Borrowing trouble: Where’s the kitchen! Sometimes, buyers looking for a deal are in for a big surprise

By Lynn Arditi
Published August 3, 2008

Raymond Horbert, Jr., Gammons Realty, Cranston, is trying to sell this home at 88 Sugarbush Trail, North Kingstown, which has no kitchen left after the homeowners moved out. The cabinets, granite countertops, appliances and downstairs bathroom fixtures were also taken by the homeowner. The Providence Journal/Frieda Squires
Raymond Horbert, Jr., Gammons Realty, Cranston, is trying to sell this home at 88 Sugarbush Trail, North Kingstown, which has no kitchen left after the homeowners moved out. The cabinets, granite countertops, appliances and downstairs bathroom fixtures were also taken by the homeowner. The Providence Journal/Frieda Squires

It didn’t take long to figure out that something had gone terribly wrong at the house on Sugarbush Trail in North Kingstown.

The first clue was on the landscaped front lawn: sprinkler heads snipped off.

Next, through a wooden gate, the heater for the in-ground swimming pool was missing.

But nothing compared with what the prospective buyer and his real estate agent discovered when they stepped inside.

“Oh my God!” the buyer, Peter Furness, recalled saying. “There’s no kitchen!”

The shiny black countertops, wood cabinets, built-in double oven and decorative hanging lights were all gone.

“Someone,” Furness said, “literally pulled out the kitchen.”

The series of unfortunate events that unfolded in this manicured cul-de-sac in North Kingstown was strange, indeed, but hardly an isolated incident.

Foreclosed properties, such as the one on Sugarbush Trail, accounted for one in four residential sales in Rhode Island from January through May, according to the State-Wide Multiple Listing Service.

In gritty Providence neighborhoods, vacant and boarded triple-deckers threaten to empty entire city blocks, making easy prey for vandals and thieves.

But in this manicured suburb?

BACK WHEN the house on Sugarbush Trail went on the market in the fall of 2006, Rhode Island was just coming off the biggest real estate gold rush in more than a decade.

The broker’s listing featured an online photo tour of the nearly 4,900-square-foot house, built in 2001, complete with vaulted ceilings, a stone fireplace, windows with crown molding and a modern designer kitchen. The original list price was $789,900.

The house on a 1-acre lot sold in November 2006 for $730,000.

The buyer was Jeremy Joseph DeBarros, then a 27-year-old loan originator at Mortgage Options of America, a subprime lender in North Dartmouth, Mass.

Three years earlier, DeBarros had filed for Chapter 7 bankruptcy protection, listing a vacuum company he owned in the court documents. At the time, he was divorced and renting an apartment in West Warwick. He had been working for five months as an account executive at the Lincoln office of the former subprime lender Ameriquest Mortgage. He listed monthly income of $2,139.92, including a military disability pension, which paid $190 per month.

DeBarros financed 100 percent of the purchase price of the house on Sugarbush Trail with two mortgages: a 30-year loan for $583,920 from Argent Mortgage Company LLC and a second mortgage for $145,980, according to property records. He lived in the house with his wife, two daughters and two dogs, both boxers, according to neighbors, who described him as friendly and well-spoken. Their only complaint back then was that one of his boxers tended to be aggressive with another neighbor’s dog.

Then, on June 14, 2007, at 6:10 a.m., a police cruiser pulled up to the DeBarros home. North Kingstown police had a warrant to arrest Jeremy DeBarros on a “fugitive from justice” charge in connection with an alleged mortgage fraud scheme in Swansea, Mass.

Some time during the fall, neighbors said, trucks arrived and the DeBarros family moved out.

Three days after Christmas last year, CitiGroup Global Realty Corp. filed a foreclosure deed at the Town Hall, legally transferring ownership back to the lender.

The house remained empty until a real estate agent hired by CitiGroup got a call about the listing.

“I was all excited when the bank called up and said I was going to get a real expensive listing,” recalled Raymond Horbert Jr., a real estate agent for Prudential Gammons Realty in Cranston.

That is, until he saw the kitchen – or rather, that there was no kitchen.

“I was mortified.”

Horbert, who works part-time as a housing inspector, noticed other items missing, too. French doors had been torn from their hinges. A toilet in the downstairs bathroom was gone. So was the vanity. Air conditioner condensers had been ripped out. And there was a fist-sized hole in the wall of the master bedroom.

But the most troubling of all to Horbert was the kitchen. Besides having no appliances, cabinets or counters, the water, sewer and gas lines had been cut, leaving the pipes open and unsafe. The lines would have to be sealed off before an inspector would set foot in the place.

Horbert had seen houses with copper pipes cut out and radiators dismantled. But why would anyone remove an entire kitchen?

IN BRISTOL COUNTY District Court in Fall River, Mass., one morning in June, Jeremy DeBarros slipped into the back of a crowded courtroom.

Tall and handsome, he stood out among the jean-clad and tattooed crowd, dressed in a well-tailored pinstriped suit with a lavender shirt and matching tie. He spoke briefly with his lawyer, then slid onto a wooden bench and waited for the case on the alleged mortgage fraud to be called, his soft leather loafer jiggling.

At the time of DeBarros’ arrest, he was working as a mortgage originator when a Swansea homeowner called his company seeking help in refinancing her house to avoid foreclosure. Instead, DeBarros arranged for the house to be deeded to somebody else, according to court documents.

A lawyer representing DeBarros argued that the homeowner received more than $13,000 and an option to buy back the property, so she “got exactly what she contracted for.”

DeBarros faces charges on two felony counts: larceny of over $250 by false pretense and solicitation to commit a felony.

The judge scheduled the case for a jury trial on Sept. 18.

In the hallway outside the courtroom, a reporter asked DeBarros about the house he’d lost to foreclosure on Sugarbush Trail in North Kingstown.

What happened to the kitchen?

“We had wanted to remodel it,” he said, “but we lost the house….”

His lawyer stepped into the hallway. DeBarros excused himself to speak with him and then turned to leave, indicating that he had nothing further to add.

“The situation,” he said, “is what it is.”

IN RHODE ISLAND, a property is legally owned by the person or entity named in the property deed, said Stephen J. Shechtman, managing partner of the Pawtucket law firm Shechtman Halperin Savage, whose clients include banks in foreclosure cases.

The mortgagor remains the property’s legal owner until the lender files a foreclosure deed, which usually occurs shortly after the property goes up for foreclosure auction.

“A legal owner,” Shechtman said, “can do anything a legal owner wants to his or her property.”

However, he said, most mortgages require that the borrower “preserve and protect the collateral” or property.

“You can’t pull out the cabinets and plumbing without replacing them,” Shechtman said, speaking generally. “That would not be preserving and protecting the collateral. It would be stripping [it].”

Damage to foreclosed properties is common but difficult to prove, people in the industry say. Banks may decide it’s not worth the expense to go after the borrower, since the likelihood of recouping the losses from someone who can’t pay the mortgage is generally slim.

A spokesman for CitiGroup declined comment on the case.

“We don’t know if it was a borrower who damaged the property or a third party,” said Alfred A. Veltri, a Providence lawyer who represented the bank at the closing. “Could kids break in and do that? I don’t know.”

UNTIL RECENTLY, foreclosures in the state were concentrated almost exclusively in the Providence area, but not anymore. An analysis of credit data by Moody’s shows that first mortgages entering foreclosure during the second quarter climbed more than 200 percent in the state’s suburban and rural communities from a year earlier. In Greater Providence, the increase was 128 percent.

“It appears that foreclosure problems are spreading out into the suburbs,” said Mark Zandi, chief economist at Moody’s “The urban core or Providence metro area got hit first and hard, but now the suburbs are getting dragged into the mess.”

In Rhode Island, foreclosed properties are selling, on average, for 49 cents on the dollar value of the mortgage, according to an analysis by First American Core Logic’s Loan Performance, a data and research firm in California. A foreclosed house with a $100,000 mortgage, for example, would be expected to sell, on average, for $49,000.

“That’s a significant loss,” said LoanPerformance’s Mark Carrington. “It obviously gets worse with any additional damage to the property.”

In the case of the house on Sugarbush Trail, Horbert, the real estate agent, snapped photos of the damage and wrote a description for the bank’s asset management firm. The bank’s primary concern, he said, was to sell the property quickly to recover as much as possible of the debt.

CitiGroup filed a foreclosure deed on the property in December last year for $501,500 – about 69 percent of the price it had sold for just 13 months earlier, according to property records.

The bank’s real estate agent put the property on the market for $614,000.

Furness, a lawyer in Providence, was looking to buy a bigger house where his grown children could spend the summer. A real estate agent from Prudential Gammons Realty showed him the house on Sugarbush Trial.

“I was not looking for a foreclosed house,” said Furness. “We liked the house despite the insanity of it.”

It took five months, three rounds of bidding with the bank, visits with repairmen, inspectors and more legwork than he’d ever imagined. As a condition of the sale, the bank required that Furness get a construction loan to repair the damage and replace the kitchen.

“The only reason we got a very, very good price on it,” he said, “was because it was a house without a kitchen.”

The sale closed in mid-May for $560,000.

Since moving into their new house, Furness and his wife have ordered cherry wood kitchen cabinets, granite countertops and Sears appliances.

“It’s a pretty house,” Furness said. “It’s worth fixing.”

Some items will have to wait. A new motor for the pool heater, he said, runs about $4,000. They’ll have to take cold swims.

Of course, they already changed the locks. And though the neighborhood feels safe, he said, they’re not taking any chances. They installed a new security system. / (401) 277-7335

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The Providence Journal / Frieda Squires