How the Puretz mortgage scam devastated Philadelphia senior tenants

The staggering breadth of the Puretz family mortgage scam continues to surface as Aron Puretz and Boruch Drillman co-conspirator Marc Silber pleaded guilty and as a DOJ indictment of Eli Puretz appears imminent. 

The New Jersey real estate investors are part of a broader scheme across the nation to strip equity from affordable housing complexes, with thousands more across the nation and more than 100 of them in Pennsylvania, the Philadelphia Inquirer recently reported. 

The scam has exposed loopholes in commercial lending that are now under growing scrutiny. The Real Deal has reported on the pattern of abuse in the tri-state area and the intricate relationship among the owners and brokers in these transactions as well as the impact on victims. 

The scam caused widespread devastation of the senior housing complex Brith Sholom in the Wynnefield section of Philadelphia. That complex alone has racked up 275 code violations, siphoned $1 million in resident utility payments and allowed a surge of squatters who are terrorizing the senior residents, the Inquirer reported. 

The same pattern has been described in at least 20 other states, as the Puretz companies accumulated more than 16,000 units of low-income housing nationwide and used them as collateral to take out more than a half-billion in loans. Once the equity was squeezed out, they effectively abandoned the properties, letting them become uninhabitable. 

This left thousands of residences for the elderly and disabled in deteriorating conditions, as lenders foreclosed on the properties. Utility payments and relocation efforts for the displaced tenants have cost millions for local municipalities.

The companies secured nearly $50 million in low-interest government bond financing to buy apartment complexes in Philadelphia and Pittsburgh. Several of these properties are in receivership, subject to a Fannie Mae foreclosure, or condemned, according to the Inquirer. 

One location in Columbus, Ohio, even became the center of a humanitarian crisis when the city discovered 800 trafficked Haitian immigrants living there when a pipe burst on Christmas, according to the Inquirer. 

Lawyers with the Regional Housing Legal Services Reina Mehta and Jack Stucker told the Inquirer that US policymakers have failed to adequately support the aging affordable housing stock. “Our housing is underfunded,” Stucker said. “It leaves projects vulnerable to vulture bad actors.” 

Despite a history of violations resulting in fines and lawsuits since at least 2016, the Puretz companies were still able to purchase properties tied to thousands of HUD vouchers. 

According to the Inquirer, the IRS granted tax-exempt status to charities used by the Puretz companies, allowing them to avoid millions of dollars in Philadelphia property taxes and access low-interest government bond financing.

–Christina Previte