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VOL. 123 | NO. 218 | Thursday, November 06, 2008

MALS, Attorney General Sue Local Foreclosure Aid Org

By Rebekah Hearn

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Memphis Area Legal Services and Tennessee Attorney General Robert Cooper Jr. recently filed eight lawsuits in Shelby County Chancery Court against the Tennessee Housing Protection Agency, claiming the foreclosure counseling and housing services organization “exploited” seven of its clients.

MALS filed seven individual lawsuits against THPA on behalf of the plaintiffs, and the attorney general filed a suit on behalf of the state of Tennessee.

Exploitation?

Webb Brewer is the director of MALS, a nonprofit legal aid service that also is home to the Memphis Fair Housing Center, a separate entity associated with MALS, and the Home Preservation Project, which also is an individual organization that mainly helps with foreclosure crisis counseling.

Brewer said several people came through the office who had “started out with THPA and had had a bad experience.” Brewer said MALS, which belongs to the Memphis Housing Council and Network, began to hear of some other dissatisfied clients through that organization.

Then the Tennessee Housing Development Agency “kind of indirectly became aware of this and were concerned about it,” said Brewer.

Brewer said as he recalls, of the seven suits filed against THPA, three of the plaintiffs did indeed lose their homes.

“In each of these cases, it does appear to us that had they not relied on THPA, they may have been able to save their homes,” Brewer said.

Two of the lawsuits obtained by The Daily News are different in details but similar in story. The two women in these cases both lost their homes.

In one suit, the plaintiff, who was not yet in foreclosure status, claims that THPA program director Ted Houston “specifically stated to (her) that in order for THPA to help, your mortgage needs to be in foreclosure status.”

The plaintiff claims she intentionally fell behind on her mortgage so THPA could help her. But after her second meeting with Houston, her mortgage company, Saxon Mortgage, began sending pre-foreclosure notices.

The suit claims the plaintiff then contacted Houston, who told her not to respond to the letters “because he (was) speaking to someone at Saxon Mortgage” about her financial issues.

However, in January, a Saxon representative told the plaintiff that “she did not see any notes in (her) file regarding Ted Houston or THPA,” according to court documents.

On Jan. 30, the plaintiff’s home was sold at foreclosure.

The suits also allege THPA essentially pushed rental properties onto the plaintiffs. MALS and the plaintiffs are also arguing that THPA is not an accredited counseling agency.

However, according to the THDA’s Web site, THPA is listed as one of HUD’s Approved Housing Counseling Agencies, meaning at the time of publication THPA was approved to engage in loss mitigation and other types of counseling.

When informed of this, Brewer said via e-mail that “someone told me they had just gone to HUD training and were seeking certification,” and he was going to inquire about that.

‘Entirely untrue’

One by one, Mark Jones, the executive director of THPA and one of the named defendants (the others being Houston and John Does 1-5), staunchly denied the allegations.

Jones’ main argument was that THPA has helped hundreds more people than the seven named in the suits.

“Since 2007, we’ve actually helped over 300 homeowners from losing their homes,” Jones said.

“If you’re $20,000 behind, and I … call your mortgage company and work it out and call you back and say, ‘Hey, I worked it out, and you only have to pay $1,800 – well, sometimes that creates an upset client,” Jones said. “A lot of people come to us and expect us to get on the phone and solve the problem without them having to pay anything.

“We strongly feel – even though we can’t guarantee anything, because we’re not the mortgage company – like we can get a deal worked out for you, and … 99.5 percent of people that we deal with, we get a deal hashed out.”

It’s the other .5 percent, Jones said, who often can’t come up with anything to give the mortgage company when a deal is worked out. He said the plaintiffs in this case fell into that category.

Also, Jones denies having any connection with rental property landlords. He said THPA does not provide relocation services, but if a homeowner loses a home because of foreclosure, Jones and Houston will try to “network” and find rental properties to suggest to clients – but they don’t have connections to any one landlord.

“That (claim) is entirely untrue,” Jones said. “Basically, if I’m driving down the street and I see a house for rent, I’ll write down the phone number and (tell the client). But we don’t have any connection with anyone; we don’t have any kickbacks from anyone.”

The “saddest” thing to Jones is that MALS, instead of sitting down and talking with him, was suing the organization.

“We should be working together, not butting heads over this kind of thing,” he said. “I’m sure if I were to go into MALS’ files, I could find seven dissatisfied clients; but … no one’s perfect. I’m – we’re – not claiming to be a perfect company.”

When asked if mediation or arbitration might be an option to keep the plaintiffs out of a costly and emotionally taxing trial, something about which Jones expressed concern, Jones said he was “open” to any suggestions.

“We have nothing to hide,” Jones said. “If we just ducked our heads down and said, ‘No comment, no comment,’ people would assume we were up to something. We’re not. We work hard, we’re diligent.”

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RECORD TOTALS DAY WEEK YEAR
PROPERTY SALES 38 349 15,066
MORTGAGES 111 449 19,779
FORECLOSURE NOTICES 33 91 3,886
BUILDING PERMITS 0 512 35,842
BANKRUPTCIES 62 309 14,343
BUSINESS LICENSES 18 138 5,129
UTILITY CONNECTIONS 69 385 21,817
MARRIAGE LICENSES 13 106 4,663

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