A settlement between Chase Manhattan Mortgage Corp. and borrowers who say they were duped into buying overpriced homes in the Poconos may be on the rocks.
While talks continue in the lawsuit filed by Poconos homeowners, a report recently filed in court indicates that the former federal judge asked to mediate is hesitant to hold further meetings because of the gulf between what the homeowners want and what they are being offered, the attorneys insist that settlement is still a possibility.
“The mediation is continuing,” said homeowners’ attorney Stephen A. Weiss. “The talks have not fallen apart. I have every reason to believe that settlement can be achieved.”
“We’re still trying,” said Ernie Preate, counsel for Chapel Creek Homes, Inc., one of the defendants in the case.
While Weiss declined to say what demands and offers have been made, the report filed by the attorneys involved in the case says that the gap is so wide, that the mediator is hesitant to continue if that gap is not narrowed.
The homeowners are seeking financial settlements from Chase Manhattan Mortgage Corp. and Pennsylvania developer Gene Percudani.
Although Percudani’s attorney did not return MortgageDaily.com calls for comment, Chase spokeswoman Charlotte Gilbert-Biro said, “Chase vigorously denies the allegations of the complaint. Chase has always made every effort to keep borrowers in their homes.”
Weiss, the homeowners’ attorney, said that because mediator Donald E. Ziegler, a former chief judge for the U.S. District Court for the Western District of Pennsylvania, has been out of town on an unrelated mediation for a number of weeks, that the litigants have not been able to engage in another round of talks.
Chase has already settled with a group of 200 homeowners by reducing the balances of individual mortgages — a hit to the megabank of between $10 to $20 million dollars.
The homebuyers’ allegations of fraud have ballooned to include dozens of defendants, the filing of criminal charges, civil filings in both state and federal court and claims by Chase in a lawsuit of its own against Percudani that it was deceived when it purchased the mortgages.
The homeowners say the alleged fraud involved Percudani and his companies, Chapel Creek Homes, Raintree Homes and Chapel Creek Mortgage Banker. The companies advertised home ownership in the Poconos for only $1,000 down. According to the class action suit complaint, Percudani allegedly used a special promotion where the customer paid Raintree 12 monthly payments — which Raintree said was the amount of time it took to build the home — and was refunded the entire amount through payments from Raintree to the customer’s landlord or directly to the customer. By doing this, Raintree was allegedly able to satisfy HUD down payment requirements.
During the 12-month construction period, Chapel Creek Mortgage Banker and/or Raintree allegedly manipulated the credit histories of the customers, ensuring approval from wholesaler Chase Manhattan Mortgage Corp. for every customer.
An appraiser overvalued the homes by as much as 42% to make the deals work, according to the complaint.
Although cleared of criminal charges, Percudani faces a civil lawsuit filed by the state alleging that he and former partner Gerald Powell put together a scheme to defraud the homebuyers.
The homeowners and the defendants have asked the court that they be given until Jan. 31 to complete mediation.
RELATED:
Inflated Poconos Loans, Appraisals May Cost Chase $10-20 Million
Chase Manhattan Mortgage Corp. is considering reducing the value of more than 200 Poconos-area mortgages after appraisal reviews performed by Lenders Service Inc. (LSI) on about 25 loans indicated the homes were sold at inflated prices, according to the Pocono Record. The “Write Downs,” which could reportedly cost Chase between $10 and $20 million, would be on loans originated by Chapel Creek Mortgage Banker, Inc. based in Mount Pocono, Pennsylvania. If enacted, victims would see the balances of their mortgages reduced.
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