Foreclosed House Flipped, Then Burned

Vanivijayathi Savalgi made $125,000 buying and selling this Newhallville home. Then the house went up in smoke — as have Savalgi’s real estate dreams.

Call it a tale of two houses. Or a textbook case of what happens when speculators pounce on a real estate bubble, then leave a trail of ashes in city neighborhoods.

In either case, the story of 73-75 Lilac St., which the city now plans to demolish after a “suspicious” July 2 fire, reflects the challenges that New Haven faces in trying to stay ahead of a metastasizing foreclosure crisis and keep it from devastating neighborhoods.

It also reflects the easy money dished by out-of-state mortgage companies to support purchases of properties by speculators who made a quick buck but dragged neighborhoods down in the process. Not to mention the many hands continuing to profit from properties’ decline as the foreclosure crisis advances.

Even in its death throes, 73-75 Lilac has been generating wealth. Just not for people on Lilac Street or the surrounding Newhallville neighborhood.

Pre-Independence Day Blaze

David McLellan (pictured) was on his way to his job as a medical transport driver shortly before 4 p.m. on Thursday the 2nd when he came across the blaze two doors down from his own home. Flames burst out of the 73-75 Lilac’s second and third-floor windows.

“I came outside and pssshhh!! The house was on fire!” McLellan recalled. “I hollered to everybody to come out.”

Assistant Fire Chief Ralph Black called the blaze “suspicious.” The department’s currently investigating it. “We want to know how it started in a house that was vacant with no utilities.”

Acting LCI Director Frank D’Amore and Building Department chief Andy Rizzo said the city has issued an order to demolish the three-family, two-and-a-half-story wood clapboard house. It appears that some kids had broken into the house the day of the fire, according to D’Amore. One story going around the neighborhood is that they were playing with fireworks.

Neighbor McLellan said the house has been boarded up and vacant for quite a while.

It has been that way on and off since at least 1983, according to an inspection file at the Livable City Initiative (LCI). It was boarded up in 1984. It passed through several owners. At one point in 1987, a city lawyer reported it “was sold before we could place a building code lien on it.”

That building was again boarded up and uninhabitable when Vanivijayathi Savalgi (pictured at the top of this story) bought it on Jan. 19, 2005 for $140,000.

She and her husband, Raghu Savalgi, were on a buying spree, she said in a conversation outside her tidy Westville home (pictured).

They began purchasing homes around eight years ago, she said. Originally from India, they had come to New Haven in 1995 to practice medicine. (Her husband got a job at Yale.)

They decided to quit their jobs in 1999 to pursue her husband’s dream — to build a not-for-profit foundation called “Splar.” (The foundation name, rather than the family name, is on the sign outside their home.) The foundation, based here, works mostly in Africa’s Ivory Coast so far. According to its website, it is “a global organization dedicated to human welfare” and establishing “centers around the world” to promote low-cost health and science-related “beneficial changes in society.” (“Splar” stands for “Savalgi’s Process of Life Advancement Research.”)

“It’s like mainly social and preventive medicine, like nutrition, screening tests,” Vanivijayathi explained. The organization “educates people about nutrition” and basic glucose and blood pressure testing.

The Savalgis needed money to support themselves while they built up the foundation. So, according to Vanivijayathi, they decided to go into New Haven real estate. In a big way.

They bought 18 houses, she said. Most of them were in low-income stretches of neighborhoods like Newhallville, including two on Lilac Street and another nearby on Starr Street. They bought the houses under various names — Vanivijayathi’s, and those of limited liability corporations called “Savalgi Community” and “Savalgi Homes.” They rented apartments in the houses to families receiving federal Section 8 subsidies. They farmed out the job of running the properties to a private management firm. The idea was to take in the profit while building Splar.

That worked for a while, Vanivijayathi said. But they ran into troubles. The families kept trashing the apartments. The housing authority, which administers Section 8, insisted on new repairs after each annual inspection, repairs that cost thousands of dollars. Section 8 subsidies soon failed to cover the combined costs of mortgage, insurance, and repairs, she said.

Plus, the management companies were lousy at their job, she complained. The Salvalgis went through three different companies.

They decided to unload the properties. They succeeded in doing so with 73-75 Lilac. They had put $30,000 into fixing it up and renting it out again, she said. On April 2, 2007, a realtor found them a buyer, who took the house off their hands for $265,000 — a whopping $120,000 profit in a little over two years.

“We can’t take just one house like that” to calculate profit, she said. “Because in another house we run a loss of $70,000.”

In fact, the family has been turning most of its houses over not to buyers, but back to lenders. Most of the houses have either been foreclosed on, or are in the process of being foreclosed on. (The city is foreclosing on 425 Blake St. for $4,170.81 in back taxes.) The lenders doing the foreclosing include some of the major purveyors of risky loans that helped cause the current foreclosure crisis and recession, such as Countrywide.

And while the Savalgis have been living in a serene block of upper Westville seemingly worlds away from the neighborhoods they invested in, that too may change. Vanivijayathi said she had to go back to paying work, doing medical reviews for an insurance company. (Her husband continues to work at the foundation without receiving a salary, she said.) And because they can no longer afford the taxes on their home, they plan to move in two months to a smaller place, she said.

“I should tell you,” she said, “our experience in New Haven has been very, very” poor.

Back On Lilac Street

Meanwhile, 73-75 Lilac wasn’t faring much better. The buyer the Savalgis found, named Robert Lee Morgan, was in the process of buying up properties in poorer neighborhoods, too, at the time. He too was receiving mortgages form lenders like Countrywide. Even faster than the Savalgis, he was ending up in foreclosure — within months of purchase.

According to numerous foreclosure suits on file at the state courthouse, Morgan was living in public housing, on Brookside Avenue. He hasn’t been showing up in court to try to keep the houses.

A visit to his address Thursday, the place court papers are delivered, revealed no sign of him. His address is in one of the Abraham Ribicoff cottages cut off like an island from the rest of town, at the end of a road of demolished concrete where another public-housing complex once stood. No one answered the door at his alleged unit (pictured). A woman standing outside said her niece lives in that unit; she never heard of Morgan.

Countrywide was the lender that gave Morgan a $251,750 mortgage to support his purchase of 73-75 Lilac. That was on March 29, 2007. By Sept. 28, 2007 — a mere six months later — Countrywide went to court to foreclose on the house.

The house became vacant again. It went on LCI’s list of vacant homes. According to LCI’s D’Amore, the city did keep tabs on it, and it had been secured, at least until kids apparently broke into it last week. “People in the neighborhood would always keep an eye on it,” he said.

As the foreclosure case slogged forward, plenty of people continued to collect money on 73-75 Lilac, although it was the simplest of procedures, an uncontested strict foreclosure. Morgan didn’t have a lawyer. Marshal Edward DiLieto served the legal papers. Hamden’s William Esposito was hired to do an appraisal. The Hartford firm of Hunt, Liebert, Jacobson, which has been omnipresent in housing court on foreclosures, had four separate attorneys making appearances, collecting a total of $1,200 in fees.

But the lender wasn’t in a hurry to take responsibility for the house. Judge Anthony DeMayo issued a judgment of strict foreclosure back in May 27, 2008. Countrywide never got around to holding a sale to dispose of the property or take legal possession. The house remained abandoned and neglected.

More than a year later, this June 19, it returned to court to transfer legal responsibility of the house to a trustee, BAC Home Loans, a California-based unit of Bank of America.
Land records still list Morgan as the owner. After the fire, City Hall’s LCI spent a few days seeking the owner, finally noticing that BAC had become the trustee of the property on behalf of Countrywide. BAC had registered with the city under a new program to keep accountable managers of properties in foreclosure.

A BAC spokeswoman, Jumana Bauwens, said Thursday that given the fire, “we’ll get somebody out there to get a report for the damages.” She confirmed that the property hasn’t gone to foreclosure sale yet. She said BAC had a previous insurance claim out for water and vandalism damage.

The fate of 73-75 Lilac is “the worst-case scenario” in the foreclosure crisis, said Eva Heintzelman. She runs ROOF, a public-private group working to stop foreclosures and get foreclosed properties back in responsible hands.

The number of foreclosure suits filed in New Haven rose from 547 in 2006 to 853 in 2007 and around 950 in 2008, according to ROOF. Experts expect foreclosures across the country to peak in the fall.

“There are going to be more cases” like this as foreclosures continue to rise in New Haven, Heintzelman said. “We have a lot of investors buying these properties … We’re worried about how investors will maintain properties.”

Previous Independent coverage of New Haven’s foreclosure crisis:

• 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.