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Taxpayers Tapped In Mortgage Mess

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By SHANNON BEHNKEN

sbehnken@tampatrib.com

Published: March 8, 2009

TAMPA - South St. Petersburg may not be the most obvious place for real estate investors to make a profit. Homes on some streets are abandoned or dilapidated in low-income neighborhoods tainted by crime.

But Joseph F. Daniele is a persuasive man.

Of the 347 properties he or his companies have had a hand in trading, 73 percent have fallen into foreclosure.

Now, taxpayers will pick up the tab.

The struggling neighborhood is targeted by city leaders for $9.5 million in federal money, part of a payout to municipalities with neighborhoods particularly hard-hit by foreclosures.

The Tampa Tribune in 2007 revealed the deals, which had peculiar mortgages that allowed third parties to collect large sums of money at closing. Since that report, Daniele and his companies have continued to buy and sell homes in the neighborhood despite ongoing law enforcement investigations.

And the foreclosures continue to mount.

Task Force Looking At Deals

Daniele runs Titan Development Group LLC and told the Tribune in 2007 that there was nothing wrong with his business practices. The buyers who fell into foreclosure did so because they failed to manage their investment properties, he said.

The homes were purchased by 65 buyers, many of whom complained to police that they bought the properties at inflated values and borrowed tens of thousands more than the sales price.

The money was to repay Daniele for work done to the homes, he told the Tribune at the time. But many buyers interviewed for the report said work either wasn't done or was shoddy.

Calls to Daniele for comment for this story were not returned.

When the Tribune's initial report ran, 160 of 303 homes were in foreclosure. Since then, 70 more have fallen into foreclosure - 76 percent of the original sales. Lenders are left on the hook for the failed loans.

The homes were purchased over five years. Buyers said they looked past peculiar settlement documents that allowed third parties to collect thousands at their closings in order to make money in Florida's real estate boom.

All of the buyers interviewed by the Tribune said they did not contribute a down payment, even though 11 settlement documents reviewed by the paper show those buyers consistently put down $15,000 to $25,000. Knowingly misrepresenting funding to lenders is against federal law.

The deals were so complicated that the Florida Department of Law Enforcement has turned the case over to a mortgage fraud task force run by the FBI, said Ellen Wilcox, an FDLE investigator who works with the task force.

"There are only eight of us here with FDLE, and there are so many cases," Wilcox said. "It's a manpower issue. There's just so much out there that's come to light that it's just truly overwhelming."

The task force is made up of investigators from the FBI, FDLE, IRS, HUD, the U.S. Postal Service and the U.S. Attorney's Office.

In addition to the original 303 properties, the Tribune has found 25 more homes in the neighborhood that were sold to buyers in Daniele's investment program during the same time. All but three are in some stage of the foreclosure process.

And since July 2007, Daniele or his companies have arranged the sale of at least 19 additional properties in south St. Petersburg. Two of those are in foreclosure.

City Ready To Step In

The foreclosures left a jumble of vacant homes that have pushed down property values and contributed to crime in low-income neighborhoods in south St. Petersburg, said Tom DeYampert, the city's manager of housing and urban development.

St. Petersburg plans to step in to keep the neighborhood from deteriorating further. The city plans to use $9.5 million it anticipates getting from the federal government to buy a bulk of the foreclosed homes from lenders. The money is part of $3.92 billion the U.S. Department of Housing and Urban Development is giving states and local governments to buy foreclosed homes.

"We're targeting the same areas Daniele targeted," DeYampert said.

The plan is to repair the homes and list them for sale to low-income families in the fourth quarter of this year, DeYampert said.

Doug Pollock, president of Information Data Services, which investigates problem mortgages, said he doesn't think the taxpayers should have to foot the bill.

"These homes need to sit there vacant until someone comes along and offers the bank an offer they'll accept," he said.

Still, because the city is getting the money from the federal government, fixing up some of these homes is a good way to spend it, Pollock said. However, he said the city should offer the lenders a low price to take the homes off their books.

"The lenders are the ones who approved these bad loans," he said.

After the Tribune's initial report, DeYampert, with the city, interviewed buyers and turned over documents to the St. Petersburg Police Department. Police referred the case to the FDLE in March 2008.

DeYampert said it's frustrating that while the investigation continues, the companies involved are still buying and selling property in the neighborhood and foreclosures continue to grow.

"I do understand the delay, absolutely," he said. "While I understand, it's still frustrating."

HOW MANY HOMES?

Joseph Daniele or his companies have been involved in hundreds of real estate deals in south St. Petersburg.

303: Original number of properties found during a Tribune investigation in 2007
347: Number of homes now tied to Daniele or his companies
254: Number of those properties in some stage the process of foreclosure

MAIN COMPANIES

The four main companies that sold homes to investors:

•Titan Development Group LLC
•Gator Real Estate Investments Ltd. LTD
•Atlantis Property Investments Ltd. LTD
•Trident Realty Investments Ltd. LTD

The Tribune's initial investigation found:

•Settlement documents indicate buyers consistently made $15,000 to $25,000 down payments, even though buyers said they did not bring any money to the table. Knowingly misrepresenting funding to lenders is against federal law.
•In 11 cases in which the Tribune obtained settlement documents, prices included a total of $272,716 paid to companies Joseph F. Daniele operated. Daniele said the money was used to pay for repairs, but a seller and some buyers disputed this.
•Most buyers interviewed said promised repairs weren't always made and work was shoddy, even though documents show Daniele's companies received thousands of dollars, as much as $35,010, for example, at one closing. Daniele said the money was to repay him for work done before the sale.
•One lender confirmed to the Tribune that it received a sales contract with a higher sales price than the one turned in to a real estate broker. It is against federal law to withhold or misrepresent information that could influence a lender's decision to fund a loan.

Tribune researcher Michael Messano contributed to this report. Reporter Shannon Behnken can be reached at (813) 259-7804. Keyword: Investment Homes, to see a map of the properties and read the original report.

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