One mortgage broker that evaded discipline by Massachusetts banking regulators – despite many of the home sales it was involved in going into foreclosure – boasted it helps Latinos achieve their “dreams” of becoming homeowners.
Su Casa y Mas, or Your Home Realty, is a Chelsea-based real estate agency owned by two brothers from Columbia, Diego and Mauricio Osorno. The siblings also owned a company, Your Home Mortgages, that brokered home loans. Its critics allege that was an arrangement that let them set up consumers to buy high-priced housing and to fund those sales with high-interest rate loans.
Nearly 50 percent of the residential sales the Orsonos’ companies have been involved in since 2005 have faced some form of foreclosure action, an analysis by the New England Center for Investigative Reporting at Boston University shows.
The average rate in Massachusetts for residential real estate foreclosures is 8.7 percent, according to The Warren Group, Banker & Tradesman’s parent company.
“If [Su Casa] numbers don’t indicate that there’s something bad going on—there’s some unfair practices or even some fraud happening—I don’t know what does,” said Ira Reingold of the National Association of Consumer Advocates, which has represented thousands of consumers victimized by predatory business practices.
Su Casa “is the kind of business that needs to be shut down,” Reingold said.
In June, the Osornos gave up their mortgage business claiming they are insolvent, records with the Massachusetts Secretary of State show. They have failed to respond to a lawsuit filed against them in Suffolk Superior Court in March which accuses them of “unfair, deceptive and discriminatory acts and practices.”
The suit was brought by former clients who claim the Orsonos engaged in unfair and deceptive practices and discrimination for allegedly misleading Latinos into mortgages they could not afford.
The legal briefs in the case tell a tale of repeated financial stalking. The lawsuit alleges that salespeople who worked jointly for Su Casa and Your Home Mortgage would approach prospective buyers, promising affordable homes and easy-payment mortgages. When it came time to close the deals, though, those same consumers would be suddenly faced with rapidly mounting fees, interest rates and monthly payments. When consumers balked, they were allegedly threatened with loss of their deposits and wooed with promises of refinancing relief.
Diego Osorno said Su Casa cannot afford a lawyer and has not answered the lawsuit. Mauricio Osorno denied the allegations made in the suit but said he would not comment directly on it.
Mauricio said that he believes that Su Casa runs a legitimate business and that his clients were pleased with Su Casa’s services.
“I can get recommendation letters from more than 100 clients,” Mauricio said.
But the Orsonos have something better than client testimonials. They have the blessing of the state Division of Banks.
Big Loans
From the moment he emigrated from Colombia 37 years ago, Jaime Alvarez, a 57-year-old father of two, dreamed of owning a home in Boston but never thought he could afford one.
That changed when a friendly mortgage broker from his home country approached him at his children’s Brighton school in 2005. Your Home Mortgage LLC arranged $580,000 worth of subprime loans for Alvarez – with monthly payments amounting to 127 percent of his gross monthly income. Alvarez said he thought he could swing the monthly mortgage payments by renting out a unit. He also relied on the company’s promise to help him refinance in six months, which didn’t happen.
The loans were structured like a slow-growing cancer. In one, Alvarez, who was 54 when he took out the loans, would pay interest only for the first 10 years, then his payments would rapidly ratchet up. Truth-in-Lending disclosure statements show that Alvarez was on the hook for total interest payments of nearly $892,000. His total indebtedness? $1,470,000. Your Home Mortgage made $10,000 off the deal with Alvarez, according to a May, 2009 demand letter sent to them from Alvarez’s attorney.
On Nov. 8, 2007, Virginia Pratt, a foreclosure prevention specialist at ESAC, a Jamaica Plain community service agency, filed a complaint on behalf of Alvarez with the Division of Banks and the state Attorney General’s office. She questioned whether Alvarez had received payments that were due him at closing. But she was blunt in her overall agitation about the loan terms.
“Of greater concern to me are the features of the loan – i.e. 10 years of interest only on the first loan, and a balloon payment [of $148,000] on the second loan,” Pratt wrote.
None of that piqued the curiosity of the Division of Banks. In a Jan. 2, 2008, response, Erik Sprague, a DOB senior bank examiner, wrote that though Alvarez’s experience with the mortgage broker “may not have been ideal,” the DOB found no wrongdoing on the part of the company.
“I felt like a mountain came over me,” Alvarez said. “They just moved my papers from one pile to the other and give it back with a quick answer,” he said, adding he suspects there are many more cases like his.
There are certainly more cases that involve the Orsonos.
The brothers’ company was also the subject of a July 17, 2007, complaint to the DOB regarding mortgages it arranged in 2006 for Arsenia Rodrigues, a disabled, heavily-medicated Cape Verdean woman who purchased a half-million-dollar two-family home in Somerville.
Rodrigues’s annual income at the time was $27,000.
The Orsonos arranged two mortgages for Rodrigues: a 30-year-adjustable for $388,000 with an initial teaser rate of 7.5 percent and another 30-year loan with a rate of 11.4 percent.
Together her monthly mortgage payments were $3,898 with a balloon payment of $270,979.
According to the complaint, Rodrigues was living in public housing, paying just $350 per month rent when she was approached by Nohora Ortiz, an agent for the Orsonos. Ortiz assured her she could afford a home of her own. Luis Jalamelio, another Orsono employee, took it from there.
Jalamelio showed Rodrigues around to various homes, all costing roughly a half million dollars. They eventually settled on a two-family house at 31 Michigan Ave., in Somerville, for $485,000. Ortiz, claiming time constraints, presented Rodrigues a blank mortgage application and had her sign it. Ortiz promised to fill in the rest later.
When the closing came, according to court papers, Rodrigues balked at monthly payments that were double the $2,000 a month she had been promised.
According to the complaint filed with the DOB, when Rodrigues questioned the terms at the closing, Su Casa employees said she would forfeit her $5,500 deposit – nearly 16 times her monthly rent.
Su Casa and Your Home Mortgage received $8,000 for the deal, documents show.
Missing Data
The complaint with bank regulators pointed out that records such as settlement forms and an application were missing from the loan documents Rodrigues had been given by Su Casa.
The Division of Bank’s response? It’s unknown. The case is not in the DOB’s public file of admonishments. And no one connected with the Rodrigues’s has ever heard back from the DOB about the complaint.
The DOB’s Chief Operating Officer, David Cotney also would not comment on Rodrigues’ complaint, but asserted the DOB has a track record of responding to taking consumer complaints very seriously.
“We do take action when we find evidence of clear consumer abuse or of unfair and deceptive acts and practices,” Cotney said.
Carmen Mendoza, though, says she, too, was a victim of the Orsonos’ practices. Mendoza is a factory worker from El Salvador who only speaks Spanish. Mendoza was approached in 2006 by Nohora Ortiz – the same person who arranged the deal for Rodrigues—and was told she could afford a $489,000 two-family home in Somerville.
Ortiz told Mendoza to put her brother and son on the mortgage application to ensure she would qualify, according to court papers.
At the time, Mendoza earned $25,000 a year.
In the end, Mendoza found herself with monthly mortgage payments of more than $4,000. And the Orsono’s companies picked up a $7,800 “loan origination” fee.
Mendoza didn’t bother to file a complaint with the Division of Banks.
This story was reported by Jaime Lutz, Lyle Moran and Christie Musket of the New England Center for Investigative Reporting at Boston University.
