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Editor’s Note: Here is another sore point in the mortgage meltdown: Developers were in on it up to their necks. One of the ways the appraisals were skewed was to use the developer’s asking price, which at times was rising by as much as 10% per month, giving the appearance of a rapidly advancing market. This was part of the fraud on the market. Developer’s knew they could get away with it because of a tacit or actual agreement with Wall Street and Lenders, and the appraisers who certified the value of the property. The pressure from Wall Street was relentless: get the money out because they had already sold the mortgage backed securities. Any “loan” would do.

Student Filmmakers, Not Ceasing or Desisting

Aha! Sarah Friedland saw the pink slip in her mailbox, a notice that the post office was holding an item for her. Ms. Friedland, a graduate student at Hunter College in Manhattan, was sure a friend had sent her a package. But the mail turned out to be a registered letter from a lawyer who was very unhappy about a documentary film she is making on a subprime loan scandal in Brooklyn.

One sentence near the end summed up his message in boldface capital letters: “You are hereby ordered to cease and desist” saying unpleasant — and what the lawyer maintained were untrue — things about the developers he represents.

“At first,” said Ms. Friedland, 29, “I was a little intimidated. Then I got mad.” Soon, she heard that the same letter had gone to two other students who were collaborating on the film, Kahil Shkymba and Joy Nayo Simmons.

They had started work on the film project, called “Subprimed,” in February 2008, when Ms. Simmons, who works in Councilman Charles Barron’s office, told a class at Hunter that 14 residents on two streets in East New York — Dumont and Lincoln Avenues — were in danger of losing their homes. They all had bought the properties from the same developers.

It was a powerful story, and by the time the cease-and-desist letters arrived in June, the students had already plowed money and uncounted hours into the film, which is not yet finished. The legal threat, said Mr. Shkymba, 42, did not worry him, “but just going through the process of defending it would have been a hassle, and possibly expensive.”

For many of the homeowners, the saga began when they spotted signs on lampposts around Brooklyn advertising houses for “no money down, no closing costs.” The houses were being sold by “HPD, LLC,” which, at a glance, looked like it might have been the city’s Department of Housing, Preservation and Development. In fact, HPD, LLC is a private company owned by two brothers, Michael and Joseph Makhani.

In the film, Joseph Makhani is asked if the name of the company deceptively suggests it is a government agency. “If the client is stupid, that’s not my problem,” Mr. Makhani replies. “We’re not going to have classes to teach people how to read.”

Nathaniel Hill, a limousine driver, said in an interview that he bought a two-family house from HPD in 2006 for $663,000. Like others in the film, he said he was told just before the closing that he had to come up with cash — in his case, $18,000 — that was not applied to his mortgage. At the closing, he said, he learned that monthly payments would be not about $3,000, as he had been told, but $4,189.

Mr. Hill, whose annual income of $34,000 is only two-thirds of the yearly mortgage cost, said that the financing was arranged by people connected with HPD. “They’re all together in it,” he said last week.

Mr. Hill’s home is one of three on those streets that are now in foreclosure, Mr. Shkymba said, but others are in default or under intense financial pressure. “They’re all in adjustable balloon mortgages,” he said. “The balloon payment at the end is more than $100,000.”

The lawyer for the Makhani brothers, Steven J. Masef, said in the letter to the students that the developers had nothing to do with the financing for the buyers, including Mr. Hill. Any claim to the contrary, he said, was “not only a manufactured fiction but a demonstrable falsehood.” Moreover, he wrote that Mr. Hill was not credible because of a drug sale conviction 19 years ago.

But the pictures tell the story, as much as any individual. The drywall in one of the HPD houses is sliced open. There is no insulation behind it. “In cold weather, you’ll see smoke coming out of your mouth in the bedroom,” Mr. Hill said.

On the film’s Web site, the students, who are in Hunter’s Integrated Media Arts Program and the Urban Planning Program, say that “the villain behind the tragedy is the company HPD, LLC.” Mr. Masef objected, writing, “Joseph Makhani and Michael Makhani are established members of the community.”

Mr. Shkymba said, “We looked up the definition of villain, and one definition is ‘criminal.’ ”

In fact, both Makhani brothers pleaded guilty in federal court in 1999 to taking part in a scheme involving foreclosed properties in Queens; they were fined and sentenced to three months in prison. And last December, HPD and two other companies in which Joseph Makhani is a principal pleaded guilty in State Supreme Court to filing false deeds as part of a housing scam in Queens. The companies were fined $5,000 each.

Chris Dunn, a lawyer with the New York Civil Liberties Union, is now representing the students. “A student film exposing the exploitation that lies behind much of the foreclosure crisis is exactly the type of speech the First Amendment is designed to protect,” Mr. Dunn said. “We will vigorously defend the right to make and show this film.”

“We’re in it for the long haul,” Ms. Simmons, 34, said.

In fact, a few weeks ago, they screened the film in progress at a block party on Dumont Avenue. “They showed it right in front of my house,” Mr. Hill said.

E-mail: dwyer@nytimes.com

Filed under: bubble, CDO, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage | Tagged: borrower, disclosure, foreclosure defense, foreclosure offense, fraud, Lender Liability, predatory lending, rescission, RICO, securitization |