Bailouts Spawn Mortgage Fraud
Her arms were withered, her memory a fog. Bedridden and suffering from profound dementia, 91-year-old Lillie Densler was in a nursing home last year when she signed away her only remaining asset: a sturdy brick house on Chicago’s West Side.
Now, a well-known attorney, author and radio personality is at the center of fraud allegations stemming from the deal, which was part of a booming business in bailouts for struggling homeowners.
In bailout deals, a homeowner typically deeds his house to an “investor” for a year. The idea is that the homeowner can use that period to get out of debt, then repurchase the home with a fresh mortgage.
But often the home is lost in the process, not rescued.
The difficult-to-police business has become a breeding ground for mortgage fraud, government officials and legal aid attorneys say. Deals often involve misleading sales pitches, forgery and coerced clients.
Orchestrating the Densler home sale was money management expert Norton Helton, who hosted the weekly radio show “All Things Are Possible Now,” which aired on WVON until late January. It was Helton who handed Densler the pen and showed her where to sign.
Helton vigorously defended his conduct in a series of Tribune interviews. “I’m a little guy out here on the radio trying to help other people,” he said.
He purchased Saturday-morning airtime through a broker. But after learning about Helton’s bailout practice from early editions of the Tribune, station president Melody Spann-Cooper said Jan. 28 that she would end WVON’s relationship with him. “He is officially off the air,” Spann-Cooper said.
At a Jan. 12 civil court hearing, Densler’s court-appointed guardian ad litem filed a report saying Helton or someone working for him used a forged judge’s order to complete the sale of Densler’s home. Cook County Probate Judge Lynne Kawamoto immediately ordered the state attorney general to open a criminal investigation.
Helton told Kawamoto that he made sure Densler clearly understood the implications of the deed she signed.
“She seemed like she was fine to me, judge,” he said in court.
The ongoing case puts an unflattering spotlight not only on the self-assured financial advisor, but also on the lucrative home-bailout market.
“It’s at the leading edge of fraud out there,” said Daniel P. Lindsey, an attorney with the Legal Assistance Foundation of Metropolitan Chicago. “People are sold on the idea that this is temporary -- that they will be able to buy back their houses. But it rarely works out that way. The homeowner winds up becoming a tenant and usually being evicted.”
A 2005 report by the National Consumer Law Center estimated that “many, many thousands” of bailout clients have lost their homes to the advisors and investors who promised to save them. Authorities recently indicted multimillion-dollar bailout operators in California and New York.
Illinois soon may join the handful of states with laws aimed at the schemes. Atty. Gen. Lisa Madigan and state Sen. Jacqueline Y. Collins in January proposed a bill that would force Illinois bailout promoters to provide homeowners with a written contract spelling out their services and allowing the client to pull out before the services were completed. The bill also would provide penalties for violators.
For now, bailout specialists troll Chicago’s low-income neighborhoods, advertising on television and radio, networking through church groups and sometimes nailing crude signs to telephone poles.
Their clients often are desperate and unsophisticated, authorities say.
Densler’s home was co-owned by her closest remaining relative and caretaker, nephew Kelvin Martin, a counselor at the Cook County Juvenile Temporary Detention Center. Martin testified that he contacted Helton when he fell behind on the existing $125,000 mortgage.
“Me and my wife couldn’t handle our bills, so I sought bankruptcy,” Martin said at the Jan. 12 court hearing. “I saw a TV commercial for Mr. Helton talking about the bailout program.”
Under Helton’s plan, Martin and his aunt traded the $125,000 mortgage he couldn’t afford for a sketchy promise to buy back their property in a year for more than $200,000.
Despite these questionable long-term economics, bailouts are eagerly financed by some of America’s leading banks, which extend six-figure mortgage loans to the investors taking temporary title to the homes.
In the Densler bailout deal, the investor recruited by Helton’s firm borrowed $218,000 from Fremont Investment & Loan, one of the nation’s largest providers of “subprime” mortgages to homeowners with poor credit. Fremont did not return calls for comment.
Other big lenders have jumped into the market. Long Beach Mortgage has funded transactions arranged by a Chicago bailout firm called MarTav Services Corp.
MarTav has been accused of fraud in five pending civil lawsuits. One of its “real estate trackers,” Jeffrey Davis, has served prison stints for aggravated robbery, burglary and other crimes. A MarTav attorney denied wrongdoing in court and declined to comment for this article.
Peter J. Schmiedel, a private attorney appointed by Kawamoto to investigate the Densler home sale, filed a report saying the sale was “completely illegal and should be set aside.”
Helton has not been charged with any crime in the sale of Densler’s home. He asserted his innocence in court as well as to the Tribune.
Lillie Densler, a thrifty woman devoted to her family and church, had owned the house for more than two decades. But as she passed her 90th birthday, Densler had outlived her siblings and friends. Her nephew Martin and his family moved to the second floor of the building in 1998, and Densler made him a co-owner in 2001.
That year, a Cook County judge declared Densler a disabled adult ward of the court and appointed a private attorney to advise her on her rights.
Densler was moved into a nursing home, where Martin and his family continued to visit her every few days, according to court testimony.
Facing mounting bills, Martin turned to Helton for financial advice in the spring of 2005.
Helton, 44, said he grew up in the Cabrini-Green public housing projects and on Chicago’s South Side. After briefly teaching high school, he began practicing law in 1993. A year later, he became a Cook County assistant public defender assigned to night narcotics court.
He resigned from that job in 1996 after he was arrested for allegedly making a small heroin purchase on the street. Helton said he was on the street that night investigating a case. A judge tossed the charges, saying officers did not have probable cause to arrest him.
As he rebuilt his career as a bankruptcy lawyer, Helton drew on his personal travails for an inspirational novel that he promoted on his website.
His website also touts bailouts that “help homeowners get out of their financial dilemma and stay in their home.”
In the spring of 2005, Helton launched his plan to save the Densler property. Densler and her nephew agreed to sell their home for $230,000 to an investor who would supposedly hold it for a year and then sell it back.
Because Densler had been declared a disabled adult ward, Helton needed a judge’s order dismissing the guardianship to complete the sale.
Helton or someone working under him produced a dismissal order, Schmiedel’s report says.
The fabricated order dismissing Densler’s guardianship was purportedly signed by Circuit Judge Kenneth E. Wright Jr. in September 2002. But when the order was shown to Wright, the judge said it wasn’t his signature.
In addition, Helton or someone working for him faxed the title company an “Emergency Petition to Sell Personal Property” bearing Helton’s name as “attorney for guardian” -- a title he didn’t actually have.
Standing before Judge Kawamoto on Jan. 12, Helton studied that emergency petition, then suggested that one of his employees had fabricated it.
“Judge, I didn’t draft that,” Helton said.
Densler and her nephew sold the building to 72-year-old investor Maud Richardson, who secured two Fremont loans and apparently got $10,000 for her trouble.
The existing mortgage was paid off, $40,000 went to a company run by Helton, and $32,000 can’t be precisely accounted for.
