Patty Loew:
In our “Money Matters” report this week home foreclosures dipped slightly in October but the state has recorded more than 25,600 this year and is on pace to beat last year's record number of foreclosures. Experts say the sub prime mortgage meltdown is compounded by unemployment and they predict it could get even worse. "In Wisconsin's" Frederica Freyberg reports on one man's foreclosure problems in Milwaukee.
Frederica Freyberg:
A guided tour of vacant foreclosed homes in Milwaukee's inner city.
Man:
It's a shame to see these old houses that have been here forever.
Frederica Freyberg:
As a law student, Nick Toman got to know these streets while conducting a survey of foreclosures.
Frederica Freyberg:
Torn down because many of them are trashed and copper piping stolen for resale.
Man:
This is remnants of the aftermath of a foreclosed home basically. What was left behind by the homeowners prior.
Frederica Freyberg:
Chris Weifenbach works for a firm that cleans out vacant foreclosed home in Milwaukee. This one hit the auction block with bids starting at $1,000. The bank making a stab at selling it, unlike this home known as a walkaway. That’s when the lender walks away from foreclosure proceedings even after the homeowner has left. Attorney Nicole Penegor says walkaways are on the rise.
Nicole Penegor:
The banks will say they don't want the properties. A lot of the properties are worth a lot less than what is owed on the loan.
Frederica Freyberg:
That's true for Julius Holmes; the 82-year-old retired factory worker and minister got a call from a loan originator a couple years ago asking if he needed some money out of his house.
Julius Holmes:
I told him I said I don't think I can do that. I have a loan on the house. Oh yeah, we can pay that off.
Frederica Freyberg:
And so Holmes bit, refinancing the home he's owned for nearly 40 years.
Nicole Penegor:
I think a lot of brokers were cold calling and lenders were cold calling people, enticing them into either lower payments or the promise of getting cash out of the equity in their home.
Frederica Freyberg:
Holmes now owes $141,600 in principal, plus at least $12,000 in accrued and growing interest on the loan. The assessed value of his home is just over $108,000.
Julius Holmes:
He told me that it would drop to $745 a month. When I got the note it was $900 and it was not under $1,000 a month.
Nicole Penegor:
This is one of the most unconscionable loans that I've seen, which means that it shocks the conscience.
Frederica Freyberg:
What Julius Holmes signed onto was a so-called exotic loan that included a low teaser rate that went up just a month later. He admits he didn't understand the terms.
Nicole Penegor:
But it's very complicated and very difficult to understand. And even as I read through it, I have to read through it several times before I can understand exactly how the interest rate is going to be calculated and when it is going to adjust.
Frederica Freyberg:
You're a lawyer that does this kind of work.
Nicole Penegor:
That's correct.
Frederica Freyberg:
According to the loan papers the mortgage brokers got a nearly $4,000 premium from the lender for making the loan. Holmes got $980 cash but had to pay a nearly $4500 pre-payment penalty on his existing mortgage. He ended up with a new loan he couldn't afford.
Julius Holmes:
I said, I can't pay that. I tried as long as I could but I couldn't handle it.
Frederica Freyberg:
And so Countrywide Home Loans foreclosed on Julius Holmes. Legal aid lawyers are alleging the loan was deceptive, unfair and not fully explained.
Frederica Freyberg:
Holmes lawyer's alleged the broker falsified his loan application making his income look higher than it is.
Nicole Penegor:
Social security income from Mr. Holmes is $890. Here it says $2,500. The pension income he received is $292 and here it states it to be $3,903. I don't know where they got those numbers from.
Frederica Freyberg:
We sought comment from the mortgage broker but the address had changed. A call to the company resulted in a no comment from the manager except “that's what they all say when they can't afford it.” Set against the sea of foreclosures in Milwaukee and elsewhere state legislators held hearings on the issues and several measures to beef up regulations to help homeowners are on the table. Help couldn't come too soon for Milwaukee homeowners like Dorothy Bush whose home is surrounded by board-ups.
Dorothy Bush:
Nobody wants to live in this neighborhood.
Julius Holmes:
I'm living in the hope that we can make it.
Frederica Freyberg:
Julius Holmes may well be speaking for himself and thousands of homeowners and renters in Milwaukee who find themselves in the middle of the foreclosure crisis.
Patty Loew:
Since that report first aired in April the homeowner, Julius Holmes and his attorney have reached an out of court settlement with Countrywide. The terms are confidential but we’re told Holmes is satisfied. The state assembly passed three bills aimed at mitigating foreclosures including one that requires mortgage brokers to put a client's financial interests above their own. The bills have yet to pass the state senate.
