The housing hustle igniting a foreclosure crisis in Baltimore

Diana Scott’s East Baltimore rowhouse isn’t perfect, but for the last five years, it’s given her family stability in an economy where everything from gas to groceries costs more.

Every month the family of five pays $1,100 — an attractive rent considering the value of the home has tripled during their tenancy, at least on paper. Then the foreclosure notice arrived.

Something peculiar is happening to Scott’s home, along with nearly a dozen more on her street and up to 704 across Baltimore. In concentrated pockets of the city’s East and West sides, many of the homes have hit the auction block this year at noticeably inflated prices. And no one is biting.

Scott’s home is part of a portfolio linked to New York buyers who leaned on a newly popular mortgage loan product to buy hundreds of homes in Baltimore. Private equity funds have fueled its rise, and with many of the mortgages now in default, lenders and noteholders have been left holding the bag.

Starting in June, at least five Wall Street-backed financiers blacklisted the buyers, as well as some of their associates and affiliated entities — and clamped down on lending in Baltimore.

But by then the New York buyers had amassed some $100 million worth of loans from at least two dozen private lenders, including AmeriTrust Mortgage Corp. and RCN Capital, according to public land records. At least half of the Baltimore properties in the New Yorkers’ portfolio are in or nearing foreclosure.

So many defaults could send neighborhoods spiraling and untether families like Scott’s. And it has the potential to make Baltimore a ground zero for America’s next great foreclosure crisis, dooming the effort to clear the city’s stock of vacant homes and scaring off investment at a time it’s sorely needed.

Over a four-month investigation, The Banner reviewed thousands of public property records, business filings, court records and private loan documents and analyzed real estate transactions and mortgage datasets. The paper trail leads to a New York buyer named Benjamin Eidlisz, who, for the better part of a decade, set his sights on making money in Baltimore.

Spring Valley, New York

Eidlisz jumped into Baltimore real estate in 2017, with a plan hatched out of an 800-square-foot office in Spring Valley, New York, an Orthodox Jewish enclave in the Hudson Valley.

He had first tried, unsuccessfully, to develop housing in Beacon, New York, according to Eidlisz’s testimony to a New York state judge.

Then he and a business partner, Benjamin “Bruce” Sherr, formed a limited-liability company called B&H Ventures and bought roughly 100 homes in Baltimore. Sherr was to provide the initial funding while Eidlisz, listed as the LLC’s resident agent, would oversee daily operations, according to court filings and testimony.

Initially the profit margins were thin, but Eidlisz and Sherr planned to rent all the homes, refinance at a lower rate and turn a profit by year three, court records show.

Instead, by 2020, their friendship was over and investors began suing.

A raft of lawsuits alleged that mortgages, property taxes, water bills and maintenance costs had gone unpaid. Sherr accused Eidlisz of lying to investors and lenders, falsifying documents and using company funds for personal expenses. Eidlisz denied the allegations and accused Sherr of financial impropriety, which Sherr said was false.

Sherr declared personal bankruptcy and bankruptcy on behalf of B&H Ventures in 2022 — halting the legal proceedings involving him and Eidlisz.

Neither Sherr nor Eidlisz responded to multiple requests for comment. Sherr is not named in the Wall Street blacklists.

Rather than winding down in the face of mounting legal and financial troubles, Eidlisz found a new partner and doubled down.

On April 19, 2022, an entity called EGBE Ventures was organized in Maryland, using Eidlisz’s home address. It was registered in the name of Eluzer Gold, a Spring Valley, New York, resident who had a good credit score, according to personal financial documents reviewed by The Banner.

EGBE Ventures, a combination of Gold’s and Eidlisz’s initials, bought a majority of the B&H Ventures homes.

They weren’t exactly subtle about their intentions: Over the next two years, Gold formed more companies that would buy homes in Baltimore, naming them Zahav Ventures, Kesef Ventures and Gelt Ventures, words that translate from Hebrew and Yiddish to mean gold and money.

Online property records reviewed by The Banner show Eidlisz and Gold’s transactions described as “arms length,” meaning that they were independent parties who didn’t know each other. Disclosing a relationship can help ensure that real estate transactions are free from conflicts of interest or self-dealing and are instead based on the merits of the deal.

Gold’s LLCs ultimately bought more than 500 homes in Baltimore from various sellers and hired one of Eidlisz’s many companies to manage them. Gold also declined repeated requests for comment.

In a brief, in-person encounter outside his New York office, Eidlisz declined to answer substantive questions. He sat in the driver’s seat of a black SUV with tinted windows and a license-plate-shaped car decal that read “#1 DAD.”

Mid-conversation, his phone rang and the screen lit up. “Eli Gold” was calling.

A silver bullet for Baltimore?

Baltimore’s abundance of vacant properties has troubled city and state leaders for almost half a century.

After a blazing vacant house in West Baltimore killed three firefighters in January 2022, Mayor Brandon Scott, Maryland Gov. Wes Moore and business leaders pledged to raise some $3 billion to fight the problem over 15 years.

But as government officials dug in with renewed vigor, they noticed something incredible bubbling just below the surface: For the first time in a generation, the count of vacant buildings was trending down.

The progress stoked newfound optimism among city boosters, including in the mayor’s office, which eagerly shared the makings of a success story with national media.

“Y’all feel that temperature rising? That’s a housing market that’s getting hotter,” said Maryland Housing Secretary Jake Day at an East Baltimore groundbreaking ceremony this summer. “Not just in this neighborhood but across this city.”

A financial advisory group conducting a study for the Greater Baltimore Committee traced the progress to private lenders and found an unexpected source of money flowing into the city.

The researchers reported that financing with high interest rates and looser restrictions, or “hard money,” was helping to pay for investments in neighborhoods where bank money had historically been slow to flow.

It’s called a debt service coverage ratio loan, or DSCR loan. Landlords in Baltimore have been increasingly flocking to it in the past five years, a Banner analysis of national mortgage data shows.

With conventional mortgage loans — which are based on borrowers’ income — applicants are inherently limited on the amount they can borrow.

DSCR loans are particularly attractive to landlords because they have less stringent requirements. To get one, an applicant needs a good credit score and to show that a tenant’s projected rent payment is greater than the homeowner’s monthly mortgage payment.

With these loans, a landlord doesn’t need to show proof of income or even that there’s a tenant lined up. And there’s no limit on how many they can get.

The difference between the two loans is relatively straightforward, said JP Krahel, accounting department chair at Loyola University Maryland’s Sellinger School of Business. With a conventional mortgage, the bank is betting on you, the borrower, to pay the mortgage. With a DSCR loan, the lender needs the renter to pay the landlord, and the landlord must pay the loan.

DSCR loans are generally considered higher risk, which is why most are issued by private lenders, rather than traditional banks.

Real estate influencers have promoted them on social media as the next big thing in real estate. Yet DSCR loans and their impact on the housing market have mostly flown under the radar.

For a long time, almost no one was using DSCR loans to buy investment properties; they were more common in the restaurant industry. But starting around 2020, mortgage originators made these products easier to obtain and more attractive for real estate investors — via more competitive interest rates and 30-year fixed-rate terms.

DSCR lending activity spiked in Baltimore starting in 2021, a Banner analysis shows.

Many lenders liked the deals because they could sell off the debt to private equity firms and insurance companies, including arms of industry giants such as JPMorgan Chase and U.S. Bank. The loans are bundled together in massive pools of mortgages and sold to investors worldwide as securities.

It’s been a boon for Baltimore.

DSCR loans went from contributing roughly 10% of loan dollars backing single-family rental properties in Baltimore in 2019 to about 40%, more than $150 million, last year, according to a Banner analysis of national home mortgage data.

One of the nation’s major DSCR lenders is Dominion Financial, a private mortgage lender headquartered in downtown Baltimore that finances deals around the country.

Jack BeVier, a partner at Dominion, said he’s seen firsthand how transformational these loans can be for communities overlooked by traditional banks.

“The good thing is a lot of houses are getting renovated because New York figured out a solution to a problem the banks here had failed to [solve],” BeVier said in an interview in May.

But not long after, BeVier began noticing that Baltimore was seeing a wave of foreclosures on DSCR-financed properties.

All the foreclosures were linked to the New York buyers.

Dominion didn’t finance any of those deals, but the ensuing dustup threatens the entire DSCR lending market, BeVier said.

‘I regret it now’

Melvin Davis said something felt “weird” when a Baltimore real estate agent, Shraga Lerner, approached him in 2023 with an overly generous offer for an East Baltimore investment property he had bought for $13,000 about five years earlier.

Lerner, according to Davis, told the 69-year-old Maryland Transit Administration bus dispatcher that his client would pay around $100,000 for the rowhouse. The buyer was an LLC that lists Gold as its owner.

When Davis went to sign the papers, the deal was recorded as a $220,000 sale — with $92,000 made out to a third party called Better Way LLC, according to private settlement documents reviewed by The Banner.

That’s one of many LLCs registered to Eidlisz, The Banner found.

Davis, a prolific East Baltimore property owner and landlord, said Lerner told him the extra money would go toward renovating the house. An LLC registered to Lerner, meanwhile, took a $15,000 cut.

Lerner declined to comment. His name appears on a Wall Street blacklist.

It’s unclear what Better Way did with the $92,000. No permits have been pulled for the North Luzerne Avenue home, according to a city database, and the longtime tenant living there told Davis that the house was never renovated.

Davis, overwhelmed by tenants’ inability to pay their bills due to the COVID-19 pandemic, jumped at the opportunity to sell off some of his rental properties. Now he feels he left his former tenants in the lurch.

“I regret it now,” Davis said. He sold seven homes to an Eluzer Gold LLC; all but one have entered the foreclosure process.

At an auction in July on the courthouse steps in downtown Baltimore, lenders for the New Yorkers tried, and failed, to sell some of the Gold properties that went into foreclosure. When an auctioneer read out the addresses, he was met with silence: No one bid.

It’s not clear why Eidlisz and Gold kept buying homes they didn’t seem to lease or renovate. Two LLCs associated with Gold that purchased properties in Baltimore have declared bankruptcy, and in court documents, he attributed their demise to bad luck, saying he couldn’t find tenants.

The New York buyers’ troubles highlight the need for increased regulation in lending, especially among private financial institutions, said George “Mac” McCarthy, president and CEO of the Lincoln Institute of Land Policy in Cambridge, Massachusetts.

The situation closely resembles that of the Great Recession, McCarthy said. Lenders at that time were making thousands of ill-advised loans to keep the money flowing — in spite of the risks attached.

“Who’s going to pull away the punch bowl when things are going well?” McCarthy asked.

Mass foreclosures caused by the DSCR loan failures could hit Baltimore hard, McCarthy said, tanking property values across the city. It will make Baltimore’s supply of vacant houses even more pronounced and harder to fix.

“From the average investor’s point of view,” McCarthy said, “that’s a neighborhood they’re just not going to touch.”

‘Risky’ appraisals

As her house moves through the foreclosure process, Scott, the mother of three from East Baltimore, is assessing her options. So far, she hasn’t found another home that fits her budget.

Scott works for an organization that hands out medical supplies and Narcan to people with addiction. Her husband drives for MobilityLink, a state service that provides transportation for people with disabilities.

As she tried to keep track of her McElderry Street rowhome’s ownership changes, Scott searched through online property records. The numbers listed on the documents confounded her.

Its most recent sale was for about $240,000, exceeding the publicly available Zillow estimate of $106,700.

Scott said none of the landlords in her five years has renovated or substantially improved the property.

This phenomenon is playing out across the city: Homes with little or no documented renovation work have sold for double and triple their prior sale price, routinely above the publicly available estimates.

Many of the homes are even boarded up and abandoned, and others never reported a single tenant living there, bankruptcy records show.

Of the hundreds of homes The Banner identified as connected to the New York portfolio, more than 70% haven’t had a single renovation or construction permit pulled since at least 2019, according to a Banner analysis of the city’s permitting data.

More than half haven’t paid their water bills in a year or longer, a sign that many of the homes may be vacant.

One safeguard in the real estate transaction process could have identified red flags but didn’t.

Home appraisers are supposed to prevent lenders from doling out risky mortgages. They’re trained to look at a house objectively and see how it compares to similar homes nearby — and estimate what a typical buyer would pay for it.

It’s a particularly difficult job in Baltimore, said Bill Riedel, a veteran appraiser who works primarily in the city’s suburbs.

City neighborhoods can change drastically from block to block. Riedel, who also teaches appraisal classes, said an appraiser might fall into a trap thinking a house is worth more because it’s located near high-selling “comparables.”

And if you don’t know Baltimore, Riedel said, “you’re liable to make a really big mistake.”

In a sampling of 88 confidential loan applications reviewed by The Banner, the same two appraisers — Jason Taylor and Christopher Actie — surveyed all of the New Yorkers’ properties.

A variety of third-party reviewers repeatedly flagged many of those appraisals as risky due to their high valuations, according to the loan documents, which outline a host of concerns with the appraisals’ accuracy and methodology. But the lender still approved all 88 of them. Since then, some properties have been reappraised at lower values, the documents show.

Neither Taylor nor Actie, both based in the Baltimore area, responded to multiple requests for comment. Both appeared on Wall Street blacklists.

Foreclosures rain down

One Maryland-based mortgage originator, who asked to remain anonymous so he could speak freely about private business matters, stopped lending to the New York buyers when his company’s software program couldn’t verify a bank statement’s authenticity.

But the buyers turned to other lenders, documents show, including RCN Capital, Deephaven Mortgage and Loan Funder — some of the biggest providers of DSCR loans in the U.S. They kept borrowing more money even as their business unraveled.

When private mortgage companies and their financiers caught wind of the foreclosures and Gold’s bankruptcies this past spring, DSCR activity ground to a halt in Baltimore.

Foreclosures are raining down in East and West Baltimore, including in Penn North, the neighborhood afflicted this summer by a “bad batch” of fentanyl that caused more than two dozen people to overdose in one day.

A few blocks south of Penn North, James Rooths spent almost two years in a home owned by the New Yorkers, splitting the rent with a relative and a friend. Having fallen behind on rent payments, they were in the process of getting evicted when a foreclosure notice showed up this spring.

Reading the pages, Rooths thought he could stay for up to 90 days, so he held off on packing his belongings. It was a relief, Rooths said, because he had ankle surgery scheduled for mid-July.

But it didn’t matter. Unaware of the foreclosure notice, the sheriff’s office evicted the household in July. Rooths only had time to grab his cane, a phone, a cup of instant noodles and his medication. He forgot his phone charger. Everything else he owned was locked inside.

Sweating in the hot sun, Rooths eventually conceded defeat and limped away.

While others are paying the price, the New York buyers haven’t stopped trying to make money in Baltimore.

In July, Eidlisz reached out to a lender to try to buy, sell and refinance a bundle of homes, according to an email exchange reviewed by The Banner. This summer, judges allowed one of Eidlisz’s companies to take over the management of more than 200 of Gold’s properties in bankruptcy.

The bankruptcy documents don’t mention Eidlisz’s transactions with Gold, aside from saying that Eidlisz once served as Gold’s property manager. Under the court-approved agreement, Eidlisz’s company will earn $227,000 in one-time fees, plus $24,000 a month, to manage the properties. That includes Rooths’ former home.

For full details on this data analysis, visit The Banner’s GitHub page about this story.