The name Topletz Investments resonates around southern Dallas as the gold standard for slumlord exploitation of the poor. The Topletz family is infamous for purchasing hundreds of bottom-quality, dilapidated houses, slapping a coat of paint on the exterior, then renting them out to low-income residents willing to accept a rickety roof over their heads.
Patriarchs Harold and Jack Topletz spent years expanding their housing empire by snapping up hundreds of properties from owners desperate to sell or from foreclosure sales such as those that occur every first Tuesday of the month outside the Dallas County courthouse. Only the Topletzes win in this scenario: Tenants end up overpaying for rentals, the surrounding neighborhood’s value falls as a result of the squalid conditions and City Hall can’t keep up with the numerous code violations on Topletz-owned property. It’s a perfect storm of safety and quality-of-life problems inflicted on southern Dallas.
Since Jack Topletz died last year, Harold’s son, Dennis Topletz, has pursued a new approach: Instead of buying cheap properties and renting them, why not quickly flip them for a high price, with self-financed mortgages charging 11.5 percent interest?
The idea emerged from his close collaboration with another southern Dallas slumlord entrepreneur, Douglas T. “Chase” Fonteno, who built his own real estate empire, in part, by acquiring houses through adverse possession — squatter’s rights — without the real owners’ knowledge or permission. Fonteno had years of experience selling these crummy houses at exaggerated prices. He self-financed and charged buyers 11 percent interest rates.
Joining forces
Now Fonteno and the Topletz family have joined forces to begin investing in some adverse-possession properties while co-financing high-dollar, high-interest mortgages for nearly worthless houses.
Fonteno’s operation was the subject of a May 18 Points special report. Since its publication, he has curtailed public access to his blogs and taken down his Facebook page.
Many of the same personalities in Fonteno’s offices at the height of his adverse-possession operation, which involved multiple overlapping companies, also have worked alongside him in the Topletz offices at 7509 Inwood Road. The interchangeable nature of the Topletz and Fonteno businesses sometimes gets confusing to the point that the names of personnel and companies mix regularly in property-transaction documents, making it appear as though no delineation exists.
A good example was a June 3 foreclosure sale at the county courthouse conducted by Carver Dan Peavy, a former Dallas ISD trustee who apologized and resigned in 1995 from the school board after using racial slurs and profanity in a private phone conversation. An investigation ensued over allegations of his role in a DISD insurance-fraud scandal, but Peavy successfully argued in court that the phone conversation on which the allegations were based was recorded illegally. Years later, Peavy served as director of acquisitions for Fonteno’s Hilton Head Properties.
Outside the courthouse, Peavy sat in a chair quietly offering to take bids on seven southern Dallas properties whose owners had defaulted on their high-interest loans.
“I work for the Topletzes,” Peavy told me as he called for bids on one foreclosed property. But five of the seven properties he offered for sale were on behalf of Fonteno companies. One of the five was a house at 4106 Marshall St., which Fonteno’s organization acquired by adverse possession in 2006 and has sold multiple times at inflated prices and high interest rates.
The sole bidder on the Marshall property was a woman who identified herself only as Grace and said she worked for the Topletzes but also was bidding on behalf of MLE Partners. Fonteno has listed himself in documents as MLE’s president, while other MLE documents indicate participation by the Topletzes.
Grace’s winning bid for the Marshall house was $10,000.
After the foreclosure sale, I asked Peavy if he was aware that he had just sold an adverse-possession property. He seemed surprised. “I don’t have anything to do with those things at all,” he insisted.
But the fact is that the foreclosure-sale document named both Dennis and Harold Topletz as trustees of the mortgage for 4106 Marshall. With this foreclosure sale, Peavy had placed Harold and Dennis Topletz’s names on an adverse-possession house transaction and established their financial interest in the property’s sale. Real estate law experts say they can’t cite a single instance in which Texas courts have upheld the taking of urban residential property by adverse possession.
Later that day, Peavy filed a notarized document claiming that the winning bid was $13,000 — not $10,000 — and that the bidder was GP Acquisitions LLC, another Fonteno company. Grace, the sole bidder, never claimed at the sale to represent GP.
The notarized document put some distance between the Topletzes and the adverse-possession property their employee had just acquired. But I’ve obtained other adverse-possession mortgage documents that indicate Topletz involvement.
Licensing question
Aside from adverse possession, another big legal question has emerged from the Topletz-Fonteno partnership: Is anyone in either operation licensed to negotiate and issue their mortgages? It doesn’t appear so. Yet state and federal laws require anyone who originates more than five property mortgage loans per year to register and be licensed.
The federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008, known as the SAFE Act, defines a loan originator as someone “who takes a residential mortgage loan application and offers or negotiates terms of a residential mortgage loan for compensation or gain.” The Texas Department of Savings Mortgage Lending says the issuing of special warranty deeds or deeds of trust constitutes loan origination.
According to Dallas property records, Fonteno signed and filed more than a dozen special warranty deeds on behalf of the Topletzes in 2013. Peavy has signed and filed more than 20 special warranty deeds this year. Another colleague whose name appears in both Fonteno and Topletz organization documents, Cecilia Flores, filed nearly two dozen in 2013. Since the start of 2013, Topletz Investments has issued more than 100 special warranty deeds and deeds of trust.
My review of state online registries shows no mortgage-origination licenses issued to any of the Fonteno or Topletz organizations or the individuals mentioned above. The law does offer some exemptions, but none appears to apply here.
The state mortgage lending department is charged with protecting consumers from unfair or abusive lending practices. It’s the closest thing the state has to a consumer-protection bureau for homebuyers. Department officials told me they are reviewing documents in the Fonteno-Topletz cases and might refer the matter to other state or federal agencies.
Gaps of thousands
Why would that consumer-protection agency’s oversight be useful in a case like this?
Consider that the average value of Topletz mortgage filings since January 2013 is around $55,400. The average Dallas Central Appraisal District assessed value for those properties is around $14,500, making the average difference around $40,900.
Look at an individual house in that inventory. Fonteno arranged the sale and mortgage of 4614 Stokes St. in the very low-income neighborhood of Joppa in March 2013, selling it to Jennifer Wells for $49,000 on behalf of Topletz Investments.
The house has never been valued by DCAD for more than $12,800. When Wells bought it and agreed to an 11.5 percent interest rate, the appraised value was only $7,800.
Or consider Debra Brown, who signed an $83,000 mortgage with Peavy even though DCAD appraises her house at 3837 Colonial Ave. at only $11,830.
That provides just a taste of what this perfect storm of real estate practices by the Fonteno and Topletz organizations is doing to exploit poor people around southern Dallas. It’s time for local, state and federal authorities to step up and enforce the law.
Dallas Morning News editorial writer Tod Robberson may be contacted at trobberson@dallas news.com.