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COVER STORY : WOLF AT THE DOOR : The Victims of Real Estate Rip-Offs and Repair Scams Often Sign Deeds of Trust That Cost Them Their Homes. With Limited Resources, Authorities Have a Poor Prosecution Rate Against the Con Artists.

March 14, 1993

SHE JUST WANTED TO GET SOME MONEY TO PAY off part of the roughly $10,000 in liens against her South-Central Los Angeles home.

Instead, the 71-year-old widow lost her home after taking out more than $100,000 in high-interest loans through the advice of an alleged loan broker and investor who she says defrauded her and took most of the money for himself.

"I don't know why I trusted him like that. . . . He seemed to be a religious-type person and I admired him for being young," said the victim, who asked not to be identified.

Despite what the woman's attorney calls a clear case of home-equity fraud and deception, it may never reach the criminal courts for prosecution.

In a system where real estate fraud cases are arcane and difficult to investigate and law enforcement authorities and prosecutors have limited resources, real estate hustlers often elude prosecution, easily circumventing the few legal safeguards on the books to protect homeowners.

As in the case of the 71-year-old widow, authorities are well aware of the identity of many real estate hustlers. But long paper trails and a pervasive ignorance of the vagaries of real estate law among victims--and indeed, among some law enforcement officials--emboldens con artists who know that even if they are caught, they are likely to be able to quickly set up shop again.

Some victims, distressed by the poor prosecution rate against the hustlers, often try to recover their losses in civil court, but attorneys' fees and court backlogs sometimes put them further in debt. And even if the court rules in favor of the plaintiff, finding the scammer to collect damages is an iffy proposition at best.

"We do as much as we can do as far as civil cases are concerned. . . . We can't get these predators off the street. The way to put them out of business permanently is through prosecution," said Joy Simmons, senior attorney at Legal Aid Foundation.

Law enforcement officials and public-interest attorneys estimate that about 60% of the victims of real estate fraud live in South-Central or East Los Angeles. Scams started to appear in the city's low-income communities in the late '70s and proliferated with the real estate boom of the '80s. The estimated number of cases has grown from the hundreds to the thousands over the past dozen years, authorities said.

Most victims are elderly women or immigrants, particularly those from Spanish-speaking nations who speak little or no English, say public-interest attorneys.

South and East Los Angeles are prime targets for real-estate hustlers because of the dearth of lending institutions in the areas. With few alternatives, residents often turn to whomever will grant them loans, regardless of the terms.

The goal in many real estate rip-offs is to get victims to sign deeds of trust using their property as collateral in case they default on payments. In home-loan scams, fraudulent lenders sometimes persuade victims to turn the money over to them for investments or to pay debt consolidation. In home improvement scams, promised work is often shoddy and when the owner refuses to pay, a lien is placed on the property.

Home-loan and home-improvement scams are among the five most common home-equity fraud cases in South-Central and East Los Angeles, authorities and attorneys say. The others involve foreclosure loans, forged deeds and installation of water purifiers.

In scams involving foreclosure loans, con artists contact homeowners whose properties are in foreclosure and offer loans with few questions asked. But the loans are often at high interest and have balloon payments. In forged deed scams, a homeowner's signature is forged on a quitclaim deed to make it appear as if the property were given to a scammer as a gift, and the con artist in turn takes out loans against the property that are never repaid.

Water purifier scams are aimed most often at Latino immigrants who come from countries where water is a health problem.

Romelia Depaz, an immigrant from Belize, signed up for a $4,000 water purifier tank a few years ago after a sales representative told her his company would clean her allegedly tainted water. She also wanted to use the deal to establish a credit record.

She could not remember if the representative mentioned signing a lien, but eventually she found her South Gramercy Place home in foreclosure after missing a few payments.

"I think it was really a rip-off," Depaz said of the water purifying tank she received. "Because really the water is not good . . . when you look inside the tank, it's all slimy and green."

Patricia Goldsmith, an attorney for the Legal Aid Foundation of Los Angeles, said victims do not realize that it is illegal to ask buyers to sign a deed of trust as collateral against any item that can be removed from a home.

"But people are told they have to sign this, they don't know any better and then when they can't pay, their home is taken," Goldsmith said.

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