Post by RPankn on Dec 11, 2005 17:02:41 GMT -5
Subprime lenders are getting nasty [Nothing new, most have always been.]
Sunday, December 11, 2005
By Bill Walsh
Washington bureau
WASHINGTON -- Even in the best of times, a letter with the heading "notice of default" would be alarming. But for Barbara Smith, 67, the letter came at the worst time of her life.
The floodwaters from Hurricane Katrina had laid waste to the Lower 9th Ward home. She had relocated temporarily to Kentucky and was trying to figure out what to do next when she got the Nov. 14 notice from Green Tree Servicing LLC, her mortgage company. It told her to "cure the default" of $792 within 30 days or the company would foreclose and report her to the credit agencies.
"We contacted the company (and a representative) was very hostile and said he didn't care about our situation and we better send in the payment," said Adrienne Dowden, Smith's daughter. "Of course we did. He said we must continue to pay or my mother will lose her home." [Predatory lenders do this even without the pretext of a natural disaster.]
While many mortgage lenders are giving flooded-out homeowners as much as 18 months to resume payments, others -- especially subprime lenders who serve low-income and minority borrowers -- are turning up the pressure to get their money. Instead of getting extra time, these borrowers are getting strongly worded letters and phone calls saying their loans are in default and it is time to pay up. [Because they know these borrowers most likely do not know their rights, and cannot afford to seek legal counsel to help them.]
"These are empty threats to scare less-sophisticated borrowers into thinking their credit will be ruined into making payments they can't afford to make right now," said Travis Plunkett of the Consumer Federation of America.] [This gives lenders too much credit. Some just want the property, and this would make sense in New Orleans where developers would be willing to pay top dollar in the city's reconstruction.]
Green Tree and other subprime lenders say they are working with borrowers to arrange repayment plans and have no intention of initiating foreclosure, a move that would leave them with an unpaid debt and a worthless property.
Still, the Louisiana Office of Financial Institutions reported earlier this week receiving "a significant number of complaints" from homeowners saying that lenders who had granted a deferral for payments after the Aug. 29 hurricane were now demanding as many as four months worth of payments in a single lump sum.
The pressure, according to Darin Domingue, deputy chief examiner at the regulatory agency, isn't coming from mortgage companies whose loans are insured by the federal government, such as the Federal Housing Administration, the Department of Veterans Affairs, Fannie Mae or Freddie Mac. Rather, he said, it is generated by lenders whose loans are not backed by the federal Treasury and by subprime lenders who may face financial pressure from private investors.
"Their hands are tied," Domingue said. "If they are not part of something that is insured or guaranteed, they have to go by their guidelines." [Typical bureaucrat enabling bad corporate behavior. No their hands aren't tied; your department, as regulator of these lenders, could recommend the governor impose a moritorium on foreclosures in the state. But I realize this is "outside the box" thinking in our 'corporations are always right' society.]
Subprime loans are aimed at people who, because of a subpar credit history, are unable to obtain conventional mortgages. Generally they are charged higher rates because of the greater risk they supposedly represent. They also tend to be disproportionately African-American, according to a Sept. 22 study by the community advocacy group ACORN. [Not true. Studies have shown that many minorities had credit scores which would qualify them for conventional financing, but have been steered into subprime, predatory loans.]
Its report, which was subtitled "How the Subprime Mortgage Industry is Sand-bagging Katrina-affected Homeowners," drew on federal government data. It found that 37.5 percent of home mortgages to African-Americans in metropolitan New Orleans last year were subprime with rates above 8 percent. At the time, conventional 30-year mortgages were about two points lower. African-Americans in the eight-parish region got subprime loans at a rate four times higher than white borrowers, the report found. [Correct. So why isn't this reporter making the connection?]
After Katrina flooded about 205,000 homes in southeast Louisiana, prime lenders generally gave borrowers a 90-day grace period to hold off on mortgage payments. As that deadline approached, federal regulators urged lenders to give even more time, and most have. Fannie Mae, the largest mortgage company in the nation, is giving 18 months in some cases.
Green Tree Servicing gave Barbara Smith 60 days from the time Katrina made landfall. Brian Corey, the company's general counsel, said it was a blanket policy for all borrowers in the disaster zone. In the meantime, he said, the company stopped all collection calls and reached out to borrowers to assess their financial situation. Depending on a borrower's ability to resume payments, Corey said, Green Tree was extending the grace period without penalty.
"Its in our interests to work with people," Corey said. [Generally, the way to tell lender's counsel is lying is that their lips are moving.]
The "Notice of Default" letter Green Tree sent to Smith included a "modification or repayment agreement" to allow for an alternative payment schedule. But Dowden, Smith's daughter, said the company representative was so insistent on receiving payment immediately, getting a deferral wasn't even discussed. [She wouldn't want one of these forebearance agreements, either, because of their oppressive and unconscionable nature. It's like handing your enemy a loaded gun and then asking them not to shoot you. After the borrower discloses everything about their finances -- from how much they make each week, to how much they hold in deposit accounts -- the lender saddles the borrower with exorbitantly high monthly payments, which they know the borrower will eventually default on, starting the foreclosure cycle all over again. This is how all these lenders operate.]
"We did not explore any options because when we talked to them there did not appear to be any options," Dowden said. [Just wait. As the deadline in the original default letter approaches, another rep from the company, playing the "white hat," will call offering a forebearance agreement.]
Sonya Williams described a similar experience with her lender. Like Smith, her eastern New Orleans home was flooded when the levees breached. She evacuated west and then was forced to flee again as Hurricane Rita bore down three weeks later. She is now living in an apartment in Texas City, Texas.
On Oct. 19, she received an application from NovaStar Mortgage Co. in Missouri modifying her loan to tack the two months of payments she missed onto the end of the mortgage. Her next payment was due Nov. 1, the letter said.
But on Oct. 25, she got another letter from NovaStar bearing the heading "Notice of Intent to Foreclose." It said her loan was in default and warned that late payments are reported to credit agencies. It demanded a certified check for $2,700. [Oh boy, have I seen this game played before, one too many times. It's a signal the lender wants the underlying property and no matter what the borrower does, they're going to take it any way they can get it. If confronted about this apparent conflict, the lender will blame it on employee incompetence, or missing paperwork, but it's not. It's all part of their game of squeezing borrowers for every last cent before they foreclose anyway.]
"We trust that you realize the seriousness of this situation," it warned. [And probably gave the name of an employee to call to arrange payments. If she calls, the employee would become all sorts of nasty with her and treat her like a deadbeat.]
Williams said she had already decided to pay the house note in full with the proceeds of the flood insurance. She said she called the company repeatedly seeking a payoff amount and the company wanted to charge her a prepayment penalty. [Which was probably never in the promissory note she signed making such a demand illegal. But since both state and regulatory agencies are revolving doors for those in the banking industry, nothing is ever done to these lenders.] Then, Nov. 11, another letter arrived demanding the payments she had missed. [If she does happen to reach someone to request a payoff letter, first she'll be bounced around among various employees, each claiming they don't do payoff letters, hoping she gives up. If she does find out which one deals with payoff letters, she'll never reach them but instead will be sent to voicemail hell. After it gets closer to deadline in the default letter, the employee magically turns up with her payoff letter, but she'll be in for the shock of her life because it will be for a substantially inflated amount, which she probably can't afford, because the lender has tacked on thousands of dollars in various fees and charges.]
"I had been calling for over a month," said Williams, a New Orleans middle school principal. "I was trying to work it out with them to send the doggone payment."
Chris Miller, a senior vice president at NovaStar, said the foreclosure letter "could have been a glitch." [See, what did I say?] He said the company recently has extended the payment deadline for all borrowers in the disaster zone to Feb. 28. [Because they got caught. If this reporter hadn't done this story, NovaStar would have started foreclosure proceedings.]
"We don't want to foreclose," Miller said. [Lie.] "We aren't reporting to the credit bureaus. [Another lie.] I don't know why she would receive something like that." [Hello? Follow-up questions? This woman got a letter on NovaStar letter head -- someone knows something. But this reporter lets it go at the word of the company and leaves it at that.]
Williams said she was never informed of the new deadline either in conversations with company representatives or by mail. [That's because they just came up with it while talking to the reporter.] It doesn't matter anyway, she said. She paid off the loan in full Dec. 1, she said.
On Friday, she received another letter from NovaStar. It was dated Dec. 6 and said, "As you are aware, NovaStar is preparing to foreclose on your home." [I hope she kept a copy of both sides of the instrument she used to pay off the loan, and has a copy of the canceled one, because these lenders will try to foreclose and claim they never were paid unless the borrower has proof.]
. . . . . . .
Bill Walsh can be reached at bill.walsh@newhouse.com or (202) 383-7817.
www.nola.com/business/t-p/index.ssf?/base/money-0/113428616376920.xml
Sunday, December 11, 2005
By Bill Walsh
Washington bureau
WASHINGTON -- Even in the best of times, a letter with the heading "notice of default" would be alarming. But for Barbara Smith, 67, the letter came at the worst time of her life.
The floodwaters from Hurricane Katrina had laid waste to the Lower 9th Ward home. She had relocated temporarily to Kentucky and was trying to figure out what to do next when she got the Nov. 14 notice from Green Tree Servicing LLC, her mortgage company. It told her to "cure the default" of $792 within 30 days or the company would foreclose and report her to the credit agencies.
"We contacted the company (and a representative) was very hostile and said he didn't care about our situation and we better send in the payment," said Adrienne Dowden, Smith's daughter. "Of course we did. He said we must continue to pay or my mother will lose her home." [Predatory lenders do this even without the pretext of a natural disaster.]
While many mortgage lenders are giving flooded-out homeowners as much as 18 months to resume payments, others -- especially subprime lenders who serve low-income and minority borrowers -- are turning up the pressure to get their money. Instead of getting extra time, these borrowers are getting strongly worded letters and phone calls saying their loans are in default and it is time to pay up. [Because they know these borrowers most likely do not know their rights, and cannot afford to seek legal counsel to help them.]
"These are empty threats to scare less-sophisticated borrowers into thinking their credit will be ruined into making payments they can't afford to make right now," said Travis Plunkett of the Consumer Federation of America.] [This gives lenders too much credit. Some just want the property, and this would make sense in New Orleans where developers would be willing to pay top dollar in the city's reconstruction.]
Green Tree and other subprime lenders say they are working with borrowers to arrange repayment plans and have no intention of initiating foreclosure, a move that would leave them with an unpaid debt and a worthless property.
Still, the Louisiana Office of Financial Institutions reported earlier this week receiving "a significant number of complaints" from homeowners saying that lenders who had granted a deferral for payments after the Aug. 29 hurricane were now demanding as many as four months worth of payments in a single lump sum.
The pressure, according to Darin Domingue, deputy chief examiner at the regulatory agency, isn't coming from mortgage companies whose loans are insured by the federal government, such as the Federal Housing Administration, the Department of Veterans Affairs, Fannie Mae or Freddie Mac. Rather, he said, it is generated by lenders whose loans are not backed by the federal Treasury and by subprime lenders who may face financial pressure from private investors.
"Their hands are tied," Domingue said. "If they are not part of something that is insured or guaranteed, they have to go by their guidelines." [Typical bureaucrat enabling bad corporate behavior. No their hands aren't tied; your department, as regulator of these lenders, could recommend the governor impose a moritorium on foreclosures in the state. But I realize this is "outside the box" thinking in our 'corporations are always right' society.]
Subprime loans are aimed at people who, because of a subpar credit history, are unable to obtain conventional mortgages. Generally they are charged higher rates because of the greater risk they supposedly represent. They also tend to be disproportionately African-American, according to a Sept. 22 study by the community advocacy group ACORN. [Not true. Studies have shown that many minorities had credit scores which would qualify them for conventional financing, but have been steered into subprime, predatory loans.]
Its report, which was subtitled "How the Subprime Mortgage Industry is Sand-bagging Katrina-affected Homeowners," drew on federal government data. It found that 37.5 percent of home mortgages to African-Americans in metropolitan New Orleans last year were subprime with rates above 8 percent. At the time, conventional 30-year mortgages were about two points lower. African-Americans in the eight-parish region got subprime loans at a rate four times higher than white borrowers, the report found. [Correct. So why isn't this reporter making the connection?]
After Katrina flooded about 205,000 homes in southeast Louisiana, prime lenders generally gave borrowers a 90-day grace period to hold off on mortgage payments. As that deadline approached, federal regulators urged lenders to give even more time, and most have. Fannie Mae, the largest mortgage company in the nation, is giving 18 months in some cases.
Green Tree Servicing gave Barbara Smith 60 days from the time Katrina made landfall. Brian Corey, the company's general counsel, said it was a blanket policy for all borrowers in the disaster zone. In the meantime, he said, the company stopped all collection calls and reached out to borrowers to assess their financial situation. Depending on a borrower's ability to resume payments, Corey said, Green Tree was extending the grace period without penalty.
"Its in our interests to work with people," Corey said. [Generally, the way to tell lender's counsel is lying is that their lips are moving.]
The "Notice of Default" letter Green Tree sent to Smith included a "modification or repayment agreement" to allow for an alternative payment schedule. But Dowden, Smith's daughter, said the company representative was so insistent on receiving payment immediately, getting a deferral wasn't even discussed. [She wouldn't want one of these forebearance agreements, either, because of their oppressive and unconscionable nature. It's like handing your enemy a loaded gun and then asking them not to shoot you. After the borrower discloses everything about their finances -- from how much they make each week, to how much they hold in deposit accounts -- the lender saddles the borrower with exorbitantly high monthly payments, which they know the borrower will eventually default on, starting the foreclosure cycle all over again. This is how all these lenders operate.]
"We did not explore any options because when we talked to them there did not appear to be any options," Dowden said. [Just wait. As the deadline in the original default letter approaches, another rep from the company, playing the "white hat," will call offering a forebearance agreement.]
Sonya Williams described a similar experience with her lender. Like Smith, her eastern New Orleans home was flooded when the levees breached. She evacuated west and then was forced to flee again as Hurricane Rita bore down three weeks later. She is now living in an apartment in Texas City, Texas.
On Oct. 19, she received an application from NovaStar Mortgage Co. in Missouri modifying her loan to tack the two months of payments she missed onto the end of the mortgage. Her next payment was due Nov. 1, the letter said.
But on Oct. 25, she got another letter from NovaStar bearing the heading "Notice of Intent to Foreclose." It said her loan was in default and warned that late payments are reported to credit agencies. It demanded a certified check for $2,700. [Oh boy, have I seen this game played before, one too many times. It's a signal the lender wants the underlying property and no matter what the borrower does, they're going to take it any way they can get it. If confronted about this apparent conflict, the lender will blame it on employee incompetence, or missing paperwork, but it's not. It's all part of their game of squeezing borrowers for every last cent before they foreclose anyway.]
"We trust that you realize the seriousness of this situation," it warned. [And probably gave the name of an employee to call to arrange payments. If she calls, the employee would become all sorts of nasty with her and treat her like a deadbeat.]
Williams said she had already decided to pay the house note in full with the proceeds of the flood insurance. She said she called the company repeatedly seeking a payoff amount and the company wanted to charge her a prepayment penalty. [Which was probably never in the promissory note she signed making such a demand illegal. But since both state and regulatory agencies are revolving doors for those in the banking industry, nothing is ever done to these lenders.] Then, Nov. 11, another letter arrived demanding the payments she had missed. [If she does happen to reach someone to request a payoff letter, first she'll be bounced around among various employees, each claiming they don't do payoff letters, hoping she gives up. If she does find out which one deals with payoff letters, she'll never reach them but instead will be sent to voicemail hell. After it gets closer to deadline in the default letter, the employee magically turns up with her payoff letter, but she'll be in for the shock of her life because it will be for a substantially inflated amount, which she probably can't afford, because the lender has tacked on thousands of dollars in various fees and charges.]
"I had been calling for over a month," said Williams, a New Orleans middle school principal. "I was trying to work it out with them to send the doggone payment."
Chris Miller, a senior vice president at NovaStar, said the foreclosure letter "could have been a glitch." [See, what did I say?] He said the company recently has extended the payment deadline for all borrowers in the disaster zone to Feb. 28. [Because they got caught. If this reporter hadn't done this story, NovaStar would have started foreclosure proceedings.]
"We don't want to foreclose," Miller said. [Lie.] "We aren't reporting to the credit bureaus. [Another lie.] I don't know why she would receive something like that." [Hello? Follow-up questions? This woman got a letter on NovaStar letter head -- someone knows something. But this reporter lets it go at the word of the company and leaves it at that.]
Williams said she was never informed of the new deadline either in conversations with company representatives or by mail. [That's because they just came up with it while talking to the reporter.] It doesn't matter anyway, she said. She paid off the loan in full Dec. 1, she said.
On Friday, she received another letter from NovaStar. It was dated Dec. 6 and said, "As you are aware, NovaStar is preparing to foreclose on your home." [I hope she kept a copy of both sides of the instrument she used to pay off the loan, and has a copy of the canceled one, because these lenders will try to foreclose and claim they never were paid unless the borrower has proof.]
. . . . . . .
Bill Walsh can be reached at bill.walsh@newhouse.com or (202) 383-7817.
www.nola.com/business/t-p/index.ssf?/base/money-0/113428616376920.xml
