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HOUSING: Families say real estate agent led them into crisis
Of 122 sales, 75 went back to lenders amid some allegations of misleading sales practices
By ZACH FOX and EDWARD SIFUENTES - Staff Writers | ∞
VISTA ---- Working as a real estate agent, insurance dealer, income tax preparer and credit repair specialist, Miguel Romero has helped Latinos buy 122 homes since 2004, becoming one of his firm's best salesmen.
But his customers have not been so fortunate ---- at least 75 of the homes Romero sold have fallen into foreclosure. The company caters almost exclusively to Spanish-speaking customers.
Romero's sales practices, and the stories of some clients, provide a window into industry excesses that analysts say contributed to the region's foreclosure crisis:
-- Latino families who signed documents they say they didn't understand;
-- mortgage brokers who may have reaped excessive fees exploiting the language barrier; and
-- homeowners who used high-risk loans to chase riches in a booming real estate market.
There are no public allegations that Romero, who through an attorney declined to comment, broke the law. In interviews with the North County Times, several clients said they were encouraged to lie on their mortgage applications, a state crime. But a review of those clients' documents shows that Romero's name never appears as the loan officer.
Further, several colleagues of the foreclosure-prone real estate agent defended his practices in recent interviews, saying they could not imagine him encouraging people to lie.
But some clients paint a darker picture.
During weekly seminars, they say, Romero pitched his office as a one-stop shop for all their insurance, investment and tax needs. Clients say the agent was persuasive.
Romero sold 122 homes since 2004, according to a North County Times analysis of publicly available tax records and the computerized listing service used by local real estate agents.
Of those sales, 75 have entered foreclosure. Nine additional homes engaged in so-called short sales, where the lender agreed to sell the house for less than the mortgage in an effort to avoid foreclosure.
Also, tax records show that Romero worked with or employed a network of real estate agents who sold an additional 63 homes since 2005, 21 of which entered foreclosure.
Put another way, 69 percent of Romero's sales and 33 percent of his agents' have resulted in foreclosure or short sale.
"That's not an accident, that's a set-up," said Yamila Ayad, a San Marcos mortgage broker and a member of several nonprofits dedicated to helping families face foreclosure.
For perspective, 4 percent of subprime loans ---- mortgages made to less qualified buyers ---- made since 2005 in San Diego County have entered some stage of foreclosure, according to a January report by the New York branch of the Federal Reserve, the nation's central bank.
In at least seven cases, Romero's program encouraged homeowners to refinance out of mortgages they could afford and buy second or third homes with promises of wealth, his clients said.
Now, some are losing everything.
Creative financing
All seven of these clients said they lost tens of thousands of dollars and that their credit was ruined by their dealings with Romero.
At least one person said the loss was more than monetary.
"I felt bad; I even felt like throwing myself under a car," said Juventino Chavero, one of Romero's clients.
Another client, Hermenegildo Amaya, said he could afford his Oceanside home, which had a fixed-rate mortgage. But after attending one of Romero's seminars, he said, he saw an opportunity for a better life.
Romero and his associates reportedly told crowds of dozens at his weekly seminars that they could use the equity in their homes to invest in other properties.
He promised riches, luxury cars and early retirement, clients said. They said they were referred to Romero by friends, family, neighbors and telemarketing calls.
Amaya said he heard the sales pitch and decided to refinance his home to buy a second house.
The same real estate investment plan ---- extracting equity to buy additional properties ---- was employed by several of Romero's clients, all using creative financial products, according to interviews and mortgage documents.
Bare-bones payments
"They said your house is like a mine, and it has money you're not using," Amaya said.
Many of the loans were what's known as negative amortization. The financing lets homeowners pay a bare-bones monthly payment while the amount owed grows.
Eventually, the low monthly payments expire and costs explode, sometimes doubling, as lenders require the borrower to pay more interest and some principal each month.
After Amaya's mortgage payments jumped, his second home, which had become his primary residence, went into foreclosure. He was able to short-sell it and will soon be moving back to his first home.
Sitting in the home they no longer owned, Amaya and his wife, Micaela Diaz, wondered whether they would be able to keep their first home, where payments have also increased under Romero's plan.
Amaya said he remains optimistic, hoping to negotiate with the lender for a lower payment. Diaz grimaced and shook her head.
Promised riches
Amaya's tale resonates in the stories of several other clients. Impressed by Romero's pitch, they refinanced and took out loans for more than they could afford, they said.
Romero's employees encouraged them to lie about their incomes and aided in creating fictitious businesses to support those numbers, they said.
Two clients said Romero's employees created nonexistent home-cleaning businesses.
In one case, they said, Romero appeared to have prepared false tax statements. The incomes stated for the client and her husband were both inflated and used on a mortgage application, said Maria Manzano, the client.
Manzano provided the tax form to the North County Times; it listed the signature "Miguel Romero" as the preparer. It is unclear whether that tax statement was ever filed with the Internal Revenue Service.
In another mortgage application prepared by one of Romero's employees, incomes were inflated as well as rental income on the client's prior residence, said Teresa Holguin, the client.
It is a state crime to lie on a mortgage application, and a federal offense if the lender was insured by the federal government.
In recent weeks, the San Diego County district attorney and the FBI arrested five people in an alleged foreclosure scam in which investigators say 400 victims paid for a service that did nothing to halt foreclosure proceedings.
Possible connections
Romero has not been charged in that case, and authorities' allegations in that case bear little resemblance to questionable activities asserted by Romero's clients.
Spokesmen for the California attorney general and the district attorney declined to comment on whether they were investigating Romero's sales practices.
However, public records and interviews suggest that he may have been connected to at least two of the five people arrested in the alleged foreclosure scam.
Several of Romero's clients said that Edgar Martinez, one of five people arrested on conspiracy and theft charges, had worked for Romero.
Another person arrested, Diego Gil, carried the address of Romero's office on his real estate license, state records show.
Romero operates a two-story Vista office that carries the name Helping Build Wealth, which is also the name of an insurance sales firm based in Simi Valley.
Joe Bonanno, Helping Build Wealth's chief of operations, said Romero is not an employee of the company. He said that Romero is an independent salesman who sells their insurance products.
Bonanno added that his company is not involved in Romero's real estate dealings.
According to the company's Web site, Romero had the No. 1 independent office for the corporation in 2007.
Romero was not listed as the mortgage broker on any of the loan applications that carry inflated incomes, clients said. Rather, either one of Romero's employees or a loan officer from the lender was listed as the mortgage broker, according to the loan documents.
Two clients said they never met with or talked to the loan officer on their mortgages.
Most of Romero's sales and those of his agents were financed by a lender called FCM Corp., based in Simi Valley. Of Romero's 122 sales, 75 were no-money-down mortgages with FCM, according to tax documents.
Carl Kock, one of FCM's brokers, said in a recent interview that he worked with Romero on many of those loans.
Kock said that he did not believe the clients' stories that Romero and his employees encouraged them to lie.
"They're (Helping Build Wealth) a substantial company, and he (Romero) is their number one producer. I don't think he'd risk his licensing," Kock said. "I would say that if there's anybody in trouble down there, they (Romero's clients) just don't want to make the payments but they still can."
The clients interviewed for this story said they had trouble keeping up with their mortgage because they were pushed into loans that they could not afford, not because they didn't want to make them.
"I was so dumb, I believed him and we signed," said Rosario, a client who did not want her full name published and who lost two properties through foreclosure because she was unable to make the monthly payments, which she said totaled more than $9,000.
Happy customer
And not all of Romero's clients are struggling to pay the bills. Liborio Mendoza, a San Marcos homeowner, bought in 2004, using Romero as his real estate agent.
Mendoza said in an interview that he made a significant down payment of more than $100,000 and has been able to keep up with the mortgage.
In addition, Mendoza said he purchased one of Romero's insurance-investment products and has been satisfied with the return.
"If I would highly recommend him, I don't know," said Mendoza. "But he does what I ask, and I can't say he got me into trouble."
Further, one of Romero's former real estate agents, Roger Gomez, said he never saw Romero encourage anyone to lie about their incomes. He said there is plenty of blame to go around for foreclosures.
"It's not one person's fault," Gomez said. "Whatever is happening in the real estate market, it's everybody's fault. It's the broker, it's the bank, it's the borrower, it's the agent."
No complaints public
Romero's real estate license has no record of complaints, according to the Department of Real Estate, a statewide regulatory agency.
However, one of Romero's former employees said homeowners have filed several complaints with the department concerning Romero's conduct.
The complaints do not become public until the department has completed an investigation, so the department could not confirm any complaints against Romero or his company, said Tom Pool, spokesman for the department.
Some of the clients who filed complaints declined to comment for this story after receiving what they said were threatening phone calls from Romero.
At least two clients say they filed harassment complaints with the sheriff's office because of the phone calls.
Housing activists say the foreclosure rate among Romero's clients ---- 75 homeowners, or 61 percent of all sales ---- speaks volumes.
"Stunning figure"
"That is a stunning figure which raises serious, serious questions about, to the extent that this person is involved in the lending activity, the integrity of his operation," said Paul Leonard, director for the California branch of the Center for Responsible Lending, a consumer rights group.
It is possible Romero has affected more families than his real estate sales indicate because much of his business focuses on selling insurance and refinancing mortgages, clients said.
Several of the people interviewed for this story, including some former employees of Romero, said clients were predominately Spanish-speaking people with very limited English-speaking skills, who relied on and trusted the advice of Romero and his employees.
Of Romero's 95 detached house sales, all were purchased by buyers with Latino last names, according to tax records.
A tendency to trust is one reason Latinos were targeted during the housing boom and now constitute a significant portion of foreclosures, said several spokesmen from nonprofits.
Fees called excessive
And trust in Romero's company allowed the loan officers on the clients' mortgages to charge fees that some mortgage brokers called excessive, such as $15,000 in broker commissions on a $500,000 loan, according to one mortgage document. Typically, brokers said, borrowers should pay about $5,000 in broker fees on such a loan.
There is nothing illegal about charging such high fees, but it raises an ethical question, brokers said.
On at least two loans obtained by Romero's clients, borrowers paid both a loan broker fee and a "yield-spread premium," documents show.
A loan broker fee is usually paid by the borrower to the mortgage broker for a lower interest rate. A yield-spread premium is paid by the lender to the mortgage broker in exchange for a higher interest rate.
Even after paying more than $10,000 in both fees, Romero's clients secured interest rates higher than they could have qualified for, mortgage brokers said after reviewing the borrowers' credit scores.
""For all this money they (homeowners) paid, they (Romero's team) led them straight into foreclosure," said Dave Hopkins, a mortgage broker with Rancho Financial, a mortgage firm in Rancho Bernardo.
It is unclear who drafted the loans and who received the broker's fees. Some of the loan officers were employees in Romero's office while others were from the lender.
Earlier this month, Romero's office hosted another workshop. On April 24, his 123rd home sale since 2004 entered escrow.
Contact staff writer Zach Fox at (760) 740-5412 or zfox@nctimes.com. Contact staff writer Edward Sifuentes at (760) 740-3511 or esifuentes@nctimes.com.
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Cry Me a River wrote on Jun 14, 2008 9:24 PM:Sorry - no sympathy from this blogger. If you don't understand what you are signing, you have no business signing it. Sorry for your loss, but next time you'll know better.
Roberto wrote on Jun 14, 2008 10:40 PM:This is white collar crime but we already know, no one cares.
Joe wrote on Jun 15, 2008 12:29 AM:Learn how to read and speak English and you are less likely to be a "victim" of ignorance.
If the realtor had anything but a hispanic sirname it would be considered racist and targeting.
doug wrote on Jun 15, 2008 1:06 AM:If you bought a home between 2003 and 2005 and foreclosed you probably shouldnt have ever owned a home. You obviously couldnt afford it. Those risky loans were the only way you could afford it. Im tired of hearing everyone blame everyone. Would you have bought that home if the payment was 800$ more a month like it should have been? Your agent probably asked you if you d like a lower payment or more secure loan. You took the lower payment. I can guarantee it. Everybody thought they were Donald Trump buying houses a few years back. Now go play the stock market and lose your money and blame the Mad Money guy.
boo hoooo wrote on Jun 15, 2008 7:39 AM:let me guess...no comments will be posted on this charming story! typical nc times.
sounds like real estate brokers knew the latinos were easy targets wrote on Jun 15, 2008 8:24 AM:When I bought my house in 1988 as a young Father I did not know anything about real estate transactions. I have to admit that I trusted the real estate personnel and signed documents that contained details I did not understand. Fortunately everything worked out and it was due to the honesty of the real estate agent, loan brokers, and lending institution. I hope all of the dishonest agents that took advantage of their customers are found out and prosecuted.
yup wrote on Jun 15, 2008 8:44 AM:entering into a legal contract is not something you do blindly...These people went with a greed-fueled motive . Look at the guy who had the fixed rate that worked for him BUT that wasn't enough. "American dream" is not for everyone it seems!! Be happy with what you have and what you CAN afford people!!
tpguess wrote on Jun 15, 2008 9:04 AM:Everyone in North County has been injured and damaged by this type of unethical and illegal practice. I don't understand why he still has a license.
Billy wrote on Jun 15, 2008 9:05 AM:This is a failure of our government to police the lenders. Now, we taxpayers will pay the price. Money lenders will say and do anything "legal" to make money. They have no soul.
Jess wrote on Jun 15, 2008 10:15 AM:Too funny. Listening to a Realtor is hillarous. A fool and his money are soon parted
More Facts Needed wrote on Jun 15, 2008 10:27 AM:Of the 122 homes Romero sold since 2004, 69% have entered foreclosure or short sales.
Now, can we get the reporters to compare that rate to overall home sales in the same period for ALL home buyers in the same income bracket as Romero's clients? Or even ALL home buyers in the San Diego area with Hispanic last names? You have given us nothing to compare to, just some scary sounding numbers. The fact that Romero was servicing a non-English speaking community makes it seem like he was targeting them. I am not ready to draw that conclusion yet. I've read that he's "persuasive". Aren't all salespeople persuasive? I've read that he encourages homebuyers to tap their equity to purchase more homes. Aren't there several seminars in the San Diego Learning Annex offering that strategy? I know several people who have done the same thing - purchasing more properties using equity on current properties. It's a risk. Sometimes the risk does not pay off. We look for people to blame. But it's the economy.
If Romero's clientele's properties had doubled and tripled in value, instead of halved, then they would all be singing his praises.
So, let's get some comparable statistics before we condemn Romero.
been there wrote on Jun 15, 2008 11:19 AM:I can't believe a real estate agent would mislead his clients for his own profit. (sarcasm) Interesting the excessively high fees charged by this character are not illegal. But then why would they be. Fleecing the public is now completely legal in George Bush America. The CONS in running our local and federal government are all about getting rid of the very few regulations and protections for the ordinary people. Then the CONS eviscerate what’s left of the weak sister regulatory agencies; so that nothing the lying suits ever do is illegal. The CONS then get to feel so superior. They get to call the good, honest, unsuspecting folks who were cheated: “stupid”. Others misery always provide our con friends with a good laugh. They so love to cheat honest hardworking folks and then tell them they are stupid when they complain. Let’s hear it for the cons. Vote Republican and John McCain for more of the same.
read before you sign wrote on Jun 15, 2008 12:19 PM:People have been getting these 'risky' loans for years, opting for a lower payment while the house earns equity, then they refinanced. Then the equity bubble bursts. Now these people with the 'risky' loans can't refinance and can't afford the true payments. These speculators who CHOOSE a 'risky' loan have hurt the rest of us who were responsible enough to money down on our homes and get fixed rate loans. It will take years for responsible homeowners to recover from what these irresponsible speculators, agents and brokers have done to the real estate market. I have no sympathy for anyone who does not read and understand the loan documents- a mortgage is a legal transaction!! Don't sign anything you don't understand.
Romero is greedy wrote on Jun 15, 2008 12:33 PM:Miguel Romero you should be ashamed for taking advantage of the Mexican people who trusted you. You are a greedy man & will eventually reap what you have sown
Betty wrote on Jun 15, 2008 1:31 PM:Here's a lesson. When in the United States...READ AND SPEAK ENGLISH!
JSten wrote on Jun 15, 2008 2:13 PM:Everyone gets a piece of culpability pie here, the borrowers who tried to game the system (clumsily and unsuccessfully as it seems), and the promoters and opportunists who helped construct the house of cards.
As one who pretty much sat this out and didn't partake, I cay, let those who carry blame, be responsible for their actions, whether or not they made money or lost money.
Its too bad, but thats about all that justice provides.
To been there wrote on Jun 15, 2008 2:44 PM:This is not a political issue, so please don't try to make it into one. This is about free markets and free will. It's about the freedom to succeed and the freedom to fail. It is unfortunate that many unsophisticated investors lost as much as they did, but it is not an uncommon story, through time. Business cycles are just that - cycles, with ups and downs. Because we have 2 generations of largely uneducated people, due to the lack of real education in basics in the public school system, there is an almost complete unawareness of true economics. All most people know is that they work, they get a paycheck, and they can buy almost anything with credit cards, and as long as they can make the minimum payments, life is good.
Pieter wrote on Jun 15, 2008 3:03 PM:As an immigrant from Europe I learned quickly that the American economy is based on lying, cheating, broken promises, defective products, tainted food, cutting corners, dangerous, products from China, bribery, dishonesty, missing information, hidden paragraphs, mafiaoso unions, store clercks on minimum wage, and gambling. In a nutshell the housing market. You may find an honest business at a mom-and-pop-store level, and sometimes a service or tech guy that tries his best, and those are good days. These foreign buyers were too naive, once you realize the guy trying to sell you something is trying to sell you snake oil, you do so much better in this country. In fact, I have joined up, and am having a great time working in an indistry that always gets a bad reputation every time election time comes around. Succas!!!!!!!!!!
jc wrote on Jun 15, 2008 3:12 PM:Here's a little statistic that paints a good picture of what has caused the 'housing crisis'. In the year 2000, only 5% of all home loans in San Diego County were some form of Variable Rate Mortgage or Adjustable Rate Mortgage. By the year 2005, over 50% of all home loans in San Diego County were some type of Variable/Adjustable Rate Mortgage. If you can't afford the mortgage on a fixed rate, you can't afford the house. Period. Sure there are tons of dishonest real estate agents and that made the situation worse. However, like many of the posters here have said, "If you don't understand it, don't sign it." Certainly a hard way to learn that lesson, but nobody said life was fair.
Bill wrote on Jun 15, 2008 3:15 PM:Everyone here was greedy including the buyers. How many people will admit to being greedy? It’s more honorable to have been conned and to be a victim, at least in their minds.
For me, I think I’d rather admit to being greedy than to being stupid. You can overcome and reform from greed, but not from stupid.
Enough Blame to go around wrote on Jun 15, 2008 3:44 PM:The real estate agent shouldn't take the full blame. You know what your income actually is and if you see another number or lie about it yourself to obtain a mortgage, you are guilty, too. Also, if you knew you were signing for a variable rate mortgage, didn't you ever figure out what the worst case scenario payment would be??? Ignorance isn't bliss, it can lead you into financial ruin! No sympathy here, either.
Bill wrote on Jun 15, 2008 4:18 PM:it is sad how many dishonest people there are in the world . I have been in bussiness for 40 years & all the people I work say the same thing you are honest person & the people that work for say you are the best boss they ever had . Roofing Contractor
More Reading Needed wrote on Jun 15, 2008 6:04 PM:Did "More Facts Needed" read the whole article? It cites Fed data that 4 percent of subprime home loans in San Diego County since 2005 resulted in foreclosure. That said, MFN has some good ideas for apples-to-apples comparisons, i.e. with Latino borrowers and with borrowers who have similar incomes. I have no idea how anyone would find statistics like that, though. It'd probably require a special study.
And to the person who said this isn't a political issue--think again. Federal regulatory agencies are supposed to keep some of these shenanigans from happening. If the agencies are underfunded, you get a big mess. The only question is whether or not the reduction in white-collar crime is worth the funding. It's a political question.
Zoltan wrote on Jun 15, 2008 6:59 PM:Pieter aren`t you being a little harsh ? Never in your post did I read that you have decided to return to Hungary do to your disgust with an un perfect world
To Pieter wrote on Jun 15, 2008 7:28 PM:You know, that plane you came over on flies both ways. You're more than welcome to hop back on leave this country you seem to despise so much. There are liars and cheats everywhere. If your home country was so honest and wonderful, why'd you leave?
AssignBlameWhereItBelongs wrote on Jun 16, 2008 10:22 AM:I think the borrowers should get 95% of the blame. You have to be a complete imbecile to take on a negative amortization ARM without doing the math ahead of time to make sure you can afford it AFTER it adjusts. The remaining 5% can go to the weasels who didn't spell it out to these idiots that they won't be able to afford the payment after the interest rate adjusts and they start paying down principal.
GK wrote on Jun 16, 2008 1:00 PM:Pieter are you implying that there is no corruption and lying in Europe? Give me a break. Italy is the corruption capital of the world. And there is plenty of dishonesty, cheating and lying in the rest of Europe as well...as a frequent tourist there I have experienced it first hand. Europeans also have this arrogance that they are more honest and straightforward than Americans, what a bunch of bull!
Jay Jay wrote on Jun 16, 2008 1:11 PM:They'll all culpable but you usually use the little fish to catch the big fish. You promise the little fish imunity so you can get the real criminals.
The instigator of all this was the honorabnle Alan Greenspan who gave the fixed income market the proverial middle finger when he reduced the interest rates to 1% and kept them there. This created a huge new demand for higher yielding and theoretically safe (rated AAA) securities. The banks happily demanded more and more mortgages to package up and sell off to replace what the Federal Goverment no longer sold.
This dirt bag was just one of the cogs in the wheel that responded to the siren song of easy money.
Anonymous wrote on Jun 16, 2008 3:59 PM:I am so glad that this man's unethical practices are coming to light it sucks because I am one of his victims and we put trust in him. That he was honestly trying to help us but boy were we wrong. It's true I can't blame eveything on him. Im just glad and hopeful that his lies and manipulation won't hurt anyone else. He affected so many people that lost their homes and evetyhing that they worked so hard for. I believe that justice will be served. And for all those people who don't have compassion for the victims I hope you don't find yourself of victim of someone like this man.
dave from oceanside wrote on Jun 17, 2008 5:42 PM:If the deal seem too good to be true it probably has sharp teeth in it.
I took the time to read the fine print and it seamed to tick off the loan officer , but lo and behold a balloon payment clause reared it's ugly head.
Even after I explicitly told the dope no balloon payments, just a fixed rate loan.
It took a call to the bank for someone their to eventually say yes it is a balloon payment clause.
If you don't read the document, you better hope luck is on your side.
Smith wrote on Jun 18, 2008 5:34 PM:Dig deeper. Follow the money. This is just the tip of the iceberg.
anonimous wrote on Jun 18, 2008 10:44 PM:Why in the first place did this banks allowed AND OFFERED such a balloney loan programs? for sure mr romero could have not offered this programs to his clients if the banks didnt approved it!
they CERTAINLY are the root cause of all this mess!
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