From the Record:
Nine years after spending millions to build their dream home in Franklin Lakes, Kevin and Cheri Schmidt lost it recently to foreclosure.
The Schmidts have sued their bank, saying it’s to blame for their trouble. The bank declined to comment, saying it doesn’t discuss pending litigation.
Although foreclosures mostly affect lower- and middle-income households, the Schmidts’ story shows that families in upscale towns have also felt the pain of losing a home as the economy and housing market cratered. A check of upcoming foreclosure auctions in Bergen County found properties in Saddle River, Old Tappan and Ridgewood, among other more affluent towns.
According to RealtyTrac, a California company that tracks the foreclosure market, about 4 percent of Bergen County’s current foreclosure cases involve properties valued at over $1 million.
Kevin Schmidt, now 63, has had a long career as a builder and inventor. He and his wife were able to build their sprawling home — which included a pool, home theater, home gym and three-car garage — without a mortgage because he had just sold an invention, the cleaning product Dishwasher Magic, to another company for more than $5 million. They spent $800,000 to buy the lot, and an estimated $3 million to knock down the house on the property and build the new home.
What followed was a run of business setbacks and bad timing, as Kevin Schmidt embarked on several real estate ventures just before the housing market collapsed in the worst crash since the Depression.
In 2007, the couple borrowed against their property, taking out two loans totaling $2.9 million from Oak Ridge-based Lakeland Bank Corp., to get tax write-offs and cash to finance construction projects. The Schmidts say one of the loans had only a three-year term, and when it came due, the Schmidts asked the bank to combine it with their mortgage to lengthen the loan term, and lower the interest rate. They say a bank employee agreed to do so, if the Schmidts sold an investment property in Wyckoff.
The couple have moved to a rental and started a new business venture, IceBoxx, machines that create and bag ice cubes in supermarkets.
The state’s largest housing counseling organization, New Jersey Citizen Action, says that it has seen a number of homeowners like the Schmidts, dealing with foreclosures of high-priced homes.
“These were people who never would have imagined themselves in a situation like this,” said Phyllis Salowe-Kaye, head of Citizen Action. “But there’s no equity left in the house, and they can’t understand what they did wrong.”