Foreclosure hardball ... often it's borrowers who can zing it

Source: Washington Post

The eviction from their million-dollar home could come at any moment. Keith and Janet Ritter have been bracing for it — and battling against it — almost from the moment they moved into the five-bedroom, 4,900-square-foot manse along the Potomac River in Fort Washington.

In five years, they have never made a mortgage payment, a fact that amazes even the most seasoned veterans of the foreclosure crisis.

The Ritters have kept the sheriff at bay by repeatedly filing for bankruptcy and by exploiting changes in Maryland’s laws designed to help delinquent homeowners avoid foreclosure.

Those efforts to protect homeowners have transformed Maryland’s foreclosure process from one of the country’s shortest to one of the longest. It now takes on average 634 days to complete a foreclosure in Maryland, compared with 132 days in Virginia.

Champions of Maryland’s system, including Gov. Martin O’Malley (D), credit it with driving down the state’s foreclosure rate and helping thousands of victims of predatory lending, fraud and other abuses hang on to their homes.

“The market won’t fix itself,” said Anne Norton, Maryland’s deputy commissioner for financial regulations. “By the time it does, how many homeowners will be churned up and spit out by the machine?”

Critics, including economists and lenders, blame the state’s go-slow approach for a growing backlog of foreclosures and a weak-to-nonexistent recovery in home prices. To them, the system puts too much emphasis on helping individual homeowners and not enough on quickly clearing the market of foreclosures so prices can rebound and hard-hit communities can recover. And they say it also creates opportunities for abuse by those determined to drag the process out for as long as possible.

“How is it people can stay in a house for five years without ever making a mortgage payment?” said Thomas A. Lawler, a former senior vice president at Fannie Mae who now runs his own consulting firm in Loudoun County. “That’s a screwed-up process. It’s an example of how the process is broken.”

The Ritters, who bought their house for $1.29 million with almost no money down, are hardly representative of the vast majority of Maryland’s distressed homeowners.

During the boom, they set out to become mini real estate moguls, buying properties and flipping them for a profit. In the process, Keith Ritter, 54, went from being on probation for bankruptcy fraud and making minimum wage to being a successful real estate investor and landlord with a six-figure income. Then, when the housing market tanked five years ago, the couple found themselves facing multiple foreclosures.

The Ritters have tried to negotiate different payment arrangements with their lender to save their posh home near National Harbor, they said, but to no avail.

“It was never our intention to get here and never make a mortgage payment,” Keith Ritter said. “We don’t believe in living for free.”

But he and Janet, a 51-year-old real estate agent, make no apology for using every tactic available to them to stay in their house, including challenging the foreclosure sale in court, requesting mediation and claiming they had a tenant living with them. Their adversaries, they argued, are giant financial institutions with armies of lawyers that are out to make as much money as possible at the expense of homeowners.

“When a bank does all it can to save itself, that’s good business,” Keith said. “When a homeowner does the same thing, he’s called a deadbeat.”

Reprieve after reprieve

For a guy who has lost much of his wealth and is on the verge of getting booted from his home, Keith Ritter is oddly calm. He says things such as, “No matter what happens, we are at peace” and likes to quote Scripture.

He and Janet pray daily, read the Bible, attend Pentecostal services and are reliable tithers. Their faith fuels their hope that they can somehow stave off eviction. But they also keep the sheriff’s office on speed dial. Keith calls the number every few days, always with the same question: “Do you have a date for us yet?”

By now, he recognizes the voices that answer the phone at the sheriff’s office. They keep the conversation brief.

No, nothing yet. Another reprieve.

Ritter’s composure in the face of eviction may be due to the fact that he has survived worse. A native of Detroit, he settled in the Washington area after college and started a successful company cleaning commercial buildings. Through his business, he got interested in real estate.

“I saw real estate as the way to wealth,” Ritter said.

By the 1990s, he was buying up properties in Northern Virginia, and he quickly learned that making money in real estate can be harder than it looks.

“I made a lot of mistakes,” he said.

According to federal prosecutors and court records, Ritter bought real estate and then put the properties in the names of family members. When he fell behind on mortgage payments, he filed for bankruptcy protection in his relatives’ names in various jurisdictions to stop foreclosure proceedings. Then he tried to get the bankruptcy filings dismissed without telling the mortgage lenders. He pleaded guilty in 2000 to bankruptcy fraud and was sentenced to 15 months in federal prison in Petersburg, Va., where he wrote the first of three books about his deepening faith, “Life From the Inside.”

“I’ve always loved God,” Ritter said. “I haven’t always obeyed God, but I’ve always loved him.”

When he got out of prison, he spent two years on probation, working at a Sears to pay $10,000 in court-ordered restitution.

By the time his probation ended in 2004, the housing boom was underway. He and Janet settled in Fort Washington, an affluent, fast-growing community south of the Beltway.

The Ritters started out in a $360,000, 2,300-square-foot house with a circular driveway and a pool. As its value skyrocketed, the couple borrowed against it to buy other properties in Fort Washington that they would fix up and then sell. They were convinced that National Harbor, a massive planned hotel, retail and convention center complex, would raise home values.

At one point, they owned seven properties. In 2004, the run-up in prices was so steep that the Ritters grossed more than $200,000 in six months, off two deals. In 2006, they made close to that amount with a single sale.

The couple, who have no children, began driving Mercedes-Benz sedans and taking trips to Europe and the Middle East. They also donated $6,000 to a church in Springfield, court records show.

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