A 78-year-old Annapolis man who said he was duped into getting unsuitable mortgages — sending the home he had owned for decades into foreclosure — was awarded $342,000 by an Anne Arundel County jury this week.
The jury found that Dennis Hollidayoke's mortgage broker violated state and federal law when arranging a "payment option" adjustable-rate mortgage for him in 2006 and then refinancing it into another payment option loan seven months later. The mortgages are also known as negative amortization loans because the lowest payment option adds to what's owed on the mortgage rather than subtracting from it.
Hollidayoke said no one mentioned this aspect of the loan to him upfront, and his attorney said it never was made clear in the paperwork.
- The Real Estate Wonk blog
- Top 10 most expensive homes in the Baltimore region in 2013 [Pictures]
- Local housing market Top 10s for 2012 [Pictures]
- Most expensive Baltimore-area communities 2012 [Pictures]
- Most expensive Baltimore-area communities [Pictures]
- Housing market Top 10s in the Baltimore area in early 2012 [Pictures]
See more photos »
- Laws and Legislation
See more topics »
"It's been a very bad experience," said Hollidayoke, who is trying to short-sell his home of more than 40 years to avoid foreclosure. "I worked hard all my life, tried to keep a pretty good reputation, and this has put me down in the bottom of the muck."
The trial was the latest in a long-running national argument about whom to blame after many Americans signed up for complex loans they couldn't afford — the borrowers or the financial professionals who sold them the products. Hollidayoke's broker, Brian Lynn Blonder of JBL Mortgage Network, contended in court that he did nothing wrong.
"That was their defense, and the jury flatly rejected it," said Hollidayoke's attorney, Phillip Robinson, who represented him on behalf of the nonprofit Civil Justice in Baltimore.
The case is complicated.
Hollidayoke, a retiree who worked as an Anne Arundel County police officer and Naval Academy mason, said he lives on a modest pension and Social Security payments. He was looking for help stretching his money when he responded to an ad by Retirement Planning Services in 2006, according to the lawsuit.
Michael Steranka, CEO of the local company, said he had a program that would allow Hollidayoke to pay off his $61,000 mortgage, invest his home equity and let the program cover the payments on a new mortgage for five years, according to the complaint. Hollidayoke was referred to Blonder for the financing.
Steranka and his company weren't parties to the trial this week because they agreed to a confidential settlement. An attorney for Steranka, Drake Zaharris, said the settlement forbids him from commenting on the matter.
Blonder arranged for the payment-option loan, according to the complaint, and then told Hollidayoke in 2007 that he could save money by refinancing. In fact, the second loan was more expensive than the first, Hollidayoke's attorney said.
The two loans collectively cost Hollidayoke more than $23,000 in upfront fees. A reverse mortgage would have been much more appropriate for an elderly homeowner in need of cash, Robinson contended, because it would have freed Hollidayoke from the responsibility of monthly mortgage payments for the rest of his life — and the upfront cost would have been lower to boot.
The jury found Wednesday that Blonder violated the Maryland Consumer Protection Act and took fees he was not entitled to under other state and federal laws.
Neither Blonder nor his attorney responded to requests for comment.
"Clearly the case suggests that there's a responsibility on the part of the originator of the loan or the broker of the loan, as there should be, in my opinion," said Robert Strupp, systemic investigations manager at the National Community Reinvestment Coalition in Washington, who testified for the plaintiff. "Because they know how these products work."
Hollidayoke didn't realize anything was amiss until the investment program he'd enrolled in notified him in late 2009 that it would not be making his mortgage payments for five years as promised, according to the lawsuit. He discovered that his mortgage balance had ballooned from $375,000 to more than $450,000 because the program made only the minimum payments.
He couldn't afford the approximately $4,000 full monthly payment on the loan, and the mortgage servicer started foreclosure proceedings against him in 2010.
Real estate agent Sandy Wing, who is trying to arrange the short sale of his home, said Hollidayoke was "distraught" when he came to her for assistance. He didn't understand what had happened. She sorted through his boxes of records and — appalled by what she found — connected him with legal help.
"I just felt, something has to be done about this," Wing said. "This is really, really wrong."