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Barkley v. Olympia Mortgage

Court Upholds Jury Verdict Against Real Estate Scammers

    

 

AARP Foundation Litigation attorneys represent homeowners who prevailed on appeal of jury verdict finding defendants liable for fraud and conspiracy to defraud them through a property flipping scheme that involved the seller, lenders, appraisers, and attorneys.

Background


Sandra Barkley, and six other African American first-time home buyers, purchased homes in Brooklyn in 2002 and 2003  from a company -- United Homes -- which bought low and sold high. In Barkley’s case, United purchased her home for $153,000 and sold it to her only three months later, for $399,000-- more than two times the original purchase price. Subsequent appraisals revealed that the market value of their homes was substantially lower than the prices they paid: $260,000 in Barkley’s case. As a result of paying exorbitant costs and lending fees, Barkley and the others were each sold unsupportable mortgages – requiring up to 70 percent of their income each month -- and ultimately faced foreclosure.

Moreover, these homebuyers discovered serious defects in the “renovated” homes that included rotting floorboards, leaking roofs, sewage backups, and electrical and plumbing problems that were not rectified by the sellers.

Unfortunately, this group of homeowners was not alone. A review of dozens of properties sold by United Homes since 2002 revealed a serious problem of property flipping. Almost all of the properties were held by United Homes for only a few months and then sold at an average markup of $160,000 for each property. The vast majority of the properties were bought and sold in predominately minority neighborhoods.

Six lawsuits were filed by Barkley and the other plaintiffs alleging violation of New York consumer protection laws, federal lending laws, fraud and negligence, and a conspiracy to defraud. The lawsuits were brought against the seller, two lenders, and a series of appraisers and attorneys who supported the sales of these substandard homes at excessive prices using abusive mortgages. The lawsuits also claimed that in targeting non-white purchasers, the defendants violated the federal Civil Rights Act and Fair Housing Act, which prohibits racial discrimination in renting, buying, and selling homes.

In a consolidated trial of the six cases, a jury found for the plaintiffs and awarded the plaintiffs compensatory and punitive damages, and the court later awarded attorneys’ fees, totaling about $3.5 million. In the defendants appeal, the U.S. Court of Appeals for the Second Circuit upheld the verdict and fees, reviewing the egregious facts on record and noting that the verdict, punitive damages, and attorneys’ fee awards were supported by the record and not unreasonable.

Barkley and the other plaintiffs were represented by attorneys from AARP Foundation Litigation as well as South Brooklyn Legal Services and Cowen, Liebowitz, & Lapman, PC.

What’s at Stake


Property flipping scams are rampant throughout the U.S. Prosecutions have been instituted by several attorneys general and by the federal government. This widespread problem threatens neighborhood stability, undermines the tax base and creates blight.

Case Status


Barkley v. Olympia Mortgage was decided by the U.S. Court of Appeals for the Second Circuit.

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Our legal advocacy initiatives  - conducted by AARP Foundation Litigation (AFL) - reflect more than 15 years of work in federal and state courts across the country. Through our efforts, we support the Foundation’s four priority areas: Hunger, Income, Housing and Isolation, and ensure that those 50 and older have a voice in the laws and policies that affect their daily lives.