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Rampant Foreclosures Under Shady Companies

RoundPoint Mortgage services hundreds of DASP mortgages in Philadelphia through shell companies with names like Newlands Asset Holding Trust or Queens Park Oval Asset Trust, all based out of the same anonymous North Carolina office building. Newlands, a company with no listed phone number, no website and a single publicly disclosed employee has accumulated 46 properties in Philadelphia through foreclosure proceedings.

It has flipped about 10 of those properties. In one instance, Newlands foreclosed on 3687 Belgrade Street, a newly built townhouse in a middle-class neighborhood of Philadelphia, for just $65,000 in February 2014, two months after it had picked up the mortgage at a DASP sale. Another two months later, having made no major improvements to the property, Newlands resold the same house for $175,000.

These are in the minority of properties, however. In the majority of cases, private equity firms appear to mainly sit on the properties they accumulate, sometimes for years. If DASP buyers are renting out their new assets while they wait for home values to appreciate, many do not appear to be doing so legally: Out of dozens of properties owned by Newlands analyzed by City & State, none had received a rental license.

City & State reached out to both HUD and RoundPoint for comment on multiple occasions, but received no reply from
either entity.

Philadelphia councilmember Gym said she believed this process is increasing the number of vacant and rental properties in urban neighborhoods, in addition to other stressors.

“When you have homeowners who are evicted or who lose their homes, that has dramatic consequences for a city like ours that already struggles with poverty,” she said. “We have affordable housing waitlists that take years and homeless shelters that are overcrowded. We can’t fix it all.”

It doesn’t have to be this way. Gym is part of Local Progress, a network of local elected officials that has pushed for reforms to programs like DASP. In June, HUD announced that it would make an effort to steer more distressed mortgages to nonprofit buyers, who would ideally be more forgiving towards impoverished homeowners. Nonprofit mortgage buyers, known as community development financial institutions, or CDFIs, were previously outbid on 98 percent of DASP sales.

HUD now separates out some mortgages for sale specifically to nonprofits. But Gym would like to see the program go further.

“That’s one of our biggest questions. Does it all have to go to private equity or could some go to CDFIs? Or the land bank?” she said, in a recent interview.

Gym had been a champion of the land bank, an arm of City Hall that acquires blighted property. She said she believes the agency could also function as a receiver for distressed mortgages, cribbing off a model implemented in New York City, where the municipality began bidding on DASP sales.

“It’s driven by our need to not increase our homelessness and eviction rates, and not lead to blight. Because we were seeing so much,” she said. “The consequences both to individuals and communities are dramatic – the Fed not being attentive to problems like this exacerbates our local situations.”

Changing the trajectory of DASP for future homeowners can seem like a daunting and risky proposition for cities like Philadelphia, but it could stave off years of misery and legal battles for homeowners who find themselves in situations similar to Beverly Henry’s.

Henry admits even she is overwhelmed by the intricacies of her own mortgage crisis at times, but says she is driven by a simple and understandable urge.

“We just don’t want to lose our home.” 

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