Hundreds Fall for
New York Housing Scam

June 24, 2001
Authorities say nearly 400 New York families, most of them inner-city minorities, fell victim to a housing scam orchestrated by Isaac Toussie, one of Long Island's largest developers. Toussie recently pleaded guilty to making false statements and faces up to five years in prison when he is sentenced in September. Thirteen others have pleaded guilty to various charges.

Most of the victims answered ads appearing in New York City newspapers, offering affordable housing, good schools and easy access to financing, even for those with bad credit and those who lacked cash for a down payments.

Those who fell into the trap wound up buying substandard houses at inflated prices, many of them in crime-ridden neighborhoods. Investigators from the U.S. Department of Housing and Urban Development (HUD) say Toussie worked in concert with real estate attorneys, mortgage bankers and appraisers to get low-income buyers mortgages they didn't qualify for so they could buy houses they couldn't afford.

Toussie's attorney says the 29-year-old developer and his father, Robert, also a developer, netted more than $20 million from their real estate ventures in the late 1990s and were often seen driving Rolls Royces and Bentleys. The father has not been implicated in the alleged scam.

Meanwhile, many of Toussie's home buyers are now deeply in debt after signing mortgages they are unable to pay on houses that are worth less than the amount of the loan. At least 40 homeowners are already in foreclosure proceedings and another 40 are likely to wind up there, according to Michael Stolworthy, the lead HUD investigator on the case.

Besides advertising in the New York Daily News and the New York Post, investigators say Toussie advertising in such publications as The Chief, a weekly newspaper for New York City civil servants. In some of the ads, Toussie claimed to be the largest builder for New York City police, correction officers and transit workers.

Predatory lending and real estate scams are not unusual but what makes Tussie's case interesting is that it involved a wide-ranging conspiracy of bankers, lawyers, appraisers and others, investigators said.

In one case cited by Newsday, Maxine Wilson paid $146,000 for a Toussie house on Long Island, the value set by an appraised recommended by Toussie. But when neighbors told her she had paid too much, she called in her own appraiser, who valued the house at $125,000. One appraiser has pleaded guilty to filing false statements and others are under investigation.

Several attorneys and loan officers have also been arrested on felony false statement charges.

Besides the inflated sales prices and financing irregularities, many of the 400 home buyers have complained that their houses are shoddily built. Many have encountered problems with the boiler, windows and drainage. One homeowner said her Toussie home had a crack in the foundation, electrical problems, a crack in the living room roof beam and a leaking bath tub.

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