victims Lured By Subprime Targeting:
Heather McGhee has noted in her book “The Sum of US,” that a common misperception is that subprime loans were sought out by financially irresponsible borrowers with bad credit, so the lenders were simply appropriately pricing the loans higher to offset the risk of default. The Wall Street Journal in 2007 reported that the majority of subprime loans went to people whose credit scores could have qualified them for prime loans. Subprime loans were given because they were more profitable for the lender.
Although The Fair Housing Act of 1968 outlawed racially discriminatory practices by banks, according to McGhee these loans were primarily targeted “on the segment of Americans least respected by the financial sector and least protected by lawmakers: Black and brown families.“An analysis conducted by the U.S. Department of Justice of 2.5 million mortgage loans made from 2004 to 2008 by Countrywide, showed that Black customers were at least twice as likely as similarly qualified whites to be steered into subprime loans; in some markets, they were eight times more likely to get a subprime loan than white borrowers with similar financial histories. President Obama in 2009 created the Home Affordable Modification Program (HAMP), which allowed homeowners to modify the terms of the subprime loans, in order to save home ownership, after the subprime mortgage crisis. But homeowners in communities of color have been denied these affordable loan modifications more often than not. Nonprofit Legal Service Providers and Private Bar Attorneys representing homeowners in Brooklyn report that less than 10% of homeowners have received actual HAMP loan modifications since its creation.
Brooklyn has been a great place to mine victims for deed theft, because there are so many homeowners there who were targeted for predatory lending. This is where toxic predatory loans were being marketed. Desperate to save their homes, many homeowners unknowingly turned to companies they thought offered legitimate foreclosure rescue plans such as loan modifications or other mortgage relief assistance, which turned out to be scams. There were attorneys who took cases to represent people in foreclosures and who took actions that made them lose their case, literally sham foreclosure representation. There are loan modification and refinance scams where people unwittingly signed over their deeds to their home, as well as short sale scams where deeds were stolen. Some scammers tell people not to pay their mortgages because it would help them to get a modification, putting homeowners in further trouble.
Nicholson, the attorney, spoke at a public hearing in March 2019 called by Brooklyn Borough President—and now mayor elect— Eric Adams on the housing crisis in Brooklyn. She asserted that the actions of judges in foreclosure cases in Brooklyn contribute to an environment that is rife with fraud. “Since 2016, New York State judicial regulators were charged with advancing the Legislature’s policy to save homeownership. However, they have largely steered foreclosure proceedings towards auctions of homeowners’ homes,” she said. “Changing the terms of the loan under a loan modification which would make the loan affordable to the homeowner, is typically denied by judges in the state court.” Instead, judges “shut down loan modification and settlement conference proceedings even as the foreclosing attorneys could not verify the lack of fraud in their filings.“
Nicholson asserts that judges have accommodated “documents which raise questions of fraud”; sometimes they are “fraudulent on their face.” Often plaintiffs cannot produce proof that they own the loan that they are foreclosing on, and judges ignore it. Nicholson said judges have allowed foreclosure cases to continue to judgment and auction “on a questionable affidavit; an affidavit that would most likely not be considered admissible evidence in any other type of case or action, except for foreclosure cases.”
With the pandemic and ensuing economic crisis, to prevent massive defaults and assist households with economic difficulty, the CARES Act provided forbearance on federally-backed mortgages for 18 months. New York’s governor declared a moratorium on foreclosures with hardship declarations until at least January 15, 2022.
However, in October 2021, one Brooklyn judge sent out notices to several hundred homeowners to attend hearings at the Court seeking to ascertain their financial hardship situation. Attorneys from non-profit legal service providers and elected officials spoke out against this court-issued notice sent to hundreds of homeowners. The notice said defendants must attend a “hardship hearing” and status conference before Kings County Civil Administrative Judge Lawrence Knipel or risk losing their case. Judge Knipel proceeded with “conferences” for three weeks in November. According to legal service providers Mobilization for Justice and Legal Services NYC, the court notice disregarded a state law that allowed homeowners to sign a simple form attesting to their hardship during the coronavirus pandemic; this paused their foreclosure cases until Jan. 15, absent a challenge from the mortgage lender. If a hardship form had already been submitted, the case should be stayed, they argued.
Alice Nicholson, an attorney who works on Chapter 13 notes that she has been able to help clients in foreclosure get loan modifications in federal court when they file for bankruptcy, all the time, despite being denied the loan modification for years in the state court. “I can give you at least 10 people who got it in federal court after they got the notice of sale of their property, who were denied a loan modification in state court,” she said. “The judges in Federal Court hold the lenders feet to the fire, in terms of review…Also, I think the judges in Federal Court treat the homeowners with much more respect. They are more interested in preserving home ownership.” The general consensus gathered from attorneys who spoke off-the-record is that the judges are largely biased towards the banks and investors, not the mostly homeowners of color that come before them in foreclosures.
Elderly Victimized By Giuliani Era Program:
New York City’s own actions contributes to the environment that puts homeowners at severe risk, especially elderly people. New York’s former mayor, Rudy Giuliani, created The Third Party Transfer (TPT) in 1996 to privatize the enforcement of taxes by selling them off to investors. The list is public record, which marks the people on the list. The scammers have this list. The tax liens happens with people who have paid off their mortgages and they’re paying their taxes directly. This issue essentially affects seniors. The liens are sold off to investors who then foreclose on the unsuspecting homeowner. The list also suggest to scammers that these are people who are likely to be elderly or people who may be in financial difficulty.
In the run up to the pandemic, there were several New York City Council hearings about TPT and it is now under review. Its existence has caused the people on the list to be subject to countless scams, and some lost their homes unwittingly. There is the well-reported case of a Brooklyn woman whose home, worth more than $1 million, was sold for a water bill of $1347, that she had paid. She eventually got her deed back after several months and the intervention of several Brooklyn politicians.
New York recently received $540 million for homeowners in the American Rescue Act. Households behind on their mortgages, property taxes and other housing expenses can get up to $50,000 in aid through the state’s recently-approved Homeowners Assistance Fund. These funds will help homeowners impacted by Covid 19. This should provide some relief for many people facing foreclosure, in terms of catching up with their mortgages, but this will not help people with stolen deeds and fraud committed over previous years.
Brooklyn suffered significantly, with some of the highest Covid deaths, while New York City was the epicenter of the pandemic. The aftermath of the pandemic is likely to bring economic downturn and with it many more people are likely to hurtle towards foreclosure. Some people lost family members who contributed economically and have been granted relief by the moratorium. but it ends on January 15, 2022. At a virtual conference at the Federal Reserve Bank of New York about low income homeownership in November, Donghoon Lee, of Federal Reserve Bank of NY noted that “Stressed mortgages, either in forbearance or in delinquency, approach pre-pandemic levels. We expect that borrowers still in forbearance will transition to delinquency with higher probability, as more than half of them have been in forbearance for more than a year. Lower income and lower credit borrowers are at risk here.”
“Before the pandemic, we only had a few lawyers working in this space, willing to go to bat for homeowners facing foreclosure, deed theft, equity theft. And I fear that following the pandemic there will be even less. The courts and the legislature will have to look at how to address this situation. The methodology used to rush cases to foreclosure in the pre-pandemic world can’t continue,” said Nicholson.
The reporting By Ms. Mafundikwa was made possible by a generous grant from the National Association of Black Journalists (NABJ).