Fourth Year Report - Anti

Transcription

AFTF
ANTI FLIPPING TASK FORCE
FOURTH YEAR REPORT
MAYOR’S ANTI-FLIPPING TASK FORCE
Byron W. Brown, Mayor
LEGISLATION/POLICY COMMITTEE
TABLE OF CONTENTS
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Letter from Mayor Byron Brown
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AFTF Highlights
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AFTF Members and Composition
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Executive Committee
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Data Committee
10
Legal/Investigation Committee
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Legislation/Policy Committee
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Federal Subcommittee
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Communications and Education Committee
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Finance Committee
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Conclusion
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Acknowledgements
APPENDIX
APPENDIX A – Flips and Income Map
APPENDIX B – Foreclosures 2007-2008 Map
APPENDIX C – House Flipping Rates Cut Buffalo News Article
APPENDIX D – Homing In on the Bad and Ugly Buffalo News Article
APPENDIX E – City Foreclosure Auction Opens Slowly Buffalo News Article
APPENDIX F – Foreclosure Study Targets Lenders Business First Article
APPENDIX G – Joseph Furan Pleads Guilty Buffalo News Article
APPENDIX H – Joseph Furan Starts Jail Term Buffalo News Article
APPENDIX I – Jessica Doucette Deeds Away 10 Homes Buffalo News Article
APPENDIX J – Photo brief about Liberty Bell Award
APPENDIX K – Billboard for STOPFORECLOSUREWNY
MAYOR’S ANTI-FLIPPING TASK FORCE
Byron W. Brown, Mayor
It has been a great year for the Mayor’s Anti-Flipping Task Force!
The AFTF continues to make strides to combat property flipping in the City of Buffalo.
In its fourth year, the Task Force continued to focus on improving the local economy
through its efforts to promote sound real estate practices. We have been fortunate in
Buffalo to have this group working toward mitigating the destructive effects of flipping
within the city. This effort is especially critical as the nation experiences a housing and
foreclosure crisis.
Senator William Stachowski
Co-Chair
Assemblymember Sam Hoyt
Co-Chair
Kathleen Lynch, Esq.
Coordinator
WNY Law Center
237 Main Street
Buffalo, NY 14203
(716) 855-0203
www.buffaloflipping.com
Cooperative efforts to educate the public on the importance of a healthy and stable
housing market is one the most effective ways to encourage growth in our community.
This of course could not be accomplished if not for the hard work of this mostly
volunteer member Task Force, from elected officials to real estate professionals. The
AFTF is dedicated to protecting homeowners in every neighborhood throughout Buffalo.
I want to take this moment to thank everyone for all their hard work.
The mission of the AFTF is accomplished through a multi-fold effort: to collect and
analyze real estate transaction data that reveals property flipping trends and evidence
of possible fraud; to investigate complaints of unethical and illegal real estate activities
and refer them to professional organizations and law enforcement agencies when
appropriate; to evaluate procedures, policies and laws that create conditions conducive
to flipping - using this information to develop recommendations to combat this practice
and follow the recommendations through to implementation; and to educate real estate
professionals, investors, and residents as to the detrimental effects it has on our
community.
We must continue this effort to preserve healthy neighborhoods and with the
collaboration of the City and State through the Task Force and new innovative
neighborhood programs offered by the City of Buffalo, instances of property flipping will
continue to decline.
Byron W. Brown
Mayor, City of Buffalo
ATFT-ANTI FLIPPING TASK FORCE
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AFTF HIGHLIGHTS
The AFTF continues to successfully curb destructive flipping practices in the City of
Buffalo by studying real estate transactions, evaluating procedures that contribute to
flipping and by implementing steps to prevent harmful flipping. This goal to eliminate
destructive real estate practices is especially critical in view of the current nationwide
foreclosure crisis since distressed properties are frequently marketed as a tool for
making quick profits by flipping them.
The AFTF, through a partnership between Western New York Law Center and AmeriCorps
VISTA, completed the first edition of Foreclosing Erie County. This Foreclosure Study
provides valuable information with respect to foreclosures and related flipping practices.
This study enables the Task Force to understand trends and possible patterns of fraud.
The Foreclosure Study was used by the US Attorney, Western District of New York, to
secure resources to hire staff to fight mortgage fraud in our area. The office will hire two
attorneys and a paralegal to pursue civil and criminal legal actions to combat mortgage
fraud.
Last year, with support of our Co-Chairs, Bill Stachowski and Sam Hoyt and many AFTF
partners, the AFTF used its experience and the foreclosure study to secure grants
totaling $800,000 from the Division of Housing and Community Renewal and the
Banking Department to fund foreclosure prevention programs. Using these resources,
the Western New York Law Center and partner agencies are now able to provide direct
legal representation and counseling to borrowers facing foreclosure. These actions
reduce the number of properties available for flipping through foreclosure. The WNYLC
worked directly with Chief Judge Sharon Townsend to set up a court procedure which
facilitates settlement conferences. Judge Timothy Walker handles these cases for eight
counties in WNY including Erie County. The professionalism and success of Judge
Walker’s procedures and court staff are regarded as a successful model statewide.
AFTF Co-Chairs supported the Governor’s Program Bill #46 which was passed on
November 16, 2009. This bill contained several key provisions such as the foreclosure
maintenance provision and the expansion of settlement conferences to all borrowers
with home loans facing foreclosure. The foreclosure maintenance provision will address
a significant problem that occurs when foreclosing entities initiate and then abandon
a foreclosure, leaving properties vacant. Once a judgment of foreclosure is obtained,
the foreclosing entity will now become responsible for maintaining that property. In the
past, the burden and cost of this maintenance has shifted to neighbors, taxpayers and
municipalities.
We are seeking to continue our foreclosure representation program through DHCR and
want to be able to represent homeowners in this expanded process. We are working
with Americorps to engage in a targeted marketing campaign to alert homeowners in
foreclosure. STOPFORECLOSUREWNY is a brand that is being used on billboards, bus
stops, the web and other media to attract borrowers in foreclosure to our services and to
deter homeowners from using unethical distressed property consultants.
The Legislation Committee has been active in addressing property management issues.
Collaborative outreach efforts with the Buffalo Niagara Association of Realtors and
the Department of State have created growing recognition that unlicensed property
managers and licensed property managers who violate real property law both pose a risk
to real estate brokers. This effort could potentially lead to legislation that would address
this issue on a state level. The AFTF has worked directly with Department of State to
refer complaints regarding unlicensed and unprofessional property management entities.
Currently, we are monitoring one particular hearing. It involves complaints from a number
of out-of-country investors against a flipping entity that used to operate in Buffalo and is
now effectively out of business in Buffalo.
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The AFTF continued to monitor the annual In Rem auction of city properties. The new
computerized system implemented by the Department of Assessment and Taxation
provides a quick way to determine whether bidders are local or from out of town. It
enables the AFTF to view bidder information contemporaneously and identify involved
parties. We are pleased to announce that since the introduction of the anti-flipping
affidavit at the City’s annual tax auction three years ago, there has only been one
violation of the affidavit. This represents a significant and almost complete elimination of
the tax auction as a source of properties for flipping.
The AFTF was able to expand its focus again this year to address vacant property issues
outside of Buffalo. AFTF members participate in the Erie County Distressed Properties
Task Force. We have shared our strategies for dealing with city In Rem foreclosures
and joined in support of the land banking concept as a way of dealing with vacant
properties. AFTF members were asked to present information on this effort and our
foreclosure prevention efforts at the New York State Conference of Mayors on April
30th in Canandaigua, the Ken-Ton Chamber of Commerce, City of Buffalo Common
Council, University Heights Community Collaborative, and the Erie County Fair Housing
Partnership event at the Harlem Road Community Center.
As a result of complaints, investigation and analysis, this Committee has made 246
referrals to law enforcement agencies over the course of four years based on patterns or
practices that potentially involve fraudulent flipping activities.
The members of the AFTF look forward to continued success as we begin our fifth year.
AFTF Members
Executive Committee:
Mayor Byron Brown
State Senator William Stachowski, Co-Chair
Assembly Member Sam Hoyt, Co-Chair
Kathleen A. Lynch, Esq. Western New York Law Center, AFTF Coordinator
Committee Chairs
Holly Lindstrom, Western New York Law Center, Data Committee Chair
Dennis Kozuch, Chief of Staff to Senator William Stachowski, Policy/Legislation Co-Chair
Council Member Michael LoCurto, Policy/Legislation Co-Chair
Melanie Gregg, Community Programs Marketing Manager, OSP/BERC, Communications/
Education Co-Chair
Teresa Glanowski, Director of Communications and Special Projects, Assembly Member Sam Hoyt,
Communications/Education Co-Chair
Carla Kosmerl, COB Director of Administration and Finance, OSP, Finance Committee
Chair
Members
Adam Alessi, WNY Chapter of the Appraisal Institute
Anthony Armstrong, Local Initiatives Support Corporation
Grace Andriette, Esq. Neighborhood Legal Services, Fair Housing Unit Supervisor
Peter Battaglia, Esq., Ticor Title Company
Carol Brent, Foreclosure Attorney, Legal Services for the Elderly
Bryan Cacciotti, Executive Director, Homefront
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David Chadwick, Foreclosure Attorney, Legal Aid Bureau
Cavette Chambers, Esq., COB Law Department
Michael Clarke, Program Director, Local Initiatives Support Corporation
James Comerford, Department of Economic Development, Permits and Inspections
Cindy Cooper, Esq. COB Law Department
David Derrico, Foreclosure Attorney WNYLC
Patricia Fulwiler, Deputy County Clerk
Michael Donovan, Rental Registry
Bradley Dossinger, CRA VP, M&T Bank
John Ferraro, WNY Chapter of the Appraisal Institute
Matthew Fery, Rep. Brian Higgins, Washington DC office
Susan Fretz, Appraiser, WNY Chapter of the Appraisal Institute
David P. Gilmour Director, Mayor’s Task Force on Housing, Rental Registry
John Hannon, COB, Director of Real Estate
Kathleen C. Hochul, Erie County Clerk
Mary Holtz, Cheektowaga Town of Cheektowaga Supervisor
Jerry Inda, Appraiser, Appraisal Institute of Western New York
Michele Johnson, Housing Court and Community Liaison
Carrie Kahn, Executive Dean of Workforce Development, Erie Community College
Martin Kennedy, Commissioner of Taxation and Assessment, City of Buffalo
Daniel Kresse, Americorps VISTA volunteer
Tracy Krug, COB Building Inspector
G. Patrick Lester, WNY Chapter of the Appraisal Institute
Graham Leonard, Americorps VISTA volunteer
John Leonardi, President, Buffalo Niagara Association of Realtors
Daniel Locche, Government Relations Director, BNAR
Bonnie Kane Lockwood, Director of Special Projects for Rep. Brian Higgins
Alisa Lukasiewicz, COB Corporation Counsel
Jack Maloney, Deputy Director of Fannie Mae
Kirk McLean, WNYLC
Joy McDuffie, WNYLC
Brendan Mehaffy, City of Buffalo Law Department
Wende Mix, Professor, Buffalo State College
Harry G. Meyer, Esq., Hodgson Russ Attorneys, Chair-Emeritus, NYSBA Real Property Law
Cody Meyers, Assistant to US Senator Charles Schumer
Alice Miranda, Real Estate Broker, BNAR
Dr. Satish Mohan, Town of Amherst Supervisor
Laura Monte, Assistant to US Senator Charles Schumer
Beverly Moore, Buffalo Urban League
Andrea Mujahid-Moore, Esq., Housing Opportunities Made Equal
Hon. Henry Nowak, City Court Housing Judge
David Polino, President, Upstate NY Better Business Bureau
Crystal Peoples, NY State Assemblymember
Robert Reynolds, Erie County Legislator
Mark Surdi, US Dept of Housing and Urban Development
Robert Trusiak, Assistant United States Attorney, WDNY
Marissa Villeda, Foreclosure Attorney WNYLC
Denetra Williams, Foreclosure Attorney WNYLC
Heather Yanello, Special Agent, HUD Office of the Inspector General
Gary Ziolkowski, COB Department of Permits and Inspections
Federal Bureau of Investigation, Buffalo Office
U.S. Postal Inspection Services, Buffalo Office
In addition to this list, the AFTF effort has been actively supported by members of
community organizations and residents who regularly alert us to flipping practices in
neighborhoods. We extend our thanks to these dedicated community residents.
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Further, members and staff of governmental departments and professional organizations
have assisted our efforts to a) identify flipping b) research and consider measures that
will curb flipping, and c) collaborate with us to produce educational events.
Executive Committee
The goal of the Executive Committee:
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Oversee the work of the AFTF to ensure its success in curbing flipping in Buffalo
Members:
Mayor Byron Brown
State Senator William Stachowski, Co-Chair
Assembly Member Sam Hoyt, Co-Chair
Kathleen A. Lynch, Esq. Western New York Law Center, AFTF Coordinator
AFTF Data Committee
Report
The goals of the Data Committee:
Holly Lindstrom, Chair
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Analysis of property flipping activity in the City of Buffalo
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Analysis of real estate-related transactions for investigation of patterns and
practices of fraudulent flipping activity
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Analysis of points of origin of properties which are subsequently flipped or ‘Where do flippers buy the properties they flip?’
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Analysis of data to support the initiatives of other committees
This committee has been successful in conducting research studies that have provided
a basis for understanding not only individual incidences of property flipping in the City
of Buffalo, but also the systemic factors that create the conditions that make flipping
possible. With the knowledge that we have built over the last three years, we have found
that subprime/ high cost lending and foreclosure are contributing factors to flipping
activity. As a result we have furthered our research of both subprime/ high cost lending
and foreclosure as they exist in Buffalo, with the ultimate aim of eliminating illegal
flipping and encouraging sound real estate investment. Part of our work includes HMDA
(Home Mortgage Disclosure Act) data analysis and testimony on that analysis to the
Federal Reserve Board, and publicizing the findings of the WNYLC Foreclosure Study.
Data Analysis
The data committee began a foreclosure study in 2007 armed with the knowledge
that more than half of the properties flipped in Buffalo originated from some sort of a
foreclosure. Since this study began, we have gathered foreclosure data (information
on foreclosure cases that were initiated, recorded document dates and book and pages
of documents as well as the property addresses related to the cases, etc.) from the
Erie County Clerk’s Office and have been successful in building a database unlike any
other nationally. Our database links mortgage documents to foreclosure initiations and
judgments of foreclosure based on available data.
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It is important to emphasize that this foreclosure study became possible only through a
partnership that the WNYLC has developed with WNY AmeriCorps VISTA (Volunteers
in Service to America) program. AmeriCorps VISTA is the national service program
designed specifically to fight poverty. VISTAs commit to serve full-time for a year term
at their host sites. In our case, we’ve had two VISTAs who’ve extended their service past
their one year commitment. Our team of WNYLC employees and AmeriCorps VISTAs
are dedicated to this foreclosure study and the greater understanding it brings to this
community regarding mortgage foreclosure.
The foreclosure study findings released in the spring of 2009 which describe analysis
of mortgage foreclosure initiations in years 2007 and 2008 can be found on the web
at www.buffaloflipping.com. To summarize some of the key findings below, they will be
broken down to represent the year the foreclosures were initiated.
2007 Forclosure Facts
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2,777 unique properties entered the foreclosure process in 2007
2,710 unique lis pendens were filed in 2007
1,110 lis pendens were filed on parcels in the city of Buffalo (40.96% of 2007 lis
pendens filings)
All Erie County municipalities had at least three lis pendens filings in 2007
The first-ring suburbs had a 36.4% share of all 2007 lis pendens filings
Zip code 14215 had 309 lis pendens filings in 2007 (11.4% share of all filings)
389 lenders originated at least one loan that had a lis pendens filing in 2007
HSBC Mortgage Corporation (136) and M&T Mortgage Corporation (101) originated the
most loans that entered the foreclosure process in 2007
Fourteen of the top 40 originating lenders are considered subprime lenders by HUD. They
originated 16.2% of all mortgages entering foreclosure in 2007
292 lenders originated five or less mortgages that went into foreclosure in 2007
There were 303 plaintiffs on 2007 lis pendens filings
The top five plaintiffs—Wells Fargo Bank NA (223), Citimortgage Inc. (216), HSBC
Mortgage Corporation (192), Deutsche Bank National Trust Company (142), and
Countrywide Home Loans Inc. (107)—filed 880 lis pendens in 2007 while originating
only 244 loans with a lis pendens filing in 2007
The five years preceding 2007 (2002-2006) saw the origination of 1,569 loans that
entered the foreclosure process in 2007 (57.9% of all filings)
2005 had the highest number of loans entering foreclosure with 417, or 15.4% of all
lis pendens filings in 2007
There were 724 subprime or high-cost loans originated in the years 2003-2007
that entered the foreclosure process in 2007, 53.6% of filings during that period, or
26.72% of all lis pendens filings
Of the 389 lenders who originated a mortgage that entered foreclosure in 2007, 119
lenders (30.6% of total) originated at least one subprime or high-cost loan from
2003-2007
Of the 303 plaintiffs who initiated a foreclosure on a mortgage in 2007, 107 initiated at
least one foreclosure on a subprime and/or high-cost loan
Buffalo had the highest amount of subprime and/or high-cost foreclosure initiations
in 2007 with 282
In 2007, 540 unique adjustable rate mortgages had a lis pendens filed against them.
This represented 19.9% of all lis pendens filings in 2007
282 ARMs had a maximum rate of 15% or over, or 54.4% of all ARMs entering the
foreclosure process in 2007
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2008 Forclosure Facts
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2,313 unique lis pendens were filed in 2008.
The Foreclosure Prevention and Responsible Lending Act of 2008 (Subprime
Mortgage Law, Chapter 472 of the Laws of 2008) requires[d] “lenders or mortgage
loan servicers…to send homeowners with high-cost, subprime, and non-traditional
home loans a notice at least 90 days prior to the commencement of a legal action.”
This posed a de facto moratorium from September to December 2008 on lis pendens
filings for these high-cost, subprime, and non-traditional home loans.
The City of Buffalo had 894 lis pendens filings for a total share of 38.65% of all lis
pendens filed in Erie County in 2008.
The first-ring suburbs had a 39.55% share of all lis pendens filed in Erie County in
2008.
Zip code 14215 again claimed the highest number of lis pendens filings with 238
(10.3% of the total).
The number of lenders who originated mortgages that descended into the
foreclosure process in Erie County in 2008 decreased from 2007, falling by 27 to
total 362.
HSBC Mortgage Corporation was once again the top originating lender for lis
pendens filings with 206, or 8.9% of the total.
231 individual lenders were listed as the plaintiffs on lis pendens filings in Erie
County in 2008.
The number one plaintiff on lis pendens filings was HSBC, as represented by
two divisions. If combined, HSBC Mortgage Corp and HSBC Bank USA were the
plaintiffs on 332 lis pendens together (14.4%), or 240 and 92 (10.4% and 3.9%),
respectively
As in 2007, Deutsche Bank originated no mortgage loans that entered the
foreclosure process in Erie County in 2008 but filed lis pendens on a total of 105.
Mortgages originated after the year 2000 comprise 1,674 or 72.3% of the total 2,313
lis pendens filed in 2008.
As in 2007, the highest originating year was 2005 with 344 (14.9%) filings. A close
second was 2006 with 335 (14.5%) filings.
There were 618 mortgages that met the threshold for subprime or high-cost status
originated in the years 2003-2008 that entered the foreclosure process in 2008, or
26.7% of all lis pendens filings.
Of the total number of subprime and high-cost mortgages, 213 (34.5%) exceeded the
threshold for first-lien subprime status (T-Bill +3). 145 (23.5%) mortgages exceeded
the threshold for second-lien subprime status (T-Bill +5). 56 (9%) mortgages
exceeded the threshold for first lien high cost (T-Bill +8), and 204 (33%) exceeded
the threshold for second lien high cost (T-Bill +9).
Of the 362 lenders who originated a mortgage that entered the foreclosure process
in Erie County in 2008, 141 (40%) originated at least one subprime or high-cost loan
from 2004-2008.
In Rem
Since the introduction of the anti-flipping affidavit at the City’s annual tax auction two
years ago, there has only been one violation of the affidavit. This represents a significant
and almost complete elimination of the tax auction as a source of properties for flipping.
AFTF Resource UtilizationCommunity Partnerships
The AFTF continues to partner with Erie County Clerk’s office, WNY AmeriCorps, Ticor
Title Company, BNAR (Buffalo Niagara Association of Realtors), several law enforcement
agencies, as well as elected officials. We also continue to communicate with community
leaders across the City to be available to assist with questions related to property
flipping and real estate investment. These relationships are essential to our continued
success in combating unethical property flipping.
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WNYLC/Partnership with
AmeriCorps VISTA
The WNYLC’s foreclosure study would not be possible without a strong partnership
with AmeriCorps VISTA. In fact the WNYLC has received so much support for this study
that VISTAs committed to this project have increased from one the first year to three
this year. We have just filled the third position. The first VISTA committed to this project
has completed his year of service and remains on the project at WNYLC as a part-time
employee to see this project through. Our two VISTAs from last year both completed their
year of service and have stayed on to serve an additional year to see the project through.
Through AmeriCorps the WNYLC has also acquired two VISTAs for the implementation
of a foreclosure prevention project which works hand in hand with the AFTF and
Foreclosure Study to reduce foreclosures and thus property flipping in WNY.
The study will continue to be used to understand trends and possible patterns of fraud.
These actions in turn will reduce the number of properties available to unethical property
flippers, reduce the number of homes left vacant due to foreclosure, and arm the City
of Buffalo with knowledge of property transfers, mortgage transactions and foreclosure
actions over a five year period. This analysis will also assist in the construction of a
proposal for the abatement of property flipping in the City of Buffalo. The full study is
expected to be completed by spring 2010.
Assistance with the Investigative
and Legislative Committees
The Data Committee continues to devote significant resources and time to AFTF
investigations and provide information to AFTF law enforcement partners. Over time,
flipping schemes change but we have the opportunity to identify schemes and provide
additional information and referrals to law enforcement partners.
The Data Committee has actively assisted the Legislative Committee in their efforts to
curb unethical property flipping through legislative and policy change. Our data research
and analysis has showed an increasing trend of subprime lending over the last four years
in certain areas. We have identified clusters of flipping activity with similar clusters of
foreclosures (see Appendix A and Appendix B). The research conducted by the data
committee has been used for advocacy efforts- some of which were aimed at foreclosure
prevention and tougher laws to target abusive subprime lending practices. This data has
contributed to the body of information that demonstrates that subprime lending products
can be destructive to poor communities such as Buffalo.
Foreclosure study cited by US Attorney
to secure mortgage fraud grant
The WNYLC’s foreclosure study was recently cited by the US Attorney of the Western
District to secure a grant to prosecute mortgage fraud cases. Three new positions will be
funded: a civil attorney position in Buffalo, a criminal attorney position in Rochester, and
a paralegal to serve both. Since mortgage fraud is now a crime in New York, the addition
of these positions is an important development in the effort to end fraudulent lending
practices.
LEGAL/INVESTIGATION
COMMITTEE
The goals of the Legal/Investigation Committee are to:
Kathleen Lynch, Chair
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Work with the Data Committee and Law Enforcement partners
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Review and analyze data for evidence of fraud and flipping
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Research and provide background information for potential use by law enforcement
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Receive and investigate all complaints of flipping and predatory practices
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Refer victims of predatory practices and fraud to appropriate resources
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Refer information received regarding potential violations of professional ethical
standards to appropriate licensing forums
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Assist law enforcement by providing information that will help identify and prosecute
individuals engaged in illegal activity
In order to ensure that misinformation is not distributed, reputations of those engaged in
legal and ethical activity are not harmed, and that potential evidence that may be used
for prosecution purposes is safeguarded, the nature of this report is necessarily more
general and will not focus on specific individuals unless action has commenced.
This committee continues to investigate and refer cases of fraudulent internet flipping,
including violations of the In Rem contract anti-flipping provision, to law enforcement
partners and to the City of Buffalo Department of Law for action. Matters involving
patterns of potential fraud with respect to mortgages have been referred to law
enforcement agencies including the State Attorney General, HUD OIG (Housing and
Urban Development Office of Inspector General), the FBI, the US Postal Inspector
General, and the Erie County District Attorney. Complaints about property managers
have increased significantly, particularly from owners that reside out of town and abroad.
These complaints are referred directly to our contact at the Department of State (DOS),
the licensing and enforcement agency responsible for oversight of real estate brokers
and property managers. We have received a growing number of complaints regarding
unlicensed businesses that operate in violation of real property law and these are
referred to both the DOS and to the NYS Attorney General’s office.
Sustained oversight and enforcement have clearly had an impact on flipping activity. As
a result of complaints, investigation and analysis, this Committee has made 246 referrals
to law enforcement agencies over the four years based on patterns or practices that
potentially involve fraudulent flipping activities.
One entity that was responsible for significant early flipping activity in the City of
Buffalo is now the subject of an investigation by DOS and a hearing was scheduled in
October 2009. The AFTF received a substantial number of complaints, particularly from
out of country investors, regarding misinformation about the properties and property
management violations. We referred them to DOS. In this matter, the October hearing
was adjourned pending settlement discussions and we are awaiting a progress report in
that matter.
Complaints received by building inspectors and watchful community groups serve as
referrals. In one matter in the University Heights area, a building inspector notified us
of a woman who made a presentation to the group that was offering to “take abandoned
properties” in the area. We were able to investigate this concern and learned that the
woman, who purportedly owned a real estate company, was not a licensed real estate
broker and her company was not registered to do business in NY. A referral was made to
DOS. Similarly, we have received complaints regarding websites of new entities that seek
to operate in this market. If there are apparent violations of ethical obligations under
licensing laws, we refer those concerns to DOS and to the Attorney General.
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In another matter in which we documented abuses of the in rem process by a flipper, we
were able to provide the COB Law Department with information which would serve as
the basis for action on potential violations of the in rem affidavit and auction procedures.
Significantly, this was the first year that this flipper did not attend the auction.
The City of Buffalo Real Estate Department has become an active participant with the
AFTF. When a person or entity seeking to purchase a property through the Real Estate
Division raises any concerns with respect to flipping, we are asked to conduct a review to
ensure we have no evidence of flipping activity on the part of those seeking to purchase
the property.
The WNYLC Foreclosure Study (Foreclosing Erie County) was a significant development
in tracking mortgage foreclosures; this helps us identify which properties are subject
to foreclosure and therefore vulnerable to flipping. We presented this study, and the
detailed research that serves as the basis for the study, to law enforcement partners at
the state and federal level. We provided data to both the NYS Banking Department and
the Federal Reserve Bank detailing loans in foreclosure and foreclosing entities. This
study will serve as a tool for detecting and prosecuting mortgage fraud.
Our outreach efforts focus not only on identification of fraudulent and unethical
practices but also on prevention. For instance, the AFTF was able to intervene before
an elderly woman was put into a cash-out refinance loan that would have resulted in
foreclosure of her home. This referral came from an attorney who is a member of the Erie
County Distressed Properties Task Force and became aware of efforts to combat flipping
and foreclosure through our participation in this county-wide group. We were able to
immediately make a referral to law enforcement partners with respect to this activity and
the persons and entities involved in this transaction. We have received inquiries from
lenders regarding concerns about real estate entities that are seeking to offer financing
and may be involved in flipping.
The AFTF regularly tracks real estate transactions in Buffalo and became aware of one
entity that purchased a significant number of properties in the Black Rock –Riverside
area. In addition, Co-Chair Assembly Member Hoyt forwarded community concerns
about the same entity which is owned by a Canadian family. After checking with COB
inspectors and notifying other city agencies, the AFTF concluded that this entity is not
currently engaging in flipping activity. There is a very real concern that if the company
decides to start flipping, this activity will significantly impact the community. Co-Chair
Hoyt and members of the task force attended the BlackRock Riverside Good Neighbor
Planning Alliance at which this entity made a presentation. The company president
assured the community that he did not intend to flip properties and he means to keep
them up to code. However he also revealed his intention to purchase 400 units in the
area. The AFTF will continue to monitor this entity’s activity, communicate with the
president and with community residents as needed and appropriate.
This increase in communication and information between various members of the task
force and the community serves to prevent new flipping enterprises from springing up in
Buffalo.
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While we view the significant decrease in overt flipping activity as a product of
successful monitoring, we understand the need for continued vigilance-especially in light
of the current foreclosure crisis. It is critically important for real estate predators to
understand that they will not be able to operate in the Buffalo and Erie County market.
Committee members will continue to work with the Data Committee and law enforcement
to uncover patterns and practices of illegal flipping. Committee members will also
communicate findings related to policies, procedures, and legislative issues to the Policy/
Legislation Committee.
LEGISLATION/POLICY
The goals of this Committee are to:
Dennis Kozuch Chair
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Meet with government representatives, community representatives and real estate
professionals to determine what policies, procedures and laws affect flipping
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Research policies, procedures, and laws, at all levels of government, that create
conditions ripe for flipping in Buffalo
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Using data and research, make recommendations regarding policy and legislation to city, state, and federal representatives that will help curb flipping
The legislation committee has been active over the last year, especially in advancing and
advocating the AFTF’s mission, while offering our point of view not only locally but on a
statewide basis.
The AFTF continues to participate in the Erie County Distressed Properties Task Force,
and has shared our ideas with respect to legislative remedies and identified proactive
steps to combat flipping and encourage healthy real estate practices.
The Legislation Committee continues to recommend several bills in the State Legislature
which we believe will alleviate many of the conditions which have helped perpetuate the
flipping problem in Buffalo. We have had some minor successes and have been met
with some resistance to our efforts, but we will continue to work with our Co-Chairs and
others to pass new laws to curb and end flipping across the state.
To date, our best effort has been with our proposed changes to the Real Property
Transfer Form. Although the Senate passed legislation mandating the changes, we
have been working closely with representatives of the Office of Real Property Services
(ORPS) to adopt these changes internally. As a result of those talks, ORPS has
agreed to adopt our modifications, basically requiring a contact name and a physical
address representing a LLC involved in a property transaction. All of this is intended
to give municipalities’ greater ability to track down the actual owner of a property for
enforcement purposes. ORPS intends to work with the Erie County Clerk’s office to
implement these new changes in a pilot program.
13
Senator Stachowski and Assemblyman Hoyt are once again carrying bills suggested by
the AFTF:
•
Assemblyman Hoyt has introduced and passed a bill protecting historic properties
from “demolition by neglect”. The legislation intends to protect historic districts and
landmarks from demolition by neglect by allowing regulations prohibiting improper
or lack of maintenance. Assembly Bill #A.695/Senate Bill #S.1980 Vetoed by
Governor 8/11/09.
•
Assemblyman Hoyt has once again proposed land bank legislation with some
changes designed to garner the support of those who previously objected to some of
the provisions of the bill. Assembly Bill #A.700/Senate Bill #S.4281 No action.
•
Stachowski & Hoyt have sponsored a bill requiring appraisals done in the city of
Buffalo to be reported to the NYS Office of Real Property Services. Assembly Bill
A.6026/Senate Bill #S.1941 No action.
•
Another bill sponsored by Senator Stachowski would require a foreclosing party to
designate an agent to accept service in the event a property becomes vacant during
the foreclosure process. Senate Bill #S.1944-A No action
•
Legislation introduced by Senator Stachowski and passed by the Senate requires
member(s) of a LLC execute articles of organization, specify actual place of business,
or that the members of such LLC be listed. This effort was previously discussed in this
section.
•
Another AFTF recommended bill would exempt the contractors employed by the city
of Buffalo to do demolitions from paying an asbestos notification fee to the state.
Subsequent to this bill being passed, the NYS Department of Labor (DOL) met with
Senator Stachowski and representatives from the city’s Department of Inspections
& Licensing Services to discuss the issue. The DOL is working with Senator
Stachowski to shape legislation addressing the issue.
•
The notification fees continue to be a burden to the city, and the continued payment
of the fee will simply divert public monies intended for demolitions to New York
State. Assembly Bill#A.7352/Senate Bill #S.1947 No action.
•
A Stachowski bill requires a lender to ascertain the value of real property prior
to commencing foreclosure proceedings. The AFTF felt that enactment of this
legislation would deter the number of foreclosures on properties of low value.
Senate Bill #S.1972 No action.
•
Senator Stachowski & Assemblyman Mark Schroeder have filed legislation which
would allow the city of Buffalo to retain the proceeds of the sale of any property
obtained through foreclosure without having to hold title. Such funds could be used
for further economic development purposes. Assembly Bill #A.2097/Senate Bill
#S.1977 No action.
•
Members of the legislation committee were involved in negotiations with
representatives of the New York State Bankers Association (NYSBA) regarding
the bill which would designate a third party to accept service in the event a
property becomes vacant during the foreclosure process. NYSBA is opposed to
our efforts arguing that they should not be responsible for this taking these steps.
Unfortunately we were unable to reach any type of agreement on these bills and we
will continue to look at a legislative remedy to these two particular issues.
14
•
On February 25, the NYS Senate passed a bill (#S.1182) requiring the prevailing
party in a foreclosure action to maintain property in “safe and habitable condition.”
Although this wasn’t an “AFTF” bill, it is important to note that the legislation
committee, and the AFTF as a whole, have discussed the issue, and recommended
this course of action.
The bill was sent to the Assembly, where Sam Hoyt worked aggressively to make this
bill palatable to the Assembly. The legislation committee received input from the
Empire Justice Center and the City of Buffalo Law Department on possible changes
meant to appease the concerns raised by those opposed to the legislation-including the
Bankers Association and NYS Bar Association’s Real Property Law Section. Both those
organizations filed memorandums in opposition to the legislation. As Upstate Co-Chair
of the RPLS and a member of the group’s Public Interest Committee, AFTF Coordinator
Kathleen Lynch worked with other attorneys in the section to craft a dissent to the
majority’s opposition to this bill, citing the need for this legislation to address a grave
problem relating to property conditions in cities like Buffalo.
The AFTF considered this legislation to be very beneficial to municipalities that have to
deal with the increasing number of foreclosures and the “limbo” status that occurs when
banks do not proceed after judgment of foreclosure to do something with the property.
Ultimately, this legislation became part of Governor’s Program Bill #46 which was
successfully passed on November 16, 2009. This is a very significant victory for
cities like Buffalo that are already forced to contend with too many abandoned and
deteriorating properties.
•
FEDERAL
SUBCOMMITTEE
REPORT
Bonnie Lockwood, Chair
A bill (S0261 ) was introduced by Senator Kruger which would provide for the
licensing “of individuals and companies engaged in the business of residential realty
management.” The concept of licensing for property managers was discussed
and recommended by the AFTF in previous years. It has also been the subject of
discussions by the Erie County Distressed Properties Task Force. Currently, the NYS
Department of State can only bring enforcement actions against licensed real estate
agents/brokers. BNAR supports creating this license to protect brokers but would
prefer to see it enacted at the state level rather than having multiple ordinances,
licenses and fees created at the municipal level.
2009 began with a major push to bring additional federal resources to Buffalo and
Western New York to rebuild and rehab vacant homes and concluded with a high-profile
visit from the US Secretary of HUD (Housing and Urban Development).
In February, Senator Schumer and Congressman Higgins jointly introduced their
legislation, The Community Regeneration, Sustainability, and Innovation Act of 2009, an
innovative approach to fighting the vacant housing problem that has been exacerbated
by rising foreclosures. This new legislation (S.453 and H.R. 932) will create a pilot
program that would send grants and flexible funding to 15 small cities and 15 large cities
across the country to help address vacant properties.
15
The bill calls for the creation of new, competitive demonstration programs to provide
funding and incentives to assist communities in developing innovative strategies to
address the vacant housing crisis. The legislation is designed to provide flexible funding
to cities like Buffalo for developing innovative strategies including starting or expanding
land banks, encouraging innovation with regard to environmentally sustainable practices,
and promoting multi-jurisdictional or regional approaches to addressing the problem of
vacant and abandoned properties.
The Community Regeneration Act, would:
•
Establish a three-year, $300 million demonstration program that would select
15 small cities and 15 large cities experiencing large scale property vacancy and
abandonment. Once selected, a city like Buffalo could use the funding to address
its specific vacancy issues, including establishment or expansion of local regional
land banks, deconstruction and demolition of vacant and abandoned properties,
development of green infrastructure including renewable energy production, the
adaptive reuse of architecturally, historically or culturally significant structures and
the development of comprehensive plans to address vacant properties.
•
Authorize the U.S. Department of Housing and Urban Development (HUD) to
provide grants of up to $250,000 to communities to help fund the planning and
development process. It would also authorize a competitive innovative grants
program for specific short-term demonstration projects. Projects would include
designing and creating green infrastructure, the establishment of recycling systems
for recovered building materials, and/or the development of urban agriculture
initiatives. The program would receive $25 million for the first year and $12.5 million
for each of the last two years.
•
Create a new council – the Federal Interagency Regeneration Communities
Coordinating Council – that would include representatives from relevant federal
agencies. The Council would develop federal agency support plans for the cities
where the pilot program is implemented, offering technical assistance to grantees.
The council would receive $24 million in funding.
The introduction of this legislation was followed in April by a personal meeting between
Senator Schumer and Congressman Higgins with HUD Secretary Shaun Donovan to urge
his support for the bill and extend an invitation to Buffalo to see the effect this bill can
have on neighborhood reinvestment.
The Secretary accepted and on October 23, he visited Buffalo where he led a roundtable
discussion with private, public and non-profit stakeholders on problems caused by
vacant and abandoned properties and discussed ways that HUD can address increasing
trends in vacant properties plaguing cities and first ring suburbs. Members of the
AFTF participated in this meeting and provided Secretary Donovan with a copy of the
foreclosure study report. This discussion was followed by a tour of vacant housing and
blighted neighborhoods in Buffalo with Sen. Schumer, Rep. Higgins, and advocates who
specialize in affordable housing and community development.
Senator Kirsten Gillibrand has signed on as a co-sponsor. This proposed legislation has
generated debate, discussion and growing support from across the country and efforts to
pass the Community Regeneration Act will continue.
16
COMMUNICATIONS AND
EDUCATION COMMITTEE
Teresa Glanowski, Co-Chair
Alex Boylhart, Co-Chair
Melanie Gregg, Former Co-Chair
The goals of the Communications and Education Committee:
•
Provide outreach to the community to develop awareness about fraudulent flipping,
foreclosure problems, housing schemes, and the work of the Task Force
•
Develop educational programming to inform stakeholders about key issues related to
foreclosures, vacant properties, and house flipping
•
Organize media events to promote the activities of the Task Force and maintain file
of relevant media articles
2009 was another successful year for the Communications and Education Committee.
We expanded our outreach programs and media activities, highlighting in particular
foreclosure prevention efforts to reduce the number of properties available for future
flipping activities. The Task Force was the subject of several significant news articles
and announcements. We also updated our website at www.buffaloflipping.com.
Highlights:
NY Conference of Mayors- April 30, 2009
Kathleen Lynch, Holly Lindstrom and Asst Attorney General Jim Morrissey presented
their work on the AFTF and cases to the New York Conference of Mayors in Canandaigua.
Foreclosure Study Release July 9, 2009
The AFTF released the multi-year foreclosure study, generating articles in the Buffalo
News, Business First and Buffalo Law Journal. (APPENDIX F)
Federal Reserve Bank Hearing sponsored by PUSH - July 16
Kathleen Lynch and Graham Leonard (AmericorpsVISTA) presented findings, and urged
expansion of data collection and oversight.
Erie County Distressed Properties Task Force
The AFTF participated in this Erie County task force to raise awareness of flipping
county-wide and to continue to advocate for laws and policies that curb flipping.
Liberty Bell Award
The AFTF once again received the prestigious Liberty Bell Award from the Bar
Association. (APPENDIX J)
Other Notable Programs:
Vacant Property Summit at the Great Lakes Building Reuse Conference
Appraisal Institute seminar
WSNHS Mortgage Checkup programs
Operation Protect Your Home
City of Buffalo Foreclosure Study presentations to Common Council and BURA
NYSBA Foreclosure Prevention Seminars
Lawline radio show
Foreclosure Prevention Public access show
Media Coverage Included:
House Flipping Rates Cut Buffalo News (Appendix C)
Homing In on the Bad and Ugly Buffalo News (Appendix D)
City Foreclosure Auction Opens Slowly Buffalo News (Appendix E)
Foreclosure Study Targets Lenders Business First (Appendix F)
Joseph Furan Pleads Guilty Buffalo News (Appendix G)
Joseph Furan Starts Jail Term Buffalo News (Appendix H)
Jessica Doucette Deeds Away 10 Homes Buffalo News (Appendix I)
A billboard has gone up to promote foreclosure prevention see
STOPFORECLOSUREWNY.com (Appendix K)
17
FINANCE REPORT
Carla Kosmerl , Former Chair
The goals of the Finance Committee:
•
Provide funding to ensure that professionals can dedicate time and resources
necessary to accomplish task force goal of curbing flipping in Buffalo
•
Seek funding and resources that will assist victims of predatory practices, stave off
foreclosures and encourage home ownership in the City of Buffalo
The City of Buffalo has allocated CDBG funds to contract with WNYLC, a not-for profit
law and technology center, to coordinate the AFTF, participate in committee work and
conduct investigations and data analysis. Through the efforts of Co-Chairs State Senator
William Stachowski, Assembly Member Sam Hoyt and the Western New York Delegation,
funding was secured for WNYLC to undertake this project. These funds are used to
support the positions held by AFTF Coordinator Kathleen A. Lynch, an attorney with
over 23 years of legal experience and AFTF Data Chair and Assistant Coordinator, Holly
Lindstrom, graduate of Hilbert College B.S. and M.U.P. SUNY at Buffalo.
2005-2006 Funding= $57,000 in Total
$30,000 City of Buffalo CDBG Funds
$17,000 NY State Assembly Delegation
$10,000 by contract to Community Researcher
2006-2007 Funding =$ 66,000 in Total
$21,000 State Assembly
$15,000 State Senate
2007-2008 funding=$65,000
2007-2008 funding=$65,000
$30,000 City of Buffalo CDBG
2009 -2010 Funding =$65,000
$30,000 City of Buffalo CDBG
$35,000 State Senate & State Assembly WNY Delegation Funding
WNYLC In Kind Contributions
Overhead –office space, computer/telephone/paper supplies, and web-based resources
for all staff on project.
Videographer time/equipment/production
Foreclosure prevention paralegal, attorneys, supervisor
4 full-time Americorps VISTAs
18
Through collaboration with AmeriCorps VISTA and the Western New York Law Center,
the AFTF is conducting an ongoing comprehensive foreclosure study of Erie County,
NY representing years 2000- 2009. This program comes in response to ongoing data
glitches and the initial finding of the AFTF that more than half of properties flipped
originated from some type of foreclosure. The program has resulted in two full-time
employees granted to the WNYLC by AmeriCorps VISTA for a two-year period. The
WNYLC provides a $5000 annual contribution for each VISTA for the life of the program
as well as office space, computers etc.
The AmeriCorps members are building a comprehensive and linear database, which links
deeds, mortgages and foreclosures by address. The AmeriCorps members are performing
a series of foreclosure analyses and will produce a final report. This information will be
used to expedite ongoing and prospective AFTF investigations.
The WNYLC has also hired two additional Americorps Vistas to serve as intake
specialists/paralegals for the Foreclosure Prevention Project.
State Foreclosure Prevention Grants
State Foreclosure Prevention Grants
With strong support from our AFTF Co-Chairs, the in-kind contributions provided by
WNYLC and Americorps have been used as tools and leverage to attract significant
foreclosure prevention resources to Buffalo and Erie County. The WNYLC and HomeFront
Inc. the City of Buffalo’s One Stop Homeownership Center, succeeded in obtaining
$800,000 in foreclosure prevention grants to provide counseling and legal services to
stop foreclosures in Erie County. The WNYLC and HomeFront established a foreclosure
prevention program and works with the courts and area housing counseling and legal
assistance agencies to prevent foreclosure. These grants were subject to statewide
competition and are provided through the NYS Division of Housing and Community
Renewal and NYS Banking Department.
The AFTF provides an important resource to this project by identifying potentially
eligible borrowers through the Foreclosure study. As always, these agencies will continue
to make cross-referrals on flipping, fraud, and predatory lending matters.
In addition to the resources described above, the AFTF could not accomplish its
objectives without the volunteer donation of valuable time and resources by many
government, private and public sector members.
Resources and Efforts
Leveraged by this Funding
with No Cost to AFTF
State Senate
Co-Chair by Senator Stachowski
Dedication of significant staff time by Dennis Kozuch,
Chief of Staff, and as Chair of AFTF Legislative
Committee. Publication of Annual Report.
State Assembly Co-Chair by Assemblymember Sam Hoyt
Dedication of significant time by Director of Communications and Special Projects
Teresa Glanowski, Chair of Communications
Committee. Publication of Annual Report
19
City of Buffalo Carla Kosmerl, former Chair AFTF Finance Committee
Commissioner Martin Kennedy
Tracy Krug and Gary Ziolkowski, Building Inspectors
Melanie Gregg, Community Programs Marketing Manager, Former Co-Chair Communications Committee Brendan Mehaffy, Cindy Cooper, Ilo Noble Law Department Members of city staff from various departments that have met with AFTF including Taxation and Assessment, Management Information Systems and Dept of Law.
Erie County Clerk
Time and resources provided by County Clerk Kathleen Hochul, Pat Fulwiler, Deputy Legal Counsel, and technical staff to assist with Data and Legislative AFTF objectives.
Housing Court
Support from Judge Henry Nowak, court staff
NYS Banking Dept
Senator
Antoine Thompson
Co-sponsors of Operation Protect Your Home State
Federal Representatives HUD
Subcommittee led by Bonnie Kane Lockwood (Rep. Higgins). Participation by HUD, Fannie Mae, and Senator Schumer
US Attorney, WDNY
Secured grant to hire 2 additional attorneys and paralegal to combat mortgage fraud using Foreclosure Study.
Hilbert College
Faculty/Student Analysis, use of computers/ibase software
i2 Software
Buffalo State College
Programmer development/travel and time to work with AFTF and Hilbert. No cost to AFTF
Stephen T. Banko, Regional Director of HUD and Mark Surdi
Significant time and Expertise provided by Prof. Wende Mix including data analysis and GIS mapping.
20
Legal Agencies:
Support provided by Legal Services for the Elderly and Legal Aid Bureau of Buffalo.
Professionals & Organizations
Particular thanks to Harry Meyer, William Johnson, Nancy Saia, Nancy Langer, Pat Lester, Sue Fretz, Dan Locche, Doreen Fahey, Mary Kolhbacher, Pat Lester, Jerry Inda, and Adam Alessi.
Dedication of time, resources and expertise of Buffalo Niagara Association of Realtors
& Bar Association of Erie County, New York State Bar Association Real Property Law
Section, the Appraisal Institute, Attorney Grievance Committee to provide education and
information exchange about flipping.
Private Sector and Non-Profit
Support and resources provided by Better Business Bureau, LISC, individual realtors. Participation and support by housing and other non-profit agencies.
We extend special thanks to law enforcement and government agency partners that have
devoted resources to pursuit of Anti-Flipping cases and actions:
Attorney General Andrew Cuomo and Assistant Attorney General James Morrissey
New York State Department of State
HUD Office of Inspector General, Buffalo Office
Federal Bureau of Investigation, Buffalo Office
US Postal Inspectors
United States Attorney, Western District of New York
Erie County District Attorney
CONCLUSION
In its fourth year, the Mayor’s Anti-Flipping Task Force has experienced significant
success, including completion of a major foreclosure study. This year, the AFTF was
able to expand efforts in foreclosure prevention, which will ultimately decrease the
availability of properties that would be likely targets for fraudulent flipping. The AFTF is
also working to support efforts to curtail flipping in the “first ring” suburbs of the City of
Buffalo.
Modeled after a similar task force conducted in Baltimore between 2000 and 2005,
the AFTF was able to use lessons learned in Baltimore to create a task force and
significantly decrease flipping in 4 years. This accomplishment is due to the collective
efforts of a 70-member strong task force that relies on participation from the community,
government, not-for-profit agencies, educational institutions and the private sector.
21
This public-private sector collaboration has communicated a strong message that the
City of Buffalo will not tolerate unethical and illegal real estate practices that destroy our
neighborhoods.
The AFTF continues to meet quarterly as a group for progress updates and to exchange
information. Task force members and committees meet much more frequently as needed
to accomplish goals. Information, including articles and publications relating to flipping
and fraud, is communicated to AFTF members through a listserv hosted by Western
New York Law Center. The AFTF website serves as a vehicle for information about the
AFTF and includes press releases, reports, referral contacts for government offices and
professional organizations, and for complaints to be communicated to the AFTF through
the [email protected] address. Complaints have been registered by neighborhood
residents and by victims of flipping and fraud. Inquiries have been made to the site by
potential investors and by persons seeking information about specific related issues.
As reflected in this Fourth Annual Report, each of the committees has made significant
progress in achieving stated goals. The AFTF continues to combat the deleterious
impact of fraudulent property flipping on Buffalo neighborhoods. With the continued
commitment of Mayor Brown and his administration, and under the leadership of our
Co-Chairs Senator Stachowski and Assemblymember Hoyt, we will combat the problem
of fraudulent flipping in Buffalo.
ACKNOWLEDGMENTS
The Mayor’s Anti-Flipping Task Force would like to thank all members for their work on
the task force, as well as the work involved in producing material for this report.
For more information, please contact:
Kathleen Lynch, Esq.
AFTF Coordinator
Holly Lindstrom
AFTF Data Committee Chair
Western New York Law Center
Mayor’s Anti-Flipping Task Force
237 Main Street, Suite 1030
Buffalo, NY 14203
(716) 855-0203
[email protected]
22
Appendix A
Location of Flipped Properties in
Relation to the Percent of Census
Block Groups Below City of Buffalo
Median Income Level
23
Appendix B
Lis Pendens Filed on Property in
Buffalo, NY
Years 2007-2008
24
Appendix C
House flipping rates cut,
study says
By Phil Fairbanks
NEWS STAFF REPORTER
January 17, 2009, 7:19 AM
The destructive practice of flipping homes in Buffalo has been cut in half in just two
years, according to a study released Friday.
The study by Buffalo’s Anti- Flipping Task Force found the number of flipped properties
dropped from a high of about 600 in 2005 to fewer than 300 in 2007.
The task force attributed the decline to measures intended to monitor and curtail the
practice of buying cheap housing and quickly selling it at inflated prices.
“Those measures have definitely had an impact,” said Kathleen Lynch, task force
coordinator.
Lynch said the anti-flipping measures include the use of a computerized registration
system at Buffalo’s annual real estate auction.
The new system provides a quick way to determine whether bidders are local or from out
of town. It also allows the task force to view bidder information right away.
“We can look at who’s there immediately, and I think that helps eliminate fraud,” Lynch
said Friday.
One of the consequences of that new computer system is far fewer investors from
outside the region and state. In the past, it was not usual to find buyers from as far away
as Australia and Europe.
Now in its fourth year, the task force released an annual report that details its successes,
including the reduction in flipped homes.
The group also pointed to its role in the prosecution of Brent Kinney, a former Amherst
man convicted of selling a house he didn’t own. Kinney was sentenced last month to a
six-month jail term.
The task force said Kinney’s case was the first federal prosecution of a fraudulent
flipping scheme.
The task force also expanded its efforts in foreclosure prevention and initiated efforts to
curtail flipping in Buffalo’s suburbs.
Modeled after a similar effort in Baltimore, the task force was formed to combat flipping
in Buffalo. The 70-member group includes people from the community, government, notfor- profit agencies, educational institutions and the private sector.
Lynch said the group’s work has resulted in a message that the City of Buffalo does not
tolerate unethical and illegal real estate practices that destroy its neighborhoods.
25
Appendix D
Appendix D
Homing in on the
bad and ugly
By Phil Fairbanks
NEWS STAFF REPORTER
August 18, 2009, 12:00AM
Tracy Krug has a name for each of them. The Australia house. The wedding gift house.
Homing
infavorite:
on the
bad
and ugly
And his all-time
the poo
house.
By Phil Fairbanks NEWS STAFF REPORTER
Those18,
are2009,
the 12:00AM
ones he can laugh about, the tall tales that help a veteran building
August
Tracy
Krug has
a name
eachtragic
of them.
The
inspector
forget
theforsad,
side
ofAustralia
his job.house. The wedding gift house. And
his all-time favorite: the poo house.
“The worst,” said Krug, “is when you walk inside a house full of cockroaches, and there’s
Those are the ones he can laugh about, the tall tales that help a veteran building inspector forget
young
kids side
running
barefoot.”
the
sad, tragic
of hisaround
job.
"The
worst,"
said Krug,
"is when
walk insideneighborhoods
a house full of cockroaches,
and there's
young
No one
knows
the ugly
sideyou
of Buffalo’s
-- the vacant
homes,
the drug
kids
running
around
barefoot."
houses, the squatter hangouts -- like Tracy Krug.
No one knows the ugly side of Buffalo's neighborhoods -- the vacant homes, the drug houses, the
Not thehangouts
politicians
squatter
-- likewho
Tracypromise
Krug. to fix them. Not the think tanks that parachute in to
study them. Not even the community activists who count him as a friend and ally.
Not the politicians who promise to fix them. Not the think tanks that parachute in to study them.
Not even the community activists who count him as a friend and ally.
“He knows this city better than anyone,” said Michele Johnson, an East Side housing
activist. “And he’s been there from the beginning.”
Walk any street in any East Side neighborhood, and chances are good someone will say,
“Hi,” and not always joyfully, to the city inspector working the same communities he
started in 20 years ago.
“They call me Chuck Norris,” Krug said of his resemblance to the actor. “And they all
know me.”
Krug was there when white flight left the East Side with absentee landlords, some good,
some bad. He was there when the flippers moved in and was among the first to recognize
them as a problem.
“I call it job security,” he said with a loud laugh.
26
Get beyond the gallows humor, and you soon realize that, in Krug, you have a person who
can tell the story of why Buffalo has one of the worst vacant-housing problems in the
nation -- and why on some streets, most of them in his neighborhoods, seven out of 10
properties are abandoned and owned by the city.
The answers you get may surprise you, and they almost certainly will challenge your
stereotype of an East Side on life support.
Krug will tell you that 14 out of every 15 houses he looks at -- most of his job is inspecting
buildings destined for demolition -- should be torn down.
He also will tell you that every street he visits can be saved and that housing on the East
Side is in better shape now than five years ago.
“Yeah, I think we’re making a difference,” he said. “Right now, we’re eliminating the worst
of the worst, and that’s making a big difference.”
At a time when some question Buffalo’s emphasis on demolition -- one of Mayor Byron W.
Brown’s major efforts involves tearing down 5,000 houses in five years -- Krug is among
its biggest cheerleaders.
And it’s easy to understand why. Nowhere in the city is the need for massive demolition
clearer.
On some of the streets Krug patrols, every other house commonly is boarded up with a
huge square painted on the front -- a sign to firefighters that the house is targeted for
demolition and supposed to be vacant.
Running across the same houses again and again also is common.
On this warm day in August, one of Krug’s first stops is 50 Gibson St., a two-story house
recently bought on the Internet, sight unseen, by a woman in California.
Before her, the owner was a woman in Hawaii and, before her, a man in England, and
before him, James Clark, one of the so-called pioneers of Internet flipping here in
Buffalo.
The house, wide open in the rear, has been ransacked of everything, including valuable
copper piping. The only evidence of any occupants are dead rats on the floor.
“This is eight,” Krug says of his visits to the house. “I’m on my fourth court case in four
years, all on one property.”
Krug cited the house for violations more than four years ago, but every time it gets sold,
he’s required to come back and rewrite the house for Housing Court. That was at least
three owners ago.
On nearby May Street, Krug is checking out his “Australia house,” another Internet sale,
this one for $6,000 by a dentist from Down Under.
By the time Krug gets the house into Housing Court, the dentist has sold it to a man from
New York City.
The impact of flipping is hard to gauge, in part because no one has gone back and
documented it, but Krug says the consequences to the East Side have been devastating.
27
“Everyone was making a quick buck, but no one was pounding nails,” he said of the
people who bought and sold houses but never made improvements to them.
Krug, if truth be told, was one of the first to notice flipping and alert the public to its
dangers.
“Nobody, except Tracy, took it seriously,” said Johnson, the activist most people credit
with uncovering the first signs of flipping. “And in the end, we’re the ones who ran them
out of town.”
Krug’s work with Johnson is just one example of why he’s viewed as more than an
inspector.
Widely regarded as an honest, fair and zealous advocate of good housing, Krug is
respected by everyone from politicians to policy wonks.
He recently was recruited to serve on Erie County’s task force on distressed properties,
and, when the New York Times wrote about Buffalo’s vacant-housing crisis, Krug’s
picture appeared on the front page.
“He doesn’t see his inspections as a job,” said Sister Mary Johnice Rzadkiewicz, founder
and executive director of the Response to Love Center. “He sees them as a response to a
need. He’s never given up on this neighborhood. He’s still fighting.”
As the judge in charge of Housing Court, Henry Nowak has had his fair share of run-ins
with inspectors. He counts Krug among the best.
“Tracy was the first inspector to bring a problem-solving approach to his job,” Nowak
said. “He recognized early on that a lot of the people he deals with simply need help.”
In rare candid moments, Krug will admit that making a difference is what gets him up in
the morning.
That and the occasional tall tale, the house so memorable it warrants a name.
The “wedding gift” house, a two-story building on Sycamore, was a present from the
owner to his newly married niece.
One problem: The house, a mess, needs to be torn down, and the happily married couple
is now footing an $11,000 demolition bill.
“A lovely wedding present,” Krug said with a smile.
A few minutes later, he finds himself driving down Hirschbeck Street, site of a recent
double murder and the location of possibly his most memorable house.
Even today, inspectors know it as the “poo house” -- a reference, not to the story book
character, but to the unspeakable contents they found throughout the structure.
On the really bad days, the days when Krug finds barefoot kids running through roachinfested houses, he thinks of the “poo house.”
And he laughs, in part because he has to.
“For some reason,” Krug said of his time on the East Side, “I stay over here.”
28
Appendix E
Appendix E
City foreclosure auction
opens slowly
Properties for sale hit record
number
By Brian Meyer
NEWS STAFF REPORTER
October 27, 2009, 8:23 AM
Luis
Aviles ofscans
Buffalo,
scans
a list of
for of
sale
at theForeclosure
City of Buffalo
Luis Aviles
of Buffalo,
a list of
properties
forproperties
sale at the City
Buffalo
auctionForeclosure
at the Buffalo
auction atCenter
the Buffalo
Niagara
Convention Center on Monday morning.
Niagara Convention
on Monday
morning.
Derek GeeDerek
/ Buffalo
GeeNews
/ Buffalo News
CityBuffalo’s
foreclosure
auction opens slowly
largest foreclosure auction in its history got off to a sluggish start Monday, with
with nearly 85 percent of the properties failing to attract opening bids.
Properties for sale hit record number
But city officials quickly pointed out that most properties on the block on the opening day
By BrianofMeyer
the three-day event had been offered unsuccessfully in past years.
News Staff Reporter
predicted
activity
would
Updated:They
October
27, 2009,
8:23
AMpick up today and Wednesday when the auction continues
in the Buffalo Niagara Convention Center.
Buffalo's largest foreclosure auction in its history got off to a sluggish start Monday, with with
700
participated
in Monday’s
only 237 of about 1,420
nearly 85Nearly
percent
ofbidders
the properties
failing
to attract auction,
openingbut
bids.
properties offered attracted the minimum opening bids.
But city officials quickly pointed out that most properties on the block on the opening day of the
of Monday,
about
3,400unsuccessfully
properties remained
for sale. The number declined slightly
three-dayAsevent
had been
offered
in pastupyears.
each hour as people who owe back taxes and fees scrambled to pay their debts.
They predicted activity would pick up today and Wednesday when the auction continues in the
“We can Convention
remove properties
from the [auction] list right up until two minutes before the
Buffalo Niagara
Center.
sale,” said Martin F. Kennedy, the city’s commissioner of assessment and taxation.
Nearly 700 bidders participated in Monday's auction, but only 237 of about 1,420 properties
He encouraged
people toopening
visit thebids.
tax office in Room 121 of City Hall to pay their
offered attracted
the minimum
delinquent bills.
Some bidders Monday were looking for investment properties. They included Clint
Holcomb, who acknowledged that investors must plan beyond the initial purchase price.
“People need to make sure they not only have money to buy the place, but also to make
repairs,” he said. “There’s a reason a property is only selling for $4,000 or $5,000.”
City Judge Henry J. Nowak, who presides over Housing Court, urged bidders to become
familiar with the process and any properties they hope to buy. Many properties on the
list have pending housing code violations that will have to be resolved after sales are
finalized.
29
“The people who have the most trouble are people that come in with unreasonable
expectations — those who think they can buy a beautiful property for next to nothing
that needs no work,” Nowak said.
But he also noted that the number of auctioned-off properties that later become
problems in Housing Court seems to have declined.
Some give partial credit to a task force that has been targeting “flippers,” who buy
cheap properties, then quickly sell them without making improvements. Kathleen A.
Lynch, coordinator of the Mayor’s Anti-Flipping Task Force, noted that buyers must sign
anti-flipping affidavits promising not to sell the parcels for more than 120 percent of the
auction price for at least six months.
“Please understand that the city will monitor and will enforce that provision,” Lynch told
participants.
She later told a reporter that housing advocates who are monitoring the auction have not
seen any obvious signs of potential flipping activities.
Many first-day bidders bought vacant lots. Diane Picard, executive director of the
Massachusetts Avenue Project, successfully bid on a West Side parcel that her not-forprofit group has been using as part of an urban farm.
While this is the largest auction in city history, Kennedy noted that unlike last year,
the list included properties that are delinquent in paying water bills. If the city hadn’t
imposed a one-year moratorium last year on foreclosures for newly delinquent water
bills, Kennedy said, last year’s auction would have been larger.
30
Appendix F
Appendix F
Foreclosure study targets
lenders
October 27, 2009, 8:23 AM
Busness First of Buffalo
By Matt Chandler, Kelsey
Swanekamp
Mark Webster
Americorp Vista volunteers, from left, Kirk McLean, Dan Kresse and Graham Leonard with Kathleen
Americorp Vista volunteers, from left, Kirk McLean, Dan Kresse and Graham Leonard
with Kathleen Lynch.
Friday, July 24, 2009
Don’t call Tom Liolos a predatory lender.
Foreclosure
study targets lenders
Though he is in the lending business, Liolos, branch manager of Homestead Financial
in Amherst, First
is quick
distance- himself
from
the classKelsey
of lenders
whose actions are
Business
oftoBuffalo
by Matt
Chandler,
Swanekamp
criticized in the foreclosure report released earlier this month by the Western New York
Law Center.
Don’t call Tom Liolos a predatory lender.
“I wouldn’t put somebody in a house they couldn’t afford,” Liolos said, referring to a
practice that
contributed
to the nationwide
mortgage-lending
Though
he many
is in believe
the lending
business,
Liolos, branch
managercrisis.
of Homestead F
quick to distance himself from the class of lenders whose actions are criticized in
Kathleen Lynch, who spearheaded the Law Center study, says there are plenty of lenders
released
earlier
month
by the Western
New Yorkterms
Law and
Center.
who lined up
to offerthis
loans
with outrageous
interest, complicated
virtually
guaranteed foreclosures in their future to prospective home buyers.
“I wouldn’t put somebody in a house they couldn’t afford,” Liolos said, referring
“There were
absolutely cases
where
individualsmortgage-lending
were targeted who weren’t
in a position
believe
contributed
to the
nationwide
crisis.
to understand these contracts and terms,” Lynch said.
Kathleen
Lynch, who spearheaded the Law Center study, says there are plenty o
The report, “Foreclosing Erie County,” reviewed more than 5,000 mortgages that
offer
loans
with outrageous
terms
virtually
went into
foreclosure
in 2007 and interest,
2008 in ancomplicated
attempt to break
down and
who was
being guaranteed
foreclosed
upon,
as
well
as
what
areas
of
the
county
were
hardest-hit
and
what
banks
future to prospective home buyers.
were most frequently at the other end of the foreclosure notice. Lynch says it is the
largest such
study
of its kind cases
in Erie where
County, individuals
and one she hopes
help prevent
“There
were
absolutely
werewill
targeted
whofuture
weren’t in a p
mortgage crises.
these contracts and terms,” Lynch said.
“We felt like we had to do the study to find out what was going on,” she said.
The report, “Foreclosing Erie County,” reviewed more than 5,000 mortgages tha
What her
team
found,
analyzed
data down
they collected,
wasbeing
that one
in three upon, as
2008
inas
anthey
attempt
tothe
break
who was
foreclosed
2007
and
subprime, or high-risk, mortgages in tonier areas such as Amherst went into foreclosure
county were hardest-hit and what banks were most frequently at the other end o
during the two years studied. Many of the foreclosed properties came from mortgages
Lynch
says
it is
largest
originated
in the
lastthe
three
years.such study of its kind in Erie County, and one she hop
future mortgage crises.
“We felt like we had to do the study to find out what was going on,” she said.
What her team found, as they analyzed the data they collected, was that one in t
risk, mortgages in tonier areas such as Amherst went into foreclosure during the
of the foreclosed properties came from mortgages originated in the last three ye
31
The report points largely at mortgage lenders and financial institutions that, Lynch said,
preyed on borrowers and were charging interest rates in some cases higher than 20
percent.
“These lenders had no responsibility for the loans they were originating,” she said. “They
didn’t care about the risk because once the deal was done, they passed that risk along to
someone else (by selling the loan).”
Liolos, whose firm brokered $31.9 million worth of loans in 2007 at an average of
$85,000 per deal, said that’s not how his company does business.
“We are involved with the loans from start to finish,” he said. “After closing, we sell the
loans to a servicing company, such as Bank of America. They pay us for originating the
loan, (but) we’re on the hook. If the first payment defaults, we have to buy the mortgage
back.”
He said even after the deal is done, if the mortgage gets to be 30 days late, Homestead is
liable for the mortgage.
“We have more at stake than people who just sell off the mortgage, so we’re less likely to
make iffy loans,” he said.
Lynch and her staff don’t dispute that there are honest, responsible lenders out there,
but she said the study exposed case after case of lenders using misleading, deceptive
tactics and complicated contracts to trip up unsuspecting borrowers. Among the tactics
she said her group saw:
• Adjustable rates that increased monthly.
• Loans that began with a set interest rate, then at a preset time opened up to a limitless
interest rate.
• Loans with fixed interest rates in excess of 20 percent.
• Loans that exceeded the value of the property.
• Elderly homeowners pushed to refinance their homes at high interest rates for longterm mortgages.
• Loan agreements that were suddenly changed at the closing, putting the buyer into a
much-riskier loan product.
“We’re not out to malign someone who isn’t engaging in bad practices,” Lynch said,
adding that she hopes the data collected will be used by municipalities and lawenforcement agencies, among others, to ensure that prospective home buyers all have a
fair chance to not only obtain a home loan, but to be able to repay it.
But for smaller lending institutions such as Cattaraugus County Bank, headquartered in
Little Valley, not engaging in these “bad practices” hasn’t saved them from poor public
perception as the fallout from the housing crisis has worsened. Salvatore Marranca,
president and CEO of CCB, said he is “mad as heck” at the actions of some of his
colleagues in the banking industry.
32
“We’re paying for the sins of others,” he said. “A few big megabanks screw up, and we
pay. They do ill or imprudent things, I pay, and they’re not held accountable. It’s very
frustrating and very unfair.”
Marranca said that in the last year, his FDIC insurance has increased 400 percent, and
he blames the lending mess.
“If I made those business decisions (risky loans to unqualified borrowers), this bank
would be closed down in a second,” he said.
Though 2,710 lis pendens transactions (the first step in the foreclosure process) were
filed in Erie County in 2007, the study revealed that only 35.9 percent of those properties
ended up being foreclosed on. Despite that relatively low number, Lynch said there is still
cause for concern going forward, despite government regulations put in place in the last
12 months to protect homeowners facing foreclosure.
“This is an issue that affects renters, as well,” she said. “Everyone is impacted, and we
are hopeful that this report can be helpful to prevent these types of harmful trends from
happening in the future.”
To view the complete study report, visit www.wnylc.net.
33
Appendix G
LOCKPORT — A Niagara Falls man who sold houses he doesn’t own via the Internet
pleaded guilty to third-degree grand larceny Thursday in Niagara County Court.
Man admits selling houses
illegally
Joseph S. Furan, 40, of Lockport Road, admitted to third-degree grand larceny and could
be sentenced to as long as seven years in prison when he returns to the courtroom of
Judge Matthew J. Murphy III on April 30.
By Thomas J. Prohaska
NEWS NIAGARA BUREAU
February 27, 2009, 7:14 AM
Assistant Attorney General Michael McCabe said in court that Furan sold two Niagara
Falls houses to a British investor through the Internet in February 2007. The Englishman
paid $19,000 for a house on Linwood Avenue and $32,000 for one on 18th Street.
Furan said in court he once held title to the Linwood Avenue home — his wife formerly
lived there — but lost it in a foreclosure action. He never owned the 18th Street house, he
admitted.
Furan said he has repaid the Englishman $12,000, but McCabe said the Englishman
wants full restitution from Furan.
Murphy said, “I don’t think he has the means to do it.”
Defense attorney Robert Viola asked for a delay in sentencing so Furan would have a
better chance to round up more money, but Murphy refused.
Attorney General Andrew Cuomo issued a statement saying, “This con artist
masqueraded as a legitimate real estate entrepreneur who lured victims into costly
scams by selling properties he did not even own.”
Furan had been called to account two years ago by State Supreme Court Justice Kevin
Dillon, who ordered him to stop selling real estate online, unless he posted a $100,000
bond, after Furan was sued by the attorney general’s office after a complaint from
Buffalo Mayor Byron W. Brown’s Anti- Flipping Task Force.
Last year, Furan served 30 days in jail for contempt of court for violating that order.
Furan at first listed houses on eBay and later switched to the craigslist site, prosecutors
have said. He has an expired real estate license.
34
Appendix H
Realty swindler Furan starts
jail term
By Matt Gryta
NEWS STAFF REPORTER
May 01, 2009, 7:20 AM
Joseph S. Furan surrendered Monday to begin a four-month local jail term before he
begins making $800-a-month payments to the British investor he swindled out of
$39,000 on two Internet house-flipping deals two years ago.
Furan, 40, of Lockport Road, Niagara Falls, pleaded guilty Feb. 26 to third-degree
grand larceny for the February 2007 Internet sales of two Niagara Falls houses, one on
Linwood Avenue and one on Eighth Street that he sold the British investor.
In placing Furan on probation for the next five years, Niagara County Judge Matthew J.
Murphy III barred him from conducting business on the Internet under a lawsuit the state
attorney general’s office launched against him two years ago due to his Internet house
sale scams.
After Furan’s sentencing, Attorney General Andrew M. Cuomo issued a statement saying
Furan was a “con artist who masqueraded as a legitimate real estate entrepreneur who
lured victims into costly scams by selling properties he did not even own.” Cuomo did not
identify the British investor duped by Furan and Furan could not be reached to comment
after the sentencing proceeding.
According to court records, Furan was ordered two years ago by State Supreme Court
Justice Kevin Dillon to stop selling real estate online unless he posted a $100,000 bond.
In that case, Furan was sued by the attorney general’s office after a complaint from
Buffalo Mayor Byron W. Brown’s Anti-Flipping Task Force. Furan served a 30-day jail
term on contempt of court charges for violating Dillon’s order two years ago.
35
Appendix I
Doucette deeds away 10
homes to investors
By Jonathan D. Epstein
NEWS BUSINESS REPORTER
June 20, 2009, 6:45 AM
A controversial young real estate investor, who at one time was implicated in a
damaging property-flipping scheme in Buffalo, has deeded 10 of her homes to a group of
Pennsylvania investors who hold the overvalued mortgages.
According to Erie County Clerk records, Jessica Doucette of Brooklyn “sold” the 10
homes to Buffalo Property Investors LLC of Bala Cynwyd, Pa., for a total of $479,000.
Some of the homes are rented; others are vacant.
No actual money changed hands, however, as the property transfers were handled
as “deeds in lieu of foreclosure,” said Doucette’s attorney, Patrick Dudley, a partner
at Zdarsky, Sawicki & Agostinelli LLP in Buffalo. The homes are generally worth
significantly less than the mortgage value, and the investors are hoping to recover some
of their losses.
“This sale was likely a way for them to recoup some of the money,” said Kathleen Lynch,
an attorney at the Western New York Law Center and coordinator of Buffalo’s AntiFlipping Task Force.
Buffalo Property Investors is owned by Hallinan Capital Corp., which is owned by two or
three “rather wealthy” investors in Pennsylvania and Florida, said Rochester attorney
John Menard, who represents them. They originally owned mortgages on a dozen homes,
but two were demolished.
But they can’t just “flip” them again because significant repairs must be done and there
are four to five years’ worth of back taxes that must be paid. So instead of just writing
off the losses and “walking away from the entire mess,” Menard said, the group decided
to take over the homes, hire their own property managers, and get the homes repaired to
meet codes.
“They are really looking at it as a long-term project, to make back the money that’s
already been put there and ultimately been lost,” Menard said.
It could not be determined exactly who the investors are, although the address listed for
the group is home to a financial firm called TC Financial Group.
“Of course, it is a preferable option to have someone responsible for the properties rather
than just seeing them sit abandoned and deteriorating,” Lynch said. “It is certainly worth
watching, though. I think the question now is what will Buffalo Property Investors LLC do
with these properties.”
The homes are located at 42 Brinkman Ave.; 119 Humber Ave.; 404 Vermont St.; 1144 West
Ave.; 54 Kerns Ave.; 55 ComoAve.; 151 Courtland Ave.; 172 Sprenger Ave.; 237 Shirley
Ave.; and 43 Arkansas St.
Meanwhile, Doucette, who is living and working in New York City while attending
graduate school there, still owns about 35 properties in both Buffalo and Rochester,
which are maintained by her brother, Joshua. In the past, she has sold other homes to
entities such as Weinrauch Family Real Estate LLC and to PJAM LLC, but Dudley said no
contracts have been signed on any other homes here and they are not for sale.
36
About half of the remaining homes are currently under the jurisdiction of Buffalo
Housing Court and Judge Henry Nowak because they were cited for serious building
code violations. The court established an arrangement and plan for them similar to a
receivership to address those infractions.
“What we are doing is working within that framework to remedy all of the issues,” Dudley
said. “All we’re trying to do is to be responsible property owners.”
In May 2007, the Doucettes were named in a lawsuit by state Attorney General Andrew
M. Cuomo against a New York City investment firm called East Coast Capital. The suit
accused East Coast of overseeing a scam involving 53 local properties and collecting $2
million by defrauding investors.
Cuomo’s lawsuit claimed East Coast bought 53 homes for a total of $961,300 and then
deceived private investors into providing more than $2.9 million in private mortgages.
According to the lawsuit, East Coast then transferred the properties to Doucette, who
was supposed to fix the properties. Instead, she defaulted on the inflated mortgages,
received almost $700,000 from East Coast, and left investors holding the bag, Cuomo
claimed.
Last October, Cuomo shut down the investment company, forcing it to pay more than $3
million in restitution.
A spokesman for Cuomo said the case against the Doucettes is still pending. Cuomo’s
office is aware of the property transfers and is “monitoring the situation,” the spokesman
said.
But the Doucettes have insisted they were not a part of the East Coast Capital scheme
and “were every bit as victims as the mortgage holders,” Dudley said. “They were named
in a lawsuit, but we’ve maintained that they had nothing to do with the parties that really
caused the problems,” he said.
37
Appendix J
Accepting the 2009 Liberty Bell Award from then-president Manias are Kathleen Lynch
and Joseph Kelemen on behalf of The Western New York Law Center
38
Appendix K
This is the StopForeclosureWNY billboard located at Genesee and Herman
Streets
This is the StopForeclosureWNY billboard located at Genesee and Herman Streets.
39
40

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