Lawsuit alleges fraud in real estate transactions

Several Baltimore-area homeowners are suing the largest residential real estate team in the state, alleging a "scheme of fraud and misrepresentations" involving home purchases, sales and financing.

The suit, a proposed class action, names the Creig Northrop Team, Long & Foster and several mortgage firms — including Long & Foster's Prosperity Mortgage Co. — as defendants.

A similar lawsuit brought against the Northrop team by a Howard County couple was settled in March.

The new suit was filed Dec. 9. It alleges that the defendants used a complex scheme to get clients to buy new homes without first selling their old ones, requiring two new loans rather than one and netting more fees and commissions for the companies. The defendants fabricated documents to make these deals possible, the lawsuit also alleges.

A Long & Foster spokeswoman said Monday that the company could not comment on pending litigation. Creig Northrop said he had not been served with the lawsuit and had no idea he was being sued until he was asked for comment Monday.

Northrop's team — which has offices in Howard, Carroll and Montgomery counties and is part of Long & Foster — handled a higher volume of home purchase and sale transactions than any other real estate team in the country last year, according to a ranking prepared for industry analyst REAL Trends.

In the complaint, lawyers for Frank and Catherine Larocca of Mount Airy, Mehdi Nafisi and Forough Iranpour of Clarksville, and Kenneth and Angela Pfeifer of Sykesville say each couple went to the Northrop team for help selling their homes and buying new ones.

The homeowners were seeking to move in 2006 and 2007, a period when sales activity was falling off. But agents with the team persuaded them to sign contracts for new homes without contingencies that would have allowed them to back out if they couldn't sell their old homes, according to the complaint. The agents told each couple that they could finance the down payment on the new home by taking out a "bridge loan," the lawsuit alleges.

"No such bridge loans were actually available to the Plaintiffs, and the Defendants knew this fact," the lawsuit alleges.

Instead, Prosperity Mortgage put together applications for a home equity line of credit on the old homes and sent the applications to a competing mortgage company without the homeowners' knowledge, the lawsuit alleges. The Northrop team delayed listing the homeowners' current homes for sale until after the line of credit was approved because they wouldn't have qualified if it were clear they were trying to sell, according to the lawsuit.

Then Prosperity Mortgage processed applications for mortgages on the new homes, the lawsuit says. To get the homeowners to qualify despite a now-high debt load, Prosperity Mortgage manufactured fake leases to make it appear that the old homes were being rented out, the lawsuit alleges. The homeowners were unaware of these maneuvers, according to the complaint.

"Defendants forged the Plaintiffs' signatures," the lawsuit alleges.

These deals, according to the complaint, left each couple with three loans — mortgages on both homes plus the equity line of credit. They were not able to easily sell their original homes for the amount the Northrop team led them to believe they could, and their agents "pressured" them to lower their asking prices, "typically well below the market values initially provided to the Plaintiffs by the Defendants," the lawsuit alleges.

In the earlier lawsuit that settled in March, a Fulton couple said they were victimized by a similar buy-now-sell-later scheme. G. Russell Donaldson, who represented them and is one of the attorneys involved in the new suit, said the settlement terms were confidential.

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