"Are you Ms. Marshall?" Wilhemina Marshall remembers the contractor in the dark sunglasses asking, after he found her family in their temporary apartment.

"We've seen your burned-out house. We can help you renovate."

Wilhemina Marshall thought she had lost everything when, in November 2000, she returned from a nursing shift to discover an electrical short had sent her house up in flames.

Then she got an offer for help.

The contractor said he'd fix the Marshall home and help secure financing to cover the cost. But instead of getting a home improvement loan, the Marshalls say the contractor tricked them into taking out a second mortgage. When the contractor disappeared before the work was complete, the Marshalls stopped making payments. Then, they were hit with foreclosure notices from a bank they'd never done business with.

Today, the Sheriff's Department will put the Marshall home up for sale. They have 10 days to leave.

"This is my castle," said Wilhemina, 57, as her 2-year-old grandson waddled through her small kitchen. "I've worked for this for 40 years. Please let me keep my house."

The Marshalls' case illustrates how easily homeowners can be lured into a contract they don't understand and can't afford.

It is also a complicated example of what is now happening to thousands of Americans. In the next six years, 1.1 million homeowners are expected to enter foreclosure, according to a March study by First American Corp. of California.

The industry responsible for most of those foreclosures -- subprime lenders, which issued loans to risky borrowers -- is collapsing. Left in its wake are boarded-up homes, stunned investors and industry employees across the country with pink slips.

The hook
Wilhemina grew up across the street from her house in Paterson's Northside, a tight-knit community where, back then, people left their doors unlocked. When her neighbors decided to move in 1970, she bought their house for $14,900 with a simple 30-year, fixed-rate mortgage -- far different than the range of loan products now available.

The Marshalls raised their seven children in the quaint two-family home. They held family barbecues, birthday parties and Christmas dinners. Wilhemina's mother, a former sharecropper in Georgia, eventually moved in.

They struggled financially. Leo worked as an operator for R. Tape Corp., a South Plainfield factory, and Wilhemina did shift work as a nurse. They typically earned less than $40,000 a year, they said.

Just before Thanksgiving in 2000, fire gutted their home. The devastated family boarded up the windows and moved into an apartment in the Hillcrest neighborhood. While the house sat empty, they paid on their mortgage, plus $1,100 a month in rent.

"It was just so depressing and stressful to me," Wilhemina said.

The Marshalls used their insurance reimbursement to pay off all but $10,000 of their mortgage. This way, they could sell the house, make some money, and move on. But it was a heartbreaking prospect.

Then in August 2001, John Evans, head of East Coast Developers of Belleville, came calling. How and why he found them made the Marshalls wary, but Evans' words gave them hope. He said his company would transform the couple's house back into livable condition. When the Marshalls said they couldn't afford it, Evans assured them he would find financing.

Days later, Evans came back -- he had found a willing lender. D&M Financial would grant the Marshalls a loan. The Marshalls would sign a $108,000 check from D&M over to East Coast for the repairs. Every month, the Marshalls would pay D&M $1,300 toward the loan.

With visions of the rebirth of their home in their heads, the Marshalls signed a document called a "home improvement contract" with East Coast in October 2001. They endorsed a $108,000 check to D&M's title company.

The line
Several weeks later, the Marshalls received a copy of the home improvement contract in the mail with the words "paid in full" penned in the top left corner. No work had been done yet. Confused, they tried to contact Evans. Unable to reach him, they called D&M's president, Demetris "Jimmy" Michalaki.

There was nothing to worry about, Michalaki said. The repairs would soon begin.

Several months later, contractors did show up and do some work. The Marshalls moved back home in 2002. But a Paterson inspector stopped the work after discovering the contractors lacked the necessary permits. Then, the basement partially collapsed.

"One morning we woke up and the house was sitting lopsided," Wilhemina said. "I stood there with my mouth wide open."

Again, Michalaki reassured them.

But in early 2002, the Marshalls received a letter from a different bank, which had bought the loan from D&M. The bank, one of several who would eventually buy and sell the Marshalls' loan, sent copies of a mortgage application made out by D&M on September 2001 for the Marshalls. The 30-year loan was for $132,000 at 10.75 percent. In addition to covering the $108,000 in home repairs, it paid off the couple's first mortgage and other debt.

Copies of the documents revealed that D&M's appraiser had overvalued the Marshalls home by $100,000. The Marshalls also say their signature was forged and earnings were inflated.

"No one would have loaned (them) that kind of money. The house was clearly distressed," said Brian Fowler, a Ridgewood lawyer representing the Marshalls.

It had been more than 30 years since Wilhemina had studied a loan application, but she knew something was amiss. Calling the bank, Wilhemina tried to explain that D&M gave her a home repair loan, not a second mortgage. Perhaps this bank would finally finish the work on her house, she asked.

The representative, Wilhemina remembers, was not sympathetic. "All they were seeing were dollar signs," she said. "They didn't care about my story."
The Marshalls sought legal help and stopped making payments. Fowler filed a civil lawsuit in state Superior Court in Passaic County against D&M, East Coast and Evans in 2003. But the current loan holder, US Bank, sent a foreclosure notice against the Marshalls for late payments. They eventually declared bankruptcy to stop the foreclosure attempt.

In 2004, a state Superior Court arbitrator in Passaic County ruled that East Coast had been paid "in an apparent conspiracy with D&M" for a "predatory loan," and that D&M was liable.

In its court documents, D&M denied any connection to East Coast, stating that while they may have shared an office in Belleville in the past, they have no "business relationship with East Coast whatsoever."

East Coast's phone number has been disconnected, and it is not registered with the state as a home improvement contractor. Fowler's efforts to locate Evans or East Coast were unsuccessful, and court documents list Evans and East Coast as unserved defendants in the suit.

Frank Catalina, a Jersey City lawyer who handled D&M's defense, did not return repeated calls for comment.

Saul Berkman, a New York City attorney for D&M, said he was not aware of the Marshalls' case. But the company is facing a similar suit in New York involving a contractor working in tandem with D&M. The plaintiff, Berkman said, is at fault.

"Everything has to be taken with a grain of salt," said Berkman about the New York case. "She knew what she was doing."

Meanwhile, Gordon Home Improvement, an independent contractor hired by the Marshalls in 2004, found their house needed thousands of dollars in work. Photos taken at the time show holes in the kitchen walls and exposed floorboards. The Marshalls borrowed money from family members to fix the immediate problems. But they feared for their safety, as the kitchen floor was shifting.

In 2005, banking regulators in New Jersey and New York launched investigations against D&M. A few dozen banks have sued the company for selling them bad loans. In one federal court case in Brooklyn, D&M was accused of conducting "vastly inflated appraisals," misstating borrowers' incomes and writing false checks for about $20 million in loans.

In 2006, D&M declared Chapter 7 bankruptcy, which put the fraud cases on hold. Berkman believed the suits would never come to trial.

The sinker
Superior Court Judge Margaret M. McVeigh ruled against the Marshalls on March 27. She found US Bank deserved payments because it had no knowledge of the loan's original terms.

Calls made to Vladimir Palma, a Mount Laurel lawyer for US Bank, were not returned. A bank spokeswoman declined to comment, citing customer privacy.

Today, the Marshall home will be part of a county foreclosure sale. Fowler filed an appeal to stay the foreclosure and reverse McVeigh's decision but was not optimistic. "It's a pretty desperate situation," he said.

After hearing about the sale on Monday afternoon, Wilhemina was having trouble breathing.

"What am I going to do? Walk across the street and throw myself in the river," said Wilhemina, who didn't know where she will go if her house is sold.

What happened to John Evans?
One of the biggest mysteries in Leo and Wilhemina Marshall's case is what happened to John Evans -- the contractor who first approached them about financing their home repairs.

Brian Fowler, the Marshalls' lawyer, sued Evans for violating a long list of state and federal legal protections in executing a home improvement contract.

But Evans has yet to face any legal questioning on his conduct.

Jeff Lamm, spokesman for the state Attorney General's Office, said they have no registered complaints against East Coast Developers, the Belleville company that Evans represented when he contacted the Marshalls in 2001.

But East Coast does not hold a state contractor's license, and the license number listed on the contract issued to the Marshalls is not valid, Lamm said.
"If they are doing renovation in homes, they shouldn't be," he said.

Evans was subpoenaed by Fowler to testify in court but failed to show in 2004, legal filings show. East Coast is listed in court documents as an "unserved" defendant.

East Coast's repair contract lists 383 Washington Ave. as their place of business. 383 Properties, a West Orange company that owns the building, could not be reached Monday for information about their former tenant. DMAC Financial Corp., the property's current tenant, has been there for a year and said they had no knowledge of East Coast.

While Evans goes missing, the list of accusations against him by Fowler on behalf of the Marshalls is extensive. Under New Jersey's Consumer Fraud Act, a home improvement contract must include start and end dates for the work, which are not listed on the paperwork given to the Marshalls. The law also bars contractors from accepting the full payment before any work has been completed.

Fowler hired an investigator to locate Evans, but he had vanished.

"The business was shut down and they were gone," Fowler said.

--Heather Haddon
Reach Heather Haddon at 973-569-7121 or haddon@northjersey.com.