Tuesday, April 13, 2004

Home investor's deals investigated


Owners say they lost money and their houses

By Ken Alltucker
The Cincinnati Enquirer

Cheryl Kathman's time had nearly run out. With too many bills and not enough cash, the Norwood resident turned to a phone number listed on a letter sent to her home.

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Lawrence Kathman and his wife Cheryl have filed a civil lawsuit.
(Tony Jones photo)
An investor, Troy Lee Keith, offered Kathman a last-ditch strategy to avoid the embarrassing ordeal of being kicked out of her home because of foreclosure. All she had to do was sign some papers and send him monthly checks.

"He said he would buy our home and rent it back to us," Kathman said. "He was a smooth talker, real convincing."

Kathman said she followed Keith's instructions to the letter. She paid his company an up-front fee of $1,800 and followed with monthly rent checks of $650. The idea was that she would rent the home from Keith's company for about one year, clean up her finances and then buy back the home later.

But within weeks after striking a deal in October, Kathman began receiving threatening letters from her lender, Manufacturers & Traders Trust Co. The lender had no deal with Keith's company and still expected Kathman to pay her mortgage. When she didn't, Kathman's foreclosure case ran its course through Hamilton County courts, and the lender reclaimed the property.

As she began investigating her situation, Kathman discovered she wasn't the only homeowner who negotiated deals with Keith only to face losing their homes at a sheriff's sale months later.

Kathman and Forest Park resident Tamra Foy filed small-claims court lawsuits seeking refunds for thousands of dollars paid in fees and rent checks to Keith. And detectives in Cincinnati, Springdale and other jurisdictions say they're investigating deals negotiated by the 36-year-old former fast-food restaurant manager in at least three Southwest Ohio counties.

Police have not filed any charges, but they have identified at least 48 people who have been offered similar deals, according to Springdale Police Detective Jim Grindle.

Keith says he was working to buy the houses to give everybody a fair chance to reclaim their homes. His contracts never guaranteed that his company would pay off their mortgage debt.

Those who have turned to Keith for help describe him as charming and persistent.

David Gabbard had run out of options last fall when he received a pitch from Keith. Keith told Gabbard he would meet him at a Tri-County motel where Gabbard and his wife were enjoying a night away from home.

"My wife and I were down there swimming," Gabbard said. "He came down there and brought all the paperwork. We signed everything down there at an indoor picnic table by the pool."

Despite paying more than $4,000 to Keith, Gabbard said, he was evicted from his Hamilton house in January.

Grindle said Kathman, Foy, Gabbard and others have learned the hard way that the foreclosure investing business can be fraught with risky deals and fast talkers.

A report last fall showed that 2.7 percent of all Ohio loans were in foreclosure - the highest rate in the nation. Southwest Ohio has been hit particularly hard, with the number of foreclosures in Hamilton County more than doubling over the past five years to more than 3,600 in 2002.

Virtually anybody can buy dozens of homes from desperate homeowners facing foreclosure with little oversight from the state of Ohio. If foreclosure investors don't represent themselves as licensed real estate agents, Ohio's division of real estate and professional licensing lacks the legal wherewithal to regulate their practices.

"There is no provision under state law for these people to be licensed," said Pieter Wykoff, Ohio Department of Commerce spokesman. "If someone believes he (Keith) was representing himself as a licensed real estate professional, we'd certainly be interested in them talking."

Vena Jones Cox, past president of the Real Estate Investors Association of Cincinnati, said many investors negotiate deals with lenders to halt foreclosures and keep people in their homes if they choose.

"It makes me mad when somebody takes a perfectly good strategy like this and gives everyone a bad name," Jones Cox said.

Missy McCall Hammonds, an investor who purchased Gabbard's house after the foreclosure, said she becomes frustrated when desperate homeowners are duped by unethical players.

"Those of us who are trying to go out and do ethical investing, this makes it very difficult for us," said Hammonds, president of the Butler County Investment Property Association, a real estate investing group.

Homeowners aren't the only ones who've lodged complaints about Keith. Representatives of the Sycamore Township-based company K T Property Management say that Keith has improperly used their name in several transactions. They have asked him to stop representing himself as a current or former K T Property Management employee.

In late February, detectives executed a search warrant at Keith's house in Springdale and seized paperwork on several transactions. Grindle said police detectives in Cincinnati, Butler County and other jurisdictions are still evaluating the information.

Keith said his business dealings are legal. He said the deals he struck with Kathman and other homeowners never guaranteed that the homeowners would get their property back.

"There was no promise that we'd buy her house," he said in a recent interview. "We did everything we could do to work with them."

He said in these cases the homeowners voluntarily gave up all rights to the property by signing "quit-claim" deeds. Kathman and other homeowners also signed over power of attorney to Keith. They voluntarily signed contracts agreeing to pay Keith monthly rent checks for his services.

Keith wouldn't provide any names of homeowners or property addresses but said he and his former company, K T Property Management, have helped many desperate property owners reclaim their homes. He said he left his position as office manager of K T Property Management several months ago and formed a new company in December, Keith Property Management & Investing LLC.

He declined to say who hired him at K T Property Management, and he said he would not provide a supervisor's name.

Company doesn't know him

Company officials offer an explanation for Keith's reluctance to talk about K T Property Management.

They don't know who he is.

K T Property Management manages 500 apartment units in Warren County. It doesn't invest in foreclosed homes, said Cathy Zimmerer, an accountant and spokeswoman for K T Property Management of Sycamore Township.

"Mr. Keith does not work for us and never has in any way, shape or form," Zimmerer said.

She said K T Property Management learned several months ago that a person named Troy Lee Keith was using the company's name. Zimmerer said her company received a bill from a vendor who claimed to do work for K T Property Management, but K T Property Management officials never authorized the work. Furthermore, the address listed on the invoice was that of a Tri-County office that Keith once used.

K T Property Management officials said they have attempted to reach Keith by phone and by a visit to his Tri-County office. They sent a certified letter to his address requesting Keith stop using the company's name. Somebody signed to receive the letter. Keith didn't return a phone call to the company, Zimmerer said.

The use of K T Property Management's name so far hasn't caused the company major financial problems.

"But the potential is there," Zimmerer said.

Keith said he's been in the real estate and property management business for several months. Formerly, he worked at various restaurant management jobs.

He believes disgruntled homeowners who don't understand the intricacies of the foreclosure investing business are fueling the police investigation. He expects the investigation will fizzle out with no charges ever filed.

"The police can do their investigation, but if they really had a strong case, don't you think I would have been charged already?" Keith said.

'A lot of grief'

Keith declined to discuss his criminal record. He was convicted in 1999 in Hamilton County on a charge of passing a check with insufficient funds. He was given a suspended sentence of 60 days and ordered to pay restitution and court costs.

Keith said his main goal in foreclosure investing is to help people. That's why he said he is frustrated when homeowners such as Kathman complain about his business practices.

"There are people out there that I've helped," Keith said.

Keith gave $3,000 to a Batavia man and also paid for his hotel stay and storage costs after the man lost his home to foreclosure. But that was after Gilbert Strobridge paid Keith nearly $5,000 in fees and rent to Keith.

After staying three weeks at a Red Roof Inn with his daughter, two dogs and two cats, Strobridge used Keith's refund of $3,000 to move into a rent-to-own house in Eastgate.

"We turned out very lucky, but he still caused us a lot of grief," Strobridge said.

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E-mail kalltucker@enquirer.com




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