New Haven Independent

Which side ends up losing the money is the focus of a dispute whose trail wends from Ocala, Fla., to Pennsylvania, Hartford, and finally New Haven.

Specifically, to the doors of Claribel Sanabria and Margarita Santiago (pictured) and pawn shop manager Edward Ortiz. One of them may have to eat $4,800 in checks bounced by an allegedly crooked lender that once handled $80 billion worth of loans. The lender wrote those checks to Sanabria and Santiago to entice them to vacate foreclosed-upon apartments they were renting.

“I think they’re crazy, the lenders, the mortgage” companies, Claribel Sanabria said. “I think they’re not being fair with people.”

“For a long time I’ve known that tenants are the innocent victims of the mortgage crisis,” said her legal-aid lawyer, Amy Marx, who has a history fighting big lenders on behalf of tenants. “This situation took the victimization to a new level.”

The episode began on July 24, when Florida-based Taylor Bean and Whitaker Mortgage Co. wrote two $2,400 checks, to Claribel Sanabria and Margarita Santiago. The mother and daughter were renters in two apartments at 1263 Quinnipiac Ave. Taylor Bean foreclosed on the home.

Like many out-of-town lenders stuck with mortgage defaults and wanting to resell properties, Taylor Bean wanted the renters to leave. The mortgage company retained the Hartford bankruptcy law firm of Bendett & McHugh and a Framingham, Mass., firm called Asset Management Specialists (ASM) to deal with Connecticut properties. The foreclosure crisis has been a bonanza for such firms.

The tenants’ legal-aid lawyer worked out a deal with Taylor Bean under a new state program called Cash For Keys. Under the program tenants agree to leave the premises without dragging out their departure. The lender agrees to give the tenants cash so they can afford to move — at least twice the cost of the tenants’ security deposits, if they paid one. Sanabria and Santiago were each entitled to $2,400 under the agreement.

Although their checks were cut on July 24, they didn’t get them right away. That’s because Bob Gallagher, the manager of ASM’s Framingham office (a division of a national company based in Levittown, Penn.), said he wanted his outfit to come down and see the place first to make sure it was in good shape, according to Attorney Marx.

Gallagher made it down on Aug. 13. In the meantime, Sanabria and Santiago borrowed money from friends and relatives to rent new apartments in West Haven and move their belongings.

Also in the meantime, Taylor Bean was running into trouble. On Aug. 3, amid allegations of fraud by the company, the Federal Housing Administration suspended it from servicing loans. (Some 95 percent of the 488,000 mortgages serviced by Taylor Bean were backed by the government. It was the largest non-bank mortgage lender in the country.) The feds raided the company’s offices two days later. Most of the staff was laid off; on Aug. 7 the company received a cease and desist order from Florida’s Office of Financial Regulation.

Attorney Mark said that Gallagher assured her there’d be no problem with the $2,400 checks. ASM found the apartments to be in good shape and turned over the checks to Sanabria and Santiago.

They took the checks to M&M Pawn Shop and Checking Cashing on Grand Avenue near Ferry Street. Manager Edward Ortiz (pictured) cashed their checks. They in turn paid back the friends and relatives who fronted them money for the move and the security deposits on their new apartments.

On Aug. 14, federal regulators shut down a bank, Colonial, that was closely linked to Taylor Bean. The same day M&M Pawn Shop got notification that the two checks had bounced.

Ortiz called up Sanabria and demanded his money back.

“How can we pay it back?” she said in an interview at her new home this week. She no longer had the money.

Taylor Bean was no help. It’s kind of busy, and unreachable, at the moment: It declared bankruptcy on Aug. 21. (It couldn’t be reached for comment for this story.)

Ortiz has been calling Sanabria ever since. If she “doesn’t pay,” Ortiz said, “we have to go to the police and make a report.” Otherwise his outfit is out the money, he said.

Attorney Marx is pushing both the asset management firm and the Hartford law firm to get Taylor Bean to reissue the check. She said her tenants fulfilled their end of the bargain and got caught up in problems in which they had no role. “She was promised money to which she is entitled, from a major corporation which has assets.”

Who’s On The Hook?

“The threat to have someone arrested under the circumstances is outrageous” since there was no evidence of the tenants acting in bad faith, said Dan Blinn, managing attorney of the Hartford-based Consumer Law Group.

Under “ordinary circumstances,” the person who passes a bad check may be legally (though not criminally) liable to a check-casher, Blinn said, “but these aren’t necessarily ordinary circumstances.” “These check-cashing places,” he added, “charge exorbitant fees” to cover the risk of bad checks.

“In this kind of case, you have layers of liability,” said Bill O’Sullivan, chair of the Connecticut Bar Association’s business torts committee.

O’Sullivan said he couldn’t give a legal opinion on this case without researching it himself. His “initial cut”: “It looks like one of those cruel situations where somebody gets victimized by a bankruptcy.” The tenants could theoretically file claims to get $4,800 back from Taylor Bean, but they’d be standing far back in a line where secured creditors usually claim whatever money’s left.

Amy Marx said she’s “confident” she’ll get one of Taylor Bean’s representatives to issue her clients a new check.

Bob Gallagher, the Massachusetts asset manager, said he doesn’t know if Taylor Bean will produce a new check. “That’s in Taylor Bean’s hands,” he said. He described his company as “just a courier.”

Asked if he has had other Cash for Keys checks bounce, Gallagher replied, “Not that I’m aware of, sir. We’re just a third party.”

In fact, Taylor Bean’s meltdown has cost his firm, too, he noted. “Like everyone else, we’re left holding the bag [with unpaid bills]. We’re victims like a lot of people are. They’ve caused a lot of pain for a lot of people.”

One of the attorneys handling the case for Hartford-based Bendett & McHugh failed to return a phone message left Wednesday. Another, reached on Thursday, declined comment. She referred the case to partner Adam Bendett, who did not immediately return a message.

Rafael Podolsky, who works with tenants as a staff attorney at Hartford’s Legal Assistance Resource Center, said the case illustrates a problem that occurs not just when lenders declare bankruptcy, but when they fail to deliver checks by the day tenants move out. “Now, because it’s late,” he observed, “other problems happen.”

Previous Independent coverage of New Haven’s foreclosure crisis:

• Foreclosed House Flipped, Then Burned
• Foreclosure Purchase keeps Tomatoes Alive
• Rerun On Atwater Street
• City Left Holding Foreclosed House
• WPCA Fails To Uproot Family
• A New Haven Dream Foreclosed
• This Is The Face Of Deutsche Bank
• Out-of-Town Bankords Respond To Call
• Banks Duck City On Foreclosed Homes
• Rescue Squad Hunts For “Tipping Points”
• John Wins A Loser
• Still A Bargain, Foreclosure Price Zooms
• Flippers Get 2nd Shot At Fixer-Upper
• Suburban Cop Finds A City Steal
• Absentee Banklords Thwart Foreclosure Sales
• City Forecloses On 40 Lots
• Crowd Seeks Cure For “Mortgage Distress”
• Donovan: “Help Is On The Way”
• 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.