Monday, June 19, 2006
67 Defaults On Timeshare Mortgages Raise Questions
67 defaults on timeshare mortgages raise questions about Sunterra Villas de Santa Fe resort
After Barry Dunlevy became sick with cancer and back problems, his $100,000-a-year income in the aerospace industry dropped by half. He could no longer afford to make the $178.12-per-month payments on his timeshare at Sunterra Villas de Santa Fe. And he couldn't sell the investment.
In 2005, the company foreclosed on his property.
Dunlevy is one of 67 buyers who defaulted on their Sunterra mortgages in the past two years, according to state District Court documents in Santa Fe. Many of the defendants attributed failure to make the payments to bankruptcies, divorces or death, but some didn't cite a reason.
The high number raises questions about whether some buyers could afford the timeshares -- as well as whether they knew what they were getting into.
Sunterra, now one of the biggest timeshare companies in the world, was founded in 1996. It owns almost 100 resorts in Hawaii, Canada, Europe, Mexico and the continental United States, including Santa Fe. The Santa Fe resort, which has 105 suites, is located at 400 Griffin St., on the corner of Paseo de Peralta near downtown. It opened in 1998.
Customers who buy a timeshare from Sunterra are guaranteed a vacation, usually one week, each year. The cost ranges from $8,000 to $150,000, but most are about $15,000. The price depends on the location of the resort, amenities and the time of year. A summer week on Cape Cod, for example, costs more than an October respite.
Sunterra uses a points system. The owner has a certain number of points that can be used either at the "home resort" or traded for different accomodations at different times at one of the company's other resorts.
Most of the people who defaulted on their Sunterra loan payments owed between $6,000 and $12,000, according to court documents. Interest rates on the loans were commonly 14.9 percent.
The foreclosed timeshares are auctioned off on the steps of the state District Court in Santa Fe. In February, Sunterra was the only bidder for a timeshare owned by José and Mary Gonzales. The company agreed to pay $12,077.36 for the property.
Since 1999, the year after Sunterra came to Santa Fe, the state Attorney General's Office has received 10 complaints about the company, and complaints are also mentioned in the foreclosure files.
In legal documents filed in Sunterra's case against Lawrence and Wendy Fendall of Albuquerque, for example, the couple alleged Sunterra officials misrepresented their product, based the mortgage on a fraudulent purchase contract and made false and misleading statements to get them to attend a sales presentation.
"Our difficulties with the Sunterra purchase started almost immediately," Wendy Fendall wrote in a 2000 letter to the company. The couple told company representatives they wanted to use the timeshare for a particular week in 1999, and sales staff told them they could, but after the sale, they learned they couldn't.
"Three weeks later there was no record of our timeshare purchase in any systems associated with the 800 numbers given to us in our timeshare owner documents," Wendy Fendall wrote, "and our temporary membership card was useless."
The couple had hoped to go to Sedona, Ariz., or South Beach, Fla., but ended up having to come to Santa Fe, an hour up the road. "This experience left us anxious, upset and fearful that we had not only been bamboozled, but deceived and taken advantage of as well," Wendy Fendall wrote.
After a series of other problems, the couple decided not to make payments on the timeshare, Wendy Fendall's letter states. Eventually the company started foreclosure proceedings against them.
Sunterra and the Fendalls reached an agreement this spring, and the case is no longer set for foreclosure, but the couple experienced almost seven years of problems with the company, court records show.
Local Sunterra officials referred all questions to the company's headquarters in Las Vegas, Nev.
Amanda Deveaux, a public-relations official at PJ Inc., a New York City public-relations firm hired by Sunterra, said she was unable to get anyone from the company to comment for this story.
The company asks people a series of 11 questions that start with, "Do you want ... "
All of the questions mention positive aspects of owning a Sunterra timeshare, such as, "Do you want ... A guaranteed vacation every year," and "Do you want ... A spacious suite that is all yours -- every time and everywhere you travel."
Most people would reply "yes" to all of the company's questions, but the Federal Trade Commission recommends people ask themselves some tougher questions when buying a timeshare.
For example, an FTC fact sheet advises that people should add up all the costs, including mortgage payments and expenses, travel costs, maintenance fees and taxes, closing costs, broker commissions and finance charges before making a decision to buy.
It's also important to ask whether the company has a cap on maintenance fees, according to the FTC. Those fees -- which can add up to $500 to $600 a year at Sunterra -- can rise at rates that equal or exceed inflation, and you have to pay them even if you don't use the timeshare.
Prospective buyers should compare the cost of owning a timeshare to the cost of renting similar accommodations in the same location for the same period of time, the FTC suggests.
When comparison shopping, prospective buyers should talk to real-estate agents and people who own timeshare units at the resort, and check complaints with the state attorney general and the Better Business Bureau, according to the FTC.
In New Mexico, most of the complaints lodged against Sunterra were dated around the time the company filed for bankruptcy in May 2000. The company emerged from Chapter 11 bankruptcy in July 2002, according to news reports.
Larry and Catherine Werbelow complained that they drove from their home in Socorro to Santa Fe to attend a four-hour sales presentation in July 1999, but when they tried to redeem their travel coupon for a vacation in San Diego, they were told the company was going through bankruptcy and the coupon was worthless.
The most recent complaint was in 2003, from Julian and Gertrude Leyba of Los Lunas. They wrote the AG's office to say that Sunterra told them their timeshare had been paid off in 1999, then, out of the blue, they received a letter from the company saying they had defaulted.
The Better Business Bureau in New Mexico gives Sunterra a "B" rating, which means the nonprofit considers the company reputable. The rating also means the BBB believes company officials would respond to any complaints against it.
The BBB has a record of only one complaint against the company filed since 1998. But Sunterra did not respond to the complaint.
In May, Sunterra announced in a press release that it didn't file its first-quarter earnings with the federal Securities and Exchange Commission because it had not yet hired an accounting firm. As of last week, the company still hadn't filed the report.
Sunterra lost $34 million last year in net income and $70 million in 2004, according to the company's 2005 report.
Nationally, however, the timeshare industry is thriving, according to the American Resort Development Association.
The association cited an October 2005 PricewaterhouseCoopers study that focused on 47 companies that owned 280 timeshare resorts. The study showed sales of $5.6 billion in 2004, an increase of 15.4 percent over the year before.
"Timeshare continues its spectacular growth with no signs of slowing down," said Howard Nusbaum, president and chief executive officer of ARDA, in a press release. "The growth is occurring across the U.S. and around the globe with developments by public and private companies."
Most timeshares cost about $15,000, according to the organization.
Carol Rose, a former verification loan officer at Sunterra in Santa Fe, said timeshares are popular because owners can pass the investment on to their children. But it's important for people to do their homework, she stressed.
Salespeople tell potential buyers that all they have to do is put a few hundred dollars down and they can go to Hawaii, Mexico and other places they've always wanted to visit, according to Rose. "And then reality sets in. They find that space is very limited. They thought that six months was enough time to book in advance when they need to book a year in advance -- for a place like Hawaii."
"A lot of people are mad at themselves because they're spending all this money and they're not using the timeshare," she added.
Rose, who now owns Amanda's Flowers in Santa Fe, said she worked for Sunterra for more than four years and enjoyed her job.
Sunterra closed its Santa Fe sales office September 1, 2004, Rose said, but if the company ever reopened it, she'd love to go back. "It was a great company to work for," she said.
Now the nearest Sunterra sales office is in Sedona, Ariz., Rose said. Since Sunterra timeshare owners purchase points that can be used anywhere, it doesn't necessarily matter if someone's home resort is in Santa Fe or Sedona. The Sedona resort is also much larger, with 416 suites, according to the company's 2005 annual report.
Rose said she never knew of any dishonest sales practices at the company, and Sunterra officials did their best to educate customers about their purchase.
Customers who have claimed they were misled probably hadn't done enough research on timeshares, Rose said. Filing a complaint against Sunterra "was an easy way for them to (try to) get out of something they shouldn't have done in the first place," she said.
After Barry Dunlevy became sick with cancer and back problems, his $100,000-a-year income in the aerospace industry dropped by half. He could no longer afford to make the $178.12-per-month payments on his timeshare at Sunterra Villas de Santa Fe. And he couldn't sell the investment.
In 2005, the company foreclosed on his property.
Dunlevy is one of 67 buyers who defaulted on their Sunterra mortgages in the past two years, according to state District Court documents in Santa Fe. Many of the defendants attributed failure to make the payments to bankruptcies, divorces or death, but some didn't cite a reason.
The high number raises questions about whether some buyers could afford the timeshares -- as well as whether they knew what they were getting into.
Sunterra, now one of the biggest timeshare companies in the world, was founded in 1996. It owns almost 100 resorts in Hawaii, Canada, Europe, Mexico and the continental United States, including Santa Fe. The Santa Fe resort, which has 105 suites, is located at 400 Griffin St., on the corner of Paseo de Peralta near downtown. It opened in 1998.
Customers who buy a timeshare from Sunterra are guaranteed a vacation, usually one week, each year. The cost ranges from $8,000 to $150,000, but most are about $15,000. The price depends on the location of the resort, amenities and the time of year. A summer week on Cape Cod, for example, costs more than an October respite.
Sunterra uses a points system. The owner has a certain number of points that can be used either at the "home resort" or traded for different accomodations at different times at one of the company's other resorts.
Most of the people who defaulted on their Sunterra loan payments owed between $6,000 and $12,000, according to court documents. Interest rates on the loans were commonly 14.9 percent.
The foreclosed timeshares are auctioned off on the steps of the state District Court in Santa Fe. In February, Sunterra was the only bidder for a timeshare owned by José and Mary Gonzales. The company agreed to pay $12,077.36 for the property.
Since 1999, the year after Sunterra came to Santa Fe, the state Attorney General's Office has received 10 complaints about the company, and complaints are also mentioned in the foreclosure files.
In legal documents filed in Sunterra's case against Lawrence and Wendy Fendall of Albuquerque, for example, the couple alleged Sunterra officials misrepresented their product, based the mortgage on a fraudulent purchase contract and made false and misleading statements to get them to attend a sales presentation.
"Our difficulties with the Sunterra purchase started almost immediately," Wendy Fendall wrote in a 2000 letter to the company. The couple told company representatives they wanted to use the timeshare for a particular week in 1999, and sales staff told them they could, but after the sale, they learned they couldn't.
"Three weeks later there was no record of our timeshare purchase in any systems associated with the 800 numbers given to us in our timeshare owner documents," Wendy Fendall wrote, "and our temporary membership card was useless."
The couple had hoped to go to Sedona, Ariz., or South Beach, Fla., but ended up having to come to Santa Fe, an hour up the road. "This experience left us anxious, upset and fearful that we had not only been bamboozled, but deceived and taken advantage of as well," Wendy Fendall wrote.
After a series of other problems, the couple decided not to make payments on the timeshare, Wendy Fendall's letter states. Eventually the company started foreclosure proceedings against them.
Sunterra and the Fendalls reached an agreement this spring, and the case is no longer set for foreclosure, but the couple experienced almost seven years of problems with the company, court records show.
Local Sunterra officials referred all questions to the company's headquarters in Las Vegas, Nev.
Amanda Deveaux, a public-relations official at PJ Inc., a New York City public-relations firm hired by Sunterra, said she was unable to get anyone from the company to comment for this story.
The company asks people a series of 11 questions that start with, "Do you want ... "
All of the questions mention positive aspects of owning a Sunterra timeshare, such as, "Do you want ... A guaranteed vacation every year," and "Do you want ... A spacious suite that is all yours -- every time and everywhere you travel."
Most people would reply "yes" to all of the company's questions, but the Federal Trade Commission recommends people ask themselves some tougher questions when buying a timeshare.
For example, an FTC fact sheet advises that people should add up all the costs, including mortgage payments and expenses, travel costs, maintenance fees and taxes, closing costs, broker commissions and finance charges before making a decision to buy.
It's also important to ask whether the company has a cap on maintenance fees, according to the FTC. Those fees -- which can add up to $500 to $600 a year at Sunterra -- can rise at rates that equal or exceed inflation, and you have to pay them even if you don't use the timeshare.
Prospective buyers should compare the cost of owning a timeshare to the cost of renting similar accommodations in the same location for the same period of time, the FTC suggests.
When comparison shopping, prospective buyers should talk to real-estate agents and people who own timeshare units at the resort, and check complaints with the state attorney general and the Better Business Bureau, according to the FTC.
In New Mexico, most of the complaints lodged against Sunterra were dated around the time the company filed for bankruptcy in May 2000. The company emerged from Chapter 11 bankruptcy in July 2002, according to news reports.
Larry and Catherine Werbelow complained that they drove from their home in Socorro to Santa Fe to attend a four-hour sales presentation in July 1999, but when they tried to redeem their travel coupon for a vacation in San Diego, they were told the company was going through bankruptcy and the coupon was worthless.
The most recent complaint was in 2003, from Julian and Gertrude Leyba of Los Lunas. They wrote the AG's office to say that Sunterra told them their timeshare had been paid off in 1999, then, out of the blue, they received a letter from the company saying they had defaulted.
The Better Business Bureau in New Mexico gives Sunterra a "B" rating, which means the nonprofit considers the company reputable. The rating also means the BBB believes company officials would respond to any complaints against it.
The BBB has a record of only one complaint against the company filed since 1998. But Sunterra did not respond to the complaint.
In May, Sunterra announced in a press release that it didn't file its first-quarter earnings with the federal Securities and Exchange Commission because it had not yet hired an accounting firm. As of last week, the company still hadn't filed the report.
Sunterra lost $34 million last year in net income and $70 million in 2004, according to the company's 2005 report.
Nationally, however, the timeshare industry is thriving, according to the American Resort Development Association.
The association cited an October 2005 PricewaterhouseCoopers study that focused on 47 companies that owned 280 timeshare resorts. The study showed sales of $5.6 billion in 2004, an increase of 15.4 percent over the year before.
"Timeshare continues its spectacular growth with no signs of slowing down," said Howard Nusbaum, president and chief executive officer of ARDA, in a press release. "The growth is occurring across the U.S. and around the globe with developments by public and private companies."
Most timeshares cost about $15,000, according to the organization.
Carol Rose, a former verification loan officer at Sunterra in Santa Fe, said timeshares are popular because owners can pass the investment on to their children. But it's important for people to do their homework, she stressed.
Salespeople tell potential buyers that all they have to do is put a few hundred dollars down and they can go to Hawaii, Mexico and other places they've always wanted to visit, according to Rose. "And then reality sets in. They find that space is very limited. They thought that six months was enough time to book in advance when they need to book a year in advance -- for a place like Hawaii."
"A lot of people are mad at themselves because they're spending all this money and they're not using the timeshare," she added.
Rose, who now owns Amanda's Flowers in Santa Fe, said she worked for Sunterra for more than four years and enjoyed her job.
Sunterra closed its Santa Fe sales office September 1, 2004, Rose said, but if the company ever reopened it, she'd love to go back. "It was a great company to work for," she said.
Now the nearest Sunterra sales office is in Sedona, Ariz., Rose said. Since Sunterra timeshare owners purchase points that can be used anywhere, it doesn't necessarily matter if someone's home resort is in Santa Fe or Sedona. The Sedona resort is also much larger, with 416 suites, according to the company's 2005 annual report.
Rose said she never knew of any dishonest sales practices at the company, and Sunterra officials did their best to educate customers about their purchase.
Customers who have claimed they were misled probably hadn't done enough research on timeshares, Rose said. Filing a complaint against Sunterra "was an easy way for them to (try to) get out of something they shouldn't have done in the first place," she said.
# posted by John @ 4:45 AM 
