October 25, 2002
Sean Caine, 410-576-6357
GENERAL'S OFFICE ORDERS "FLIPPING" CONSPIRATORS TO PAY
MILLIONS FOR RESTITUTION AND PENALTIES
General J. Joseph Curran, Jr. announced today that his Consumer
Protection Division has issued a final Order in the case of four
men and five companies charged with misleading and deceiving consumers
in numerous real estate transactions in Baltimore. Real estate sellers
and lenders Lee M. Shpritz and Lee P. Woody III, appraisers John
Morgan and Michael Almony, and the companies American Skycorp, Inc.,
L&R Properties, Inc., West Star Properties, Inc., West Star
Properties, LLC, and Almony Appraisal Services, were ordered to
cease violating the Consumer Protection Act, pay restitution to
consumers, and pay civil penalties and the costs of the Division.
The total amount of the restitution will exceed $2 million.
Consumer Protection Division found that the men and their companies
violated Maryland law when they used deceptive and misleading practices
to sell homes to consumers, usually first-time home buyers with
poor credit, a practice known as "flipping." They sold
homes at inflated prices based on fraudulent appraisals to consumers
who could not afford them. Many of those consumers later defaulted
on their mortgage loans.
practices of these men hurt these homebuyers terribly, and also
created significant problems for the neighborhoods in which the
homes are located," said Curran. "As sellers, lenders
and appraisers, they had a duty to adhere to standards designed
to protect the public. Instead, they took advantage of a vulnerable
population for their personal gain."
Division found that Shpritz, Woody and their companies had engaged
in a number of unfair and deceptive trade practices, including:
advising consumers to sign blank or partially blank documents, and
then filling them in with false income and asset information later;
misrepresenting the purchase price of a home to consumers and then
increasing it at settlement; advising consumers to falsify gift
letters; misleading consumers about home inspections and appraisals;
failing to disclose that Shpritz was both a seller of a property
and the loan officer for the lender; approving FHA loans even though
consumers had unacceptable credit histories and debt-to-income ratios
and using appraisals they knew to be inaccurate.
and Almony were found to have provided misleading appraisals by
using comparable sales that were not in the described neighborhood,
omitting appropriate comparable sales, making misleading statements
about the neighborhood predominant values, and failing to report
recent prior sales of the property in question.
Order imposes a number of requirements with which Shpritz, Woody,
Morgan and Almony must comply if they are to engage in any future
residential real estate transactions or appraisals in Maryland.
Shpritz and his companies, L&R Properties, Inc., West Star Properties,
Inc., and West Star Properties must disclose all material facts
to buyers; explain to consumers the difference between an appraisal
and a home inspection and urge them to hire their own home inspector;
not act as both a seller of a property and as a mortgage broker
or lender for the same transaction; and make any sale to a first-time
homebuyer or one that has a loan insured or financed by the FHA
or Veterans Administration contingent on the buyer obtaining homeownership
and American Skycorp must reject any loan that does not meet the
underwriting criteria established by the FHA or VA, as applicable.
They must maintain a list of at least 10 HUD-approved appraisers
and sequentially select appraisers from this list to conduct appraisals,
and deliver a copy of any appraisal report to the prospective buyer
promptly after receiving it.
and Almony are required to report truthfully on prior sales of the
property in the last year, report on any sale that occurred within
one year and located within one-quarter mile and within the neighborhood
boundaries of the property stated in their appraisal report.
four men and their companies are ordered to pay, within 30 days,
restitution of up to $2,272,801.50. They were also ordered to pay
civil penalties totaling $264,000 and costs. The Consumer Protection
Division will distribute the restitution money to injured consumers
through a claims process based on company records.