Meet 96-year-old Albert Blank, and the first thing he does is point to his eyes. "I'm blind," he says. Actually, one eye can still make out shapes. Four years ago, when agents of contractor Paul Grattan Construction Inc. came knocking on the door of his white, frame house in Clairton, Blank's vision was probably better. Perhaps it wasn't good enough, though.
In May 2000, Grattan's salesmen visited Blank and got his signature on a contract calling for new carpeting in two rooms, a new tile floor in his kitchen, and a back door. To pay the $9,990 charge, Grattan's guys introduced Blank to loan brokers The Money Store, which got him a 20-year, $28,239 mortgage that also refinanced Blank's debts. About a month later, Blank signed another contract with Grattan, for a new cellar door and repairs to the cement steps from the backyard to the basement. Blank paid Grattan's $6,850 charge by getting a second, 15-year mortgage via The Money Store.
"They pushed everything on me," Blank rasps. "They put in things I didn't want. ... I signed it. I was a damned fool."
The improvements Blank got for the $16,840 he paid Grattan apparently didn't much enhance the value of the house; the building's value, according to Allegheny County's tax assessors, is now $5,800. The kitchen tiles are coming up, the cellar door is rusting, and the molding around the drafty backdoor is unpainted lumber. The transactions saddled Blank with $353 a month in payments -- a hefty chunk of his $1,100-a-month income -- and $35,000 in debt, set to expire when he reaches 112 years of age. Three months after taking out the second loan, Blank started making down payments on his funeral.
In July 2001, family members discovered the mortgages when they moved Blank to a nursing home. Because the nursing home devoured his income, he stopped making loan payments. Lender Wells Fargo Bank filed for foreclosure in January 2003, but later cancelled the debt when Greg Simmons, anti-predatory lending manager for the Pittsburgh Community Reinvestment Group, raised questions about the legality of the loans.
Paul Grattan says he's not responsible for loans Blank and others take out to pay his bills. "Without a doubt I would recommend a broker to somebody," he says. "But I wouldn't be responsible for how they do their loan. ... I am not a bank."
Grattan declined to meet with City Paper, but talked briefly on the phone.
"I do work on homes," Grattan says. "If somebody is 20 years old or 80 years old, and they need work, I do the work. ... Especially if they're older, because are they going to do the work themselves?" His crews do 250 jobs a year, he says, and if the work isn't satisfactory to the customer, he'll send another crew to fix it. As for the loans, he said, "They made it themselves. ... I've said all I'm going to say."
Nonetheless, his aggressive, door-to-door marketing has left a trail of foreclosures and other sour deals from Clairton to Braddock to Sheraden to Wilkinsburg, where his firm is located. Simmons says PCRG has received more complaints about Grattan than about any other contractor. Those complaints are part of an annual avalanche of grievances about home-improvement jobs and related loans that law enforcement is, so far, almost powerless to stop.
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When a homeowner wants to fix or improve the house, but doesn't have ready cash, it often makes sense to refinance the mortgage. Refinancing can turn the home's value into cash. That cash can pay for quality home improvements that may increase the value of the house.
When the contractor's work doesn't do much for the home's value, and the loan is too big or burdensome, the result can be financial ruin -- a destination several of Grattan's clients have reached or approached:
Â· A Braddock widow who asked not to be named says Grattan's team came to her door "six or seven times. They kept telling me that the house looked worse than the house next door, which is empty." The widow signed several home-improvement contracts over the course of 2002, in which Grattan pledged to replace the siding on three sides of her house and replace three windows, for $19,000. The siding is now warped in one area, and two of the windows are very difficult to lock. Grattan referred her to Champion Financial Services of Regent Square for financing. To pay Grattan's first bill, CFS secured her a $30,000 loan that also paid off some debts. For Grattan's second invoice, she refinanced into a $44,800 mortgage -- almost double the $23,300 the county says her property is worth. The $332 monthly payment proved unmanageable, and the lender filed for foreclosure in December 2003. The widow has filed for bankruptcy in an effort to restructure the debt.
Â· Carol and Paul Mulligan of Sheraden signed on with Grattan in 2001, contracting for nine new windows for $8,000. Grattan also introduced the Mulligans to broker CFS, which arranged a $65,450 loan to wipe out their old mortgage and cover the contractor's bills. The new mortgage exceeded the $51,700 assessed value of their house, but was justified by an appraisal done by Burton Trautman of Clinton, Pa. (Trautman was sued by state Attorney General Jerry Pappert recently for allegedly inflating appraisals to justify loans.) When Paul's work hours were trimmed, the Mulligans missed a few mortgage payments. After about three months, Paul got a new job with more hours. But with late fees and attorney charges, the Mulligans were so far behind that they had to make payments-and-a-half for a year to catch up. The windows have cut their heating bills, but they regret "the hell we [went] through" because of the loan, says Carol.
Â· Grattan's crew came to single-mother Randa Lowe's Wilkinsburg house in 2001, and introduced her to CFS. They fixed a flat roof, she says, but didn't put eaves all the way around. Now rainwater pounds her old windows and comes in through the frames. "It wasn't coming in around the frames until they put their ladders up and bent things up," says Lowe. She's received multiple pre-foreclosure notices on the $37,500 mortgage CFS got her, which exceeds the $28,300 assessed value of her property. "I just never get caught up," Lowe says.
Â· Mildred Williams was 89 in 2001 when a Grattan representative stopped by her Wilkinsburg home, and signed her to a $10,800 home improvement contract. To pay for it, broker America's Mortgage Outlet refinanced her mortgage, putting her into a $45,000 loan. Living on $1,000 a month, Williams couldn't keep up with the $355 payments. Her lender filed for foreclosure in April 2003, and her home of 18 years was listed for sheriff's sale in December. Neighborhood Legal Services attorney Dan Haller got the sheriff's sale postponed, and had a psychologist evaluate Williams. She was unable to calculate her own age, subtract seven from 100, name her neighbors or doctor, or remember whether she'd been married once or twice, according to the psychologist's report. Haller is negotiating with lender Wachovia Bank to have the debt reduced.
"My personal experience is when [borrowers] say the loan got them in trouble, they often really got themselves in trouble," says Mike Annichine, president of broker CFS. He says his firm hasn't used accused appraiser Trautman for several years. "We did have some concerns with him. That's why we cut him off," Annichine says. But he maintains that loans CFS arranged based on Trautman's appraisals weren't inflated, noting that county assessments aren't always accurate measures of value.
Trautman didn't return calls.
"It looks like you've got a crappy contractor getting in touch with a crappy lender to provide bad financing for these deals," says PCRG's Simmons, who is trying to help the above Grattan clients renegotiate their loans. Such arrangements can devastate neighborhoods, he says. "If you get a home that's foreclosed on and in need of repair, it's going to sit vacant and contribute to blight."
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Albert Blank's family complained about Grattan to the attorney general's Bureau of Consumer Protection. The bureau contacted Grattan, whose lawyer maintained that the contractor did nothing wrong. Four months later, the bureau wrote to Blank, saying they "have not been able to resolve this matter on your behalf." The attorney general's office has never filed any lawsuit against Grattan, and won't say whether it has received other complaints about him.
The Bureau of Consumer Protection gets about 2,200 complaints about home-improvement jobs and related loans every year, says bureau Director Frank Donaghue. In a typical year, the attorney general files 30 lawsuits on such cases, and recovers $1 million in restitution for bilked homeowners. Donaghue admits that represents a small fraction of the losses incurred by the 2,200 complainants, and figures those complainants represent just a fraction of those wronged.
It's difficult to do much better, Donaghue says, because of the multitude of contractors and the paucity of regulation governing them. "Anybody with a hammer and a truck can be a home-improvement contractor," he says. Contractors aren't required to register with the state. "You have the traditional fly-by-nighters who are coming in, talking people into signing a home-improvement contract, getting a sizable down payment, and skipping town."
To win a judgment against a contractor, the attorney general must show a pattern of abuse -- a difficult legal standard. "Even if we are able to successfully bring an action, it's often difficult to get the contractor to pay," Donaghue says. "They may go into bankruptcy and then they start up again under a different name."
Since 1998, the attorney general's office has been pushing for better home-improvement regulations. Proposed legislation requires contractors to register with the state and pay a $150 biennial fee. Contractors would have to include their registration numbers on all advertisements, enabling consumers to find out if the firm is legitimate or the subject of complaints. Registration fees would pay the damages of victims of remodeling rip-offs who couldn't get restitution by suing the culprits. Several practices that aren't currently criminal in Pennsylvania in relation to home improvement work -- making false or misleading statements in person or in ads, taking an advance payment and then failing to do the work, and intentionally damaging property during the sales pitch or while doing the job -- would be criminalized.
Each legislative session, the proposal is reintroduced and fails. "Members with really strong associations with the [Pennsylvania] Builders Association have been lobbied to put all kinds of amendments on it, so it wouldn't pass," says Rep. Keith McCall of Carbon County, currently the prime sponsor of the proposal. McCall says he's preparing a major push for the bill.
"We are opposed to registration," confirms Builders Association spokeswoman Debbi Tingley. "There are no prerequisites for being registered. ... It's probably going to create a false sense of security."
State Rep. Steve Barrar, a Delaware County Republican who has led the opposition to McCall's bill, says the registration fee "will end up being a tax on only the legitimate guys. The fly-by-night guys will never pay it."
Some of the legitimate guys, though, want registration. The National Association of the Remodeling Industry's 200 Pennsylvania members take courses and pass competency exams, but see their image tarred by "rip-offs," says NARI Governmental Affairs Director Mark Kinsey. (Paul Grattan Construction Inc. is not a NARI member.) "Let's legitimize the industry," he suggests. McCall's bill gives prosecutors "some teeth to do what they should do without waiting for five, 10 or 20 people to get ripped off."