“So get to it. What do you have?”
“Spencer got in over his head. He bought the house in two thousand, saw it go up in value, and pulled the value out in a home-equity loan six years later. I don’t know what he did with the money but he didn’t put enough aside to pay his now two mortgages. He then took the first step down the road of desperation. He combined those two loans into a single refi with one reasonable payment on an adjustable rate.”
“And let me guess, it didn’t solve anything.”
“No, in many ways it made matters worse. He can’t keep up and then the crash happens and he is circling the drain financially. He gets so far upside down on his mortgage he’s breathing dirt. He stops making payments altogether and the bank starts foreclosure proceedings. He does a smart thing and hires a lawyer. The only thing is, he hired the wrong lawyer.”
“He should have hired you, is that what you’re saying?”
“Well, it couldn’t have hurt. The lawyer he does hire doesn’t really know what she’s doing, because she’s like all the other lawyers in town and jumping into the foreclosure business with both feet.”
“Like you.”
“Like me. I mean, paid criminal defense work dried up. Nobody had any money. I was taking referrals from the public defender and working for chump change. I couldn’t even make my child-support payments on time. So I went into foreclosure work. But I did my goddamn homework on it, and I hired a smart young associate out of the kind of law school that puts a chip on your shoulder and gives you something to prove.”
“Okay, I get it, you did it right and Spencer’s lawyer did it wrong. What happened?”
“Well, the one thing she got right was the assessment that a legitimate bank wasn’t going to touch Spencer’s dumb ass. So she puts him into hard money.”
“What’s hard money?”
“It doesn’t come from a bank. It comes from investor pools, and because it’s not a bank, they charge points up front and interest rates above market — sometimes damn close to the rates the mafia guys charge for money on the street.”
“And so Spencer’s problems only got worse.”
“Oh, yeah. This poor guy’s trying to hold on to his house and make his payments. Meantime, he’s sitting on a big fat seven-year balloon. And guess what, that balloon is about to pop.”
“Back up and speak English. I paid off my house twelve years ago. I don’t know what any of this means. What’s the balloon?”
“Spencer made a deal with an investor pool called Rosebud Financial. I heard about them back then, that they had money to bail people out. Supposedly it came from a bunch of guys in Hollywood and it was run by another guy, named Ron Rogers, a real shark. He cut these deals and didn’t care whether the taker could pay or not. If there was enough bottom-line equity in the property, he’d cut the deal, because he knew he’d get two shots at foreclosure: either when the poor slob homeowner couldn’t make his monthly payments or at the end of the term, when there was a balloon payment for the balance.”
“So, the deal is, you pay these high monthlies, and then at the end you still have to pay off the whole note.”
“Exactly. These hard-money deals were short-term mostly. Two years, five years. Spencer got a seven-year deal, which was pretty long, but the seven years is up in July and he’ll owe all the money.”
“Can’t he now go to a real bank and refinance again? The financial markets are pretty good now.”
“He could but he’s fucked. His credit rating is shit and Rosebud Financial is putting the boots to him. They’ve dinged him every time he pays late by a week. You see? They want to put him in a corner. They know he’s got no money to pay the balloon and he can’t refinance the debt because of his record. In July they’re going to take the house from him. And this is where it gets good. You know what Zillow is?”
“Zillow? No.”
“It’s an online real-estate database. You can plug in a property address and get a ballpark valuation based on neighborhood comps and other factors. That was the thing I had to check before we talked, and sure enough, Spencer’s property comes in at high six figures — almost a million bucks.”
“Then why doesn’t he just sell it, pay off the balloon, and walk away with the profit?”
“Because he can’t. That deal he cut with Rosebud requires company approval before a sale can be made. And that’s where he hired the wrong lawyer. The fine print on the contract — she either didn’t read it, didn’t understand it, or didn’t care. She just wanted to put him into that loan and move on, maybe even getting a kickback in the process.”
“Rosebud’s not letting him sell.”
“That’s correct.”
“So, they won’t let him sell. He can’t pay the balloon. Rosebud’s going to take the house, sell it, and split the profits among the Hollywood investors.”
“You’re getting good at this, Bosch.”
Bosch sipped the last of his martini and thought about the scenario. Spencer was facing the loss of his house unless he could come up with more than a half million in cash to pay off the balloon. If that didn’t make him vulnerable to corruption, nothing would.
Haller sipped his martini and nodded as he watched Bosch track it all. Then he smiled.
“I saved the kicker for last,” he said.
“What?” Bosch asked.
“Spencer’s lawyer? The dumb one? Her name was Kathy Zelden. I knew her back in those days. She was a junior lawyer in a small firm, and her boss would send her to the courthouse the first Monday of every month, because that’s when they published the foreclosures list. I was there, she was there, Roger Mills, a bunch of us — first Monday of every month. We’d buy a copy of the list and then the flyers would go out in the mail. ‘In foreclosure? Call the Lincoln Lawyer.’ Like that. Everybody on the list got flyers in the mail, phone calls, e-mails, the works. That’s how I got most of my clients.”
“That’s your kicker?”
“No, the kicker is that I’m talking seven, eight, years ago, when I knew her as Kathy Zelden. She was a real looker, and a year or two later her boss got his hand caught in her cookie jar. It was a mini-scandal. He ended up divorcing his wife of like twenty-five years and marrying Kathy. So the last five years, Kathy Zelden’s been known as Kathy Cronyn.”
Haller held up his glass for a well-earned toast. Bosch was empty but he took his glass and banged it hard enough to draw attention from nearby tables.
“Holy shit,” he said. “We got ’em.”
“We fucking-A do,” Haller said. “I am going to blow their shit right out of the water when we get to that hearing next week.”
He drained his glass just as the waiter brought their dishes of pot roast and duck fried rice.
“Gentlemen,” the waiter said. “It looks like we are in need of more essential vitamins.”
Haller picked up his empty glass and offered it.
“We definitely are,” he said. “We definitely are.”
21
After the pot roast and fried rice, Bosch and Haller tried to piece things together. They agreed that the whole scheme likely started when Spencer, facing the upcoming balloon payment with no money and no approval to sell his home, went to the lawyer who put him into the Rosebud deaclass="underline" Kathy Cronyn née Zelden.
“She says, ‘Sorry, pal, but next year that balloon is going to pop and you’re going to be fucked,’” Haller said. “‘But let me introduce you to my husband and law partner. There might be a way for you to get the money you need before July.’ She makes the intro, and Lance tells him that all he has to do is figure out how to get something into one of the sealed boxes in that big warehouse where he works. Guys like Spencer probably sit around on their breaks talking about ways to defeat the system. Idle work gossip becomes a real thing and the way out of the mess he’s in.”