Home buying spree snaps

A year after a woman bought 10 overpriced properties, she's not the only one hurting.

By JEFF TESTERMAN, Times Staff Writer
Published September 9, 2007

Jill Jackson tried a get-rich-quick scheme last year, buying 10 properties in 10 weeks, building her mortgage loans to almost $2 million. Now, all of those properties are in foreclosure.
	[Ken Helle | Times]

ADVERTISEMENT [Ken Helle | Times] Investors Outlet bought the 70-year-old, two-bedroom home at 3120 N Woodrow Ave. in Tampa Heights for $140,000, then conveyed it to Jackson at closing for $205,000, pocketing most of the difference, according to the seller.

TAMPA - Jill Jackson, a single mom and apartment renter with an annual take-home pay of about $24,000, managed to go on an incredible real estate buying binge last year.

In the span of 10 weeks, she bought 10 properties. She did not put a single penny down, borrowing the price for all 10 by signing for mortgage loans totaling $1.84-million.

The investment plan seemed too good to be true. And it was.

A year later, Jackson's portfolio has collapsed like a house of cards, with every one of the 10 properties in foreclosure and Jackson's credit wrecked. The 31-year-old says she was foolish to fall for the get-rich-quick scheme pitched to her by a church acquaintance.

"I didn't know what I was doing," Jackson acknowledges. "I don't have any background in real estate."

Jackson says she was enticed into the investment plan by Investors Outlet, a Tampa company run by William Ondra Joel II.

Joel, 27, is a former $8-an-hour worker at a Tampa mental health center who got into real estate after seven arrests on drug charges. He did four months in a Georgia boot camp in 2002 for cocaine possession.

"They arranged everything," Jackson says of Investors Outlet. "They picked out the properties. They selected the lenders. I was just told to go the closings, and that's what I did."

Beginning with three closings on a single day in February 2006, Jackson says she followed the Investors Outlet instructions, buying 10 properties she never had seen. She paid about $700,000 more for the portfolio than the county property appraiser said the properties were worth, a premium of 61 percent.

That wasn't a problem, though. At every closing, loan papers were waiting for her that provided 100 percent of the price. She just signed.

What Jackson says she did not know was that Joel and Investors Outlet were pushing up the prices of the properties by quietly changing contracts before she ever arrived at a closing.

Investors Outlet bought the 70-year-old, two-bedroom home at 3120 N Woodrow Ave. in Tampa Heights for $140,000, then conveyed it to Jackson at closing for $205,000, pocketing most of the difference, according to the seller.

The home is in a poor location, across the street from an electric substation that is surrounded by a chain-link fence topped with barbed wire. Seller Tony Muniz was surprised that the home went for $205,000 -- with a loan for $205,000.

"It's hard to see how the investor got 100 percent financing,"Muniz said. "It's kind of scary."

Jackson could not find tenants to pay the rent she needed to repay the mortgage. Seven months after she signed for the loan, the lender filed foreclosure papers.

Her other nine properties went the same way, with the 10th foreclosure suit filed last month.

"This is a snapshot of what's happening in every village, town, city and county in America," said Ralph R. Roberts, a real estate broker, bestselling author and real estate industry watchdog.

"A lot of unassuming young men and women are being induced to be straw buyers."

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The disintegration of Jackson's portfolio spread ripples far beyond her ruined credit rating.

Tenants were evicted. Some properties were vandalized after being vacated, creating eyesores that devalued the surrounding neighborhoods.

All 10 of the mortgage companies that advanced loans to Jackson quickly sold the loans to big out-of-town lenders. Thosenow face losses because Jackson's homes are worth less than the loans Jackson got to finance them.

Deutsche Bank foreclosed on Jackson's $205,000 loan on the Woodrow Avenue home. When the bank unloaded the property, it got just $139,900 - $100 less than Investors Outlet had paid for it before Joel tacked on a $65,000 markup and passed it along to Jackson.

Roberts and other experts see the bad loans reverberating through the economy.

As lenders write off their losses or even fail, credit tightens. Wall Street gets skittish. Selloffs follow, and the average Joe winces as the value of his 401k plummets.

Said Roberts: "It's part of the mortgage meltdown around the country."

He said artificially high appraisals and computer-graded credit applications gain easy acceptance from wholesale lenders, who are eager to make mortgages, collect their commissions and quickly sell the loans to big institutional lenders.

How else could Jackson -- who took home $24,000 a year as a credit services company employee and had a negative net worth -- have qualified for 17 loans totaling almost $2-million?

"These lenders put on blinders," Robert said, "and now, they're starting to go out of business."

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The most run-down property in Jackson's portfolio was the duplex at 8525 N Semmes St. in a high-crime section of Sulphur Springs. A land trust headed by Joel bought the duplex for $100,000 and sold it to Jackson for $138,000.

The $138,000 loan was provided by BNC Mortgage Inc., a "subprime lender" specializing in mortgages to borrowers with shaky credit or difficult-to-document income.

Last month, BNC announced it was shutting down, putting 1,200 employees out of work. The reason given for BMC's demise: a high rate of delinquent loans.

Joel said last year that a strong selling point for the duplex was that a tenant there qualified to receive HUD-backed Section 8 rent subsidies. But the Tampa Housing Authority has no record of any such payment to a tenant after Joel's trust bought the duplex.

Joel said he would not agree to be interviewed for this story, but would answer questions submitted in writing. The St. Petersburg Times sent questions to Joel, but he did not respond.

Sheldon Bing, who until recently lived next door to the Semmes Street duplex, recalls Jackson arriving with a mower one day and trying to cut knee-deep grass before giving up. The duplex has since been vandalized and painted with graffiti.

The property management group that took over after the foreclosure placed a sign in the yard marketing the duplex briefly, Bing said,"but I think the rats ate it."

A few blocks away is the 816-square-foot home at 8514 N 16th St. Jackson paid $125,000 for it, with a $125,000 loanfrom Ownit Mortgage Solutions.

One of the 20 largest U.S wholesale lenders, Ownit targeted borrowers with poor credit. It was forced into bankruptcy in December because of loan defaults.

Major Brady, who lives next door to the 16th Street home, says people came and went there for weeks after Jackson bought it.

Jackson says she was unaware of the unauthorized tenants, but Brady says he witnessed drug use in the back yard and left his dogs out at night "because I was afraid they'd break into my place."

Ownit originated the $125,000 mortgage, but LaSalle Bank ended up with it. After the bank foreclosed, the 16th Street home was sold to an investment company for $80,000 -- a 36 percent loss.

Jackson did manage to salvage one of her properties before foreclosure auction: She paid $230,000 for the home at 606 E Lambright St. and sold it for $255,000.

She tried in vain to sell several others. When the foreclosure summons came, she replied in writing that she wished to give properties to lenders to avoid foreclosure.

"I have tried to sell the house, but have no offers," Jackson wrote to the attorney for one lender.

"I was told by a Realtor the house may have been over-appraised at the time I purchased it. So, I am interested in carrying out a deed in lieu of foreclosure. In the meantime, I am still trying to sell the home myself and being careful of people that have tried to scam me."

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Jackson's post-foreclosure scorecard goes like this: She sold one for a modest profit. Lenders sold two for losses. One case is pending eviction of a tenant. And six properties are on the market with asking prices below Jackson's mortgage amount.

Wells Fargo's agent is asking $215,000 for the 1,300-square-foot home at 907 W Columbus Dr. The bank bought the $225,000 loan made to Jackson by Fremont Investment & Loan, a company ordered by federal regulators this year to overhaul its policies because of shoddy underwriting criteria and too many risky loans.

At the two-bedroom, one-bath home at 3510 W McElroy Court, the grass has disappeared from the front lawn and the tiny pool is showing a buildup of scum. Tampa Tribune press worker Carolyn Martin said she sold the home to Joel for $190,000. It was then conveyed to Jackson for $230,000 at closing.

Today, a real estate agent is getting few nibbles despite knocking $59,100 off that price.

"Oh goodness, it was way overpriced at $230,000," said Coldwell Banker's Gail Garcia. "We're having trouble moving it at $170,900."

As before her foray into real estate investment, Jackson lives in a second-floor apartment in St. Petersburgand owns no real estate. She says she has been hurt by the investment fiasco and the accompanying newspaper publicity but has learned from it.

"I didn't wish for it to turn out this way," she says. "I know a lot more now."

Times researcher John Martin contributed to this report. Jeff Testerman can be reached at 813 226-3422 or testerman@sptimes.com

[Last modified September 8, 2007, 21:56:43]