Posts Tagged ‘foreclosure crisis’
Posted on April 4th, 2011 by Mark Stopa
Last night, a friend of mine watched this video on 60 Minutes. He couldn’t believe how widespread and pervasive the mortgage and document fraud has been in the foreclosure industry. In the video, for instance, multiple people admitted they forged signatures on Assignments of Mortgage, purportedly as Linda Green, to facilitate foreclosures for big banks. My friend asked me what many homeowners have wondered:
“How can the banks get away with this?”
My inability to give a satisfactory answer that question is maddening. Sure, I told my friend how banks’ lawyers argue the assignments of mortgage are irrelevant because their standing to foreclose is predicated on an indorsement, not on an assignment, and the intent of assignments is merely to alert creditors to the proper mortgage holder. But that argument left him cold, just like it leaves me cold when lawyers make that argument in court. After all, how can banks be committing fraud to this degree, for the express purpose of facilitating foreclosures, and it be irrelevant in foreclosure cases?
My response, of course, is that it can’t. Regardless of whether banks file a fraudulent assignment in that particular court file or try to use that assignment to facilitate a foreclosure, to turn the other cheek at this misconduct is to enable it.
Years ago, I routinely filed Motions to Disqualify Counsel when I saw a fraudulent assignment like this, as often that assignment was drafted by the banks’ lawyers, who were facilitating the misconduct. I’d estimate I had ten hearings on those motions. Each time, I argued (among other things) this was a fraud upon the court and the courts should not continue to denigrate the integrity of the profession by allowing this misconduct. Each time, I pointed out how the public’s perception of the judiciary was getting worse and worse by what could only be characterized as widespread fraud. Yet each time, those motions were denied. Each time, the judges didn’t seem to care that the assignments were so obviously bogus, created after-the-fact, by robo-signers for numerous different banks.
Watch the 60 Minutes video. As you do, ask yourself: How can the banks get away with this? And what does it say about our court system that widespread sanctions have not been implemented for this obvious misconduct? Or, as my friend wondered:
How can the banks get away with this?
Mark Stopa
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Posted on January 4th, 2011 by Mark Stopa
I just had the pleasure to read Foreclosure Report from Florida Attorney General. Wow. Just … wow.
To all of you out there who question the existence of foreclosure fraud, you must read this report.
To those of you who wonder whether homeowners could ever have valid defenses to foreclosure, you must read this report.
To anyone who thinks banks are have done nothing wrong, you must read this report.
As you do, bear in mind – this isn’t coming from me, a foreclosure defense attorney, or a “disgruntled” homeowner. This report comes from the Florida Attorney General.
The entire report is awesome, but I particularly like the solutions suggested by the AG:
1. Assuring the integrity to the judicial foreclosure process
– Documents submitted must be true and accurate
– Affidavits must be proper in substance and form
– Assignments must be properly executed and accurate
2. Due Process Rights to the Foreclosed Homeowners
– Proper Service of Process on the Homeowner
– Proper Standing to sue by the Plaintiff Bank
– Substantive review of paperwork prior to foreclosure
Foreclosures will have to go forward, and there will be many more next year, but they need to be done within the law.
Mark Stopa
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Posted on December 12th, 2010 by Mark Stopa
David Bornstein of the New York Times penned a nice article today called When Lenders Won’t Listen. Here’s the part that really jumped off the page at me…
After describing the injustices experienced by several homeowners in their experiences with lenders, a competing view was presented:
There are those of us who were raised with the idea that if you make a bargain you keep it. If you say you will return something you have borrowed, whether it is a lawnmower from next door or a bank loan, then you do what you have said. … But then I was raised in a different America.
Unfortunately, I fear too many Americans, who remain unfamiliar with the foreclosure process, feel this way (presuming, of course, that position is from a homeowner and not a bank crony who is paid by the banks to sway public opinion by submitting such posts). Anyway, I loved the response of David Bornstein, the author of the article, who wrote:
Not all bargains are made in good faith, however. Borrowers and lenders, it turns out, did not share equal information in many cases. … It was predatory lending that decimated inner city neighborhoods — not anything that resembled fair deals. … [M]any homeowners across the nation did understand what they were signing even if they failed to appreciate the real risks. The difference was that the borrowers made their mistakes one house at a time, effectively as amateurs. The lenders made these mistakes as professionals, dealing with hundreds of thousands of borrowers, and they concealed the cumulative problem even as it was metastasizing. So now we have millions of homeowners who wouldn’t be in distress if not for the fact that they lost their jobs as a result of a recession that was precipitated by the very bankers who are now threatening to foreclose on them.
Wow. What a truly awesome way to describe the impetus for the problems we’re facing.
I urge all of you to forward that paragraph to your family, friends, and neighbors – unless, of course, you just want to forward this entire blog. 😉 From the words of a New York Times columnist, let’s make everyone realize the banks are the bad actors in the foreclosure crisis. After all, the first step to a solution is recognizing the problem – and clearly the greed of the Wall Street Fat Cats was and is the problem.
Mark Stopa
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Posted on November 18th, 2010 by Mark Stopa
Today’s Washington Post reports that Citimortgage has admitted mistakes in its foreclosure filings. Unfortunately, news like this has become so common that it’s easy to say “ho, hum,” but we must not fall into that trap. For instance, here’s a quote that is buried in the story but, upon reflection, is really, really disturbing:
“to assure that these affidavits are substantively correct and properly executed, Citi expects that affidavits executed prior to the fall of 2009 will need to be refiled”
Think about that for a minute. As I read that, Citi is admitting that all affidavits executed in and before the Summer of 2009 must be re-filed, apparently because every such affidavit was done incorrectly. You may think that’s a good thing, but ask yourself this – what about all of the homes Citi foreclosed on from before the Fall of 2009?
I can’t speak for Citi, but I can vitually guarantee you that Citi isn’t going to unwind any of those foreclosures. The new affidavits wil only be filed in the cases that aren’t already over. For those that lost their homes to improper evidence, there is, apparently, no remedy.
Here’s the entire story…
http://voices.washingtonpost.com/political-economy/2010/11/citimortgage_admits_to_foreclo.html
Citigroup, which for almost two months has claimed its process for preparing foreclosure affidavits was sound, is reviewing about 14,000 documents, including 4,000 that may have been notarized improperly, a company official said in written testimony to Congress to be delivered Thursday.
Unlike other large mortgage servicers it competes with, Citi had not frozen foreclosures and had repeatedly declined to publicly discuss any internal reviews it was conducting. Harold Lewis, managing director of CitiMortgage, said in the written remarks that 10,000 of the 14,000 documents being reviewed are for judicial foreclosures.
The purpose of the review is “to assure that these affidavits are substantively correct and properly executed. Citi expects that affidavits executed prior to the fall of 2009 will need to be refiled,” Lewis said. The other 4,000 documents that are being reviewed were prepared at its Dallas processing center and “may not have been signed in the presence of a notary, to assure that these affidavits are substantively correct and properly executed.” Lewis said these affidavits were also be refiled.
Lewis and other representatives from large mortgage servicers-Bank of America, J.P. Morgan Chase, Ally Financial-will take questions from members of Congress Thursday starting at 10 a.m. at a House Financial Services Committee hearing. Lewis said that Citibank had been taking steps to improve its foreclosure practices since the fall of 2009.
In responding to questions about the robo-signing problems at other servicers, Citi has previously said that it has “have strong training to ensure that appropriate employees are fully aware of the proper procedures.”
Mark Stopa
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Posted on November 11th, 2010 by Mark Stopa
I had the opportunity today to interview with Bay News 9 in Tampa, essentially to give my opinions about the flaws with senior judges and rocket dockets. The interview aired in Tampa and Orlando. Here’s a link to the story, with video; the written version is below.
Jacqueline Fell, the reporter on this story, did a really nice job showing the contrast between how judges view the foreclosure process and how foreclosure defense lawyers do. Unfortunately, this debate isn’t going to end any time soon.
ORLANDO –
Foreclosure courts started in Orange and Osceola counties in July. It’s money straight from the legislature to pay separate judges to hear just foreclosure cases. It’s helping keep the court system moving. But some have said it’s helping banks kick people out of their homes faster.
Foreclosure courts were supposed to be the answer to the back log of cases at the courthouse. But just a few months and thousands of cases later, it’s now heavily criticized by national media and advocates for going too fast.
Administrative Circuit Judge Fred Lauten was hearing a number of cases before foreclosure court started. He said 10,000 cases in Orange and Osceola counties have been resolved since July, and it’s not moving too quickly.
“There are days when I’ve heard 10 cases in a hour, and there are days when I may have heard 30 cases an hour,” Lauten said.
“In a particular morning, a judge could rule on 100 foreclosures between morning session and break for lunch. The next day, the judge may only get to 25 to 30 of them. [It] depends on what the issues are on the case,” Lauten said.
Mark Stopa, who is one of the most outspoken foreclosure defense attorneys in the state, disagrees and said the foreclosure process is broken. “What happens is these rocket dockets and senior judges and everything just goes on a fast track, especially when homeowners don’t have a lawyer,” Stopa said.
When concerns of faulty paperwork made newspaper headlines, big banks put a moratorium on foreclosures to investigate. But things are back up and running.
Lauten said it’s not the job of the judge to find the proper lending owner and so criticism shouldn’t lie within the courts. “Any individual judge needs to decide the case based on what they hear in the courtroom, based on the evidence that’s presented before him or her and not based on something he might read in a newspaper or see on television,” Lauten said.
Stopa is urging for government intervention, saying homeowners aren’t given a fair chance to voice their arguments. He also continues to stress this process is so convoluted and complex that a homeowner shouldn’t go at it alone.
Stopa said getting an attorney for a year can be less than one month’s mortgage and could mean the difference in moving out or staying in your home.
Federal lawmakers are about to take a closer look at the judicial system’s role in the foreclosure crisis.
The House Judiciary Committee will hold a hearing next Wednesday.
A Florida congressman requested a hearing on the implications accelerated foreclosure courts have had on the rights of homeowners facing foreclosure.
Mark Stopa
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Posted on November 10th, 2010 by Mark Stopa
I read lots of articles in the media about foreclosure, and this one may be the best I’ve ever read. It’s a little crass, as it includes a few f-bombs, but put that aside and what you have is an author who does an incredible job of explaining the foreclosure crisis in a way that the typical American can understand.
By: Matt Taibbi, Rolling Stone
The foreclosure lawyers down in Jacksonville had warned me, but I was skeptical. They told me the state of Florida had created a special super-high-speed housing court with a specific mandate to rubber-stamp the legally dicey foreclosures by corporate mortgage pushers like Deutsche Bank and JP Morgan Chase. This “rocket docket,” as it is called in town, is presided over by retired judges who seem to have no clue about the insanely complex financial instruments they are ruling on — securitized mortgages and labyrinthine derivative deals of a type that didn’t even exist when most of them were active members of the bench. Their stated mission isn’t to decide right and wrong, but to clear cases and blast human beings out of their homes with ultimate velocity. They certainly have no incentive to penetrate the profound criminal mysteries of the great American mortgage bubble of the 2000s, perhaps the most complex Ponzi scheme in human history — an epic mountain range of corporate fraud in which Wall Street megabanks conspired first to collect huge numbers of subprime mortgages, then to unload them on unsuspecting third parties like pensions, trade unions and insurance companies (and, ultimately, you and me, as taxpayers) in the guise of AAA-rated investments. Selling lead as gold, shit as Chanel No. 5, was the essence of the booming international fraud scheme that created most all of these now-failing home mortgages.
The rocket docket wasn’t created to investigate any of that. It exists to launder the crime and bury the evidence by speeding thousands of fraudulent and predatory loans to the ends of their life cycles, so that the houses attached to them can be sold again with clean paperwork. The judges, in fact, openly admit that their primary mission is not justice but speed. One Jacksonville judge, the Honorable A.C. Soud, even told a local newspaper that his goal is to resolve 25 cases per hour. Given the way the system is rigged, that means His Honor could well be throwing one ass on the street every 2.4 minutes.
Foreclosure lawyers told me one other thing about the rocket docket. The hearings, they said, aren’t exactly public. “The judges might give you a hard time about watching,” one lawyer warned. “They’re not exactly anxious for people to know about this stuff.” Inwardly, I laughed at this — it sounded like typical activist paranoia. The notion that a judge would try to prevent any citizen, much less a member of the media, from watching an open civil hearing sounded ridiculous. Fucked-up as everyone knows the state of Florida is, it couldn’t be that bad. It isn’t Indonesia. Right?
Read the rest of the article here. It’s worth the read.
Mark Stopa
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Posted on November 8th, 2010 by Mark Stopa
It’s bad enough that the loan modification process is not helping homeowners as intended, a failure I’ve reported in this blog many times. Unfortunately, it’s even worse than that. As numerous media outlets are now reporting, and as I’ve seen in my daily practice as a foreclosure defense attorney in Florida, temporary loan modifications often *cause* a homeowner who was otherwise not behind on mortgage payments to go into foreclosure.
The New York Times has a real-life story, but here’s the simplified version:
The homeowner is making monthly mortgage payments as required, but finances are tight. The homeowner asks the bank for a loan modification. The bank says it needs to review the homeowner’s financial information to make a decision, but agrees to a temporary modification while the application is being reviewed. The homeowner’s payments are temporarily reduced from $1,500/month to $1,000, pending the review process, which the bank says should take a couple of months. The homeowner diligently makes the $1,000 payments each month and anxiously awaits approval on the permanent modification. The process seems simple enough, so the homeowner is optimistic.
Two months turn into six, then eight, then ten. The homeowner keep making the required $1,000/month payments, never imagining it would drag on this long. The homeowner keeps calling, and the bank keeps saying the permanent modification is being reviewed. Then, bam. The bank rejects the permanent modification, without explanation (or a flimsy explanation that shouldn’t have taken 10 months to disclose). But instead of telling the homeowner to resume the $1,500/month payments, the bank requires the homeowner pay all of the arrearages. In other words, the $500/month that the homeowner didn’t have to pay while the modification was being reviewed – those monies need to be paid, all at once, in one lump-sum, plus interest, late fees, attorneys’ fees, etc. When the homeowner can’t/doesn’t pay that $7,500 lump sum (10 months x $500/month = $5,000, plus $2,500 estimated interest, late fees, etc.), the bank pursues foreclosure.
This sounds impossible to believe, but this phenemonon is happening to homeowners all across the country. Please, don’t fall prey to such “gotcha” tactics.” Retain a foreclosure defense attorney to assist you through this process.
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Posted on November 4th, 2010 by Mark Stopa
Below is a horribly sad, tragic story. Putting aside the emotional aspects of it (to the extent that’s possible), two questions jump out at me. Please think about these questions after you read the story:
1. Without foreclosures, would the home have been abandoned and the pool left in the shape that it was? Before you answer, ask yourself this – do people living in homes leave their homes looking like that? Or do homes wind up in that condition because banks foreclose and the homes wind up vacant?
2. What does it say about the foreclosure system that the parents of this deceased child have to join 20 defendants because it’s so unclear who owns the home?
When a toddler wandered into a foreclosed home and drowned in the pool, a host of legal complexities surfaced.
Woulby Dieudonne holds a photo of his son Dieudonne who drowned in this pool that was boarded up two years ago in Miramar. October 20, 2010. Only the attorney and the father were there.
BY TONY PUGH
In a nation with millions of foreclosed homes, the one next door proved the most dangerous for 2-year-old Isaac Dieudonne.
On Oct. 11, 2009, Margarrette and Woulby Dieudonne were moving into their new home in the 6700 block of Southwest 26th Street in Miramar when their son Isaac strolled unnoticed out the family’s open front door. Minutes later, the toddler was found floating facedown in the algae-ridden backyard pool of a neighboring foreclosed home.
A neighbor administered CPR as the foul water spewed from Isaac’s mouth. Thirteen minutes after arriving at the hospital, he was pronounced dead.
The Dieudonnes’ tragedy led to a wrongful death lawsuit that shows how complications from the nation’s housing downturn can slow the wheels of justice.
The Dieudonnes never moved into their new home after the accident and Margarrette hasn’t been back since that fateful evening. Between bouts of depression, insomnia and emotional emptiness, she has found it difficult to visit her son’s grave, even on the anniversary of his death. But with a heavy heart and four helium-filled balloons in hand, she made the solemn cemetery trek last month out of respect for Isaac.
“I feel an obligation for me to at least show up on his birthday and on his birthday in heaven because I feel like he’s watching over me and he may feel like I abandoned him. But I haven’t,” she said, fighting back tears. “So I went there to place two balloons [at his grave]. And I released two to the sky to let him know I love him and, even though he’s in heaven, I truly do miss him.”
SAFTEY HAZARDS
Untold thousands of foreclosed homes across the United States pose an added public safety hazard because of their green, murky backyard pools, which can breed mosquitoes, nourish problem animals and rodents, or, in the case of Isaac Dieudonne, attract young children.
The Dieudonnes’ lawsuit hinges on a simple, but painful, question: Who is most liable for the boy’s accident? Was it the parents who were watching him or the property owners, servicing companies and maintenance firms that were responsible for making sure the vacant house met public safety requirements?
Like millions of foreclosed properties across the country, the home where Isaac drowned has been awash in legal action over the years, making it difficult to determine who owned the property at the time of the accident.
It took months for the family’s attorney, Janet Spence of Pembroke Pines, to sort through the property’s muddied chain of title possessions and transfers. At one point, Spence said, the home had two separate foreclosure actions pending simultaneously.
Spence also has faced some of the same paperwork irregularities that have put the nation’s foreclosure cases on indeterminate hold. Several documents transferring the mortgage appear to be flawed or possibly fraudulent, with conflicting dates. Two documents show that the mortgage was transferred from one mortgage company to an affiliated company in November 2007 and again in February 2008.
One of the questionable documents was generated by the Florida Default Law Group in Tampa, one of four law firms that are under state investigation for allegedly “fabricating and/or presenting false and misleading documents in foreclosure cases,” according to the Florida Attorney General’s Office
COMPLEX TRAIL
Because of the confusing paper trail, Spence has named 20 defendants in the case. They include banks that once owned the mortgage, companies that serviced the loan, property maintenance companies and even a company that was holding the mortgage for the banks.
Some defendants, such as American Home Mortgage Servicing, and the property management firm, Field Asset Services, are claiming parental negligence in the case. Others, including JPMorgan Chase, say they had no ownership stake in the property when the accident occurred.
“What you’ve described is a really tragic example of what happens when properties are abandoned and no one individual or institution will accept responsibility for the property,” said Dan Kildee, president of the Center for Community Progress, which pushes for redeveloping vacant and abandoned properties. “It’s particularly troubling when mortgage-foreclosed properties are managed by a servicer who claims they don’t own the property and therefore they don’t have any obligation to protect the public.”
On a recent visit to the Florida home where Isaac died, Spence and Woulby Dieudonne said the side gate where Isaac probably entered the property was still open. The screen door to the enclosed pool area was locked, but Spence said holes and tears in the enclosure still allowed easy entrance to the pool, which remains full of dirty water, but is now covered by wood scaffolding.
The Miramar city code requires that gates on pool safety barriers have spring locks that self-close after opening. The requirement applies to the screened pool enclosure and the fence around the backyard, Spence said. Safety barrier gates also must be locked when the pool isn’t being used. Spence said that neither the pool enclosure nor the backyard fence met either requirement at the time that Isaac drowned.
The Dieudonne case was filed originally in state court, but was moved to U.S. District Court after a defendant claimed that the case lacked a valid Florida-based defendant. That claim was later proved false and ultimately was withdrawn. Because of that, Spence is asking that the case go back to state court and that the federal judge impose punitive sanctions against the defendants for allegedly providing false information about the disputed Florida defendant. A hearing on those issues is set for this month.
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Posted on November 2nd, 2010 by Mark Stopa
As CNN adeptly reports, President Obama has done a complete 180 in his stance on foreclosures, now taking the position that foreclosures are “necessary” for the economy to recover. As I read the article, below, two questions jump out at me:
1) How does throwing homeowners on the streets “help” the economy?
2) Who is going to buy all of these foreclosed properties?
I don’t have an answer to #1. (Please spare me the lip service about how it’s ”necessary” to get these properties on the market - we all know most houses that become bank-owned remain vacant for months or years, and clearly that benefits nobody). The answer to #2 is clear. The only people who can afford to buy foreclosed properties are people who are already rich; the rest of the foreclosed properties will go back to the banks. Hence, Obama is standing by, watching, as the country re-distributes wealth on a massive, widespread basis from middle class homeowners to big banks and wealthy investors. Anyone else find this ironic, coming from a Democratic President?
What’s unfortunate is that Obama’s original thoughts on this issue were right - the country needs to find a way to create meaningful loan modifications to keep homeowners in their homes.
NEW YORK (CNNMoney) — The Obama administration is singing a different tune about foreclosures.
A year ago, officials focused on stemming the foreclosure tide. Now they are touting the need for foreclosures to rebuild the housing market.
Last week Phyllis Caldwell, head of the Treasury Department’s Homeownership Preservation Office, told a congressional panel that “an important part of ensuring longer-term stability in the market is to enable properties to be resold to families who can afford to purchase them.”
And White House Press Secretary Robert Gibbs last month told reporters that without sales of homes in distressed areas the “recovery in the housing market stops. It’s frozen.”
“That obviously can have — we believe and others believe — a very negative and detrimental impact to our economic recovery efforts and the housing markets in states that have been hardest hit,” Gibbs said.
But when Obama unveiled his signature foreclosure prevention program in February 2009, he said loan modifications were a key way to prevent the housing crisis from deepening. His initiative called for reducing distressed borrowers’ monthly payments to 31% of their pre-tax income.
“We’re not just helping homeowners at risk of falling over the edge; we’re preventing their neighbors from being pulled over that edge too — as defaults and foreclosures contribute to sinking home values, and failing local businesses, and lost jobs,” the president said.
The shift in rhetoric signals the Obama administration is recognizing that its loan modification program is foundering, experts said. Also, it is acknowledging that banks must address their swelling ranks of delinquent loans.
To be sure, the administration is still concerned with helping homeowners avoid foreclosure. Officials have rolled out a series of initiatives in 2010 aimed at assisting the unemployed and the underwater who owe more than their houses are worth.
And, they have called for reviews into the institutions’ foreclosure policies and procedures, stressing that servicers must comply with the law.
But they also now acknowledge more vocally that foreclosures must continue for a normal housing market to return. And that, in part, is why the administration is not supporting a nationwide foreclosure freeze despite the paperwork scandal that is roiling the mortgage industry.
The administration says there has been no change in either policy or rhetoric surrounding foreclosures and the housing market. The loan modification program was never meant to save every homeowner and officials always acknowledged the role of foreclosures in the market’s recovery, according to a Treasury spokeswoman.
“We have always thought some foreclosures needed to happen for there to be a full housing recovery,” said the spokeswoman, Andrea Risotto.
But, experts say, the new tone eminating from the White House also recognizes that the modification program is not living up to its initial goals of helping up to 4 million people avoid foreclosure. Some 496,000 distressed borrowers have received long-term modifications through September.
“What they have now realized is there are a lot of borrowers who can’t be saved and have to be moved through the foreclosure process,” said Laurie Goodman, senior managing director with Amherst Securities.
And they must break this news to Americans.
Officials are “trying to soften everybody up” to the fact that foreclosures are necessary, said Guy Cecela, publisher of Inside Mortgage Finance, an industry newsletter.
The new talking points, however, won’t likely result in a change in policy, said Anthony Sanders, a real estate finance professor at George Mason University. Administration officials will continue to support foreclosure alternatives because they are more palatable.
“As long as politics are involved, they’ll keep doing it,” said Sanders
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Posted on October 31st, 2010 by Mark Stopa
If you’re evaluating whether to enter a “temporary” loan modification, read this article closely. I’ve spoken with hundreds of homeowners with similar experiences, and it’s not a pretty picture. It’s so bad, I’d argue that most people who can’t afford the normal monthly payments are better off not paying at all.
As it’s Halloween, let’s call “temporary” loan modifications what they are - a trick.
By Cami Joner
Columbian Staff Reporter
Sunday, October 31, 2010
Joseph and Jacqueline Freeman at their Battle Ground-area farm, Friendly Haven Rise. The 10-acre farm and home have been on the brink of foreclosure since 2008, when the Freemans lost income from the farm business. The Freemans operate the farm like a school, where people pay to learn about raising crops and livestock and using tools.
Jacqueline and Joseph Freeman thought they were doing everything possible to keep from losing their Battle Ground house and farm when they obtained a temporary mortgage modification through a federal program in 2009. But despite not missing a single month’s payment during 12 months at a “trial” reduced mortgage rate, the Freemans are worse off now than in late 2008, when their income fell dramatically due to canceled bookings at their farm-school business, Friendly Haven Rise.
Last month, the Freemans received a foreclosure notice from their lender, Wells Fargo, which said the couple’s mortgage is $23,000 in arrears. They feel betrayed by the federal program that was set up to help, Jacqueline Freeman said. “We had no clue we were headed toward foreclosure,” she said. “We thought we were taking part in a national program that was helping people.”
The Freemans are not alone. They are among millions of American home owners who are frustrated with the Obama administration’s Home Affordable Modification Program, or HAMP, a $75 billion federal program that was supposed to be their salvation. Instead, the program appears to be failing droves of homeowners who, like the Freemans, have been drawn into trial modifications that leave them with more principal outstanding on their loans, less home equity and worse credit scores.
Launched in February 2009 with $50 billion from the U.S. Treasury Department and $25 billion from taxpayer-owned enterprises Fannie Mae and Freddie Mac, HAMP promised to help between 3 million and 4 million homeowners modify their mortgages. Twenty months later, only 495,898 U.S. borrowers have received permanent loan modifications, according to a newly released federal report.
In Washington, 9,054 homeowners have been helped with permanent mortgage modifications through HAMP, and another 3,390 are in trial modifications. Many others have entered the program and then exit without receiving a permanent modification. Meanwhile, 17,670 Washington households faced foreclosure in the three months ending Sept. 30. The program and its predecessor, Making Home Affordable, have helped very few troubled homeowners in Clark County, a suburban community where the foreclosure rate is the fourth-highest in the state with one out of every 374 housing units in foreclosure.
HAMP runaround
According to a Vancouver foreclosure counselor, the problem with HAMP is that banks don’t stick with its trial payment period guidelines, which state that temporary help should last no more than three months before borrowers receive permanent modifications to their mortgages. Instead, many lenders stretch trial modifications out for months or years as homeowners deplete dwindling savings accounts in a futile effort to get stable relief.
“I’ve got clients I’ve been working with for over two years that have had no permanent resolution,” said Kevin Gillette, program manager at the nonprofit Community Housing Resource Center in Vancouver.
The agency provided counseling to more than 1,000 local households from Oct. 1, 2009 through Sept. 30, but Gillette said he has few success stories to share. He said the HAMP trial period is supposed to last only long enough to test whether the homeowner is committed to making the modified payment. However, Gillette said lenders often keep taking the reduced monthly payments for six months or longer. “In the end, they deny the permanent modification,” leaving bewildered borrowers wishing they had saved the money instead.
Gillette finds the situation appalling. He blames mortgage banks, which, he said, have little to gain from permanent HAMP modifications and just waste the homeowners’ money and time while keeping them suspended in trial payment limbo. “Why not tell homeowners no, you’re not going to help them and let them go on about their business?” he said.
That might have helped the Freemans, who contacted their lender at the first sign of mortgage distress. They were told they would be eligible for HAMP if they skipped two months’ worth of payments.
“It was actually easier those months,” said Jacqueline Freeman, who used the reprieve to pay off other bills.
Gillette warns his clients not to follow the advice to skip monthly payments, which will immediately put an already-troubled homeowner in mortgage default. “Nobody should be telling anybody this, but they do,” Gillette said.
Though few in the mortgage industry defend HAMP, many bank lenders deny claims that they’re giving bad advice. The challenge, according to a Wells Fargo Bank spokesman, is that a mortgage modification often can’t help a homeowner who’s been caught in the downward spiral of economic recession and unemployment.
“The bottom line is, if you had a job before and now you’ve lost it, even if we modify the loan, with zero income, the customer cannot afford to pay it back,” said Tom Unger, a Portland-based spokesman for Wells Fargo.
Unger said Wells Fargo and other banks often see more success with in-house modification programs that avoid the confusion of the government-driven HAMP. “When the government programs were first announced, people’s expectations ramped up and then the (program’s) rules kept changing,” he said.
Mortgage black hole
The Freemans thought they were benefiting from the trial modification that reduced their monthly payment from $2,150 per month to a more manageable $1,390. Now Jacqueline Freeman would like to know what happened to the total $16,680 they shelled out over the course of 12 months. “How could the bank say we are $23,000 behind? That part doesn’t make sense to us,” she said. Gillette said most homeowners don’t understand that trial reduction does not reduce the loan’s interest rate.
“All the while, that loan balance is growing until (the homeowner) is so far in the hole there’s no way they can ever come out of it,” said Gillette, who has seen numerous homeowners devastated by trial modifications.
Some have left his clients in arrears by as much as $70,000, he said.
“The banks are setting these people up to fail,” said Gillette, a former mortgage professional who theorized that mortgage lenders would rather foreclose on the house and write off the bad debt. Banks, on the other hand, insist that their institutions want to help, rather than end up in the real estate business.
“A foreclosure is not good for the customer, not good for the community and not good for us. It’s always going to be the last option,” Unger said. That said, banks have lately run into problems for rushing the foreclosure cadence.
Rushing the cadence
Earlier this month, banks came under scrutiny in the wake of the disclosure that many had used “robo-signers,” or people who rushed to sign thousands of documents a day without reviewing the details.
“Some of these practices can deprive homeowners of their legal right to save their homes,” said Rob McKenna, Washington state attorney general.
As a result, the nation’s largest mortgage company, Bank of America, temporarily halted foreclosures. The attorneys general from all 50 states launched an investigation. Other large lenders, JPMorgan Chase, Ally Financial Inc. and PNC Services stopped foreclosing in up to 23 states.
However, the hoopla has largely died down, as Bank of America is pushing ahead with a new wave of foreclosures, according to The Associated Press.
Some say putting the blame entirely on banks and the government isn’t fair. After all, homeowners sign a contract, a note and deed of trust that shows an obligation to make the payment, said Mark Saftich, a senior mortgage director for Director’s Mortgage Inc. in Vancouver.
“That’s why there is so much paperwork at the closing table,” Saftich said. “It is signed by all parties stating they will pay the lender the amount over the life of the loan with a clause that says, if it’s not paid, notice will be given and the house will be foreclosed.”
Jacqueline Freeman said the notion of foreclosure never entered her mind when she and Joseph purchased their home and 10-acre farm in 2003.
Lessons learned
But the Freemans say they’ve learned some hard lessons about trusting mortgage providers and the government’s HAMP program. “The main thing is, it doesn’t stop the clock on the foreclosure, in spite of paying out all that money,” Jacqueline Freeman said, adding that she remains optimistic about saving the farm.
The Freemans put in a call to Sen. Patty Murray at the height of the senator’s election rebid. Murray’s office has pledged to help the Freemans, who say they will do whatever it takes to avoid foreclosure, Jacqueline said. “We are fine, upstanding, taxpaying citizens with a farm,” she said. “It’s not just a house. It’s our business and everything we do.”
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