Behind the stone walls of the gated Windermere Country Club are some of Central Florida’s nicest homes. And nestled along the rolling fairways of its 18-hole golf course, you’ll find a 4,300 square foot home on beautiful Lake Crescent. Complete with a pool and private boat dock, it was valued last year at almost $740,000.
And its owner is crying poor.
The owner is Justice Diane Hathaway. Last November, she convinced her bank she didn’t have the money to keep making payments on her Michigan home on Lake St. Clair, even though she owned her Florida lakefront home free and clear.
In fact, records show in a little over a year, she’s owned four homes: one in Florida, and three in Grosse Pointe Park.
The homes are a part of a dizzying property shuffle that experts say raise ethical and legal questions, but Justice Hathaway has been ducking those questions for more than six weeks.
Hathaway was a Wayne County Circuit Court judge before being elected to Michigan’s highest court in 2008. She ran as an ethical and accountable judge.
But records obtained by 7 Action News have some asking if she was she ethical in how she convinced her bank to let her out from her mortgage on her Lake St. Clair home. It saved her potentially hundreds of thousands of dollars in unpaid mortgage payments.
Hathaway was allowed to do what’s called a short sale. That’s when a homeowner convinces the bank to sell their home at a loss rather than go into a foreclosure. In this economy, with home values plummeting, lots of people try to do the same thing, dodging their debt through a short sale.
But not everyone gets one. To qualify, a homeowner needs to prove to their bank that they can’t afford to keep making their mortgage payments because they’ve suffered some type of hardship, like a loss in income. The process can take months, if not years as Don Marquette learned. When times got tough, his grown-children moved in with him and his wife, and then she lost her job.
He was supporting five adults on his own, so he asked his bank for a short sale, but they wouldn’t approve it. The bank kicked him and his family out of their home.
“It was mortifying,” Marquette said.
“I’m 60 years old, I’ve worked 28 years, I’ve worked all my life. Basically I felt like a bum.”
Hathaway’s story was different. She hasn’t had a shortage of homes to live in. There’s home #1 in Florida valued at about $740,000 that she and her husband bought in 1999. Two years later, they bought home #2 on Lake St. Clair.
A few years later, Hathaway bought home number #3: this one on Windmill Pointe in Grosse Pointe Park, assessed at $208,000.
But then a strange real-estate shuffle began: the homes were moved out of the judge’s name and into her step-kids’ names. It all happened just months before the bank gave Hathaway the green light for a short sale.
Home #3 on Windmill Pointe was moved into her 26-year-old step-son’s name. In Florida, home # 1 was taken out of Hathaway’s name, and put into her step-daughter’s name.
It took months for the bank to reach its decision, and before it did, enter home #4: this one on Grosse Pointe Park’s Balfour Street. Records show it was purchased for cash, placed in Hathaway’s other stepdaughter’s name and assessed at $276,000.
We don’t know if her stepdaughter ever lived in it, or whose cash was used in the purchase, but we do know who’s living there now: over several days, our undercover cameras caught Hathaway watering the plants and being dropped off at the home.
Within a few months of purchasing the 4 th home, the bank approved the short sale for Hathaway’s Lake St. Clair home. It sold for $840,000, almost half of Hathaway’s mortgage. And not long after, the property shuffle started up again.
The Florida home that Hathaway put into a step-daughter’s name was switched back into the Justice’s name. The home on Balfour Street listed in Hathaway’s other step-daughter’s name was also put into Hathaway’s.
“It raises questions,” said Bingham Farms attorney Howard Young.
Young specializes in asset protection and estate planning. He reviewed the timing of the property transfers, but we didn’t tell him they were Hathaway’s. He says while it’s difficult to know why she did what she did, the timing seems unusual.
“It just sounds like, listen I’m going to park these assets in your name for a while, there’ll be deeds recorded, you’ll own them for all intents and purposes but our deal is, because you’re my child…when the trouble passes, you’re going to transfer the property back to me,” Young said.
For six weeks we tried to talk to Hathaway. We called her and sent e-mails asking why she moved properties in and out of her relatives’ names, and whether she told her bank. She had no comment.
So our cameras caught up with her as she left her home. She ducked our questions again.
“Shouldn’t you respond to these? These are important questions,” asked 7 Action News Investigator Ross Jones.
“I have nothing further to say,” Hathaway said before speeding off.
Without an explanation from Hathaway, it’s hard to know why she shuffled her properties in and out of her name, and if it had something to do with her short sale. Howard Young says when his clients have asked about moving assets out of their names to qualify for a short sale , he’s told them to be cautious.
“Those are typically fraudulent transfers, because they are done with the intent to delay, hinder, or defraud creditors,” said Young.
“And we are very careful to advise against making such transfers because even as an attorney, you can well be considered a co-conspirator in a fraud and that has significant ethical issues, and the state bar is going to come looking," he said.
Judges are held to a high standard of conduct in Michigan, and according to the state judicial code, they need to avoid even the “appearance of impropriety.”
The bank that handled Hathaway’s short sale wouldn’t comment on the specifics of this deal, but said they require homeowners disclose all properties in their name. We’ve learned Hathaway did pay her bank $10,000 at the time of the short sale’s closing.
As for Don Marquette, two years after his bank kicked him out of his home, it decided to approve his short sale, but the damage had already been done. He and his wife nearly drained their retirement savings just to put a roof over their head.
If you have a tip for the 7 Action News Investigative Team, contact us a (248) 827-9466 or at firstname.lastname@example.org.
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