October 26, 2007 (LPAC)--On the evening of October 25, 2007, a public hearing in the Georgia State Capitol Building entitled "Predatory Lending and the Current Mortgage Crisis" was convened by State Senator Vincent Fort of the 39th District, representing the Southside of Atlanta, also present from the Georgia Legislature was Representative "Able" Mable Thomas (D-43rd) and Representative Randal Mangham (D-62th), both from the Atlanta area. Senator Fort was the original author of the state of Georgia’s Predatory Lending Laws, which, until repealed in 2002, were touted as the toughest in the country. The hearing was held to hear testimony from those being affected by predatory mortgage lenders and potential home foreclosure. There were approximately 50 people in attendance at some point during the hearing, in a room booked for 50 people maximum. Cameras for all major news affiliates (ABC, FOX, NBC, CBS) were set up, but only remained long enough to get a few minutes of footage. A gentleman from People TV, a local, independent media outlet, recorded the entire proceeding.
The event began by hearing from various local residents and their struggles in meeting their Mortgage payments. All of their testimonies shared the common theme of elderly African-American women, often disabled, being taken advantage of by unscrupulous mortgage brokers, moving them from Fixed, to Adjustable Rate Mortgages without a concern for their ability to pay even the initial refinanced payment amount, and now, not being able to meet those "upgraded" payments, are faced with foreclosure on a home they have owned for 20 or more years. A summary of their individual situations, follows:
Resident 1, approx. 60 years in age, had, in 2003, put her entire life savings, $37,000, down as a payment on a $112,000 home. In the midst of financial difficulties she received a "cold-call" from a mortgage brokerage firm (Fremont), who ultimately refinanced her mortgage at what she thought was a Fixed-Rate Mortgage of 6.9%. After receiving documentation and consulting with a lawyer, she discovered that her mortgage would soon adjust to a rate of 9.9%, and to an amount that she will be unable to pay. The woman’s main source of income is the alimony payments she receives from her former husband. Through last minute legal action she currently remains in her home, though the foreclosure has only been postponed. United States Bank owns her mortgage.
Resident 2, a woman over 60, with an adult, mentally disabled daughter, has lived in her home 26 years. She receives two Social Security checks each month, for her and her daughter each, that, together, total less than $800. Her actual total income is $1266 per month. After refinancing (Greenpoint), she has two mortgages, one with a fixed-rate of 9.9%, and the second with a adjustable-rate that starts at 13.25% and goes up to 18%. With the help of attorneys at the Atlanta Legal Aid Society, it is discovered that her loan application was falsified by the broker, with her stated income being changed to $3950 per month from Social Security. Considering this isn’t possible, it should have been a red flag to numerous personnel along the lending chain, but the loan was approved regardless. Goldman Sachs now owns her mortgage. She is faced with foreclosure.
Resident 3, provided surrogate testimony through her attorney from the Atlanta Legal Aid Society, Seniors Specialist. The resident is 74 in age and could not attend in person because she is ill and confined to her bed. She made her original mortgage payment of $505 per month with her $623 Social Security check, and through other income assistance programs. The Resident decides to refinance because she needs extra help with her bills, and is prompted to call America One Finance from a television commercial. She is set up on what is known as a 80/20 loan, where the borrower gets two mortgages, one at 80% of home’s value, the other 20%, the second of which is a piggyback loan allowing the borrower to pay no down payment. The borrower is responsible for the legal and closing fees in the deal, and these were paid for with the money from refinancing. Absolutely no documentation proving income was required from the resident to obtain the loan, these loans being known as "liar loans", because of the potential for people to misstate their financial well-being. In this case, it would have been very easy to verify the borrower’s income, as it was all received from government agencies. Her new, total loan payment, from both mortgages, was at an initial $880, well above her ability to pay. The 80-mortgage was based on an ARM of 5 years of interest-only payments at 7.5%, then after five years the loan begins adjusting to a maximum rate of 13.5%. The 20-mortgage was set at a fixed rate of 13.75%. Lehman Brothers owns this woman’s mortgage. She is faced with foreclosure.
Resident 4 was also a written testimony given by the client’s lawyer, because, she, age 55, mentally and physically disabled, also takes care of a young son. Currently her monthly income is $1384 a month, a combination of her Social Security, disability check and her pension fund from her previous employment. The woman had owned the home for 25 years and was near the end of her mortgage, accruing over $100,000 in equity, owing approximately $20,000. Having banked at Wachovia Bank in her community for years, familiar with and what she thought was a trusting relationship with the personnel at the bank, they, being very aware of her financial situation, suggested that she refinance the mortgage to help pay off some of her more unsecured debts: car payments, credit cards, furniture, etc. The resident now owes $88,000 on her mortgage, up from $20,000, with monthly payment increased from $359, to $778 per month. She is faced with foreclosure.
This report was generated by LPAC organizing activity in Georgia.
