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Foreclosure Tragedy

posted by Angie Littwin

An excruciatingly sad story about the human costs of the home-mortgage crisis:  http://www.cnn.com/2008/US/10/03/eviction.suicide.attempt/index.html. A 90-year-old woman, Addie Polk, shot herself inside her foreclosed, Akron, Ohio home. It appears that she will live, although she is still in the hospital. Representative Dennis Kucinich, a member of her state's congressional delegation, told her story on the House floor during today's bailout debate, saying, "This bill does nothing for the Addie Polks of the world." He voted against the bailout, which finally passed in the House this afternoon.

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Sad indeed. However, how are we supposed to help these people? Ohio is an armpit and not known for job growth. The article didn't make any mention of why she fell on hard times. The article does try to imply that it is some how the lenders fault.

The foreclosure "crisis" is like all the other so-called "crisis" we have. No one is mentioning that the loan she got from CW probably kept her out of foreclosure a couple of years ago. Sounded like she might have needed a reverse mortgage, but who knows. The only real foreclosure crisis is that the increase is driven by CA, NV, FL, and AZ - speculator central. While sad, the Addie Polks are not the face of foreclosure, but instead it is the Casey Serins (the 23 year old "real estate investor" of iamfacingforeclosure.com fame.

I have to say, Russ, I don't think I've ever seen a person ASSume so much in one sentence and just be so blatantly WRONG in the next. I think you just set some kind of internet record. If I weren't so disgusted I'd be impressed.

Mike:

What exactly do you disagree with? I am not saying that this isn't a sad situation. What I am disagreeing with is how the MSM keeps trying to make the Addie Polks of the world the face of foreclosure when it fact it is not. Do a little research yourself. Something like half of all foreclosures are INVESTORS, not little old ladies.

The vast majority of foreclosures are caused by job loss, divorce, or medical problems - not predatory lending. The article did not offer one explanation as to why Mrs. Polk is in this situation. If that is the case, just how are we supposed to help people when the root cause of their problem is something out of our control?

Believe me, I am no fan of large mortgage lenders. However, I want a little more balance in how things are reported.

http://www.cnn.com/2008/US/10/03/eviction.suicide.attempt/

"In 2004, Polk took out a 30-year, 6.375 percent mortgage for $45,620 with a Countrywide Home Loan office in Cuyahoga Falls, Ohio. The same day, she also took out an $11,380 line of credit.

Over the next couple of years, Polk missed payments on the 101-year-old home that she and her late husband purchased in 1970. In 2007, Fannie Mae assumed the mortgage and later filed for foreclosure."

http://www.reuters.com/article/domesticNews/idUSTRE4928IS20081003

Akron police spokesman Lt. Rick Edwards:

"It appears they're evicting her over her mortgage. She's lived in the house, the neighbors said, something like 38 years and in the last couple of years fell prey to some predatory lending company or financial institution," Edwards said.


So, she's 86 years old, and gets a first and a second home equity line of credit from pure-as-the-driven-snow Countrywide in 2004 on a house she's owned since 1970.

Yep, I'm sure that was all on the up-and-up. Or maybe she was an INVESTOR, eh?

On the other hand, it is nice to see that Fannie Mae forgave her loan:

http://www.mansfieldnewsjournal.com/apps/pbcs.dll/article?AID=/20081005/UPDATES01/81005007/1002/NEWS01

Up until now, voluntary loss mitigation has been a huge failure - you can't reach anyone, if you do reach them, they don't respond or they say they don't have authority. If you do get to talk to them, they count it as HOPE NOW having saved your house.

At least now we know what the real criteria is for actually getting some loss mitigation help: Eat a Glock to get out of hock.

Well, at least it's something to build on.

AMC:

Please explain how is missing mortgage payments the fault of the lender? What indications do we have that it was a predatory situation? Last I checked, banks don't foreclose unless you aren't paying your debts as agreed. Why did Mrs. Polk miss previous payments... she had a thirty year fixed loan, so it wasn't a "toxic" mortgage.

Here is what I saw more often than not over the past few years that are now showing up as foreclosures. Homeowner falls on hard time and needs to get some cash out of the house. They call up a lender and the lender is able to get them a loan to prevent foreclosure or allow them to pay bills (usually medical). Unfortunately, after a year or two, things don't get better financially and the homeowner falls on hard times AGAIN. In the past, they would have just refinanced again to get out of trouble. Now, these people don't have anyway out due to the market. Three years ago, these folks were kissing their loan officers for saving their ass, now that the banks won't do "foreclosure bailouts" or sub-prime lending and give them a new loan, they are stuck... game over. Another foreclosure statistic.

She's 86 years old, getting not only a first but a second on her home.

From Countrywide circa 2004.

If you don't think those facts, put together, suggest something other than the lender acting in the best interest of Grandma Polk - hey, that police spokesman is probably just lying, right?

And Fannie Mae forgave the debt because it was such a good loan. They weren't worried about anybody digging into it. No, that couldn't be a factor.

In the last year or so, Countrywide did make some big strides toward becoming a more responsible corporate entity - but in 2004? Dealing with an 86 year old woman? Countrywide?

You think their loan officer really thought she could make the loan payments? Or even gave a thought about whether she could actual make the loan payments? Carefully went through her income and expense budget? Made sure this 86 year old woman fully understood what she was doing? Explained risks in the slow and painfully repetitive way you'd need to make sure an 86 year old woman really understood what you were telling her - assuming you really had her best interests at heart, and not just another closing on your day's schedule?

If you want to bring the "INVESTOR" crap - fine. Clearly, both sides - lenders and borrowers - were screwing each other blue in certain areas of the country.

But my God man - she was 86 years old and dealing with Countrywide in 2004! I mean really - how do you picture this having gone down? How many folks do you know who are 86 years old? Tell me how much time you think the lender spent talking about risks and finances with this incredibly vulnerable person, almost certainly on a fixed income. They don't say when she lost her husband - but it sounds like she was probably a widow at the time of the loan transaction.

If you want to deflect blame for where this country is today by yakking about individual responsibility, and it's all the borrowers' fault, and look at those INVESTORS - I'd suggest you use folks as examples who aren't our country's most vulnerable citizens dealing with one of most notorious lenders of the foreclosure crisis era.

If she had made every payment, when she finished paying off her 30 year mortgage, Addie Polk would have been 116 years old.

http://www.independentmail.com/news/2008/oct/06/addies-world-90-year-old-symbol-economic-mess/

"For a lender to offer a 30-year loan to an 86-year-old seems as if they were betting the property wouldn’t stay in her hands, that foreclosure, either upon nonpayment or the borrower’s death, would be the end result.

But Polk didn’t die. At last report, she was in a local hospital. The city is trying to find a way to help her and others like her, elderly residents on fixed incomes who were so fearful of losing their homes, they responded to seemingly sympathetic lenders.

There are certain responsibilities a borrower has when seeking a loan. Not to borrow more than they can comfortably repay. Not to be talked into a larger loan with the lender’s assurances that they will be able to repay it, despite that little voice inside that asks, “But how?” Not to blithely think “Everything will be alright somehow,” despite the odds that it won’t, not really, not at all.

But any lender who would assume an 86-year-old woman on a limited and fixed income was capable of fulfilling an obligation for a 30-year mortgage is — dare we say it? — nutty as Miss Addie’s Christmas fruitcake."

Russ, everything that you just spat at me is absolutely industry party line BS until/unless you back it up with fact. I'll bet you also think that lenders/note holders/servicers really don't want to foreclose on properties and actually DO lose money on foreclosures.

At this late hour I'm not going to trot out my stats and links because I have to hunt for them a bit and it's been too long of a weekend. But if you put yours up I'll put mine up and we'll see whose make more sense. I'll simply start by saying that you apparently haven't read Professor Porter's "Misbehavior and Mistake in Bankruptcy Mortgage Claims" or The State Foreclosure Prevention Working Group's recent release whereby they state that as much as 80% of loan modifications to date have been essentially useless/worthless.

You are correct in that MSM, in large part, has been doing a P poor job of reporting on the overall issues and simply continues to be drawn to cases like Ms. Polk's or Carlene Ballderama's suicide an hour and a half before the foreclosure auction in Taunton, MA last month. Unfortunately, cases like these sell papers. But no one seems to bother to look below the surface to discover the root cause of the problem. They just ASSume that it's what they "know" to have happened and that every case is identical which could not be further from the truth.

"Last I checked, banks don't foreclose unless you aren't paying your debts as agreed."

Again, you apparently haven't read Professor Porter's study and you ABSOLUTELY aren't at all familiar with my own situation - which is similar to the situations of 281,100 OTHER victims of a single mortgage servicer in Fairbanks Capital Corp. n/k/a Select Portfolio Servicing and potentially "tens of thousands" that the FTC expect to contact them as a result of their recent settlement of FTC v. EMC/Bear Stearns. Trust me when I say that I'm confident that I'm NOT the one that needs to do some research. I've been LIVING the research for more than seven years now...Try Googling me sometime. Last I checked, Google had four pages on me so there should be plenty of info to choose from.

Why did Ms. Polk miss payments? Perhaps she really DIDN'T miss any payments - after all, Countrywide is involved. Did they sell the servicing rights to her loan before selling the loan to FNMA or did they keep them in-house? Either way, Ms. Polk was potentially screwed. Perhaps her servicer simply manufactured the default against her. Has there been any mention anywhere of how much, if any, equity she had in her home? That would be a key part of the puzzle for me...

But then I just reminded myself, if I remember correctly, you're a LO. So riddle me this - what are the reasons that a LO WOULDN'T have offered MS. Polk a reverse mortgage instead of a first and a second - other than potentially more commission for the LO?

Interesting language that FNMA used - they're going to "forgive whatever balance due she had on the loan." The loan, and here I go ASSuming, I would be willing to bet was securitized. If such is the case, then either CFC or FNMA, heck possibly even both, may have made claims against the insurance policies covering the pool thereby recouping at least the outstanding balance of Ms. Polk's loan. IF that did happen, then there would be nothing for FNMA or CFC TO forgive as they would have covered their "loss" and if they DID foreclose they would have potentiall been "double dipping". But they claim that they're "forgiving" her balance due and giving her the house back to put some spin on the story for them. After all, how could you possibly spin a story like this otherwise?

IF Ms. Polk survives and makes it out of ICU, FNMA looks like a hero for giving her the house. What none of us may ever know for sure is whether or not either FNMA of CFC legally had the right to foreclose on her to begin with. It would take a CPA/CFE or CFA to determine that.

Wow... I guess I touched a nerve!

Mike:

Without knowing Mrs. Polks situation it is hard to say why she didn't get a reverse mortgage. Countrywide offers them. She may not have had enough equity in the house. By the way, reverse mortgages pay very very well. I doubt anyone would give up being able to use a reverse mortgage vs a conforming loan since they commission (2%) on a reverse mortgage is set by the government and substantially higher. Another one of the misconceptions is putting people in subprime vs conforming. Subprime loans usually didn't pay jack either. Option ARMs paid a lot more if the consumer was too focused on rate. If they took time to educate themselves about the product, it usually wouldnt pay that much but consumers were so focused on the 1% teaser rate even if you tried to talk them out of it, they would ignore you and go to the shiester down the street.

AMC:

Banks are prohibited from discriminating based on age. To not offer her a 30 year loan when she qualifies for one based on her age would be a big no no. If she couldn't afford the 30 year, she certainly couldn't handle the payment on a 15 or 10 year note. The borrower's age is irrelevant to lenders.

My point is simply that when you look at the data of foreclosures, the vast majority are not the Mrs. Polks of the world. The bulk of foreclosure right now are driven by just four states - CA, NV, FL, and AZ. These four states were speculator central. The other states Michigan, Ohio, Indiana are driven by in the toilet local economies. To try to blame EVERYONE's ills on predatory lenders and bad servicing is mind boggling. Newsflash: Everyone doesn't pay their bills like they should and shit happens. People lose jobs, etc. LIFE AINT FAIR.

I get calls all the time from people and it is literally the same story. Either some dumbass bought five houses thinking they were going to flip them and now they are stuck (oh, by the way, these show up as primary residences because they usually lied on the loan application) OR it was a subprime case where the person refinanced a couple of years ago to get cash out and now it is time to pay the piper and there aren't any loans available to save the day again like it was a few years ago. I just call it like I see it. The data bears this out. Deal with it.

Do we need to do something with predatory lenders? Heck yeah. I hate having to compete against these boiler room hack shops. But to act like every foreclosure under the sun is some how the lenders' fault is asinine. I am not towing the industry line.

I have been calling for regulatory changes to this business ever since I got in it. I think it is criminal that there aren't any serious professional standards for mortgage originators and we handle the largest financial transactions of most people's lives. I also think people need to put more effort into educating themselves about their homes and mortgages. People just want to get on Lendingtree and have a $500k loan spit out versus really understanding the ins and outs of the loan, why or why it isn't good for them. Just hawk the lowest rate and all the suckers line up.

Russ -

You've dodged my main questions.

Do you think Countrywide, in 2004, spent any time really educating Ms. Polk about her loan?

Do you think any analysis was done by Countrywide about whether or not Addie Polk could afford to pay the loans?

In other words - did Countrywide bother to form a subjective belief as to whether or not Addie Polk could pay the mortgage loans they were peddling to her, and did Countrywide take the time to make sure she understood the obligations she was undertaking?

Or did they just sell her a product that they could transfer to a tranche, because it looked facially like other mortgages? In other words, was she just another closing on the day's appointment book?

My strong suspicion is: Countrywide never analyzed whether Ms. Polk could pay the loan, had no interest in whether she could actually afford the loan or not, and the people who dealt with her probably didn't explain much of anything at a "kitchen table" closing where the words "sign here" were spoken more than 10 times more frequently than the word "risk".

Non-discrimination laws have nothing to do with the above questions or issues.

The idea that banks can't "discriminate" against borrowers based on age isn't an excuse for scaming our vulnerable elderly. If I recall correctly, the Arthur Murray Dance Studio cases offer some guidance on the legal limits on ripping off seniors. And there are limits - and parroting "we aren't allowed to discriminate" isn't going to get companies who vicitimize 86 year old widows very far in front of a jury.

AMC:

Definitely not dogding your questions.

Do I think Countrywide spent anytime educating Mrs. Polk? Probably not knowing how crappy the average loan originator is that works for big banks. However, we don't know what education Mrs. Polk needed either. She got a 30 year fixed loan, the simplest and least risky loan you can get. This is your payment, end of story. It wasn't like she got stuffed into an Neg Am.

Do I think any analysis was done by Countrywide in regards to if she could pay the loan? Most likely, but we don't know. Countrywide had their Fast & Easy stated income product(Fast & Sleazy as we used to call it) which was just a conforming fannie/freddie product that allowed stated income. However, we don't know if that product was used. You would be surprised at what gets approved by Fannie & Freddie. Fannie's automated underwriting system allows 65% debt ratios and Freddie doesn't have a limit. If the equity and credit were good, you coudl get an approval all day long.

What I am trying to get you and others to see is that it isn't as simple as saying a little old lady went into foreclosure therefore the big bad bank is at fault. It is a lot more complicated than that and if you take the time to really delve into the data and talk with those of us who are on the front lines everyday, you would understand this. I don't care how good the economy is, how great the mortgage originator is, how prudent underwriting is, THERE WILL ALWAYS BE PEOPLE WHO GO INTO FORECLOSURE. You are never going to get this socialist utopia where everyone gets to own a home with a mortgage and no one every runs into financial problems.

The scenario I presented is very very common. I would bet a steak dinner that Mrs. Polk took cash out of the property because she was having problems back in 2004 and almost on the brink of foreclosure then. Her only option was either foreclosure in 2004 or get a cashout refinance to help her get out of a sticky situation. The situation didn't get any better, hence the foreclosure that is going on in 2008.

In 2004, everyone would have been thanking the LO for saving Mrs. Polk, but now everyone acts like the lender was predatory when there is no proof of that. It is tragic, but again do not try to make this to be the face of foreclosure because it is not and the data bears it out.

That answer right there is part of the problem, Russ.

You're absolutely correct in saying that no one knows the pertinent facts of the case. But you automatically run to defend the industry even in the face of an $8 BILLION settlement agreement in order to make the case go away for CFC and an even BIGGER "settlement" of $700 Billion - no wait, wasn't that $860? - for the entire mortgage and banking industry of the United States.

CFC alone has a long history of screwing borrowers - and no one calling them on the carpet for it legally. ABC News' Brian Ross covered the CFC/Katrina fleecing last year.
http://blogs.abcnews.com/theblotter/2007/08/mortgage-compan.html
http://blogs.abcnews.com/theblotter/hurricane_katrina/index.html

I will be the first one to admit that there are FAR more legitimate foreclosures in the US than there are fraudulent ones. But the fraudulent ones DO exist. And as long as they do exist and until they are properly and fully prosecuted there is simply no way that anyone can or should assume anything about ANY foreclosure case. To do that is simply disrespectful to Ms. Polk, Carlene Balderrama of Taunton, MA, Nadine Knowles of Clearwater, FL, Jim Hultman of Berkeley, CA and the rest of the most likely millions of people at this point who have faced fraudulent and illegal foreclosure situations.

Maybe once the Kool-Aid runs out and the full effects of the last five or six years wear off people will be able to understand that there are lenders, note holders and servicers that really ARE stealing people's homes. Oh wait. No, that probably won't happen because now that housing prices are in free fall there won't be nearly as much equity to steal and foreclosures won't be nearly as profitable for them.

http://www.nytimes.com/2008/07/20/realestate/20mort.html
"According to Alfred A. DelliBovi, chief executive of the Federal Home Loan Bank of New York, one family has completed the transition from homeowner to tenant, and four more families are soon to follow.

One obstacle for HARP in some cases, Mr. DelliBovi said, is finding the current lender. Loans are typically sold to investors, sometimes repeatedly.

Meanwhile, servicers, whom investors pay to collect mortgage payments from borrowers, often have no incentive to help borrowers find the ultimate holder of a loan, Mr. DelliBovi said. “Servicers make more money on a foreclosure than when the loan is worked out,” he said."

Mike;

No one is defending the industry as you would say. I am just tired of all the crying about foreclosures as if every foreclosure is a somehow due to the "predatory lenders." Do predatory lenders and servicing companies exist? Without a doubt. No one is arguing that.

The settlement makes sense. The banks cannot win. This isn't an issue of facts and data, it is a PR war that the banks lost. They have no choice but to settle even if their highly paid lawyers show that 50% or more of the foreclosures on their books are SPECULATORS & Fraudsters who knew damn well what they were doing and the other half are folks who are having issues that have NOTHING to do with their loan product - jobs, divorce, & medical. I am sure there are a handful of legitimate cases of boiler room antics, but at the end of the day it doesn't matter. The press, community groups, politicians all have their eyes on the banks. They can't win and have to settle.

Now instead of a residential real estate closing taking 2 hours, it is now going to be an all day affair with a couple hundred more pages of more nonsensical disclosures written like only a lawyer could write, even more CYA, and probably fewer products to help those that want and need it.

There you go defending the industry, again Russ...

Maybe if closings are going to take all day, the contracts should be released AHEAD of closing so that they can be properly REVIEWED by prospective buyers and/or legal counsel to make sure that the deal is a good one for both sides - much like any other contract is reviewed. And we didn't have the current problems in the markets when there were fewer "products" (I've always loved that term for mortgage packages) that borrowers could "qualify" for.

This business of borrowers sitting down and signing 50 pages of legalese in an hour is yet one more than that really does have to come to an end.

I'm sure if CFC/BAC thought that they had legal grounds they'd MUCH rather spend $8 Billion on legal fees instead of just coughing it up in settlement and admitting, at least in the "PR war" that they were wrong.

My story is long and detailed but I'll keep it as short as possible.  Five years ago my wife and I both had credit scores in the mid 700's.  I owned a manufactured housing retail sales center, owned a home, vehicles, and things seemed fine.  Then tradegy hit.  I learned I had intestinal cancer and wound up having surgery to remove about 70% of my small intestines.  I recouplerated and planned to go back to work, but the Saturday before I was set to start back (the follwoing week), I woke up and my arm was limp, like when your foot goes to sleep.  My speech was slurred and my memory was gone.  I'd suffered a mild to moderate stroke (the doctors told me that it wasn't related to the cancer).  I spent so much time trying to recover but of course, those companies I was in debt with could care less.  All together I was out of work for well over a year.  My wife was rear-ended whle sitting at a red light, a blow so hard she was forced to have back surgery and she's had an inconceivable 14 blocks to try and reduce her pain.  She applied for disability but we all know how long that takes. The "empire" that we'd worked so hard to build quickly began to crumble. After all was said and done and the smoke cleared, we'd lost everything.  I was advised by an attorney to file Chapter 13 but by now being able to work, it only delayed the inevitable.  We lost everything.  Our cars, our credit, and finaly our home.  While in the housing industry, I put over 1,200 families into homes and now I sat on the other end looking for some kind of help.  I don't see how anyone can go through a repossession or a foreclosure and it not rip out their insides.  The fact that I had 2 boys (boys now 10, 8 and a 3 yr. old little girl) made it 100% worse, b/c they couldn't understand why we were having to move.  We moved out, moved into an appartment for one year and then moved into a home (renting) here in Trussville where we've beenn for 1 year and 8 months.  Our lease will expire at the end of February 2009 and I just cannot do another lease at this house we're in.  My kids and my wife deserve so much more.  Financially, things have begun to turn towards better days, as I work with ITT Technical Institute as a recruiter and while I'm not rich, I make a decent income.  In what can only be describer as a miracle, my wife won her claim for disability and received a lump sum back payment and now receives $1500/mo.(net), so we bring in around $3700/mo net and although I'm certain that at some point down the road I'll get back into the housing industry (having that itch), for now we've got a stable income.  I've attempted to go through a mortgage broker but it just drug on and on for an eternity.  We've tried to find a home with owner financing or a lease purchase option.  What we need right now is guidance on where to go from here. While the housing market is in the tank right now, I just can't believe that there's not some sort of program or situation that we can get into.  Somebody...Anybody...please help.

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