Sue The Subprimers?

DSCN8537.JPGThat’s one option under consideration by a task force plotting New Haven’s response to the foreclosure crisis.

Three members of a mayoral task force offered a preview Tuesday of what they’re learning so far about the pending crisis, and what steps they’re considering suggesting to combat it.

Mayor John DeStefano appointed the task force to study the growing number of foreclosures in New Haven, sparked by a collapse of the so-called “subprime” market — loans to people with bad credit, often on terms that are exploitative and/or difficult to repay. He wants the task force to report back with a plan of action as the number of foreclosures is projected to hit a peak later in 2008.

Task force members Sameera Fazili (in photo), Robin Golden, and Carla Weil shared some of what they’ve learned so far with 30 people gathered for breakfast at the Graduate Club. The event was organized by the Community Loan Fund and sponsored by TD Banknorth.

DSCN8522.JPGGolden (pictured), a former housing authority and Board of Ed official who now works at Yale Law School’s legal services unit, said the group is exploring whether to follow the lead of cities like Baltimore in suing some of the lenders who made the bad loans. Golden said after her talk that the idea is still in the exploratory stage.

Seven lenders are responsible for a full 40 percent of the loans that have gone into foreclosure in New Haven since 2005, Golden reported. The number of foreclosures in town jumped from 365 in 2005, to 545 in 2006, to 1022 in 2007. More than a third of the foreclosures have occurred in just three neighborhoods: Fair Haven, the Hill and Newhallville. More are expected this year. Most of the homes are owner-occupied, Golden said.

To see a neighborhood breakdown of city foreclosures and the list of top lenders involved in them, click here.

A class-action lawsuit can at the least make it easier for people in New Haven to reach often faceless, distant bureaucrats at out-of-town lending institutions to negotiate settlements to troubled mortgages short of foreclosure, Golden said. Yale’s legal services clinic would file the lawsuit if the idea progresses.

“One of the things you do with litigation is get people’s attention,” she noted. “We can make [lenders’] life miserable, which can get their attention.”

Fazili, who also works at Yale legal services, outlined other steps the task force is planning or considering:

‚Ä¢ Reaching out to homeowners in danger of being foreclosed on, but not yet missing payments. That makes it easier for them to qualify for “great new refinancing options.” Outreach efforts will include a March 4 community meeting with church and other community leaders who may have unwittingly led low-income people into predatory loans in recent years. “People were preyed upon in church and community settings by people they thought they could trust,” Fazili said.

• Create a lending pool to help troubled homeowners work their way out of debt without losing their property.

• Offer legal help to holders of subprime mortgages who are facing or potentially facing foreclosure. The lawyers could help negotiate short sales, prepare bankruptcy filings, or pursue other methods of limiting the damage.

‚Ä¢ Look at ways to keep foreclosed-upon property out of the hands of out-of-town speculators. One idea is to have a quasi-government agency snap up properties and rent them out, sometimes to their previous owners. Click here for a story about Dan Kildee’s efforts to do that in Michigan and his work spreading the word to cities across the country.

‚Ä¢ Plan neighborhood-wide strategies for parts of town where a cascade of foreclosures could repeat a pattern from the ’80s and mid ’90s: abandoned buildings as well as substandard properties snapped up by out-of-town speculators and real-estate flippers who milk the properties but don’t improve them. An aggressive effort by City Hall helped cut the number of abandoned buildings in New Haven from 1,500 to under 300 from 1996 to November 2005. But over the last 12 months, the city has seen a 19 percent rise in abandoned buildings, most of that increase coming in the past half-year.

DSCN8540.JPGWeil, executive director of the Community Loan Fund, noted that the current crisis has innocent roots: Efforts to help more people afford to buy homes. In some cases, experts now agree that such efforts put homes in the hands of some people who could never afford to keep them. In other cases, dishonorable lenders signed people up for exploitive terms they didn’t understand, lured by low original interest rates that ballooned two years later. Also, the mortgage market changed: Local banks and other lenders no longer maintained the risk of making risky loans. Instead they packaged mortgage loans to out-of-state lenders. That reduced accountability.

At the end of the presentation, Matthew Nemerson, head of the Connecticut Technology Council, questioned whether the burgeoning number of foreclosures, painful as they are, might represent a market correction that could have some positive results — whether for instance out-of-town property owners may be able to maintain and rent out needed apartments.

“Isn’t it possible in some neighborhoods, having more rental properties might be a better thing?”

The panelists agreed some people should never have bought homes, and rental housing is needed. But they argued that absentee landlords, especially from out of town, often do a worse job keeping up properties, and can drag down an entire neighborhood in the process.

New Haven saw that happen in the 1980s and ’90s when a wave of speculators snapped up properties in poor neighborhoods. Some milked them for federally subsidized Section 8 rents without reinvesting in properties. Others — some of them eventually arrested and convicted of federal fraud charges — falsely inflated land values through complex flipping schemes involving shell corporations, leaving neighbors to clean up the damage. One neighborhood group, Trowbridge Renaissance, recently started going to house auctions to seek to outbid the speculators. (Read about that here.)

Read previous Independent coverage of New Haven’s foreclosure crisis:

• WPCA Hearing Delayed
‚Ä¢ Megna’s “Blood Boils” at WPCA Tactics
• Goldfield Wants WPCA Answers
• 2 Days, 8 Foreclosure Suits
• WPCA Goes On Foreclosure Binge
• A Guru Weighs In
• WPCA Targets Church
• Subprime Mess Targeted
‚Ä¢ Renters Caught In Foreclosure King’s Fall
‚Ä¢ She’s One Of 1,150 In The Foreclosure Mill
‚Ä¢ Foreclosures Threaten Perrotti’s Empire
‚Ä¢“I’m Not Going To Lay Down And Let Them Take My House”

The following links are to various materials and brochures designed to help homeowners avoid foreclosure.

How to prepare a complaint to the Department of Banking; Department of Banking Online Assistance Form; Connecticut Department of Banking, Avoiding Foreclosure; FDIC Consumer News; Statewide Legal Services of Connecticut, Inc; Connecticut Bar Association Lawyer Referral Service.

For lawyer referral services in New Haven, call 562-5750 or visit this website. For the Department of Social Services (DSS) Eviction Foreclosure Prevention Program (EFPP), call 211 to see which community-based organization in the state serves your town.

Click here for information on foreclosure prevention efforts from Empower New Haven.

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posted by: Ned on February 12, 2008  2:08pm

“Most of the homes are owner-occupied, Golden said.”  A quick perusal of the Short Calendars by Court Location checked against the Vision Appraisal database seems to suggest that none of the “homes”, aka investment properties, in my neighborhood are owner occupied, unless, of course someone can live in several places simultaneously.  Why do churches, that steered members into financial ruin, get special exemption from responsibility, while subprime lenders get all of the blame?
“Isn’t it possible in some neighborhoods, having more rental properties might be a better thing?”  You’re kidding right?  Or have a “quasi-government agency snap up properties and rent them out.”  This proposal is an invitation for graft and corruption on a massive scale.
How about the city buy the buildings, tear them down and sell the vacant land to adjoining, resident, tenured property owners, with deed restrictions as to the nature of any future development.

posted by: WEBblog 1 on February 12, 2008  2:11pm

It would seem the city knew full well, at the time the loans were being transacted and filed in the clerk and assessors offices, while at the same time collecting conveyance fees, that these types of legal shanagains were going on. If not, why not.

The city is caught in a juxtaposition because the city, as well as, the quasi-city WPCA, both are contributing to this foreclosure catastrophe, even today. Most of us still remember the BREEN foreclosures.

It’s ironic the city would look beyond itself for solutions. Perhaps this fact will come out in a future report, but don’t count of that happening.

The city is currently more than 70% rental. In spite of the sub-primed sales, the percentages never went below that number. One contributing factor might lie in the fact that a too higher percentage of the city population is below the government’s poverty level. New Haven continues to be in the top ten poorest cities in the nation, while at the same time, New Haven continues to be in the top five riches states in the nation. Go figure.

While these sobering statistics would discourage most groups, there appears to be a glimmer of hope within this “task force…. plotting New Haven’s response to the foreclosure crisis”.

posted by: Anthony on February 12, 2008  3:50pm

The city is just worried that the sub-prime crises is going to start to effect the seriously overpriced proprty downtown.

posted by: cedarhillresident on February 12, 2008  3:56pm

“Isn’t it possible in some neighborhoods, having more rental properties might be a better thing?”

Ok, who has an answer to this question. OH OH I do! In the area I live in, the goal of our community is to make it as owner occupied as we can. Comments like that really scare me. Why would we want more rental property’s. New Haven hmmmm YALE New Haven.  Wow I want to say more about this comment but I am being good right now.

posted by: RevKev on February 12, 2008  5:28pm

The truth of the matter is that many of us just can NOT afford to buy houses right now.  I suggest that at the same time we look at providing QUALITY affordable housing we spend more time focusing on figuring out how to help people AFFORD HOUSES.  That means we need to work on increasing incomes for ALL people (at least the ones willing to put in the time to build their capacity to earn more.) We can do that by making sure that some of this new development that Johnny D is promoting includes those of us who are historically underrepresented in these projects - poor people (who in NH almost always translates to brown people.)  We call that Affirmative Economic Development. Not affirmative action (i.e. construction jobs) but something that will last.  This housing crisis is just the tip of the iceberg unless we look for a holistic approach to solving this crisis.

posted by: Your Tax Dollars at Work on February 12, 2008  6:03pm

Basic problem: lenders qualified borrowers for unsustainable mortgages.  Why? Because there was no risk to the lenders (they could immediately sell the “sub prine” loans into mega, insured, Wall Street organized pools) AND lenders profited because they retained huge fees for origination and servicing.  While lenders took no risk,  inevitable losses were sustained by direct or indirect investors in the pools (someone had to lose and as usual, it was the “little guy” whose savings and retirement funds were being invested in the mortgage pools and the poor shnooks who signed their names to the mortgage papers)

While we’re busy murdering the bankers for doing what comes naturally to them, perhaps we should ask a few other questions:

Where were the lawyers and law professors now wringing their hands over the predictable disaster?

Where were our vaunted government officials now wringing their hands—the Mayor and City officials, for instance, who let all this happen because the Grand List was being inflated and vacant homes were being occupied?

posted by: nfjanette on February 13, 2008  12:26pm

Basic problem: lenders qualified borrowers for unsustainable mortgages. Why?

Because the government needed something to fuel the economy and make it appear that there had been some recovery.  By artificially inflating the value of real estate and then making that money available to sellers and owners (via refinancing and second mortgages), a significant infusion of cash was available for consumer spending.  Now, the house of cards (no pun intended) is collapsing, and we’re going to have to face the reality that there has been no recovery - quite the opposite.

posted by: Barbara Ann Jackson on February 13, 2008  1:22pm

Real estate foreclosures are predatory lenders’ bonanzas because foreclosures enable PROPERTY FLIPPING, and flipping enables misleading investors concerning housing market profits.  Debt collection fraud is the prime method for accomplishing fraudulent flipping.  In fact, because of FRAUDULENT FORECLOSURE PROCEEDINGS, SCORES OF PEOPLE HAVE NOT LAWFULLY LOST OWNERSHIP OF THEIR PROPERTIES, AND LEGALLY ARE STILL THE OWNERS, but they do not know it. Even worse, some homeowners are being sued under “DEFICIENCY” judgments although the foreclosure itself is null.

Despite the many probes into factors of the mortgage crisis, there has been almost no investigation of the most lethal mortgage mess component: DEBT COLLECTION ABUSE and JUDICIAL COLLUSION.  The Feds need to seek the whereabouts of perhaps billions of dollars and massive amounts of real estate that winds up in the collector attorneys’ possession -as well as examine the scores of attorney bankruptcy court frauds.

Collector Attorneys deliberately file foreclosures naming defunct mortgage companies, or companies which no longer hold the notes; or affix collectors’ fees exceeding “Acceleration Clauses.”  If homeowners sue or “Unfair Debt Collection Practices,” collectors make more $$ through protracted litigations. Additionally, some collectors file in Bankruptcy Court falsified motions to “Lift Stay” pleadings for purposes of accomplishing SIMULATED AUCTIONS of real estate properties.

Additionally, as an added measure to heighten chances of judicial favor, collector attorneys propagate that defaulted property owners are costing their clients a lot of money, while the true culprit is collectors’ fraud and racketeering.  Exploiting distressed property owners for purposes of making money from their predicaments and then misrepresenting the facts has to be the cruelest exploitation and maligning against people faced with becoming homeless!

In States like Louisiana, because Wells Fargo and Freddie Mac greatly benefit from fraudulent foreclosures, ANY representation about $$$ billion dollar losses due to people defaulting on mortgages should be weighed against needless payments of legal fees to law firms which
outmaneuver -and even persecute people who file court proceedings in opposition to fraudulent foreclosures and repossessions.

In August 2005,Freddie Mac evicted Louisiana property owners because Freddie Mac falsely claims to have purchased their property in year 2005, from a mortgage company which has been defunct since year 2002.  **See Proof at:
http://www.lawgrace.org/2008/01/05/united-states-chief-justice-robert’s-aim-to-raise-to-raise-federal-judges-pay-is-revolting-new-orleans-federal-judiciary-call-to-impeach-judge-g-thomas-porteous/ *Also posted on the lawgrace.org site is the “successor in interest” Affidavit for that defunct mortgage company.

Lastly, for a purported debt of $86,000.00, through use of a non-existent mortgage company, attorneys racked up more than a quarter of a million dollars in litigation fees.  Later, the property was sold to a 3rd party for $37,000.00.  Investors got nothing, nothing practical was accomplished by evicting the homeowners, and neighborhood property values declined.
_____________________________________
Here’s a few more links:

*Mortgage Mess, Foreclosure Fraud and Impediments to Justice
http://newsblaze.com/story/20071203130614tsop.nb/newsblaze/TOPSTORY/Top-Stories.

*ILLEGAL REAL ESTATE FLIPPING…
http://www.lawgrace.org/2007/06/21/illegal-real-estate-flipping-unfair-enrichment-etc/

*Comment on the Foreclosure of Judge Reginald Badeaux’s Home
http://www.lawgrace.org/2007/12/08/my-december-7-2007-comment-posted-to-the-times-picayune-blog-about-the-news-article-entitled-“judge-gets-debt-reprieve-badeaux-has-skipped-mortgage-payments”-the-foreclosure-of-this-lo/

*Federal Judges’ Pay Raise; New Orleans Federal Judiciary Call To Impeach
http://newsblaze.com/story/20080101084831tsop.nb/newsblaze/TOPSTORY/Top-Stories.html

Barbara Ann Jackson

posted by: concrenedwestvilleres on February 13, 2008  3:27pm

There are several issues here.  First, the question is whether these subprimers were acting fraudulently by promising one set of terms and then changing them at closing.  The only way to prove that is to provide documentation which shows the difference.  People who signed a loan agreement can not and should not be able to claim they didn’t know what they were signing. The effects on the ability of people to get credit would be devastating to the ability to get credit and to the economy.  What lender in their right mind would lend to someone knowing that if things turn sour they will sue and possibly win claiming they didn’t know what they were signing?  The major problem is that the investors don’t want to lose their money and the debtor wants to remain in their home that maybe they couldn’t afford in the first place.
Second, this country has a vast lack of financial education and it is one topic that needs a greater focus.  The citizens of this country need to learn how to manage their money and how to go through the process of mortgages and other types of financial transactions.  I believe that we can avoid this type of situation again by implementing financial education classes at the high school level (before kids go to college) and at the college level (before they graduate and head into the real world, so to speak).  This can make it harder for con artists to succeed as some phony subprimers did.
Last, we need to address affordable housing in the area and how to help people realize the dream of owning their own home and not losing it due to rising rates or fraud.  New Haven is becoming more expensive all the time (the new Wintergreen apartments in Westville run from $1060 to $2600 per month).  Who can afford that on a regular basis?  Affordable housing is key and while there is no easy solution, a solution can be found if those invested in it try.  The real power is with the consumer, but the consumer doesn’t realize their power and they need to.
One more thing- we don’t need more lawsuits in this country.  Yale Legal Services will be taking up the cause, but what if it is found that the target companies did nothing wrong?  If that is the case, then Yale should pay the companies’ legal fees.  If Yale believes this is a fraudulent practice they should put their money where their mouth is.