November 24, 2003
HUD ANNOUNCES SETTLEMENTS WITH LENDERS THAT FINANCED FRAUDULENT LAND SALES SCHEME
Agreements could save 1,000 families $38 million
WASHINGTON - The Department of Housing and Urban Development today announced settlements with two Massachusetts-based lenders that financed a group of developers accused of perpetrating a fraudulent land sales scheme. The developers preyed on more than a thousand people nationwide, primarily senior citizens. The lenders, Litchfield Financial Corporation and Developer Finance Corporation, agreed to offer various options to save a thousand borrowers as much $38 million.
Last August, HUD and the Justice Department filed a lawsuit charging the developers (operating under the names "Buyers Source" and "Belmont Properties") with using high-pressure sales tactics to defraud consumers in violation of the Interstate Land Sales Full Disclosure Act. Today's agreements focus on the lenders associated with the Buyers Source scheme.
"The agreements we announce today will go a long way toward making some
of these good people whole again," said John C. Weicher, HUD Assistant
Secretary for Housing-Federal Housing Commissioner. "Whether you create
the fraudulent scheme, or provide the financing, HUD will work vigorously to
protect consumers from being deprived of their fair share of the American Dream."
Litchfield, a subsidiary of Textron, Inc. based in Williamstown, Massachusetts, agreed to offer three options to more than 600 defrauded consumers who still are making payments to Litchfield. The borrowers can: Transfer their lots to Litchfield to satisfy their debt; continue their payments with a reduction in their loan balances; or, continue their payments with a smaller reduction in their balances, plus a cash payment. In addition, Litchfield will offer $3,000 to nearly 200 families who refinanced or otherwise paid off their loan balances with the Company.
Developer Finance Corporation (DFC) of North Adams, Massachusetts, agreed to offer nearly 250 purchasers the option of transferring their lots back to DFC to satisfy their debt.
The Litchfield agreement also requires the Company to implement certain business practices that will make it far more difficult for developers such as Buyers Source to perpetrate similar frauds on the public in the future. Specifically, Litchfield agreed to ensure that the developers it does business with are properly registered with HUD. Litchfield also agreed to require its developer customers to provide proof that they have given required disclosures, called property reports, to all of their land-buying consumers.
These settlements will allow more than 1,000 families that financed their land purchases through Litchfield and DFC the opportunity to transfer their overpriced lots to the lenders to satisfy their outstanding debt. Depending upon which options borrowers select, the Department estimates that the two settlements will save consumers $38 million in principal and interest payments over the next 14 years. For more information, visit Litchfield and Developers Finance Corporation agreements.
On September 17th, a federal court in Virginia issued a Preliminary Injunction against Buyers Source, Belmont Properties and their owners - freezing their personal and business assets and prohibiting them from selling land illegally. HUD also filed a related lawsuit in a Missouri federal court in August, and obtained a similar order. HUD intends to continue its lawsuit against Buyers Source and its owners.
Buyers Source and their affiliated businesses sold more than 1,200 parcels of land in Florida, South Carolina, Ohio, Arkansas, Texas, New Mexico and Missouri at prices that far exceeded their value, sometimes by as much as 3,000 percent. HUD claims that Buyers Source approached timeshare owners with an offer to purchase their timeshares - in exchange, the victims purchased lots from Buyers Source at greatly inflated prices at interest rates up to 13 percent upon the false promise that they were buying sound investment property they could resell at a profit. For more information, visit HUD's lawsuit against Buyers Source and Belmont Properties.
Litchfield and other Textron subsidiaries had financing arrangements with Buyers Source in three subdivisions - Sugarmill Woods, near Homosassa Springs, Florida; Apple Valley, near Howard, Ohio; and, Savannah Lakes, near McCormick, South Carolina. DFC acquired notes from Buyers Source in two of the subdivisions - Apple Valley and Savannah Lakes, as well as Holiday Island, near Eureka, Arkansas.
HUD is the nation's housing agency committed to increasing homeownership, particularly among minorities, creating affordable housing opportunities for low-income Americans, supporting the homeless, elderly, people with disabilities and people living with AIDS. The Department also promotes economic and community development as well as enforces the nation's fair housing laws. More information about HUD and its programs is available on the Internet.
EDITORS NOTE: Consumers who wish to contact HUD with questions
about these settlements or the Buyers Source lawsuit may call 1-800-248-8180.