Neal St. Anthony: Young lawyer takes aim at equity strippers

Leah Weaver is a fledgling lawyer with $100,000 in college and law school loans to repay. But she has chosen a $36,000-a-year job in public-interest law even though she could easily make twice as much at a law firm.

Why? So she can help duped consumers recoup from guys like Ron Esau and other so-called "equity strippers."

Weaver, a 2005 graduate of William Mitchell College of Law, is one of 50 young attorneys selected as two-year 2005 Equal Justice Works Fellows in public-interest law.

Esau and James Johnson, partners in HJE Financial, last month were banned from the residential mortgage business by state regulators and fined $10,000 after a judge concluded that they deceived vulnerable folks in foreclosure.

Weaver will use the fellowship to continue her work at Legal Aid of Minneapolis. She interned there, going after unscrupulous lenders. In one case, a lender ripped off an immigrant mother of eight who fell behind on her mortgage after her carpal tunnel syndrome left her unable to work as a seamstress. In another case, an 82-year-old widow unwittingly sold her $125,000 home to equity strippers for $50,000. They evicted her when she couldn't afford the $800-a-month payments she was making to stay there on an $815 monthly Social Security check.

"It appalls me the way people take advantage of other people who are trying to achieve the American dream by hanging on to their house," Weaver said.

"It would be nice to make more money, but this is what I want to do for a couple years. I find the work fulfilling. There are dozens of people I know of who have been taken by equity strippers."

Equity strippers are considered such a problem that the 2004 Legislature passed a strengthened law. Equity stripping, also called "equity skimming," is a tactic that often targets people who have substantial equity in homes that are in foreclosure. The equity stripper offers to buy the home, pay off the mortgage and let the occupants continue living there while making payments to the equity stripper.

This hits home for Weaver, who knows that home equity is the biggest source of wealth for most working stiffs. In the early 1980s, Weaver's single-parent mom lost her job on Minnesota's Iron Range. But she was able to sell her house, pocket some precious cash from the deal and start life anew for herself and two daughters in the Twin Cities.

Equity strippers take advantage of desperate -- sometimes dumb -- homeowners.

As soon as a foreclosure notice is filed by a mortgage company, equity strippers start contacting the often-panicked owners. They portray themselves as friendly forces who want to help the owners keep the house. Typically, they pay the owners a low-ball price for the house, often disguised as an unsecured loan, The equity stripper evicts the former homeowner if they fail to make what essentially are rent payments.

Many distressed homeowners are too panicked to do the smart thing: contact the mortgage company, which usually would rather work out new terms to avoid the time and expense of foreclosure. Or work with a nonprofit credit counselor or personal adviser to get control of finances and hang on to the house. In some cases, the prudent course of action might be to sell -- but to a legitimate buyer at the market price.

Weaver's two-year fellowship is underwritten by the Minneapolis law firm of Leonard, Street and Deinard and the family of Hyman Edelman. In addition to legal representation, Weaver will train volunteer attorneys on the new Minnesota law at Leonard, Street and elsewhere, as well as work with mortgage companies and community groups.

"The new law provides a very clear set of regulations for these deals," Weaver said. "Everything has to be conducted according to the regulations, such as full disclosure so the homeowner knows exactly what they're getting into. The purchaser has to comply with the federal Truth in Lending Act just as any creditor would. They are essentially making a loan."

CEOs build houses

Nothing better than a bunch of CEOs hammering their thumbs -- for a good cause.

A bunch of brass hammered away Monday at Twin Cities Habitat for Humanity's annual CEO build -- this time on a couple of houses in north Minneapolis.

The crew included Dick Pettingill of Allina Hospitals, John Wiehoff of C.H. Robinson, Lisa Bormaster of the Business Journal, Jon Eisele of Deloitte & Touche, Dorothy Bridges of Franklin Bank, Kathy Tunheim of Tunheim Partners, Dave Roberts of Graco, Barbara Lupient of Lupient Enterprises, Doug King of Merrill Lynch and Mark Rauenhorst of Opus Corp.

Habitat is a housing ministry that provides affordable housing for working poor folks who also work on the volunteer crews. Prices are kept low by virtue of donated materials and contributions.

Thankfully, the CEO crew was overseen by skilled workers.

Neal St. Anthony can be reached at 612-673-7144 or nstanthony@startribune.com.