July 14, 2011 |
Flickr Creative Commons / respres
Photo Credit: Flickr Creative Commons / respres
Millions of American homeowners owe more to their bankers than their properties are worth. With incomes stagnating and unemployment pushing higher, foreclosures are projected to hit a record high this year.
But some are learning the hard way that you don't have to stop paying your mortgage to lose your home. In fact, in some cases you don't need to have a mortgage in the first place – people are losing properties they own free and clear to the foreclosure process.
Some Americans are losing their homes to screw-ups on the part of banks and loan servicers. In March, an exhaustive investigation by the Federal Reserve was, incredibly, unable to come up with a single example of a "wrongful foreclosure." According to the Huffington Post, consumer advocates “criticized the central bank's examiners for narrowly defining what constitutes a 'wrongful foreclosure,'” and warned that “the public would not take the Fed's findings of improper practices seriously.”
And why should they? The Orlando Sun-Sentinel reported on just such an “error”:
“When Jason Grodensky bought his modest Fort Lauderdale home in December, he paid cash. But seven months later, he was surprised to learn that Bank of America had foreclosed on the house, even though Grodensky did not have a mortgage.”
He didn't learn about the action until his title was transferred to another lender. BofA, the bank that had foreclosed, eventually acknowledged the error and promised to correct it at their expense, but not before putting Grodensky through months of anguish. "I feel like I'm hanging in the wind and I'm scared to death," he told the Sun Sentinel. "How did some attorney put through a foreclosure illegally?"
According to The Week, A jury punished Countrywide Home Loans in January 2009 for failing to notice that it was repossessing and selling the wrong Las Vegas condo back in 2003. Sgt. Gerald Thitchener and his wife, Katrina, absent at the time, were awarded $3.4 million in damages. '[Countrywide] never even said they were sorry,' noted one juror.”
Another anecdote from The Week:
Dr. Alan Schroit claims he got a "putrid" surprise when he arrived at his Galveston, Texas, vacation home last October after Bank of America ("with which he has neither a relationship nor a mortgage") allegedly repossessed his home and turned off the utilities, leaving 75 pounds of frozen salmon and halibut to rot in the fridge. Schroit, who'd been planning to grill the fish for 30 guests the next night, is suing the bank. (For its part, BoA does "not believe the case will show merit.”)
According to ProPublica, a significant number of homeowners have been in for another nasty surprise when they lost their homes while the banks were telling them they were in the process of modifying their loans. In fact, some companies misinformed borrowers struggling to keep up with their payments that in order to be eligible for a loan modification, they first had to go into default on their mortgages. Lenders then added all sorts of late fees and penalties, then recouped those fattened balances by foreclosing.
Regulators have done little to stop the practice, and the "problem appears to be getting worse," said Kevin Stein, associate director of the nonprofit California Reinvestment Coalition.
Last month, the coalition surveyed 55 foreclosure-avoidance counselors throughout the state. Collectively they serve thousands of borrowers every month. Almost all of the counselors, 94 percent, reported having worked with clients who'd lost their homes while under review for a modification. About half of the counselors reported this happened "often."
Then there are people struggling to keep up with their real estate taxes – in some cases, taxes based on home values that are totally out of line with what their properties are actually worth today. A lot of those back taxes are owed by developers, stiffing their local communities – in Hennepin County, Minnesota, the Star-Tribune reports, “the 10 taxpayers with the highest delinquent debts, many of them developers, were responsible for a whopping 9 percent of that debt, or $5 million. In contrast, their 85 parcels made up only 1.2 percent of the 6,967 found to be delinquent.”
A new class of corporate vultures has moved in to pick the last scraps of meat off of the corpse of the American middle-class. Ventures have started snapping up tax liens at pennies on the dollar, and extracting fees of up to 25 percent of what they recover – either by dunning homeowners for the cash or via the foreclosure process.
Gannett reports that “every year, investors such as American Tax Funding provide schools, metro government and fire departments with money in lieu of property owners who fail to pay their taxes.” But that also means that millions “go to investors, typically based out of town" — millions that could be used by communities hit hard by the recession.
They also jack up what you owe, so you can never get caught up. According to Gannett, the “lien buyers can charge 'excessive' fees, especially legal costs once a case moves to foreclosure, making it nearly impossible for the homeowner to avoid losing the property.”
In Berwick, Maine, one property owner was surprised to learn his house had been auctioned off from underneath him for a fraction of its purchase price to none other than the wife of the town manager – it was the only bid that came in (the town manager insists nothing inappropriate went down in the deal).
Then there are people losing their homes who owe nothing to the bank, but are falling behind on their co-op or condominium fees. In some cases, those fees have increased dramatically to make up for fees lost to vacant units sitting in limbo.
According to the Associated Press, “one in five U.S. homeowners is subject to the will of the homeowners’ association, whose boards oversee 24.4 million homes. More than 80 percent of newly constructed homes in the U.S are in association communities.” What's more, more than 50 percent of those gated communities “now face 'serious financial problems,' according to a September survey by the Community Association Institute. An October survey found that 65 percent of homeowners’ associations have delinquency rates higher than 5 percent, up from 19 percent of associations in 2005.”
Here, again, the jackals smell some profit. The AP adds: “Before now, associations rarely, if ever, foreclosed on homeowners. But today, encouraged by a new industry of lawyers and consultants, boards are increasingly foreclosing on people 60 days past due on association fees.”
The St. Petersburg Times told a particularly troubling tale of a Brandon, Florida, couple named Ron and Angela Zappia. The two are disabled – she has cancer, he faces chronic asthma, possibly as a result of doing volunteer work at the World Trade Center site after 9/11. They get $2,100 per month in disability benefits, and were in the process of working out a loan modification on their $269,000 condo when they fell $600 behind in their dues to the homeowners' association.
Their home was immediately snapped up by an outfit called Property, Inc., which had bought up 71 homeowners' association liens in the same county in recent months. The firm told the couple they could pay $15,000 to make it “go away,” in the Times' words, or they could remain in the unit paying rent. But if they chose the latter option, the company refused to make mortgage or tax payments on the unit as other landlords do. "I said, 'Are you throwing me out of my own home?' and she said yes," Zappia said of her dealings with the company. According to the Times, “Zappia is still trying to figure out how someone could get title to her house for pennies on the dollar. 'It may be legal,' she said. 'But it's so hard to believe when you're living it.'"
Foreclosure isn't just a personal tragedy for the homeowners involved; the real estate mess continues to be a weight dragging down this painful, jobless “recovery.” Washington has steadfastly refused to offer homeowners real relief, as that would require Wall Street to take some losses. Meanwhile, the media have pivoted from the foreclosure crisis – and the catastrophe in our labor markets – to focus relentlessly on the deficit.
In a society with different priorities, perhaps that wouldn't be the case, but in America, we're supposedly all on our own. And when business is presented with an opportunity to make a few bucks, it has a “fiduciary responsibility” to pounce on it -- never mind the economic or human consequences.
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