Taxpayer dollars entangled in Middle TN foreclosure messPosted: Updated:
Nearly an entire neighborhood in Smithville is in foreclosure as the people renting the houses are being kicked out and a lawsuit raises serious questions if an out-of-state investor, trust and mortgage company are to blame.
There are serious questions of how the homes appraised to be worth half a million dollars are now in foreclosure, and the mortgage company that made the deals is not even licensed to issue mortgages in Tennessee.
Because the homes appraised to be worth half a million dollars went into foreclosure, they were picked up by the mortgage company Fannie Mae, which is in the process of paying back billions of dollars in loans to the government following the housing crisis.
When Fannie Mae picks up more debt, it can repay the loan slower.
Lawyers now involved in the Smithville foreclosures said taxpayers shouldn't count on getting their money back anytime soon out of the mess.
"The taxpayer's going to be footing the bill," said attorney Frank Buck.
Most of the homes on Shiloh Lane in Smithville sit empty, with tall grass growing between for sale signs.
Foreclosure signs hang in some windows.
Renters learned earlier this year that they were being evicted.
"I don't know where to go. I don't know what to do," said renter Sherry Tubbs.
The idea of the vacation and rental properties began in Utah, where, according to a lawsuit and one of the builders, investor Brian Zimmerman worked with the trust ELT, LLC, to develop and buy the houses.
Property records show a company out of Las Vegas, Sahara Mortgage Corporation, handled several of the mortgages, and the first step after the houses were built was to have them appraised.
Each one of the houses on Shiloh Lane were appraised at more than $500,000 and were sold to out-of-state investors.
Yet later, when the local tax appraiser's office looked at the properties, they appraised them for about $140,000.
A Channel 4 I-Team investigation found that Sahara Mortgage Corporation isn't authorized to do mortgages in Tennessee.
In Nevada, where Sahara is based, the company actually surrendered its mortgage license after the state accused the company of continuing to give out loans when it hadn't renewed the license.
Yet once the deals were done, the trust, the investor and the builders walked away with the money.
But at some point, the mortgages weren't being paid, and one after another started falling into foreclosure.
And the renters who made a down payment and moved in from out of state were told they were being evicted.
"I don't sleep much. I'm stressed out," said renter Shawna Lavertu.
Attorneys said because Fannie Mae picked up the foreclosures, which originally sold for more than half a million dollars a piece, and now are being sold for a fraction of the selling price, taxpayers shouldn't expect to get their money back anytime soon.
The homes on Shiloh Lane were used to appraise other new properties in that area, and now several other homes are also extremely overvalued.
"The taxpayer is going to be stuck with the grossly over-valued property," Buck said.
Buck is representing the only out-of-state investor the Channel 4 I-Team could find who did pay the mortgage. Buck's clients are now stuck with a house worth hundreds of thousands of dollars less that what they paid.
Another mortgage company is suing investor Brian Zimmerman, claiming fraud and misrepresentation, including over-valuing a property.
Buck's out-of-state owners were named in the lawsuit, too, but they have been dropped after Buck's clients claimed they too were duped.
"When you follow the money, that's when you'll find the folks, I'm afraid, that didn't play fair," Buck said.
The Channel 4 I-Team tracked down the people who did make money off the houses on Shiloh Lane, including Zimmerman and the Utah trust, and they either did not return our calls for comment or issued a "no comment."
One of the appraisers now has a formal complaint with the state filed against him.
"When these things happen, all of us pay," Buck said.
When the Channel 4 I-Team told the Tennessee Department of Financial Institutions about what we've uncovered about Sahara Mortgage Corporation, the state asked for all of our documents in order to inquire further.
The renters on Shiloh Lane are fighting in court to stay in the houses and said they called in an FBI agent. The Channel 4 I-Team contacted that agent, who could neither confirm nor deny that they were investigating.
The homes on Shiloh Lane that once sold for more than a half million dollars a piece are now for sale for less than $200,000.
We attempted to track down all of the out-of-state investors but were unsuccessful.
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