May 30, 1997

HUD cracks down on home-repair loan fraud

By LAWRENCE L. KNUTSON
Associated Press Writer

WASHINGTON (AP) -- Housing Secretary Andrew Cuomo moved Thursday to end a home-repair loan fraud that he said has turned dreams into nightmares for thousands of American families.

As Cuomo described it, too many contractors have been misusing the Department of Housing and Urban Development's insured loan program and taking advantage of the mostly low-income families who use it to renovate and repair their homes.

The program has been in existence for 63 years but Cuomo said a HUD review over the last four months showed that some contractors are performing shoddy work, falsifying documents, overcharging, failing to complete work as promised and circulating deceptive advertising.

In a crackdown, HUD will bar contractors from working directly with homeowners to provide HUD-insured financing for home repairs and improvements.

Instead, homeowners seeking such financing will deal directly with lenders.

Cuomo also barred 16 contractors -- many of them based in Texas -- from doing any business with the federal government for a year and levied civil penalties of $5,500 each against 10 of them.

"This scam is really three crimes in one," Cuomo said in a statement. "Homeowners get suckered, scam contractors get off scot-free and taxpayers get stuck with the bill."

He said efforts by the department and Congress over the last eight years have failed to fix the problem.

"Enough is enough; we want to end this," Cuomo said.

Cuomo said HUD's analysis shows that borrowers defaulted on 6 percent of the loans arranged by contractors compared with a 3.5 percent default rate for loans arranged by lending institutions.

Cuomo did not offer a specific figure but said the practice has cost taxpayers millions of dollars.

In a series of actions, HUD barred four Texas contractors from doing business with the federal government for a year. They are National Homes Services, American Applicators and Texas Remodelers, all of Houston, and American Eagle of Hockley.

Ten firms were assessed $5,500 civil penalties as well as being barred for a year. They are Landmark Building and Remodeling Inc. of Little Rock, Ark.; Fort Bend Builders and Supplies Inc. of Stafford, Texas; Modern Exteriors of Houston; Classic Siding of Beaumont, Texas; Lane's Home Improvement Co. of North Kansas City, Mo.; Lone Star Remodeling of Texas, Friendsworth, Texas; First Capital Home Improvements, Memphis, Tenn.; Five Star Ventures, Houston; All Town Construction, Manahawkin, N.J.; and First Choice Siding and Windows Inc. of Kansas City.

Two additional contractors were barred from taking part in the HUD program for a full year. They are Classic Exterior Designs, Mobile, Ala.; and A & W Siding & Window, Kansas City.