The secret lives of banks and mortgage companies, pt. 1

The anonymity of banks and servicers in the foreclosure crisis is terrifying, and it allows them to commit a multitude of abuses which go largely unnoticed and unpunished. Working with people facing foreclosure and eviction in Rhode Island, one observes how banks and mortgage companies take full advantage of our Dickensian dearth of laws protecting tenant and homeowners. Here are some of the most flagrant examples - these are real people I have spoken to over the course of my outreach.

Some quick notes: cash for keys is offered by a bank to a tenant as an incentive for the tenant to move without the bank having to go to court to evict that person. An eviction will cost the bank around $2000 per family they throw out of their home, so this is in their interest, and most will lowball tenants as much as possible (you may be offered as little as $500 to move in a very short amount of time). Not all banks offer cash-for-keys.

Banks and lenders are not required to evict tenants or homeowners after foreclosure, but as a rule the overwhelming majority choose to do so. Foreclosed homes sit vacant for months, and are often vandalized (pictures to come soon).

-Yolanda was the last tenant in a three-family apartment building that had been foreclosed by HSBC, a multinational bank. Her landlord ran away with her security deposit, and she was unable to get in touch with him. The bank offered her $500 to move out in 24 hours. She did not accept, as this was totally unreasonable for a mother of three who needed to find another affordable apartment. They then offered $400, then nothing. The bank shut the water off to the house - a "self-help eviction" to force her out which the bank had "looked into" and found to be legal in RI. The servicer - First American REO Servicing based out of Denver, told her that the shutoff wasn't their problem, and that she needed to leave her apartment. Needing to take care of her children and facing an apartment infested with cockroaches, Yolanda moved out. The house, located in a high-foreclosure neighborhood, was vandalized soon after and her belongings there were stolen. When I called First American they said they could only offer $800, but when pressed relented and offered the $1600 Yolanda wanted if she would leave by the end of the month and the apartment was in "broom-swept" condition.

-We spoke to a woman who is living in her third foreclosed apartment in a few block radius. She had moved into the three-family apartment on Sorrento St. only last month, and was in the process of fixing it up when we knocked on her door. All of her landlords have stolen her security deposits, and her most recent landlady took this woman into her house when the landlady was already in default on her mortgage. When we talked to the people in the apartment building, the landlady called her and told her that we were lying about the house being in foreclosure and that she needed to keep paying rent. Tenants do not need to be told about a foreclosure under RI law, allowing landlords to collect rent illegally for months and run away with deposits before the tenants even know what's going on. This woman has three children and one on the way. All three families in this building stand to be evicted and RI does not have "just cause" eviction, meaning that banks and lenders do not have to prove anything to have someone evicted once they own the house. The foreclosing lender is Saxon Mortgage.

-Virgilio is a (former) landlord that we've been speaking with is facing eviction from his home, which was foreclosed by predatory lender American Home Mortgage Services (formerly Option One). At the time that he went into default (stopped paying) on his adjustable-rate mortgage, he was paying around $3000 a month. This is not an uncommon amount, and many long-time homeowners who refinanced with the wrong company during the real estate "boom" have faced similar payments as their interest rates "reset". The lender that exploited Virgilio is now forcing him out of his home. He is on disability and suffers from severe depression; his son is successful in high school basketball but his father has no idea where they'll live. His money depleted by months of unfair loan servicing and a cut in his disability benefits, he cannot afford to rent without Section 8 (subsidized) housing but cannot find any in the state without a long waiting list. He is seeking cash for keys, but the servicer, Westcott Properties, informed me that AHMS rarely offers it and when it does only gives around $500. The woman I spoke to complained about being yelled at by Virgilio and informed me that she had around 100 cases to deal with (they're a local servicer). AHMS/Option One/their parent company H&R Block was recently forced by courts in Massachusetts to give 45 day notice on foreclosures initiated by them so the court may examine whether the loan was predatory. This essentially forces the company to negotiate with the borrower to modify the loan (fix the interest rate, lower the payment plan, etc.). We have no such law to sue with in RI. Virgilio's court date for eviction is December 12th.

more to come...