Barefoot land faces foreclosure

A lis pendens, which is Latin for "suit pending," is a formal notice that a lawsuit is about to be filed.

Barefoot Retail Partners owns Barefoot Landing's entertainment district, where the Alabama Theatre, House of Blues and Alligator Adventure are located, according to Horry County property records.

The pending foreclosure would not include Barefoot Landing's retail and restaurant areas, which are owned by a separate corporation.

While a foreclosure would include the Barefoot Retail Partners property, it would not affect the operations of the entertainment venues there, which lease land from Filipowski's corporation.

"It would have no impact on us," said Bob Wood, general manager of the Alabama Theater. "The bank would have to honor our lease."

Filipowski did not return telephone messages last week.

Michael Hickerson, a Charleston lawyer who represents TD Bank, also did not respond to requests for comment.

Barefoot Retail Partners bought the property for $9.5 million in 2005, according to county property records. The corporation obtained a $10 million loan from what was then Carolina First to buy the property.

Barefoot Retail Partners obtained another $6 million loan tied to the property from Carolina First in 2007, according to court documents.

The $10 million loan was due in, August and the $6 million loan was due in September, property records show.

TD Bank has not said how much of the loan amounts are in default. That information likely would be included in the foreclosure lawsuit.

Businesses and lawsuits

Filipowski - a 60-year-old son of Polish immigrants who goes by the nickname "Flip" - made his fortune from a Chicago-based software company he formed called Platinum Technology Inc. in 1987.

That company, which produced database management software, grew through a series of acquisitions until it was bought out by Computer Associates in 1999 - the cusp of the dot-com stock run-up.

Computer Associates paid $3.5 billion for Platinum Technology - the most expensive software-industry transaction at the time - and Filipowski pocketed about $300 million from the sale.

Filipowski's success was a boon to Chicago's fledgling technology sector, which had hoped to compete with California's Silicon Valley. His next venture - an Internet incubator called Divine Inc. - proved to be a disaster.

Divine spent millions on overvalued tech start-ups, and its stock offering faltered amid the dot-com bubble's burst, eventually driving the company into bankruptcy.

"It was a life event - one with a lot of learning experiences, but not one with a lot of monetary success," Filipowski told a newspaper in the wake of Divine's eventual demise in 2003.

Filipowski next moved to Winston-Salem, N.C., where he formed his latest business, called Silkroad Technology Inc., which sells business management software.

Filipowski also formed Silkroad Equity, a private investment firm that counts Barefoot Landing's entertainment district as one of its subsidiaries.

Another Silkroad subsidiary - SilkHOB LLC - has been embroiled in a two-year legal battle with the House of Blues restaurant at Barefoot Landing.

House of Blues claims the subsidiary promised to provide the restaurant's promotional and marketing services for a three-year period starting on July 4, 2005.

House of Blues also claims SilkHOB promised to cover the venue's operating losses during that time, totaling $3 million.

SilkHOB claims in court documents that no final agreement ever was signed and that the subsidiary does not have $3 million to cover House of Blues' losses.

A hearing to determine whether House of Blues should be granted a summary judgment in the lawsuit is scheduled for Monday at the federal courthouse in Florence.

HOB Entertainment Inc., the California-based parent company of the local House of Blues, has joined the local restaurant in the lawsuit against SilkHOB.

Filipowski was a former member of HOB Entertainment's board of directors and was one of the people who ousted House of Blues founder Isaac Tigrett as chief executive in 1997 - the same year Tigrett visited North Myrtle Beach to herald the local venue's grand opening.

More lessons to learn

In addition to the Barefoot Landing property, Filipowski soon could lose a trio of oceanfront homes he and his Flips LLC business own along the Golden Mile section of Myrtle Beach, according to court documents.

JP Morgan Chase filed a lawsuit against Filipowski last year, claiming he had defaulted on an $8 million loan for which the homes had been used as collateral.

Filipowski filed a countersuit, claiming the bank tricked him into signing an interest rate swap agreement that he later learned would cost him $750,000 to terminate.

Both sides agreed to dismiss their claims earlier this year, but JP Morgan Chase still has a lis pendens on each home.

Filipowski is trying to sell the homes for a combined $8.8 million, according to real estate listings. That includes $4.6 million for his privately gated home at 3404 N. Ocean Blvd., complete with Japanese garden, ornate furnishings and infinity-edge pool.

In a separate court action, TD Bank is threatening to foreclose on five parcels Filipowski's Coastal Resort Holdings LLC owns in Barefoot Resort because of an unpaid $5 million mortgage. TD Bank filed a lis pendens against that property earlier this month.

Filipowski's legal problems have been complicated by his divorce from ex-wife Veronica, whom he met in the late 1980s during a golfing trip to Myrtle Beach.

Veronica Filipowski received an undisclosed sum from the divorce last year. The judge in that case closed the divorce hearings to the public and only allowed those who signed confidentiality agreements to attend.

Veronica Filipowski now is suing her ex-husband's mistress under North Carolina's "heart balm" torts law, which lets jilted spouses seek financial compensation for adultery. Veronica Filipowski is seeking at least $40,000 in damages from the mistress in a trial scheduled for next month.

The divorce also scuttled Andrew Filipowski's plans to help build a minor league baseball stadium for Winston-Salem's Class A team, the Dash. That team plays in the same league as the Myrtle Beach Pelicans.

Filipowski had co-owned the baseball team - then known as the Warthogs - with Billy Prim, founder of the Blue Rhino propane cylinder exchange company and the brother of Veronica Filipowski.

The Filipowskis split in the midst of the stadium construction, leaving Prim and city officials to come up with his partner's share of the costs. The $48.7 million stadium ultimately was completed in time for the Dash's opening game this year.

Andrew Filipowski and Prim also had been partners in Blue Rhino, which got its name after Prim went on an African safari and remarked that a rhinoceros would be the perfect mascot for his company because it is "tough, sturdy and looks like a tank." Blue was added to the name because it is the color of a propane gas flame.

Blue Rhino also ran into trouble when its auditor questioned some of the company's financial transactions in 1999 and its stock plunged from about $25 per share to $2 per share. Blue Rhino continued to dominate market share, however, and Prim and Filipowski sold the company in 2004 for $343 million.

Most recently, Andrew Filipowski's Silkroad Technology announced this month that it has closed on $40 million in equity financing from a group of investors.

A news release announcing the investment said the money will be used for sales and marketing efforts, acquisitions and product development. It is not clear whether any of the money can be used to pay off debts related to the threatened foreclosures along the Grand Strand.

Tech-sector analysts have said it would be foolish to discount Andrew Filipowski's ability to bounce back from financial setbacks, citing the numerous times he has done it in the past.

"For better or worse, Andrew Filipowski ... is the closest thing the digital content industry has to a rock star," Michelle Manafy, editor of E-Content newsletter, wrote in a 2003 profile of the entrepreneur.

Even amid the breakup of his marriage and the public feud with former business partner Prim, Andrew Filipowski maintained an optimistic philosophy during a 2007 interview with the Chicago Sun-Times, telling the newspaper he has no regrets about his personal or business failures.

"I only think about it from a lesson learned," he said. "If you dwell on the past, you end up going crazy."

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Foreclosure program offers a way to stay home

In the two-hour session, Kidd talked about how lenders make decisions, what information homeowners need to provide to get a loan modification and how the Homeownership Resource Center can help. And she didn't hold back the punches as she described the need for homeowners to be honest with the foreclosure counselors and give them all their financial information.

"If you want to tell us stories to make your file look better, we will close your file," she said. "You have to be able to back up what you put in your hardship letter."

But Kidd was also reassuring.

"It's a very frustrating process, which is why no homeowner should go it alone," she said.

Mismanagement of money is the No. 1 reason people default on their mortgage, Kidd said. She advised the homeowners to cut back on everything they could - get rid of the cable package, cut your own grass instead of paying someone else to do it, put off maintenance around the house and limit holiday spending.

"Change your spending. ... None of these has to be forever," Kidd said.

She explained that banks look at budgets and may ask for some money up front so homeowners should try to have at least two payments saved in the bank.

"Why are we scrutinizing [your spending]? This is for us to build a plan and help you make the bank feel you're a good investment and give you a second chance," Kidd said.

Three years ago Kidd was the only foreclosure counselor with the nonprofit agency, but as the foreclosure crisis has exploded, her staff has grown to more than 20 employees to handle the increasing number of homeowners who need help.

In October, 930,437 properties in the United States and 10,500 properties in South Carolina were in some stage of foreclosure. There were 1,460 in Horry County and 38 in Georgetown County. Horry County has more foreclosures than the national average, with about one in every 118 properties in some stage of foreclosure, according to RealtyTrac, a company that tracks foreclosures.

The Homeownership Resource Center, which gets its funding through grants, is working with more than 1,200 homeowners and has worked on more than 8,000 cases this year, Kidd said.

If homeowners provide all the necessary information and keep in touch with the agency, about 85 percent will get a modification and avoid foreclosure, she said. Only about 45 percent of homeowners who try to do loan modifications on their own succeed, Kidd said.

The program used to involve a lot more one-on-one counseling, but over time Kidd said it was becoming too time-consuming and pulling the foreclosure counselors away from working with banks on modifications.

Homeowners can apply to get help by filling out an application online, calling the center or showing up to attend a workshop.

The process works much more quickly than individual meetings and gets homeowners into the system so the counselors can start working with the bank on their behalf, she said.

Kidd said that she's talked with Horry County about providing some additional workshops in the area in the coming months.

The biggest barrier for homeowners seems to be pride, and many are hesitant to be seen asking for help, another reason why having fewer face-to-face meetings works, Kidd said.

Joe Parker, who went to the information session last month with his wife, Paulette, said that he was worried about someone he knows seeing him asking for help.

"Being a man, I want to be able to provide for my family," he said. "I feel proud, it's hard to ask for help."

How it works

A typical day for the counselors begins with a stack of files delivered to their desks, each representing a homeowner trying to avoid foreclosure. Each counselor works on between 12 and 18 files a day, part of a rotation system to ensure that contact with the banks is consistent and persistent.

With each file, the counselor will review the status of the file, call the lender to get an update and then get in touch with the homeowner.

They spend much of their time with phones to their ears, often on hold for 20 to 30 minutes waiting for answers from the bank representatives. While the process is similar to how a homeowners would get a modification on their own, the agency has developed contacts that help with their success rate.

The agency has strict follow-up policies with the lenders, which helps them stay on top of any changes or requests for additional documents, said Tim Bonomo, another foreclosure counselor.

"Overall the system they have in place here is very effective," Bonomo said.

The counselors work in teams so they share responsibility, especially if a modification fails and a homeowner loses his home. There used to be a lot of turnover when each homeowner worked with an individual employee.

"It was just too emotional on the staff, people were burning out," Kidd said.

The job is still tough on counselors who often take the work home with them and feel a personal responsibility to help the homeowners.

"We take it seriously. We're here fighting for these individuals. We realize what's at stake," Bonomo said.

Foreclosure counselor Yolanda Tolton said it is especially hard when she realizes she can't help someone and has to call and give them the bad news.

"You don't forget it, but you have to put it in a special compartment and move on," she said. "It can't get in the way of you coming in the next day and helping someone else."

The last resort

Some homeowners wait until the last minute to seek help, so the Homeownership Resource Center has a team that handles imminent foreclosures, mainly those scheduled for sale in the coming week.

The critical response team - Mel Meleski and Jonathan McClain - is working against the clock when they get a file.

Meleski will immediately call the bank and try to get it to agree to postpone the sale. He typically doesn't have time to submit updated documents, so he will use the pay stubs, mortgage documents, financial worksheets and hardship letters that are already in the file.

"You try to convince them there's potential," he said.

The challenge is reaching someone who has the authority to grant a postponement and then following up to ensure that the lawyer has removed it before the sale.

Meleski has worked with master-in-equity officers throughout the state and attended foreclosure hearings to contact homeowners when there is still time to save their homes.

"The main thing is getting to people in time," he said. "If you're putting some effort in, the judge is going to give you the time, which is why we're trying to get to people early."

Once Meleski stops the sale, McClain will try to get additional information from the homeowner and work toward a modification.

Some homeowners are not honest about all their expenses or their income, which is one of the problems McClain said he has run into.

"We need to know the truth when we go to battle," he said.

McClain was a mortgage banker and said that his experience on the other side helps him negotiate today.

"I have a more practical view," he said.

Even McClain, who says he's not a softy, gets satisfaction from helping homeowners.

Kathy Reynolds, 43, of Summerville, is one of those who has found help at the center. She went there as a last resort, one last-ditch effort to save her house before trying to sell it in a short sale or giving in to the foreclosure, she said. She had surgery and then lost her job, and knows she won't be able to afford the mortgage payments with her unemployment checks.

"I'm so thankful there is a resource like this, that can be a go-between," Reynolds said. "There is a light at the end of the tunnel and it is not an oncoming locomotive. For the first time I feel like I'm going to be able to keep my house."

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Foreclosure aid out of reach for many

"It's just really disappointing because so many people could really use this assistance to get back on their feet, and it's so limiting right now," said Debbie Kidd, the director of Family Service Inc.'s Homeownership Resource Center.

Kidd said most of the clients the nonprofit housing and foreclosure counseling agency works with don't even come to them asking for help until they are six months behind on payments, which would be too late to qualify for the program. Of the roughly 1,200 cases the agency is working with, fewer than 50 homeowners will qualify under the guidelines, she said.

South Carolina has received almost $300 million through the federal Hardest Hit Fund, which is part of the Troubled Asset Relief Program. On Monday, the state will launch a pilot program to test new foreclosure prevention assistance that should be available statewide by the end of the year, said Clayton Ingram, a spokesman for the S.C. State Housing Finance and Development Authority.

The S.C. Housing Corp. will be administering the program, which will be known as S.C. HELP, or the S.C. Homeownership and Employment Lending Program, with the assistance of nonprofit housing agencies in the state.

Homeowners in the pilot program can qualify for one of two types of assistance: monthly mortgage payments for those who are out of work or a one-time payment to help formerly unemployed homeowners pay off the missed payments and fees.

The program, which was initially touted as a way to help many homeowners who haven't been helped by other programs, will only help a narrow group that qualifies.

Homeowners looking for monthly payment assistance must be collecting unemployment, looking for work, be no more than 120 days behind on their payments and must prove financial hardship. Homeowners who want a reduction in how much they owe to help cover missed payments must be able to document that the hardship was beyond the homeowner's control, that payments were made on time for the year before the hardship event, and the mortgage can be no more that 120 days overdue.

The assistance will be in the form of zero percent interest loans that will be forgiven if the homeowner pays on time and stays in the house for at least five years, Ingram said.

Program changes possible

Kidd said the assistance will only help homeowners who have recently become unemployed or just failed to make a payment, leaving out those who have struggled for months to do a modification and need help too.

"We have some great families we've been working with for a long time, and this is what we were hoping would be the thing to help them save their home," she said. "I'm being optimistic that the state is going to change their policies once they go through the trial program. They're going to have to."

Ingram said the state is open to making changes and said that determining eligibility criteria is one of the purposes of the pilot program.

The state chose to set 120 days past due as the mark for eligibility because after that point a foreclosure has typically been initiated, he said. In addition, homeowners who are fewer than 120 days delinquent are more likely to have positive long-term outcomes, Ingram said. Programs in other states and Treasury guidelines also helped shape the criteria, he said.

Kidd said in many cases banks are waiting six or seven months before even filing a foreclosure notice, and even after that point there is time to work with homeowners and prevent the foreclosure.

Ingram said the state would like to be able to help all homeowners who are facing a hardship, but there just aren't enough resources available.

"With the just knowing the number of people out there, just how far back do you reach? It doesn't matter where you draw the line, someone is going to be left out," he said.

Still hoping for help

For homeowners such as Nicholas Marinelli and his wife, Louise, extra help could mean that they are able to stay in their home, they said. They bought a North Myrtle Beach condo in 2006, but since then Louise Marinelli got hurt, had to give up her job and is now on disability, and Nicholas Marinelli's accounting business has fallen off dramatically, leaving them unable to make their payments.

When they bought the property, they had a 30-year fixed-rate mortgage and paid 25 percent down, but during the past few years, their mortgage rose from about $2,000 a month to $4,000 a month. The bank began the foreclosure process in March and so far the Marinellis haven't been able to work out a loan modification. Nicholas Marinelli has even sent in payments of several thousand dollars only to have them returned because it wasn't the full amount he owes on the property, he said.

"No one is really working with us," Nicholas Marinelli said.

The federal government's Home Affordable Modification Program hasn't helped the Marinellis yet, just like it hasn't worked for other homeowners across the state and country. The program has been widely criticized for its inability to help homeowners avoid foreclosure. In a report released last month, the U.S. Department of Treasury conceded that the number of permanent modifications early in the HAMP program was lower than anticipated.

About 460,000 - or 35 percent of the 1.3 million trial modifications - have become permanent modifications since the HAMP program started in April 2009, according to the report. About 11 percent of homeowners who got the modifications had defaulted again within nine months.

In October, 930,437 properties in the United States were in some stage of foreclosure. There were 1,460 in Horry County and 38 in Georgetown County. Horry County has more foreclosures than the national average, with about one in every 118 properties in some stage of foreclosure, according to RealtyTrac, a company that tracks foreclosures.

Aiming for progress

The modification program is helping more homeowners than when the program launched, said Andrea Risotto, a spokeswoman for the U.S. Department of the Treasury, which administers TARP and the Hardest Hit Fund. But in addition to the modification programs, the Treasury Department has expanded options for struggling homeowners, including through the Hardest Hit Fund.

"It's another tool in the toolbox, really," she said. "Certainly we continue to implement the mortgage modification program. It's a really important part of the administration's broader housing policy."

The Hardest Hit fund was launched in early 2009 when money was given to the five states that had the greatest declines in home prices. The program was expanded this year to provide funding in states that had the highest unemployment rates, including South Carolina.

Horry County's jobless rate was 10.5 percent in September, while Georgetown County's unemployment rate was 10.9 percent. Statewide unemployment ticked down to 11 percent from 11.1 percent. The national unemployment rate stayed at 9.6 percent in October.

"[Treasury] recognized that not only negative equity but unemployment are two issues that many homeowners across the country are struggling with," Risotto said.

Homeowners who are unemployed often cannot qualify for a mortgage modification because they cannot prove their ability to pay off the loan, so the Hardest Hit funds are an alternative, she said.

The Marinellis don't know whether they will qualify for assistance through the state program, but what's clear to them is that they need some help to pay the $24,000 in back payments plus fees they owe.

They've thought about selling the property, but they owe more than it's worth, despite their 25 percent down payment, Nicholas Marinelli said.

Nicholas Marinelli said if he qualified for the Hardest Hit funds, it would be a big help.

"What this might mean, if I could get something to hold me over, to stabilize my economic situation, it would really be a godsend and help me out," he said.

The S.C. State Housing Authority, which designed the program, estimates 20,000 to 33,000 S.C. homeowners will be helped with the Hardest Hit Fund money, Ingram said.

The program was initially supposed to start helping homeowners last month, but additional funding and plan revisions have taken longer than expected, he said.

"We were more optimistic in the beginning that we would be able to get it running more quickly than we were able to," Ingram said.

Once the pilot program is complete, homeowners will be able to apply for the assistance online or by phone.

"We really haven't put an end date on the pilot program," he said. "It will end when we are secure that our system can take applications and process them expeditiously."

The goal is for the pilot program to last no more than 30 days, but there is no firm end date, he said. Other states have started programs quickly and run into problems, something South Carolina wants to avoid, Ingram said.

"We don't want to put more stress on people who are already stressed by having to delay and delay," he said.

The two programs in the pilot program have caps on how much homeowners can receive. Homeowners who receive monthly payment help can get a maximum of $36,000, and those who get a direct loan reduction to help pay off what they owe will have a maximum payment of $10,000 per household in targeted counties and $5,000 in other counties. Targeted counties have the highest unemployment rate within the state, and Horry and Georgetown counties are not among them.

At the end of the trial period, the full roll-out of the program will also offer additional options to homeowners, including a modification program to help homeowners who don't qualify for HAMP, a second mortgage restructuring program and a property disposition program to help homeowners where foreclosure is unavoidable move into a rental property.

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