Wednesday, August 14, 2002

Erpenbeck homes face foreclosure

By Patrick Crowley,
The Cincinnati Enquirer

        BURLINGTON — An eastern Kentucky bank has filed foreclosure actions on two homes built by the Erpenbeck Co. in Boone County.

        The foreclosures filed by Community Trust Bancorp of Pikeville, Ky., were revealed Tuesday during a court hearing in Boone Circuit Court on allowing cash buyers of Erpenbeck-built homes to join a class-action suit. The buyers hope to have banks release the liens on their homes.

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        Boone Circuit Judge Jay Bamberger did not render a decision on the suit, filed by lawyers Jeff Blankenship and Ed Monahan on behalf of homebuyers Steven and Whitney Remley and as many as 49 other people who paid cash for their Erpenbeck-built homes.

        Instead, Judge Bamberger gave lawyers for the four banks named in the suit — Peoples Bank of Northern Kentucky, Bank One, Provident Bank and U.S. Bank, formerly Firstar Bank — more time to answer the suit, take depositions and conduct research. The next hearing was set for Sept. 20.

        But as the hearing was drawing to a close, Newport lawyer Steve Franzen revealed that Community Trust had filed foreclosure actions July 23 on two homes built by Erpenbeck Co. in Triple Crown, an exclusive country club and subdivision in Boone County.

        Mr. Franzen's clients, Cheryl and Joel Piatt, paid cash for their home and may consider joining Mr. Blankenship's class action suit, though the couple have also filed a title insurance claim.

        Meanwhile, James and Helen Kelble, represented by attorney Tom Rumpke, discovered that they did not hold clear title to the home they purchased in January. They have filed their own lawsuit against Peoples Bank.

        Community Trust entered the picture in the spring of 2001. The Erpenbeck Co. wanted to borrow $5 million to buy land and build the Triple Crown development but its major lender, Peoples Bank, was already at its maximum allowable limit of loans to Erpenbeck.

        So Peoples invited Community Trust in as a participating lender. Community Trust made the $5 million loan to the Erpenbeck Co. but Peoples continued to administer the loan, including collecting mortgage payments.

        On July 2 Peoples assigned the mortgages for homes in the development over to Community Trust after the bank requested responsibility for the loans.

        Beverly Storm, a lawyer for Peoples Bank, said the foreclosures were not expected. Lawyers for Community Trust did not return calls to comment.

        But Mr. Kelble said in court documents that Peoples said it turned over the loans “to avoid costly litigation and expenses.”

        “Peoples Bank doesn't want any responsibility for this,” Mr. Kelble said in an interview. “We're upset. We assumed Peoples Bank was working through the problems with the various homeowners and was not going to assign our mortgages to anyone.”

        Ms. Storm said it is “absolutely not true” that Peoples is ducking its responsibility and allowing Community Trust to foreclose.

        “We negotiated the handling of loans with other banks that were involved from the beginning,” Ms. Storm said. “I know (the Kelbles) are upset, and we feel badly ... but we did not know Community Bank was going to foreclose.”

        Foreclosure is the fear of cash buyers seeking class-action status.

        Louise Schulte, an 85-year-old widow who was in court Tuesday, paid cash when she bought a Boone County condominium from the Erpenbeck Co. in October 2000. Despite assurances from banks, she fears losing her home.

        “That was the hardest day, when I had to go in and tell my mother she didn't own her home,” said Mrs. Schulte's daughter, Carol Lux.

        Her other daughter, Eileen Krebs, said that during the closing on the condo she watched her mother “hand over her life savings to Michelle Marksberry,” an Erpenbeck Co. employee who handled closings for the company.

        While the banks oppose certification of the cash buyers into a class-action lawsuit, lawyers for all four banks indicated Tuesday it is not the banks' intentions to take the buyers' homes.

        The banks, however, do not believe they are negligent in cash transactions between the Erpenbeck Co. and the buyers.

        But according to Mr. Blankenship the banks are negligent because they allowed representatives of the Erpenbeck Co., an Edgewood homebuilder under federal investigation for allegations of bank fraud, to act as their agent.

        Money paid to Erpenbeck employees such as Ms. Marksberry was supposed to pay off first mortgage construction loans on the homes. But the loans were never satisfied, and the first mortgage liens remain, Mr. Blankenship said.

        Erpenbeck Co. employees are suspected of taking 211 checks cut at closings and depositing them, totaling $16.7 million, into accounts at Peoples Bank, even though the checks were made out to construction lenders.


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