SANTA CRUZ — When a home goes into foreclosure, a rising trend in the county, the home-owner is often deluged with mailings and solicitations offering financial help. Santa Cruz homeowner Laura Merchant responded to such an offer three years ago.
Leonard Bernot, the man who offered to help her, ended up owning her property, and now he faces felony charges on grounds he induced her to enter into an unlawful "equity purchase" contract, violated the foreclosure consultant law and committed grand theft.
Like most Santa Cruz real estate, Merchant's 1,382-square-foot home had escalated in value. It was reappraised at $625,000 when Bernot took title to the property in 2004, five days after Christmas.
"Among the paperwork he had her sign was a grant deed turning over ownership to him," county prosecutor William Atkinson said.
Bernot took out loans large enough to pay off the debt and get another $90,000 for himself, Atkinson said.
Atkinson filed charges in May against Bernot, 40, a lending consultant in Orange County. The charges allege violations of state law regarding foreclosure consultants and equity purchasers.
Bernot pleaded innocent June 13 and is scheduled to appear in Santa Cruz County Superior Court on Aug. 13 for a preliminary hearing.
| Neither Bernot nor his attorney, Sher Garrels, responded to calls seeking comment. |
Experts say foreclosure rescue scammers target longtime homeowners in hopes of tapping into the equity in their property. While they offer temporary financing and present papers for the homeowner to sign, they often include a document that transfers ownership of the property.
Atkinson said Merchant was promised a "Band-Aid loan," a temporary fix, and instead found herself threatened with eviction and her home owned by Bernot.
She sought the assistance of Soquel attorney Bill Purdy, who filed a notice of rescission, a legal document that cancels a notice of default, on her behalf in April 2005.
Purdy is representing Merchant in a civil lawsuit against Bernot, who signed a quit-claim returning the house to Merchant in March of this year. A quit-claim is a deed releasing interest in real property.
Purdy has heard numerous tales of woe from homeowners in foreclosure.
Notices of default, which are sent out when homeowners miss a payment, are skyrocketing.
As of June 19, there have been 328 such notices in Santa Cruz County, compared to 180 a year ago, according to the Santa Cruz Record, which tracks delinquencies. The number of homes in foreclosure is 170, up from 48 a year ago, and about half of those are actually sold.
In May, California ranked second to Florida, with 29,530 foreclosure filings, a 17 percent increase from April, according to Bargain Network, an online foreclosure tracking service. Foreclosure scams prompted California legislators to introduce SB 526 and AB 1356 this year, but both bills stalled. The soonest either could be reintroduced is January.
People who inadvertently sign away their homes to foreclosure scammers are likely to have difficulty regaining their property.
"Everything's stacked against the former homeowner," said Purdy. "It's designed that way. Until there's vigorous enforcement, I don't think it will stop"
His advice to borrowers: Stay away from phone or e-mail solicitations for refinancing. Instead, talk to your lender about restructuring your loan.
Contact Jondi Gumz at jgumz@santacruzsentinel.com.
