A poster house for title fraud

The new buyers of a rundown graystone showed up Jan. 9 to look at the house they’d won at a foreclosure auction. They took the plywood off the front door and went inside to make sure the utilities had been shut off. Then they called the police.

Sitting upright in the corner of a bedroom off the kitchen was a human skeleton in a red tracksuit. Next to him lay a dead dog. Neighbors told police the corpse was almost certainly Randy Johnson, a middle-aged man who lived alone in the house.

The cause of Johnson’s death has not yet been determined, but it is just one of the mysteries about the house, which was transferred three times to new owners without anyone noticing a dead man inside. It’s a story involving forged deeds, a suspect title company and a Chicago family that has been under investigation for mortgage fraud.

Left holding the bag is Countrywide Home Loans, the nation’s largest mortgage lender and a company whose practices are being scrutinized by the Illinois attorney general’s office. Countrywide made mortgages of $450,000 on the property. Now it will probably lose it all because it financed the sale of a home whose rightful owner was in no condition to sell.

The intrigue surrounding the house offers a glimpse into the strange and murky world of mortgage fraud.

Lenders duped into making loans have every incentive to unload the properties, and almost none to blow the whistle on wrongdoers. If borrowers or government watchdogs fail to cry foul, the same home can change hands again and again before anyone is the wiser.

“They foreclose. They don’t care; they just foreclose,” said Daniel P. Lindsey, a supervisory attorney with the Legal Assistance Foundation of Metropolitan Chicago. Most of the time, he said, the foreclosures go through because no one with an interest has the legal firepower to stop them.

As lenders prepare to move an unprecedented number of troubled properties off their books, it’s buyer beware with a vengeance. Illinois Atty. Gen. Lisa Madigan has called it a looming crisis:

Lenders filed 91,000 foreclosures in Illinois last year, a number expected to go higher in 2008. If fraud was involved in only a small percentage of those loans, it still translates into thousands of homes with troubled histories that could come back to haunt lenders, owners and entire neighborhoods.

Recently, Countrywide vacated the recent sale of the house and returned the buyer’s money. That happened only after Cook County officials announced they would fight to put the house back in the Johnson family’s name.

All the longtime neighbors on the street knew Randy Johnson and his mother, Arrellia Johnson.

Randy Johnson had never been quite normal, they said. He was standoffish, almost aloof as a child. They said he didn’t work except for tinkering with cars in front of his house, and as he got older he became reclusive.

There were “Keep Out” and “Private Property” signs posted all over his small backyard, which was crowded with six city garbage cans. A metal shopping cart blocked the concrete stairs to the basement door, and a collection of chains and padlocks held outside doors shut.

Neighbor Craig Cox remembers that it took years for Johnson to respond to his waves.

Scott Clayton, whose garage faced Johnson’s across the alley, recalled a few run-ins.

One time Johnson complained when Clayton was clearing snow from his garage door and piling it next to a brick wall that served as Johnson’s back fence. Clayton didn’t understand why until later, when he saw Johnson climbing over the brick wall because his gate was broken.

Whatever his quirks, Johnson was a neighborhood fixture, sitting on his front stoop in a butterfly chair with his dog, Prince, beside him. He loved animals and adopted strays.

Things got worse for Johnson, neighbors say, after his family began to fall apart. One sister, Joe Ann Harris, died in 1996. Another sister, Bobbiette, moved to the East Coast.

Then his mother died in 2001, and Johnson was left alone in the three-story house.

In November 2005, Johnson was arrested for brandishing a “short sword” when a female friend wanted to go home, police records show. He didn’t stop her, but police charged him with aggravated assault. He posted bond and was ordered to return for a court date in early December 2005. Johnson never showed up, records show, and his bond was forfeited.

When Johnson hadn’t appeared outside for weeks in early 2006, neighbors called the city’s non-emergency number asking for well-being checks, fearing he might have had an accident.

Firefighters broke down the front door and searched but didn’t locate Johnson. His death remains under investigation.

Someone without Johnson’s best interest at heart also noticed his absence.

In October 2006, a deed was filed with the Cook County Recorder of Deeds indicating that Johnson’s mother had transferred the house to a woman named Rhonda Evans.

The deed appeared to have been drawn up 10 years earlier, in 1996, when Arrellia Johnson was still alive, which should have been a red flag that something unusual was going on, real estate attorneys say. The deed bears the signature and notary seal of Mae Evans, who is Rhonda Evans’ mother, Missouri birth records show.

Mae Evans also is the mother of Edwin Evans, a convicted rapist and armed robber who was indicted on mortgage fraud in September.

The deed is a “forgery and fraudulent,” according to a motion filed in Chancery Court by Cook County Public Administrator Michael I. Bender. Bender’s office represents the estates of people who die without wills in Cook County.

To back up the forgery claim, Bender noted that the purported 1996 deed was drawn up on the stationery of Cook County Recorder Eugene Moore, which is not possible because Moore did not take office until 1999. Jesse White was recorder of deeds in 1996.

That discrepancy did not stop the warranty deed from being recorded. Rhonda Evans then sold the house to Donald Franklin of Harvey, Ill., for $450,000 in late January 2007, documents show.

On the same day, Franklin took out a $360,000 first mortgage and a $90,000 second mortgage from Countrywide -- 100% financing.

Franklin was a “fraudulent straw buyer” who was working with the Evanses, according to Bender’s motion. The title company that handled the closing, TriStar Title, has had its Illinois license revoked and is under investigation for mortgage fraud in Missouri and Illinois. The company has gone out of business.

Franklin never moved into the house. The next month, he stopped making mortgage payments. Countrywide filed a motion to foreclose on the property May 29, documents in the case show. Tribune efforts to locate Franklin were unsuccessful.

Then Countrywide’s attorneys asked the judge to speed things up because the house appeared uninhabited, a special status under Illinois law known as “non-residential,” documents show. Judge Carolyn Quinn granted the motion, a decision that cut a month off the usual seven-month period an owner would have had to reclaim the property.

In January, Countrywide held an auction and accepted a bid of $93,000. It was more than a 75% discount from the original mortgage debt and one-third what a nearby vacant house had sold for a few months earlier.

Still, the sale needed a judge’s final approval, which usually comes about six weeks after an auction. Before that happened, the Cook County public administrator stepped into the case, and Countrywide decided to walk away from the sale.

Countrywide, which is based in Calabasas, Calif., declined repeated requests for comment.

The public administrator’s office has said it will open an estate in the name of Arrellia Johnson, the last person who held legitimate title to the house, and is searching for her heirs. Ultimately, the house will be sold and the proceeds split among those who are legally entitled to a share.

Chicago attorney Arthur E. Rosenson knows how hard it is to unravel a fraudulent mortgage transaction.

For a year now, he has been fighting to undo another back-dated deed with Rhonda Evans’ name on it that was filed in October 2006, the same month the Johnson house was transferred.

Rosenson’s client is Mary Fredericks, an elderly Chicago woman who moved into assisted living, leaving her longtime home unoccupied. Her niece noticed something wrong when she saw someone had changed the locks with her aunt’s belongings still inside.

The niece called the Chicago Bar Assn. for help, and the group referred her to Rosenson, who is working on the case for a reduced fee.

Rosenson quickly figured out that Fredericks had never met Evans, and he asked Chancery Court Judge Peter Flynn to declare Fredericks’ signature on the deed a forgery. The judge did so in November.

But the attorney is still trying to get title to the house back in his client’s name. The case is complicated by the fact that two months after the deed to Evans was recorded, Evans transferred title to Ricky Walker of Chicago.

Walker then took out a $123,000 mortgage from BNC Mortgage, the sub-prime lender of investment house Lehman Brothers. Lehman shuttered BNC in August.

Walker is arguing that he is a victim too. He bought the house in good faith, fixed it up and has rented it to a tenant, said his attorney, Robert Habib.

“Ricky is legitimate, and that’s one reason why the judge entered the order putting him back on the title. Ricky only met Rhonda Evans once, at the closing,” Habib said.

Rosenson is confident Fredericks will eventually win because the original transfer was fraudulent.

“The system works. Within a year, we achieved a fair amount. It will take another few months to clean it up completely,” Rosenson said. “We didn’t beat them, of course, because by the time we found them, they had taken out the loan. Right now there is a cloud on the title. No third party would feel comfortable buying the home right now.”

It could take many more months before the public administrator’s office gets to the same point with the Johnson home. Already, investigators have located two possible grandsons of Arrellia Johnson, both in prison. The search for other heirs continues.

As for Randy Johnson, who would have turned 48 in December, he will benefit in a way. The public administrator will bury him privately in the South Side cemetery close to where his mother is interred.

It’s not exactly a happy ending, Cook County officials say, but it is better than the pauper’s grave that likely would have awaited him otherwise.

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Chicago Tribune reporter David Jackson contributed to this report.