New Haven Independent

The tale of the 58-60 Sheldon Terrace house exemplifies one of the more frustrating challenges facing people dealing with New Haven’s foreclosure crisis in struggling pockets of the city: Hundreds of empty, often rundown homes legally belong to lenders who live far away and more slowly to sell them to new occupants.

That’s one reason Mayor John DeStefano sent a “be a good neighbor” letter to 39 lending institutions Monday urging them to register foreclosed-upon homes with the city. Under a new ordinancenew law, lenders will soon pay $250 daily fines if they don’t register a contact person and phone number and mailing address with the city.

Click here to read the letter. It’s aimed at preventing cases like this one.

The Sheldon Terrace episode, not surprisingly, involves two of the most aggressive and controversial foreclosure initiators in town: German-based Deutsche Bank and the New Haven-based Water Pollution Control Authority. (The WPCA did not receive one of the mayor’s letters. “This letter was sent to the largest owners and servicers
of property not to just anyone who could start a foreclosure action,” said mayoral spokeswoman Jessica Mayorga.)

The WPCA foreclosed on the property for non-payment of sewer fees. It initiated close to 10 percent of the city’s foreclosures last year for similar reasons.

An auction of the house was held on Feb. 22. The Menacherrys (pictured above at the sale) prevailed. They put down a deposit. They waited for court approval of the sale.

Deutsche Bank didn’t bother sending a representative to the sale.

But it did eventually catch up with the property, and thwart the sale.

In two court proceedings in mid-March, the bank satisfied the court that it was the title holder from a previous foreclosure in January. The court disallowed the purchase by the Menacherrys, who had successfuly bid $170,000. Deutsche Bank paid the $3,247 in back sewer taxes, and in essence took the house away from Stanley and Joyce Menacherry just when they thought it was within their grasp. (Stnaley is on the right on the picture with a tenant who lost his home during the WPCA foreclosure process.)

The Menacherrys are local small business owners who had ambitious plans for renovation and for helping to stabilize the two-block Sheldon Terrace enclave off Prospect Street. They are exactly the kinds of people who the city is hoping will take over properties if they fall into foreclosure.

Menacherry said he thought something fishy was afoot when the bank neither showed up at the original sale. “And they didn’t show up either on March 16 when the court proceeding to approve the sale was held.”

“The court gave Deutsche Bank another week to get it together,” Menacherry reported. He called the proceedings a “sham.”

Norman Hurwitz, the attorney who conducted the sale on behalf of the court, disagreed. “The Menacherrys knew from the beginning,” he said, “that the bank might intervene at any moment. I had done a title search, and demonstrated that Deutsche Bank was the title holder from a previous action, although the certificate was not formally registered at the time I conducted the foreclosure brought by the WPCA.

“Why the bank did not show up at the sale, or pay the taxes,” Hurwitz said, “that’s a mystery to me. And it’s out of my bailiwick. As the committee I merely fulfilled the court’s instructions to hold the sale.”

Where was the city in its attempt to promote local ownership of properties during this foreclosure crisis on Sheldon Terrace?

Deutsche, Mayor DeStefano, has pointed out, is the bank that has brought the most foreclosures in New Haven during 2008.

“It’s a misguided notion,” said Eva Heinzelman, director of the city’s ROOF (Real Options, Overcoming Foreclosure) project, “that Deutsche Bank has much control over these situations. They are trustees for the properties and they work with numerous servicers, who make the decisions. The problem is that it’s sometimes hard to identify the servicers.”

No local or regional representatives of Deutsche Bank could be located to contact for this story. ROOF, too, has had trouble locating contacts of some of these out-of-town leaders as the group seeks to obtain abandoned properties or help current occupants fend off foreclosure.

Heinzelman said ROOF is helping the growing number of people who are “under water” — that is, whose equity is less than their mortgage — to stay in their houses.” She is seeing more and more properties in strict foreclosure. The means the equity so far below debt, the houses automatically go to the bank, without an auction.

So “we haven’t focused yet on working with people who are buying foreclosed properties,” she said.

She said she nevertheless could understand how the Menacherrys might see the process as unfair. On the other hand, she added, that with an appraisal value of $260,000 and a purchase price of $170,000, the judge may well have sided with Deutsche Bank in thinking the house might sell for much more.

Menacherry doesn’t think so. “They’d have to spend another $40,000 to fix it up, what with costs, and it’ll just sit idle,” he said, not without a touch of bitterness. He said he had to hire a lawyer to represent him against the bank at two proceedings.

Attorney Hurwitz said that Menacherry’s $26,000 deposit is in the mail. Even with that money, Menacherry said, he is out the interest he might have earned on it, plus his own lawyer’s retainer.

Worse, he’s turned off by the experience. “I don’t want to go through this again. You know these last two months we might have been looking at other properties to invest in, but not now.”

Previous Independent coverage of New Haven’s foreclosure crisis:

• Judge Forces WPCA To Give Mom A Chance
• WPCA Uproots Tenants, Too
• Home-Rescue Squad Ignores WPCA
• Sewer Agency Unloads House
• Foreclosure Evictions Halted
• Let The Bank Have It, This Time
• Hazel St. Sale Reflects Economic Climate
• Hill Foreclosure Triggers Memories, & Prayers
• Foreclosure Fee-Slashing Judge Leaves Town
• She’ll Be Watching Deutsche Bank
• A Last Pre-Foreclosure Look At A Lifetime Past
• New Yorker Snags Foreclosed-Upon Gem
• Foreclosure Dream Goes Sour
• Judge Slashes Foreclosure Bounty
• Tax Break Saves Woman’s House
• Bank Replaces “Gunshot Alley” Landlord
• Foreclosure Bill OK’d
• Singh Seeks Home For A Song
• Foreclosure’s Neighbor Worries More About Speeding
• Networking Replaces Foreclosure at Christy’s
• Foreclosure Bargain — & Renewal — Jeopardized
• Bank Outbids Akbar; Family May Keep Home
• “So Don’t Worry About Pablo”
• Bankruptcy Postpones Foreclosure
• Next-Door Foreclosures, 53 Years Apart
• They Met On Foreclosure Way
• Little Garage Draws Big Bids
• A 2nd Chance on Lewis Street
• Foreclosure Attracts New Breed of “Specialist”
• In Foreclosures, Judge’s Hands Tied
• Home Saved From Foreclosure. Cycle, Too
• A House For Precious?
• Deutsche Bank Grabs Dixwell Condo
• Reluctant Bidder Snags F. Haven Bargain
• Well, There’s Always Powerball
• Neighbors Retrieve Home From Bank
• Somebody Has Plans For Bassett Street
• Foreclosed, the Khennavongs Leave the Santanas
• Foreclosure Steal May Be Too Good
• 2nd Foreclosure in 3 Months Dims Bright St.
• After Foreclosure, W’ville Owner Still Hopes To Sell
• He’s Not Buying, Yet
• Quiet Foreclosure on Porter Street
• 3 Minutes Too Late
• Historic Gambardella Property Foreclosed
•2 Homes Lost, 1 Gained
• “Everybody’s Got To Eat”
• More Foreclosures, More Signs
• Foreclosure Sale Benefits Archie Moore’s
• Rescue Squad Swings Into Action
• A Bidder Shows Up
• Bank Beats Tanya’s Bid
• Westville Auction Draws A Crowd
• DeStefano: Foreclosure Plan Ready
• Can They Help?
• “We Should Over-Regulate These Bastards”
• Rosa Hears of Rescues
• WPCA Grilled on Foreclosures
• WPCA’s Targets Struggle To Dig Out
• Sue The Subprimers?
• WPCA Hearing Delayed
• Megna’s “Blood Boils” at WPCA Tactics
• Goldfield Wants WPCA Answers
• 2 Days, 8 Foreclosure Suits
• WPCA Goes On Foreclosure Binge
• A Guru Weighs In
• WPCA Targets Church
• Subprime Mess Targeted
• Renters Caught In Foreclosure King’s Fall
• She’s One Of 1,150 In The Foreclosure Mill
• Foreclosures Threaten Perrotti’s Empire
•“I’m Not Going To Lay Down And Let Them Take My House”
• Struggling Couple Sues Over “Scam”

To learn about the ROOF Project, a community-wide effort to help New Haveners navigate the foreclosure crisis, click here.

The following links are to various materials and brochures designed to help homeowners avoid foreclosure.

How to prepare a complaint to the Department of Banking; Department of Banking Online Assistance Form; Connecticut Department of Banking, Avoiding Foreclosure; FDIC Consumer News; Statewide Legal Services of Connecticut, Inc; Connecticut Bar Association Lawyer Referral Service.

For lawyer referral services in New Haven, call 562-5750 or visit this website. For the Department of Social Services (DSS) Eviction Foreclosure Prevention Program (EFPP), call 211 to see which community-based organization in the state serves your town.

Click here for information on foreclosure prevention efforts from Empower New Haven.