How the Foreclosure Crisis Began
Before the Second World War buying a house required a 20 to 50 percent down payment thus building in equity and decreasing the risk of foreclosure but gradually these rules scoured to a point where almost anyone who wanted to buy a house could get a lone.
In the years leading up to the crisis a flood of easy credit was unleashed into the market by
America’s mortgage industry to the point where some loans were written with no down payment and no proof of the lenders income. The government regulators became mere spectators as the Wall Street continued to encourage high risk lending by selling packaged loans to investors.
Much of the easy credit in the
Cleveland area came in the form of subprime loans. Over 30,000 high risk loans were given to the residents of this region in 2006 resulting in subprime loans making up almost 30 percent of the total loans handed out in Cuyahoga, Geauga, Lake, Lorain, Medina, Portage and Summit counties.
According to the Mortgage Bankers Association the number of foreclosure in
Ohio on subprime loans are up to two to three times higher than the statewide foreclosure rate on prime loans. Furthermore, mortgage disclosure information and court records reveal that areas with the heaviest concentration of foreclosures have been the most prevalent in subprime lending.
The executive director of Housing Research and Advocacy
Center in Cleveland, Jeffrey Dillman, claimed that the people most likely to default due to loans with high interest rates and fees were obviously ones with lower income and poor credit saying that the people who can least afford it are being charged the most.
One of the driving forces behind Cleveland’s foreclosure crisis was mortgage fraud with estimates of as many as 5,000 mortgages in Cuyahoga
County being obtained fraudulently leaving portions various neighborhoods in ruins.
A foreclosure task force launched by the state attorney general’s office in collaboration with local and federal prosecutors have charge over 170 people with cases involving $41 million in loans and over 250 properties.
The economic woes exacerbated the foreclosure crisis in the region. 25 percent of all U.S manufacturing job losses since 2001 were in
Ohio and job losses frequently result in mortgage defaults. Between 2005 and 2006 more than 45,000 higher-wage manufacturing jobs were lost in
Northeast Ohio.
Ohio’s elected leaders, whose judgments were clouded by, as critics insist, industry lobbyists, failed to see the need to regulate the mortgage industry for years. Troubled by the foreclosure crisis leading neighborhoods to resemble ghost towns took the matter into their own hands in 2002 and adapted regulations aimed at lenders charging higher interest rates but in 2006 the Ohio supreme court struck down on the laws saying that these were unconstitutional and conflicted with the state laws.
The state of Ohio does have a Consumer Sales Practice Act which prohibits “unfair or deceptive” acts while dealing with consumers but this act did not include home buying and because of this unregulated environment
Ohio ended up becoming a nation leader in the foreclosure crisis.
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Most certainly, the “Foreclosure Crisis” was initiated by those unscruplous, greedy lenders and apparently, supported by our Government. When those of us obtained our Loans, we qualified, then our loans were sold to larger lenders such as Countryswide Home Loans. The last seven (7) months I have been working to get a Loan Modification in order to avoid foreclosure. Also during those 7 months, I have been locked out of maintaining my account online or viewing pertinent information. I continued to make payments in December, February, March, April and May. Instead of making an online payment, I have had to go to the local Countrywide branch to drop off payment that they would FedEx to Countrywide Corporate at times not recording payment until late fees would be incurred. I, and my housing counselor have phoned and faxed financial documentation, hardship letters, etc. at least 5 times. Each time, that information has been lost or mishandled. Though going through Bankruptcy, I wanted to reaffirm with Countrywide. In October, 2007, I spoke with two Countrywide representatives regarding the status of my mortgage and possible options available to me after missing my October payment and decision to file bankruptcy with a planned filing date of November 2, 2007. The two representatives that I spoke with explained the option of a Loan Modification and that I would need to send in financial information and write a letter of hardship. I wrote the letter October 23, 2007and faxed it with my financial information the next day. When I phoned a week later to confirm receipt, the customer representative that I spoke with explained that it did not appear to have been received. The following day, I refaxed the documentation and request for Loan Modification. After two weeks and not hearing from Countrywide regarding the documentation, I again phoned the Countrywide Hope Hotline to confirm receipt. I was informed that it had been received, however, as I had filed bankruptcy it was not pursued. I still had not heard from Countrywide, nor would they work with my attorney regarding a reaffirmation agreement. Instead, Countrywide requested a Relief Order, which would be granted February 6th if not contested. Per my attorney, his conversation with a Countrywide Representative, and the documentation in the Order, by the Court granting this Order it was to allow Countrywide to speak with me directly regarding a workout plan or begin proceedings. My attorney spoke with a Countrywide Representative in the Bankruptcy Department January 15th, who explained to him that once the Relief Order was granted, I would be hearing from someone at Countrywide. The Order was granted February 6th, though I never did hear anything from Countrywide. To the contrary, when I contacted Countrywide after the Order was granted, and even after my Bankruptcy was discharged, they refused to speak or work with me. Earlier this month, I wrote and faxed a letter of complaint to Countrywide regarding the mishandling of my account. While my husband and I were out celebrating his birthday and our anniversary, I finally received a call from my “Negotiator” with Countrywide. Though I explained that this was not a good time, my husband and I were out in public celebrating, my “Negotiator” insisted that “if” I wanted to be considered and follow through with this process, I had to speak to her at a specific time and answer her questions at that time. After trying to explain to her the processes that I had been through the last seven months, my complaints and hope for closure to this situation, my thoughts and feelings were trivialized. At the end of the conversation I was TOLD that I HAD to call her back Tuesday, May 20th, in order to proceed. Again, it is strictly on their terms and no consideration or compassion to the homeowner. Through this whole process, I have acted in good faith and made every effort, with nothing in return from them. My question is how many people have already lost their homes or in the process of losing their home that has experienced the same? I have pleaded and begged for Colorado, my State’s officials, to step up and do something to stop this situation from spiraling further. Instead, I am told that they cannot intervene on an individuals behalf due to ethical reasons. It is a personal issue with a private company. They have tried to pass legislation but it is President Bush’s fault for vetoing that legislation. In my opinion they are all at fault and share equally in that failure. Instead, they seek to sit idly by and watch us lose our homes. Forget an indivuduals behalf, forget my behalf, act for ALL of us! Last week the President made a comment regarding the foreclosure crisis and that he will not “bail out” lenders. The President has already “bailed out” lenders with Bear Stearns & Co. and again by not passing ANY legislation that will even the playing field. Supposedly he helped Bear Stearn & Co. in order to save the American People from recession and avoid a deeper impact on our economy. Sorry but it is too late, we are already in a recession. In addition, the action was “unethical”, biased and unfair. Our Elected Officials are good with words, that is how they got in office, but can they walk the talk. No, they cannot. They talk of how they want to help the American People by passing of legislation, but no action is put toward those words. Instead, the American People get our elected officials pointing the finger at one another, blaming the other “party” for the failure. Those WORDS do not help the American People that are facing foreclosure and trying to get through this “crisis”. Our elected officials have absolutely no idea the despair, stress and fear one faces in this situation. How many more people have to become homeless with an already large homeless population in our Nation? How many more people have to lose their homes? Lose their jobs? Families? Family members? Their lives? Oh, that doesn’t matter either because they don’t know who we are. We don’t have a face. They have no personal connection to any of us, so why would they care? They speak of ethics but what about morals, does that matter? I believed that it was our responsibility and duty as human beings, much less Christians, to help one another out. I believed that our Country was built on “We the People, For the People”. I was wrong. It was built for companies, corporations and lobbyist. There are thousands of us, hundreds of thousands of us in this situation. It is unfathomable to me that it is better for all of us to lose our homes when we have such a strong desire to keep them. We (homeowners) are not asking for a “bail out”. We are simply asking that the lenders be required to work with us in a timely, reasonable and fair manner. The Mortgage Companies and Lenders are the ones that initiated this crisis by the Free Lending and Adjustable Rate Mortgages. Adjustable Rate Mortgages are a trap and take advantage of those of us that desperately wanted a slice of the American Dream! There is absolutely no way to get ahead when one’s mortgage adjusts 35% - 50% higher. It is a system set up for failure! In my opinion, it would be in everyone’s best interest and welfare for the Mortgage Companies to work things our with us, instead, they want to be greedy and keep their adjustable rates. Again, it is strictly on their terms. No consideration or compassion to the homeowner. How will it benefit the economy, lenders, our Nation when hundreds of thousands of us are displaced? We have no where to go because we have bad credit and no one will rent to us. In an already declining job market, more of us suffer job loss because we have no where to live. No address. There will be more people living on the streets, more crime, more draining of Public and Social Services, all because the Mortgage Companies refused to “work” with us and our Government turned their back on us.