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NC Attorney General files lawsuits.

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Jan 15, 2002
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HUD targets appraisal fraud

By MICHAEL JACOBS, Daily Dispatch News Editor

The federal housing department issued a proposed rule this week to address fraudulent practices like those alleged against Vance County mobile-home businessman Donald Gupton and his associates.

The Department of Housing and Urban Development (HUD) proposed Monday to make lenders accountable for appraisals on mortgages insured by the Federal Housing Administration.

The rule, FR-4722 Lenders Accountability for Appraisals, would make a lender subject to punishment by a HUD review board if an appraiser hired by the lender submitted a substandard or false appraisal.

That proposal came the same day state Attorney General Roy Cooper filed a complaint in Wake County Superior Court that accuses Gupton and Donald Gupton Inc. of using unfair and deceptive trade practices to sell modular and mobile homes, lots in real estate subdivisions, and land-home packages.

According to the allegations in Cooper's lawsuit and others, including at least one in Vance County Superior Court and four in U.S. District Court in Raleigh, Gupton's businesses -- Creative Real Estate, Dynasty Homes and Superior Housing Center -- used false appraisals to trick banks into making excessive loans for mobile homes.

The buyers often couldn't afford the inflated mortgage payments, couldn't refinance because the loan amounts were far higher than the property value, and were forced into foreclosure or bankruptcy.

"The N.C. Fair Housing Center is pleased that HUD has announced this action," the center's executive director, Stella Adams, said in a news release Monday night. "If this rule had been in effect, it may have prevented these predatory loan transactions."

The Vance County chapter of the National Association for the Advancement of Colored People forwarded more than 100 home-buyer complaints about Gupton's businesses to the Fair Housing Center, which investigated them and found them believable.

The center forwarded the complaints to Cooper's office and referred some to the Charlotte law firm of Melvin Wall, who filed the four federal lawsuits last week and said more cases are coming.

Unlike Cooper's complaint, Wall's lawsuits and one filed in Vance County by lawyer Steven DeCillis name mortgage companies and appraisers in addition to Gupton's businesses.

Reached by The Associated Press on Tuesday, Gupton declined to comment and referred calls to his attorney, Ronald Rogers of Raleigh. Rogers did not immediately return a call from the AP seeking comment.

The writer can be reached at [email protected].

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More on this continuing story.

State sues Creative's Gupton


By Staff Reports

Vance County businessman Donald Gupton must defend himself against multiple lawsuits in state and federal court as more than eight months of complaints and investigations about his mobile home practices are producing results.

The latest blow came Monday when North Carolina Attorney General Roy Cooper filed a complaint in Wake County Superior Court against Gupton and Donald Gupton Inc., accusing the operator of Creative Real Estate, Dynasty Homes and Superior Housing Center of using unfair and deceptive trade practices to sell modular and mobile homes, lots in real estate subdivisions, and land-home packages.

Cooper wants the court to shut Gupton down and is seeking a preliminary injunction to do just that. No court date has been set for either the lawsuit or the injunction, Cooper spokesman John Bason said.

The lawsuit also seeks the cancellation of all illegal contracts, civil penalties of up to $5,000 per incident, and refunds for all of the defrauded Gupton customers. Bason said the Attorney General's Office has not calculated the total value of such claims.

"This company claimed to offer consumers with poor credit an affordable path to homeownership, but instead of leading them to a home of their own, they took consumers to the poor house," Cooper said.

Gupton did not return a message left Monday afternoon at Creative Real Estate.

Cooper's case backs up the complaints of residents of such mobile home parks as Key Estates and Mettrey Estates, which have been detailed in a series of reports in The Daily Dispatch since April.

The Vance County chapter of the National Association for the Advancement of Colored People, under the leadership of Deryl von Williams, collected more than 100 complaints from Gupton's customers and took them to the state Fair Housing Center, the Attorney General's Office, state legislators, and city and county officials.

While homeowners, many of whom were forced into foreclosure or bankruptcy, expressed some frustrations as the months passed without any action against Gupton, Williams said she is happy that the state investigation was thorough.

"It is a complicated case involving serious allegations," Bason said.

"These complaints were very serious," said Williams, who has broken from the NAACP to form the United Community Foundation, which is devoted to the fair-housing fight. "You don't make these complaints lightly, and we didn't."

She said Cooper's office has four lawyers working on the case and made clear that action was imminent when they visited Vance County around Christmas.

"You don't just go after a person willy-nilly without being sure," she said. "I'd rather they take three years and be accurate."

As a businesswoman herself, she believes that "you give a business person the benefit of the doubt."

Now that such doubt is gone, she said, her group will soon file a class-action lawsuit against Gupton on behalf of hundreds of people who have complained.

"The reality is this is really moving fast," said Stella Adams, the executive director of the North Carolina Fair Housing Center. "Generally, cases like this take much longer to get to this point.

"This kind of shows the egregious nature of the violations."

Adams' office, after receiving complaints from the NAACP last year, referred cases to Cooper's office and sent several homeowners to a Charlotte law firm that works with the Fair Housing Center and has expertise in such cases, the Wall Law Firm.

"We felt that they needed more prompt action," Adams said.

Attorney Melvin Wall took that action Thursday, when he filed four lawsuits in federal court in Raleigh. The cases target Gupton, plus appraisers, mortgage brokers and mortgage lenders that worked with Gupton's companies.

According to Adams, Wall said several more lawsuits could be coming soon.

The state's lawsuit was praised by Henderson lawyer Steven DeCillis, who last year filed the first lawsuit to come out of the allegations against Gupton, on behalf of a client who is also a party to the attorney general's lawsuit. That case, against Gupton, Hinch Appraisers and Ace Mortgage, is pending in Vance County Superior Court.

DeCillis said Cooper's office kept in contact with him during the investigation.

"We are fortunate that in this state we have a person like Roy Cooper to fight for the rights of consumers," DeCillis said.

Tracy Woods, who bought one of Gupton's homes and was one of the first to go public with complaints last spring, said Monday: "I hope they get everything they deserve."

Woods, who is 34, said she is a single parent of four children and a delivered crack addict who had seven years clean Sept. 26. "I started a different life and gone respectable. It (buying a home from Gupton) hurt me because I had built up credit, stopped drugs and was living a good life for me and my children."

After she closed the deal on March 21, 2001, she didn't have lights or water in her new home for a month, Woods said.

Gupton should have to pay back all the people whose lives he messed up, she added. "I don't have no credit and no money, and nobody wants to rent to me with four kids."

Woods said she was due for foreclosure Dec. 20, but her family is still in the home "I'm still living in this house. I don't know when they are coming to get it. I'm just living on hope and faith."

Gupton's addiction for money has ruined other folks' lives, Woods said.

As alleged in Cooper's complaint -- filed in Wake County because the attorney general is free to sue anywhere in the state -- people were lured by advertisements that promised to help those with "bad credit" to get a home for just $500 a month. Salesmen told people that they could buy a home regardless of their credit and, in many cases, that Gupton would pay off their debts to help them qualify for a loan.

To recoup the money used to pay off those debts, Gupton grossly inflated sale prices and property values, the attorney general alleges. For example, if Gupton paid off a $20,000 debt, the sale price for a home and lot might jump from $80,000 to $100,000. That caused a loss to banks that provided funding for the loans.

Home buyers said they told salesmen what they could afford to pay, and Gupton promised to sell at that payment level. But when the loan closed, buyers often discovered the costs and payments were much higher. Because the property values were inflated, they could not refinance.

Cooper also contends that Gupton misrepresented buyers' financial information to secure loans with such tricks as false down payments, phony gift letters and fake titles to trade-in mobile homes.

The same mobile home was used a trade-in for nine different consumers in 18 months, the attorney general said.

"I won't tolerate businesses that cheat banks and trick consumers," Cooper said.

Monday's lawsuit is a civil complaint, but Bason, Cooper's spokesman, said further action is possible. "Nothing has been ruled out at this time."

To comment on this report, e-mail [email protected].
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