RALEIGH, N.C. (Legal Newsline) - North Carolina Attorney General Roy Cooper has filed a lawsuit regarding an alleged scheme to deceive consumers into purchasing overpriced manufactured homes and agreeing to loans they couldn't afford.
Cooper's complaint, filed on Wednesday, names Phoenix Housing Group, Inc., K&B Homebuilders, Inc., and W.R. Starkey Mortgage, LLP.
"People who need an affordable place to live don't deserve to get trapped in a tangled web of deception," Cooper said.
"Dishonest sales practices and tricky financing often leave consumers stuck with payments they can't make on homes that are worth less than they paid for them."
Phoenix Housing Group, doing business as HomesAmerica and Southern Showcase Housing, sells manufactured homes and land/home packages and also arranges financing for buyers. Phoenix Housing Group has offices in Asheboro, Asheville, Burlington, Granite Falls, Greensboro, Hendersonville and Winston-Salem.
K&B, founded by a former Phoenix employee, sells stick-built homes, modular home/land packages and foreclosed homes in North Carolina. K&B employs several sales agents who used to work at Phoenix's Granite Falls location.
W.R. Starkey Mortgage, based in Plano, Texas, provided consumers who bought homes from Phoenix between Jan. 2007-Sept. 2008 with financing.
Cooper also won a temporary court order on Wednesday enjoining five defendants - K&B; Roger Bailey, a former sales manager at the Phoenix Granite Falls store and current owner of K&B; Yo Xey Her, also known as Joe Herr, a former phoenix sales agent and current K&B employee; George William Varsamis, a sales agent for both Phoenix and K&B; and Travis Kanupp, officer and owner of K&B - from continuing their deceptive practices while the lawsuit moves forward.
Cooper's lawsuit alleges that the company's scheme worked by first luring customers into Phoenix's Granite Falls store with signs and advertisements in local newspapers promising manufactured homes for $500 down.
Sales agents told consumers that a house, including land, could be purchased for whatever price the buyer could afford, and an inflated appraisal on the property was then prepared to inflate the sale price, Cooper says.
Employees at Phoenix falsified assets and income and forged the buyer's signature on loan documents for customers who could not qualify for a mortgage, Cooper says.
Marina McCuen of W.R. Starkey Mortgage, working with Bailey to secure loans, failed to verify the financial information on buyers, and W.R. Starkey Mortgage hired a Phoenix employee to process its loans and paid Phoenix $300 for each loan closed, Cooper says.
Phoenix then charged at least two discount points - usually paid at closing in exchange for a lower interest rate over the life of a loan - to its customers without reducing the buyers' interest rates, a violation of North Carolina's usury laws, Cooper says.
At closing, buyers were told their monthly payments would be several hundred dollars more than Phoenix had originally told them, and consumers were then told they would have to pay between $2,000-5,000 to get out of the deal, Cooper says.
Cooper, in addition to the temporary restraining order, is seeking a permanent ban on all defendants from engaging in the alleged deceptive activities alleged in the complaint. Cooper also seeks cancellation of consumers' contracts, refunds and civil penalties.
Cooper's lawsuit also names Gary Good, president of Phoenix; Dennis Parris, vice-president of Phoenix; Dennis Setzer, a former sales agent at the Phoenix Granite Falls store; Marina McCuen; Ike Vinson, McCuen's supervisor with Starkey; and Kathy Smith, a licensed appraiser who conducted appraisals on land/home packages sold by Phoenix and K&B in his lawsuit.