Lost in Translation
Gertrudis Cortez's house has seen better days, but it's bustling with life: overgrown potted plants, barking bulldog, clucking chicken, gobbling turkey; Busch cans, hammock, shell of a Toyota van; diapered toddler, wobbling in the doorway, staring blankly past his grandmother at the construction on Lyons Avenue.
Cortez emigrated from San Salvador about 20 years ago. She signed a contract for deed on the house in 1994, the year after her husband died.
"I was left all alone," she says in Spanish, "so then I came and I got this house."
She financed the small duplex for $24,000, she says, so she could bring her son and daughter to Houston. Now the 70-year-old factory worker has three adults and five kids living with her, an enclave of strivers and learners making their way in a half-painted house snuggled up next to an abandoned service station in the Fifth Ward.
They're living the American dream, save for one problem:
After paying out more than $37,000 over 12 years, Cortez has reduced her principal by only $3,500.
"We're never going to finish paying for it," she says. "All our work for nothing."
Although the contract Cortez signed was written in English, all the terms were negotiated in Spanish. She was told her payments would remain level at $225 a month, she says, and no mention was made of escrow or insurance.
She says five families have gone through the house next door, suckered by the same deal. Their payments remained steady at first, but once they started making improvements to the house, back payments for escrow were demanded and the families had to pack up and move on.
"It's just theft," she says. "Nothing but theft."
Alain Cisneros, a local organizer for the Association of Community Organizations for Reform Now (ACORN), has heard all of this before. A few years ago he was canvassing the Third Ward when he met a Latino family who told him they were unsure what exactly was going on with their house. Cisneros didn't know much about real estate, but he took a copy of their contract and promised to have a look at it.
A little while later, he was cruising around the Fifth Ward when he found a little barrio of immigrant families, many voicing the same concerns as the first. Cisneros and another organizer began poring over the contracts, and they found one glaring similarity: Jack Markman, a real estate investor who has a part in several local companies that, according to his attorney, own more than 800 properties in the Houston area.
Cisneros began tracking down other people who'd dealt with Markman and his associates.
"I knocked on doors for three months, looking for the families, and it was the same: all Hispanics, all living in African-American neighborhoods," he says in Spanish. "They didn't know if they were going to own their homes. And that's how the campaign was started."
This campaign took ACORN and some of the families all the way to Austin, where they successfully lobbied for a bill that drastically changed the way contracts for deed work. The changes in the law went into effect September 1 of last year.
But that's just the beginning.
Six weeks ago a lawsuit was filed on behalf of Gertrudis Cortez and seven other families who financed homes from Jack Markman and his associates in the '90s. The suit was filed independently of ACORN, although all the plaintiffs are members of the organization.
The lawsuit alleges that:
Jack Markman and his associates, William Humphries and Maria Martinez, have been preying on immigrants for decades, intentionally targeting native Spanish speakers who don't understand the language of contract for deed, a financing arrangement in which the seller retains title and all legal rights to the property until the balance is paid in full.
Potential buyers were not told about final balloon payments, which could have been avoided in many cases had the families paid a few extra dollars a month.
Potential buyers were not told about escrow or insurance when the contracts were signed.
Markman and his associates often held off a few years before asking for escrow payments, letting the buyers make improvements to the houses before being told they had to catch up with the escrow. In at least one case, a family was conned into changing its contract to a lease after falling far behind on escrow payments.
Markman and his associates have systematically misapplied payments, often not providing receipts and charging improper late fees.
In other words, the lawsuit alleges that these contracts were designed to fail, so that Markman and his associates would be able to sell the same houses over and over again.
A call to Markman's office was directed to his attorney, Melina B. Cain, who spoke at length with the Houston Press and provided a written response.
"When you look at the true facts, you see that this is just sensationalism as an attempt to secure an unwarranted benefit," she says, which is lawyer-speak for "These folks are trying to get something for nothing."
Cain says her clients are willing to work with the families, that they have worked with the families "to get their payments low enough to where they could afford the houses, and now we're getting allegations against us that we're somehow cheating these people because they have a low monthly payment."
As for the charge that very little has been applied to the principals of the loans, she says, "The contracts these people have call for interest rates that are, like, 10 percent. And these are people who couldn't document their income, didn't have tax returns, many times didn't have social security cards. And yes, they are high-risk, which should've been reflected in an interest rate...
"This is seller financing. If you went to a bank and financed a house, look at how much you're truly paying. On a $100,000 home, you're paying something like $300,000 over time with compound interest. And that's the way it works, and at first everything goes to interest. That's just the nature of a loan."
But what about the escrow?
"If we hadn't done escrow for taxes and insurance and these individuals somehow didn't pay their taxes and insurance, that would be the basis of a lawsuit," she says.
There might be two sides to this story, but something's definitely getting lost in translation. Two threads run throughout the lawsuit: The contracts were written in English while the negotiations were done in Spanish, and all the families were told their payments would remain level till the houses were theirs.
This is what Esperanza Almaguer heard when she financed her house in 1992, according to the lawsuit. Yet between 2000 and 2001, her total yearly payments went from $2,500 to $4,400, and today Markman-Humphries Inc. holds more than $900 in escrow surpluses, which amounts to an interest-free loan. The lawsuit claims MHI charged her twice as much as necessary for escrow in 2003, even though her account had a surplus carried over from the year before.
Juanna Camarillo has made more than $15,000 in payments on her home since 1999, yet the lawsuit claims Markman-Martinez Inc. has never provided her with any accounting of the payments she's made or the balance she owes. When she called to see how much of her loan was left, she says, she was told it was the entire balance.
Sometime before December 2003, Aida Martinez was notified in English that her overall monthly payment was increasing, but the principal and interest portion was actually decreased by $7 a month, a small reduction that, according to the lawsuit, will result in a balloon payment of $3,400 when the term of her contact expires.
Over the last four years, Walter Toledo and Gabby Torres have made nearly $8,000 in principal and interest payments, yet, according to the lawsuit, only $400 was credited to the principal. This amounts to five cents of every dollar actually going to pay down the balance. The lawsuit points out that a traditional mortgage would see about 17 cents of every dollar going to the principal.
Jose Garcia and Dora Villanueva's tale might be the most heartbreaking. After their escrow payments increased more than 1,300 percent in two years, they fell behind on their payments and were asked to sign a document they were told was simply a promise to catch up on back payments, according to the lawsuit. Yet when they didn't receive their annual accounting statement, Villanueva asked why and was told the document she'd signed had converted their contract to a lease. She'd wiped away six years -- $18,000 in payments -- without even knowing it.
And this isn't the first time the real estate investors have seen legal action.
In 2000 Jack Markman was investigated by the U.S. Treasury's Office of the Comptroller of the Currency for his role in Texas Premiere Bank. The comptroller's office isn't willing to discuss the specifics of the investigation, and Markman's attorney in the matter chose not to enlighten us, but it is clear the investor got himself into some trouble. Without admitting wrongdoing, he agreed to pay a $25,000 fine and to ask permission before ever getting involved in banking again.
Markman's companies also have had some run-of-the-mill tax problems with the county and the school district, as well as a 2003 civil suit filed on behalf of Mariano and Isidora Corvera, who accused Markman Brothers Investments of breach of contract, and a 2005 civil suit filed on behalf of Antelma Nava, who claimed Markman-Humphries was refusing payments and trying to kick her out. Both of these cases are pending.
And then there's Jose and Maria Pardo, a couple originally from Matamoros who received a notice of foreclosure last March.
"They came to take the house away from us," Maria says in Spanish.
The Pardos are represented by Paul Simon and Jorge Borunda, the same attorneys who filed suit for Cortez and the other seven households. They filed for an injunction in April on behalf of Jose and Maria, claiming the Pardos were current on their payments, which is something Markman's attorney didn't dispute when speaking with the Press.
"What happened was, she was behind," says Melina Cain. "There was a default notice sent out. She came current prior to foreclosure. There was a discrepancy on the ledger. We are trying to work out, to see exactly what the balance is, to work with them."
This reconciliation will be difficult, especially since the Pardos don't trust Markman anymore.
When they signed up for the 600-square-foot house they now share with seven kids, they thought it included a yard out back, but after they moved in, a fence was put up right behind the house. (Proper platting is a major issue with contracts for deed.) Concrete was poured on the other side of the fence for a driveway, and now the weight of the neighbors' cars is messing up the sewage lines.
"We struggled a lot to get this house, and then we can't do anything because the fence is right up against the house," says Maria. "We can't get to the house to paint it or clean it or anything."
The family has made plenty of other improvements to the house: "There weren't even any windows," says Maria. "There weren't even boards to step on. And we fixed it bit by bit." But now, with new town houses looming a few blocks away, the Pardos aren't sure the property is ever going to be theirs.
In 2001 the Texas legislature increased protections for buyers in contracts for deed. This was in response to widespread abuse in the Rio Grande Valley, where recent immigrants were paying out thousands of dollars and getting nothing to show for it.
The new protections included requirements that the seller provide copies of all related documents in the language of the negotiations, which came a little too late for all the Spanish-speakers who financed houses from Markman in the '90s. Further requirements included a list of any liens on the property at the time of purchase, notification of tax and insurance payments, and annual accounting statements.
Still, a contract for deed differs from a traditional deed of trust in a major way. With a contract for deed, the seller retains title and all legal rights to the property until it's completely paid off. If the buyer defaults, the seller gets the property back and the buyer gets squat.
All of this was news to Alain Cisneros when he began knocking on doors a few years ago. But as he and other ACORN organizers tracked down more and more of Markman's clients, a plan came together.
"If you get a group of people in a room who all have the same problem, you'll figure out what to do," says organizer Ginny Goldman.
It began with direct action. Payments were made in pennies. Protesters showed up at Markman's office with a giant inflatable shark. Trick-or-treaters went to his house on Halloween and asked for their titles.
"To confront your landlord is scary enough, but to confront the person who has thousands of dollars of yours in the bank, and you could be pushed out of your home, is a scary thing," says Goldman.
But leaders began stepping up, and the decision was made to take the fight to Austin, where the group successfully lobbied for more changes in the laws governing contracts for deed. These changes went into effect last year and include a cap on late fees and the option for buyers to convert their contracts for deed into traditional mortgages.
One of the road-trippers to Austin was an organizer named Eva Diaz, who says she lost her house after making renovations and payments for 11 years. She had little to gain from speaking in front of committee after committee, but she went "because it's a big injustice," she says in Spanish. "That man shouldn't cheat the people. He already has enough money. Why is it that when he sees the houses fixed up, he takes them back? He steals even more from them, and then he's going to charge even more for the same house to the next people."
Melina Cain says ACORN has defamed her client, even going so far as to send out letters to his neighbors calling him a thief.
"That is just so objectionable," she says.
As for the lawsuit, she says, "The lawsuit itself is not news. What is news is that the plaintiffs in this case are likely being given false promises from their representatives that they will get their homes for free."
Hold on one second, says attorney Jorge Borunda: "If what she means is that we're trying to pull a fast one and get [our clients] out from underneath the deal they agreed to, that is not the case. That is absolutely false."
The lawsuit offers a couple of remedies: One is for the contracts to be enforced the way the plaintiffs were told they'd be enforced, and the other is "let's just rescind the contract, undo it, and we'll give you back what you gave us through the contract and you give us what we gave you," says Borunda. "We give you the house back, and you give us what we paid you."
Markman has offered all the families the opportunity to convert their contracts to traditional mortgages, but this hasn't translated well.
"The problem with the Markman solution, so to speak, is that all it does is effectively make Markman a lien holder on their property," says attorney Paul Simon. "They don't trust Markman, and they don't have the ability to walk into Wells Fargo..and say, 'Here I am. I'm Mrs. Cortez, and I'd like to get a $25,000 loan to refinance my house.' "
A deed of trust also doesn't have the same dual-language requirement.
"When [Markman] wants them to understand, he puts it in their language, and when he doesn't, he doesn't," says Simon.
When asked whether the families had been told one thing in Spanish before signing something else in English, Cain repeatedly mentions all the Spanish-speakers Markman keeps on staff.
"Maria Martinez, guess what her first language is?" she asks.
But that question doesn't really answer ours.
"I can't imagine that my clients would not explain a contract to somebody, because there has to be a meeting of the minds," she says. "If you sign papers at a bank and you don't understand the full import of what's going on, that's not going to stop the bank from coming after you."
Cain offered to put the Press in contact with a few of Markman's satisfied customers, and we happily accepted, so long as their situations were roughly equivalent to those of the families; we didn't see much good in talking to, say, a family of English-speakers in Kingwood who had a much better chance of understanding exactly what they were signing.
We spoke with Maria Chavez, who says she financed her first of three houses from Markman 15 years ago, and that she expects to receive the title to the first one next month.
"Mr. Markman has been very good to us," she says in Spanish. "He's been very nice. In fact, we're looking at getting another house for my oldest son."
When asked about taxes and insurance, she says, "I don't pay that. Mr. Markman does. He said that because I don't own the house yet, I don't have to pay that and he is paying for it. He told me just the other day that all those fees were current, the taxes and insurance and everything."
We spoke with Jose Moreira, who says he financed a house from Markman two years ago.
"I've never had any trouble," he says in Spanish. "Right now I owe Markman-Martinez for three months, but Maria Martinez hasn't said anything to me. She hasn't said, 'You have to pay or I'm going to get you out of the house.' "
As for the lawsuit, he says, "I think the people who are unhappy with Markman are the ones who don't like following the rules."
And we spoke with Felipe Del Aguila, who says his grandfather financed a house from Markman in 1989.
"We just did the payoff a couple of weeks ago and we're just waiting to get our papers," he says in English. "Truly we've been satisfied with Markman."
When asked if he has any idea why his experience was different from those in the lawsuit, he says, "My father has been living in the States since 1960, so he knew about the system already. You buy a house for $27,000, like the one we bought, when we're finished paying after 30 years, you're going to be paying, like, $75,000 for it.
"These people probably doesn't understand that system."
Alberto Carmona didn't understand what he was getting himself into when he financed a $24,000 duplex from Markman in 1994.
The Mexican immigrant had no idea his payments were going to increase. He knew nothing about insurance or taxes. He hadn't a clue that payments would be misapplied.
Of course, this is just his word, but there are two pieces of evidence that make him seem credible: his legs, which he can no longer use, made lame after he was shot in the back over a woman a few years before he financed the house.
Which brings us to the question, Why would someone on a fixed income knowingly sign a contract that would eventually price him out of his home? The key word here is "knowingly," and if you can think of an answer, you'd make one hell of an attorney.
The lawsuit alleges that Carmona's annual payment went from $3,000 in 2002 to almost $4,000 in 2003, and that the next year saw another bump of $300.
"I have to make the payments because I wouldn't like for them to chase me away from here," the 53-year-old says in Spanish, clinging to a house many people wouldn't think of fighting for.
The white duplex is one of many in a row on Love Plaza in the Fifth Ward. Inside, cracked tiles have been removed from the floor, making a concrete pathway for his wheelchair. Every wall could use a coat of paint.
"I started to fix the house," he says. "Everything was broken. I was trying to fix things, but there were too many things that were broken."
He says he's now quit making repairs.
"It's like everything is pretty on the outside but the heart of this is rotten," he says.
"I don't want to say only bad stuff," he says of Markman, "but what else can I tell you? As a person, he leaves much to be desired."
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