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Before the auctioneer could begin the first trustee sale bid on the Bay Point property that sweltering June afternoon, Andy Narraway handed him a flyer: "This foreclosure sale is fraudulent because the underlying Trust Deed was fraudulently created and is being investigated by the FBI."
The message was directed at potential bidders — roughly 20 representatives from banks and real estate agencies who had gathered at the Martinez courthouse steps for the sale.
In addition to the flyer, 46-year-old Narraway had brought newspaper clippings implicating James D. McConville, who ran the company that owned the property being foreclosed upon. They alleged that McConville had conspired in an elaborate mortgage fraud scheme in Southern California. Narraway had also brought a letter from Contra Costa County Deputy District Attorney Ken McCormick confirming the FBI's investigation of McConville.
Narraway hoped Wells Fargo might postpone the foreclosure because its bankers felt threatened or sympathetic — he'd take either one — by his claims that he had been a victim of mortgage fraud. But it didn't work. Just after Narraway's interruption, the auctioneer stopped, made a quick phone call, and returned 10 minutes later with news that the sale would continue.
"Property is commonly known as 39 North Broadway in Bay Point," the auctioneer said. "At this time I'm authorized to pose an opening bid on behalf of the beneficiary in the amount of $1 million even."
The moment Narraway had been dreading the past five months had finally arrived. His dark glasses did little to disguise his nervousness, given the incessant tapping of his foot on the courthouse steps.
Narraway had $750,000 — nearly half his life savings — invested in the apartment complex. Wells Fargo had more than $2.75 million invested in the same property, and when mortgage payments stopped coming last fall, the bank initiated foreclosure. The market's decline meant Wells Fargo stood to lose a chunk of change. But Narraway was about to lose everything.
He watched helplessly as bidders wearing Bluetooth headsets conferred with their bosses about prices. It was, Narraway explained later, like watching torturers decide what implements to use.
The bid for the Bay Point complex may have started at $1 million on this day in 2009, but in 2006, the same property had been appraised, according to loan application documents, at $6.5 million. At that time, Narraway had another $1 million invested in four other Bay Area properties, owned by three companies controlled by McConville. Narraway had expectations of making a moderate profit and retiring in comfort and security.
All five properties are now going into foreclosure, and Narraway stands to lose his entire retirement savings. Banks like Wells Fargo, which foreclosed on the Bay Point property, have some recourse with the federal government through bailout money. But private lenders like Narraway, who believe they've been deceived and have sought help at every level of government, are coming up empty-handed.
Recent media reports about McConville paint a narrative of one villain orbited by hundreds of victims. They largely ignore the role played by institutional lenders and the title companies that provided insurance to investors like Narraway. McConville became an easy scapegoat after it came out that he may have funneled his allegedly fraudulent profits into a slasher film (to be released on DVD later this month) and a lavish lifestyle that included a fleet of valuable muscle cars.
But McConville didn't work alone. He was able to depend on the negligence of lenders, developers, mortgage brokers, and title companies, which real estate experts say were pushing deals through as fast as they could during the housing boom to feed the hungry mortgage market on Wall Street.
No one knows this better than Narraway. During the housing boom, he and countless other private lenders trusted institutional lenders and title companies to reduce risk by doing their due diligence to find and expose signs of fraud on title documents and loan applications.
But Narraway says that, among other things, these entities failed to check whether the person signing the title documents on behalf of a given corporation was an actual officer of that corporation. That would have been as easy as calling the California Secretary of State's office, with which corporations are required to have that information on file. Lenders also failed to check the veracity of information reported on loan applications — including appraisals and monthly rental income — which would have been as easy as plugging the property address into an online appraisal site.
Narraway knew that handing his life savings to McConville was risky. But he also had reason to believe that the risk would be mitigated by a mile-wide safety net. In the past six months, he's had to learn the hard way that the net was full of gaping holes.
Back at the courthouse steps, the auctioneer closed the bid. "This property is hereby sold back to the beneficiary for $1.4 million," he said. Wells Fargo had just bought back the property it foreclosed on.
"Bam! There you go," Narraway said, snapping his fingers at the moment of sale. "Seven hundred and fifty thousand, wiped out."
Narraway arrived at San Francisco's Greyhound bus station in 1987 with $72 in his pocket and his best friend, John Lundy. Both transplants from the U.K., they lived in the Tenderloin, drove beaters, and barely scraped by for years. Flash forward to 2003: Narraway still lived in San Francisco. After more than 15 years running his own advertising businesses, he was looking for a place to invest his savings.