Two state agencies have accused three companies with ties to the Triad of "an elaborate scheme" to deceive consumers into buying overpriced manufactured homes.
The lawsuit, filed Wednesday by the N.C. Attorney General's office and the N.C. Commissioner of Banks, also accuses the companies of deceiving consumers into agreeing to loans they could not afford.
Named in the lawsuit are Phoenix Housing Group Inc. of Greensboro, K&B Homebuilders Inc. and W.R. Starkey Mortgage LLP of Plano, Texas, as well as individual defendants.
Phoenix also does business as HomesAmerica and Southern Showcase Housing. It has offices in Asheboro, Asheville, Burlington, Granite Falls, Greensboro, Hendersonville and Winston-Salem. It sells manufactured homes, land-and-home packages, and arranges financing for buyers.
K&B sells stick-built homes, modular home-and-land packages and foreclosed homes in North Carolina. W.R. Starkey provides financing for consumers who bought homes from Phoenix from January 2007 to September 2008. It has 14 offices in North Carolina, including Greensboro and Winston-Salem.
Roy Cooper, the state's attorney general, said he obtained a temporary court order in Wake County Superior Court to stop the companies and defendants from continuing the sales practices.
"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."
Officials for Phoenix and W.R. Starkey could not be reached for comment. The banking commission has set a hearing for 9 a.m. Feb. 23 in Raleigh to address issues related to the lawsuit.
The office said it received 10 consumer complaints, including one from the daughter of an elderly East Bend couple.
The office said that most of the complaints were related to the Granite Falls office of Phoenix and its marketing of a low-cost down payment for a manufactured home.
"Phoenix's sales agents told customers who responded to the ads that they could purchase a house, including the land, for whatever amount potential buyers said they could afford to pay a month. Phoenix often hid the total purchase price because its houses were overpriced," according to the lawsuit.
The office accused Phoenix of arranging for inflated appraisals on the properties it sold so it could sell the homes and land for more than they were worth. It also is accused of fabricating financial documents, falsifying buyers' assets and income, and forging buyers' signatures on loan documents to get loans for them.
"In some cases, Phoenix employees paid other businesses to provide false credit references for buyers," according to the lawsuit.
The office accused W.R. Starkey of padding its profits by charging discount points, which are usually paid at closing in exchange for a lower interest rate over the life of the loan. W.R. Starkey imposed at least two discount points on all Phoenix customers but did not reduce homebuyers' interest rates, a violation of North Carolina laws against usury.
rcraver@wsjournal.com
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