Thursday, February 13, 2003

Buyer protection posed

House acts in wake of Erpenbeck

The Associated Press

FRANKFORT - A House panel Wednesday approved a bill meant to head off scandals like the one involving Northern Kentucky homebuilder A. William "Bill" Erpenbeck..

Erpenbeck is being sued by banks, subcontractors and homeowners for millions in unpaid debt.

Click here for all Enquirer reports on Erpenbeck Co.
The Erpenbeck Co., Greater Cincinnati's third-largest homebuilder in 2000, failed to pay off construction loans on about 260 homes, leaving homebuyers in four Ohio and three Kentucky counties with double mortgages and the prospect of losing their homes to foreclosure.

Settlement of a class-action suit spared that fate for 211 consumers who had bank financing, but 50 who paid cash were left to fend for themselves.

The government believes Erpenbeck employees may have directed nearly $40 million, intended to pay off construction loans, into the company's accounts at Peoples Bank.

The total for the scandal is estimated at about $100 million.

The bill cleared the Banking and Insurance Committee.

Rep. Jon Draud, R-Crestview Hills, said his measure would offer some safeguards for homeowners and subcontractors.

One such safeguard would create a felony crime for homebuilders or contractors who "willfully misappropriate" payments from homeowners. Violators could spend up to five years in prison.

The bill also would require that title insurance agents be licensed by the state. Failure to do so could result in fines up to $5,000.

At the time of closing, the seller would have to provide an affidavit to the purchaser stating that he has paid, or will pay, everyone owed money during the construction.

Also, closing agents would have to disclose what the consequences could be if homeowners don't take out title insurance.

Some committee members said no legislation could completely stop the unscrupulous, but that Draud's bill offered some protections.

"This is not a cure-all, but it is a step in the right direction," said Rep. Mike Denham, D-Maysville.

The bill now heads to the full House.

The legislation is House Bill 251.

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