Magazine article American Banker

Two Lenders Agree to Cancel Debts in Alleged Land Scam

Magazine article American Banker

Two Lenders Agree to Cancel Debts in Alleged Land Scam

Article excerpt

The Department of Housing and Urban Development has announced settlements in which two Massachusetts lenders will offer to cancel the debts of more than 850 former time-share owners allegedly defrauded by a group of developers.

The agency said that Developer Finance Corp. of North Adams and Textron Inc.'s Litchfield Financial Corp. of Williamstown made loans to the group's customers. Neither lender admitted wrongdoing.

The Justice Department, which is a party to the settlements, has joined HUD in suing the developer group, Buyers Source, in Tidewater, Va., over "high-pressure sales tactics."

Buyers Source allegedly approached time-share owners, most of them elderly, and offered to purchase their interests if they bought subdivision lots. It sold more than 1,200 parcels in Florida, South Carolina, Ohio, Arkansas, Texas, New Mexico, and Missouri at prices as much as 3,000% above their real values, HUD said.

"Their appraised value was grossly inflated," a HUD spokesman said.

Litchfield and Developer Finance financed the purchases with loans carrying interest rates of 11.99% to 12.99%.

In an e-mail response to American Banker questions, Karen Gordon, a Litchfield spokeswoman, said that the rates were not uncommon between 1999 and 2001, and that its only involvement with Buyers Source had been offering loans to the buyers.

"The company did not participate in any illegal scheme by Buyers Source," Ms. Gordon wrote. Litchfield became aware of the situation and "discontinued doing business with Buyers Source well before HUD opened its investigation. …

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