Wilhemina Marshall thought she had lost everything when, in November 2000, she returned from a nursing shift to discover an electrical short had sent her house up in flames.
The contractor said he'd fix the Marshall home and help secure financing to cover the cost. But instead of getting a home improvement loan, the Marshalls say the contractor tricked them into taking out a second mortgage. When the contractor disappeared before the work was complete, the Marshalls stopped making payments. Then, they were hit with foreclosure notices from a bank they'd never done business with.
"This is my castle," said Wilhemina, 57, as her 2-year-old grandson waddled through her small kitchen. "I've worked for this for 40 years. Please let me keep my house."
It is also a complicated example of what is now happening to thousands of Americans. In the next six years, 1.1 million homeowners are expected to enter foreclosure, according to a March study by First American Corp. of California.
The industry responsible for most of those foreclosures -- subprime lenders, which issued loans to risky borrowers -- is collapsing. Left in its wake are boarded-up homes, stunned investors and industry employees across the country with pink slips.
Wilhemina grew up across the street from her house in Paterson's Northside, a tight-knit community where, back then, people left their doors unlocked. When her neighbors decided to move in 1970, she bought their house for $14,900 with a simple 30-year, fixed-rate mortgage -- far different than the range of loan products now available.
The Marshalls raised their seven children in the quaint two-family home. They held family barbecues, birthday parties and Christmas dinners. Wilhemina's mother, a former sharecropper in Georgia, eventually moved in.
They struggled financially. Leo worked as an operator for R. Tape Corp., a South Plainfield factory, and Wilhemina did shift work as a nurse. They typically earned less than $40,000 a year, they said.
Just before Thanksgiving in 2000, fire gutted their home. The devastated family boarded up the windows and moved into an apartment in the Hillcrest neighborhood. While the house sat empty, they paid on their mortgage, plus $1,100 a month in rent.
The Marshalls used their insurance reimbursement to pay off all but $10,000 of their mortgage. This way, they could sell the house, make some money, and move on. But it was a heartbreaking prospect.
Then in August 2001, John Evans, head of East Coast Developers of Belleville, came calling. How and why he found them made the Marshalls wary, but Evans' words gave them hope. He said his company would transform the couple's house back into livable condition. When the Marshalls said they couldn't afford it, Evans assured them he would find financing.
Days later, Evans came back -- he had found a willing lender. D&M Financial would grant the Marshalls a loan. The Marshalls would sign a $108,000 check from D&M over to East Coast for the repairs. Every month, the Marshalls would pay D&M $1,300 toward the loan.
With visions of the rebirth of their home in their heads, the Marshalls signed a document called a "home improvement contract" with East Coast in October 2001. They endorsed a $108,000 check to D&M's title company.
Several weeks later, the Marshalls received a copy of the home improvement contract in the mail with the words "paid in full" penned in the top left corner. No work had been done yet. Confused, they tried to contact Evans. Unable to reach him, they called D&M's president, Demetris "Jimmy" Michalaki.
But in early 2002, the Marshalls received a letter from a different bank, which had bought the loan from D&M. The bank, one of several who would eventually buy and sell the Marshalls' loan, sent copies of a mortgage application made out by D&M on September 2001 for the Marshalls. The 30-year loan was for $132,000 at 10.75 percent. In addition to covering the $108,000 in home repairs, it paid off the couple's first mortgage and other debt.
Copies of the documents revealed that D&M's appraiser had overvalued the Marshalls home by $100,000. The Marshalls also say their signature was forged and earnings were inflated.
"No one would have loaned (them) that kind of money. The house was clearly distressed," said Brian Fowler, a Ridgewood lawyer representing the Marshalls.
It had been more than 30 years since Wilhemina had studied a loan application, but she knew something was amiss. Calling the bank, Wilhemina tried to explain that D&M gave her a home repair loan, not a second mortgage. Perhaps this bank would finally finish the work on her house, she asked.
The representative, Wilhemina remembers, was not sympathetic. "All they were seeing were dollar signs," she said. "They didn't care about my story."
The Marshalls sought legal help and stopped making payments. Fowler filed a civil lawsuit in state Superior Court in Passaic County against D&M, East Coast and Evans in 2003. But the current loan holder, US Bank, sent a foreclosure notice against the Marshalls for late payments. They eventually declared bankruptcy to stop the foreclosure attempt.
In 2004, a state Superior Court arbitrator in Passaic County ruled that East Coast had been paid "in an apparent conspiracy with D&M" for a "predatory loan," and that D&M was liable.
In its court documents, D&M denied any connection to East Coast, stating that while they may have shared an office in Belleville in the past, they have no "business relationship with East Coast whatsoever."
East Coast's phone number has been disconnected, and it is not registered with the state as a home improvement contractor. Fowler's efforts to locate Evans or East Coast were unsuccessful, and court documents list Evans and East Coast as unserved defendants in the suit.
Saul Berkman, a New York City attorney for D&M, said he was not aware of the Marshalls' case. But the company is facing a similar suit in New York involving a contractor working in tandem with D&M. The plaintiff, Berkman said, is at fault.
In 2005, banking regulators in New Jersey and New York launched investigations against D&M. A few dozen banks have sued the company for selling them bad loans. In one federal court case in Brooklyn, D&M was accused of conducting "vastly inflated appraisals," misstating borrowers' incomes and writing false checks for about $20 million in loans.
Superior Court Judge Margaret M. McVeigh ruled against the Marshalls on March 27. She found US Bank deserved payments because it had no knowledge of the loan's original terms.
Calls made to Vladimir Palma, a Mount Laurel lawyer for US Bank, were not returned. A bank spokeswoman declined to comment, citing customer privacy.
Today, the Marshall home will be part of a county foreclosure sale. Fowler filed an appeal to stay the foreclosure and reverse McVeigh's decision but was not optimistic. "It's a pretty desperate situation," he said.
"What am I going to do? Walk across the street and throw myself in the river," said Wilhemina, who didn't know where she will go if her house is sold.
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