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State must act against loans that steal homes

Post by Patrick O'Callahan on Nov. 17, 2010 at 7:50 pm |
November 17, 2010 5:36 pm

This editorial will appear in tomorrow’s print edition.

Exhibit A: Lender extends $17,000 loan to unemployed mechanic who’d fallen behind on his property taxes, dupes mechanic into signing a note for $170,000 and a quitclaim deed that allows immediate seizure of house after a single missed payment.

Effective interest rate: 45 percent. Lender claims house.

Exhibit B: Lender loans $5,000 to single mother of two; she misses payment; he seizes her house in Graham and $70,000 in equity.

Exhibit C: Lender extends loan to Lakewood hairdresser facing foreclosure. Origination fees: $26,400. She believes she’s getting $240,000 at 14 percent. Effective interest rate is nearly 90 percent, with payment in full due in 90 days.

She says she didn’t understand paperwork but lender assured her the forms were standard. She goes to hospital, returns to find foreclosure notice on her door.

Such – according to The Seattle Times – is the modus operandi of hard-money lender Emiel Kandi, a University Place man already known in these parts for opening a casino and an illegal marijuana shop in Tacoma. Kandi may not be the most unscrupulous operator out there, but he may be the most brazen.

“I am a wolf,” he told the Seattle Times. Also: “I’m not your friend. If you step off the tightrope, I’ll take your house.”

But Kandi isn’t on trial here; he’s apparently got enough legal troubles already. As far as the public is concerned, the real defendants are the agencies and lawmakers who have let the likes of him prey on desperate homeowners with very little oversight.

Kandi’s legal ploy was packaging his residential loans as “commercial,” a category of lending that appears to be virtually unregulated.

The single mother who got bilked pleaded for help from the state Department of Financial Institutions, which investigates shady lending practices. Someone at DFI apparently saw the word “commercial” in the loan papers and read no further.

The agency has shown more interest in the case since a King County judge decided that Kandi acted in “bad faith” – now there’s an understatement – and the story hit the newspaper.

The consumer protection people at the state attorney general’s office also did nothing to help the woman.
If this is happening to the victims of one bad actor, it’s happening to others. The predatory behavior is bad enough without being compounded by official indifference.

Maybe the line between “commercial” and “residential” loans is too blurry. If so, lawmakers ought to make certain that a lender can’t evade consumer protections by camouflaging home loans as business loans. If agencies aren’t devoting enough time to stopping these life-devastating scams, this would be a good time to start.

At a minimum, any state computers that process mortgage information should be programmed to flag the name “Emiel Kandi.”

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