No happy endings

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Sharon Glover paid her mortgage every month. “I never missed a payment,” said the 68-year-old retired college vice president from Golden Valley, who purchased her house 24 years ago with her late husband.

So why did Glover’s mortgage company, after receiving her payment as usual in July 2007, continue to move ahead with foreclosure proceedings, including serving Glover with notice that the house would be sold at a sheriff’s sale last August?

Hoodwinked
Glover’s problems began in 1999, when she agreed to refinance the home after being solicited to do so by a mortgage broker at a time when she was particularly vulnerable. In rapid succession, Glover had lost her mother, father, brother and husband. She was a sitting duck for the man who, she said, “danced in here, singing my husband’s praises … I was still grieving, and I trusted this man because he respected my husband.”

The broker promised Glover that the refinanced loan would decrease her $1,200 monthly payment and pay off other bills (estimated by Glover to be at $10,000 or less). The truth turned out to be very different.

“I signed the papers believing him, and it was much later I found out that my payments were not less than $1,200, but $1,550 per month,” Glover said. “I never even got a closing statement.” The loan balance, Glover understood, was to be $94,000. “It went from $94,000 to $162,700,” said Glover. “I still don’t understand why. I didn’t have $70,000 in bills. And I don’t even know what bills they paid, because they never gave me a list.

“I was ashamed that I had been taken, but I worked and I made the $1,550 payment each month,” Glover said.

High-income women are 50% more likely to receive a subprime loan than high-income men.

32% of women borrowers receive subprime mortgage loans compared to 24% of male borrowers.

Women make up 30% of borrowers for mortgages of all types, but they make up 39% of subprime borrowers (a 29% over-representation).

Lower-income women are 8% more likely to receive subprime loans than lower-income men.

Women of color are the most likely to receive subprime loans and white men are the least likely. The gap grows with income.

Source: Consumer Federation of America, www.consumerfed.org

Targeting women
As an African American professional woman, Glover fit the profile of a subprime borrower to a T. According to the Consumer Federation of America (CFA), women have, on average, higher credit scores than men, yet they are much more likely to receive subprime loans. A CFA study released at the end of 2006 found that lower income women were 8 percent more likely to receive subprime loans than men. And as income increases, the disparity widens even further: Women earning higher incomes are 50 percent more likely to receive a subprime loan than a man at the same income level.

Race plays a significant role. The same study found that women of color have the highest incidence of subprime mortgages of any demographic group. Higher-income African American women are almost five times as likely and higher-income Latina women are four times as likely as higher-income white men to receive a subprime mortgage.

According to Julie Gugin, executive director of the Minnesota Home Ownership Center, which links homeowners who are having trouble making payments with nonprofit agencies, “Those who have subprime mortgages are significantly more likely to face foreclosure.” Undesirable characteristics of subprime mortgages include higher closing costs, higher monthly payments, balloon payments (the entire mortgage becomes due, requiring the homeowner to refinance), adjustable rates (at the end of a relatively short time, commonly two years, the interest rate of the mortgage “adjusts” upward, increasing the monthly payment), and severe penalties for refinancing prior to the interest rate’s initial upward adjustment.

Why would a woman take out a subprime mortgage? According to Acorn Housing Corp. Midwest Regional Director Alexa Milton, “These brokers and lenders prey on people who don’t know a lot about mortgages and finances. Some of the borrowers would have qualified for a prime rate mortgage.” According to a 2006 report by the Wall Street Journal, 61 percent of borrowers who received subprime mortgages had credit scores high enough to qualify them for prime loans. And some borrowers may look at a subprime mortgage as a temporary solution, hoping to refinance at a later date.

Even those who shy away from brokers and fly-by-night mortgage companies aren’t immune to predatory lending. Countrywide Financial, the nation’s largest mortgage lender, has become notorious for its involvement in subprime lending. Countrywide recently admitted that at the end of 2007, one in three of its subprime clients were delinquent on their mortgages. And Minnesota-based Wells Fargo Bank has made news recently when a number of large cities, including Baltimore and Cleveland, sued the lender, claiming it engaged in predatory lending practices. According to the Baltimore lawsuit, Wells Fargo gave subprime mortgages to 65 percent of its black customers and just 15 percent of its white customers.

Anatomy of a foreclosure

1st missed payment Lender begins collection calls and letters

2nd missed payment Lender continues collection efforts; Mortgage is officially “In Default”

3rd missed payment Lender continues collection efforts; Lender transfers account for Foreclosure Dept.

4th missed payment Lender sends account to foreclosure attorney. Legal fees begin to accrue; “Notice of Intent to Foreclose” sent to homeowner

5th missed payment Attorney schedules Sheriff’s Sale date; Sheriff’s Sale date published in legal newspaper for six consecutive weeks

6th missed payment Homeowner served with notice of Sheriff’s Sale (four weeks before sale)

7th missed payment Sheriff’s Sale occurs; Homeowner has six months to redeem the house by paying off entire mortgage and legal fees. Homeowner may occupy the house during this time.

This timeframe may vary slightly by lender and individual circumstances

Source: Minnesota Home Ownership Center www.hocmn.org

What causes default?
“In most cases, a crisis beyond [the homeowner’s] control causes [them to get in trouble on their mortgage],” Gugin said. “It’s often a loss of income caused by job loss; divorce, death or a break up; a health crisis, even an adult child who was helping with the mortgage moving out. Beyond that, it’s the people who have mortgages that were never appropriate for them and that were likely, though not always, sold to them under cloudy circumstances.”

“You see people who didn’t have the ability to repay the loan,” Milton said. “But that is not most of it. It’s mostly people who have had a crisis, whose loan adjusted upward, or who were taken advantage of and put into mortgages at a higher interest rate when they didn’t need to be.”

‘I never thought I was dumb’
The Minnesota Women’s Press talked to Melissa Jordan (name changed for privacy reasons) said she walked into a subprime mortgage with her eyes wide open-and lived to regret it. Jordan explained, “I was self-employed and my husband was unemployed. We were moving to the Twin Cities so I could take a job, and we knew my husband would find work too. We had a decent credit record but couldn’t show sufficient income. When our Wisconsin house sold at a loss after being on the market for a year and a half, we didn’t have much to put down on the new house. So we decided to take the subprime loan the broker offered, figuring we could make the large payments for maybe a year and then refinance.”

After closing, Jordan learned that there was a substantial penalty for refinancing within the first two years of the mortgage. After her husband got a job, the couple decided to bite the bullet and refinance anyway-only to learn that, in the year since they had closed, plummeting property values put them in a “negative equity” situation-they owned more on the home than it was worth. Their mortgage company refused to negotiate.

“We are stuck with a high mortgage payment,” Jordan said. “My husband’s job pays less than we expected, and in order to pay the mortgage, we’ve have to let other bills slide. As a result, our credit rating has suffered. If we lose the house, I wonder if a decent landlord will even rent to us. They all do credit checks now.”

Jordan’s adjustable mortgage rate adjusts upward this summer. “I don’t know what will happen then,” she said. “I feel like this is my own fault. I’ve been a homeowner for many years, and I thought I knew what I was doing.”

Jordan said that along with worrying about losing the home, she feels “so ashamed and embarrassed. This is not the kind of thing you talk to people about. You hear them talk about why someone would be dumb enough to take out a subprime mortgage. I never thought I was dumb.”

Packing to move
Glover can understand those feelings. She, too, has felt ashamed.

These are common feelings among subprime borrowers who get into trouble, Gugin said. “Shame, guilt, depression, fear”-she ticked off the reactions mortgage counselors report among their clients. Glover has even suffered physical symptoms related to her mortgage problems: “I broke out in this rash all over my body,” she said. “I have pictures of it … my doctor said it’s due to all the stress.”

It was after her mortgage was sold to Florida-based Ocwen Financial Services that Glover’s stress level began to rise. Ocwen insisted on taking over payment of Glover’s property taxes and insurance, “although I was current on both. They increased my payments by $400 a month.” Glover continued to make the payments, now $1,945 per month.

After she had three strokes and then, within a six-month period, both hip and knee replacement, Glover was unable to continue full-time work. She never missed a mortgage payment, draining her savings to keep up. And then, after losing a part-time consulting position after she fell at work, Glover had to rely on Social Security and a monthly annuity check.

“I still didn’t miss a payment, but I had to pay at the end of the month, because that’s when I get the money,” Glover said. She had just $200 per month after paying Ocwen, and even stopped taking prescribed medication to pay the mortgage.

Yet Ocwen refused to cut her a break. Though Glover let the lender know, both over the phone and in writing, that she couldn’t make the payment at the beginning of the month, as soon as she was five days late, they called her repeatedly. All it would have taken for Glover to stay current on her mortgage was for the lender to adjust her payment due date from the first to the end of the month. “Ocwen refused to give me even that small breath,” she said.

When Glover made her payment each month-she went to the additional expense of wiring the money so Ocwen would receive it as soon as possible-she always informed the lender that the money should be used to pay that month’s payment only. Instead, Ocwen credited the money first toward the late fees that had accrued. As a result, though Glover faithfully made her payments, her account went deeper and deeper into foreclosure proceedings.

Glover was able to find a lawyer to handle her case pro bono, and she joined a large class-action lawsuit against Ocwen. She was served with papers stating that her home would be sold and she went to the sheriff’s sale in August 2007, only to learn that her home had been pulled from the list. Neither Glover nor her attorney were informed of the last-minute reprieve.

Glover isn’t counting on that reprieve holding, and she doesn’t have the tens of thousands of dollars needed to reinstate her mortgage. Still, she has continued to pay $1,945 each month-only now, the money goes into an escrow account established by her attorney.

“I’m in limbo,” Glover said. “I’m starting to pack. I’m looking at rentals. I have a company coming to look at buying some of my furniture.”

She is a little gentler with herself these days; on reflection, she allowed, “I can understand my need to trust [the broker].

“It’s not pretty. It does hurt. If I can bring some light to some of this, show another side, I want to do it to help others.”

What Glover doesn’t understand is how the broker could do what he did to her. And she doesn’t understand why Ocwen was so unwilling to grant her what she thinks of as a small accommodation.

“All I wanted was for them to change the due date. If it could have just been at the end of the month …”

Help is available
According to Julie Gugin of the Minnesota Homeownership Center, it’s natural for homeowners in trouble to have a hard time admitting it. “One of the challenges with foreclosure counseling is that it’s important to act, and act early,” she said. State lawmakers have responded to the need by allocating funds to increase the number of mortgage counselors at nonprofit agencies. 48 percent of the clients who were counseled by one of the state-funded foreclosure prevention programs were able to hold on to their homes. Homeowners can find a nonprofit, state-funded agency in their county by going to http:// www.hocmn.org/HomeownerResources.cfm.

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