3 Companies Involved in a Scheme to Sell Overpriced Homes Barred from Business

Allison Tussey —  June 4, 2014 — Leave a comment

Recent court orders bring to an end a long-running case against an elaborate scheme that deceived consumers into buying overpriced manufactured homes and agreeing to loans they couldn’t afford.
In the case against Phoenix Housing Group and W.R. Starkey Mortgage, nearly $4.3 million in refunds for consumers have been obtained and the companies worked with federal authorities who brought criminal charges against several individual defendants.

Consumers were lured by advertisements promising manufactured homes for $500 down, but wound up paying thousands of dollars for land/home packages whose values were inflated by faulty appraisals. Many of the buyers could not qualify for a mortgage, so the people behind the scheme falsified documents and forged buyers’ signatures on loan paperwork.

It wasn’t until the closing that buyers learned their monthly payments would be several hundred dollars more than they expected, but were told they’d have to pay $2,000 to $5,000 to get out of the deal—more than most buyers could afford. A number of the homeowners eventually lost or are in the process of losing their homes to foreclosure because they could not make the payments or refinance their overpriced homes.

A suit was filed in November, 2009 against three companies and several individuals seeking to stop the scheme permanently and win back money for consumers. The companies involved in the case were:

Phoenix Housing Group, Inc. sold manufactured homes and land/home packages and arranged financing for buyers. The company, headquartered in Greensboro, also did business as HomesAmerica and Southern Showcase Housing and has offices in Asheboro, Asheville, Burlington, Granite Falls, Greensboro, Hendersonville and Winston-Salem.

K&B Homebuilders, Inc. sold stick-built homes, modular home/land packages, and foreclosed homes in North Carolina. K&B was founded by a former Phoenix employee and employed several sales agents who used to work at the Phoenix store in Granite Falls.

W.R. Starkey Mortgage, L.L.P., Plano, Texas provided financing for consumers who bought homes from Phoenix.

Judgments were won against the three remaining defendants in the case, Ike Vinson, Dennis Setzer, and Yo Xey Her.

Under a consent judgment, Ike Vinson, a former mortgage loan officer for Starkey, is banned from the mortgage business in North Carolina and will have to pay $100,000 if he violates the judgment.

Under a default judgment, Dennis Setzer, a former sales agent for Phoenix at its Granite Falls location, is banned from the manufactured and modular home business in North Carolina. Setzer was ordered by the court to pay civil penalties of $125,000, $5,000 for each of 25 land/home packages he sold fraudulently.

Under a default judgment, Yo Xey Her (also known as Joe Herr), a former sales agent for Phoenix at its Granite Falls location, is also banned from the manufactured and modular home business in North Carolina. Her was ordered by the court to pay civil penalties of $220,000, $5,000 for each of 44 land/home packages he sold fraudulently.

A consent judgment was entered in the case of Gary Lee Good, the president of Phoenix. Good is barred for five years from the manufactured and modular home business in North Carolina and cannot have any ownership interest in or receive any money from any entity in that industry. Good will have to pay $100,000 if he violates the judgment.

Victims in the scheme who financed their purchase through Starkey earlier saw refunds of $26,000 each from an August, 2010 consent judgment resolving Starkey’s role in the scheme. A total of 165 consumers received refunds that totaled nearly $4.3 million.

Starkey also paid $125,000 for consumer education and the costs of the enforcement action and $25,000 to help provide financial counseling to consumers who receive refunds under the settlements.

In addition, Starkey remains permanently barred from making loans when a manufactured housing dealer is a party to the deal, collecting financial information about prospective borrowers from anyone other than the borrowers, and charging discount points unless requested and paid by a borrower to reduce the interest rate.

Attorney General Roy Cooper announced the court orders.

The Attorney General’s Office worked with the Office of the Commissioner of Banks in the civil cases involving these corporations and individuals. The U.S. Attorney’s Office for the Western District of North Carolina has charged several of the individual defendants in the AG’s case as well as other individuals, and a number of them have entered guilty pleas and are awaiting sentencing.

“This scheme turned the American dream of homeownership into a nightmare,” Cooper said. “We moved aggressively to stop others from getting hurt and send a strong signal that we won’t tolerate this kind of fraud in North Carolina.”

Allison Tussey

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