Anatomy of a foreclosure

Anatomy of a foreclosure

Institutional mortgage juggling leads to disabled Altadena woman’s eviction  

By John Seeley 06/05/2013

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I n spring 2003, Harolyn Rhue, then employed as an administrative assistant at Bank of America, was ready to sell her condo in Altadena. A rambling three-bedroom ranch-style home near the foothills was offered in a probate sale so Rhue made a $100,000 down payment and, though troubled by its terms, took a World Savings mortgage arranged by her broker for the balance.

But last week, around her tenth anniversary there and after several years of seeking loan modifications from Wells Fargo Home Mortgage — which absorbed World Savings’ assets when it acquired Wachovia Bank in 2008 — Rhue was kicked out of her home.

Shortly after 7 a.m. last Thursday, Rhue, who still suffers the effects of a brain injury incurred in a car accident in 1983, was awakened by loud knocking. Steadying herself on her cane, she was confronted at the front door by as many as six Los Angeles County sheriff’s deputies, who were there to effect an eviction ordered by the Orange County investors, operating under the name of Laurel Trust, to whom Wells Fargo had sold the property last August.
“I never thought this could happen,” Rhue told the Pasadena Weekly later that day.

The 53-year-old Rhue had good reason to be surprised. She had filed a bankruptcy petition in April and was expecting Wells Fargo to acknowledge the faulty mortgage and come up with a workable resolution. Bankruptcy proceedings normally give temporary protection, or a “stay,” from foreclosure. And on Monday, Rhue returned to federal bankruptcy court in hopes of voiding the eviction as a violation of the stay and restoring her to the home, filing a request for an emergency order, supported by a doctor’s letter warning about the eviction’s impact on her health. A clerk walked the request directly to a judge in chambers. The judge could issue an immediate order to place her back in the home or schedule a hearing in 48 hours.  

Occupy Fights Foreclosures (OFF), an offshoot of the Occupy LA movement, took up Rhue’s cause several months ago, setting up camp on her front lawn in early April and organizing a call-in campaign to Wells Fargo’s CEO’s office.
OFF’s Carlos Marroquin, a foreclosure victim himself, exchanged letters with the bank and pledges to keep the pressure on until the Wells Fargo undoes the alleged injustice that stripped Rhue of her home, not to mention more than $100,000 in equity.

Marroquin may be in for a long wait. Wells Fargo spokesman Gary Kishner said by email that Rhue’s property is no longer of any concern to the bank.

“We worked with Ms. Rhue for nearly three years in an effort to find an option that would allow her to remain in the home, but we were unable to find any way to keep her in her home,” Kishner said. He pointed out that it is not the bank throwing her out. “Title was transferred to a third-party purchaser in September. The buyer, not Wells Fargo, is responsible for any activity related to the property and we are no longer involved in any related actions.”

But Rhue and OFF supporters said that there should never have been any sale or “transfer” last fall. Rhue says she understood her case was still under review at the time of foreclosure; Wells Fargo denies that. The office of Pasadena attorney Stephen Golden filed a 25-page motion in August, alleging that Wells Fargo had not acted in good faith in the loan modification reviews and had no right to foreclose for that and other reasons. This challenge to Wells’ right to proceed had not yet been heard when the title was transferred.

Says OFF’s Marroquin, “Wells Fargo just wanted to transfer this hot potato and have somebody else take the flak. They pass the buck like this all the time to get out of the responsibility for fixing their predatory loans.”

Rhue, who is African American, is the latest victim of a predatory loan epidemic that has hit minorities and the disabled particularly hard. There was already one other foreclosure on her block this year, and homes at the end of the street and on nearby Loma Alta are in pre-foreclosure.  

In 2011, Wells Fargo received an $85 million penalty from the Federal Reserve Board over charges it steered borrowers into high-cost loans. The Fed ordered Wells to compensate certain borrowers between $1,000 and $20,000. The cities of Baltimore and Memphis filed lawsuits alleging Wells Fargo engaged in “reverse redlining,” or intentionally targeting minority communities for predatory mortgage loans, leading to high foreclosures in minority neighborhoods. Wells settled with the two cities out of court.

In 2012, Wells Fargo settled a federal investigation into charges that it knowingly targeted minorities for risky mortgages that came with higher costs, according to documents filed in the US District Court for the District of Columbia, agreeing to provide $125 million in compensation for minority borrowers who the US Department of Justice said were steered into subprime mortgages, plus making $50 million available in new loans in heavily minority areas.
Rhue’s mortgage typified these risky loans, though the originator was not Wells Fargo, but World Savings, later acquired by Wachovia and then Wells Fargo through mergers. Her so-called pick-a-payment mortgage loan allowed borrowers to make a minimum payment amount for a limited time under certain conditions. When a payment was insufficient to cover the monthly interest, unpaid interest was added to the loan balance so the outstanding balance increased, an occurrence known as “negative amortization.” Plaintiffs in a successful mortgage class-action lawsuit claimed that Wachovia did not adequately disclose the pick-a-payment loan’s potential for negative amortization.
Wachovia agreed to establish a $50 million settlement fund to resolve the case affecting pick-a-payment loans from World Savings Bank or Wachovia Mortgage, between August 2003 and December 2008. However, Rhue, though caught in the downward spiral of negative amortization, was not helped with any settlement money. In Rhue’s case, the loan was more than inappropriate. It was never manageable, based on income figures twice her actual earnings. Rhue says she neither claimed the numbers listed nor did she actually sign the document, alleging her signature was forged. To make the payments she took a second job, but soon found the extra shift too exhausting. But she loved the house, and tried persistently to get a revised payment plan.

By late 2004, the bank had filed notice of foreclosure. Then in 2005 it granted a temporary loan modification, which lasted a year and a half, but a 2007 request for a permanent modification was refused. Years of fruitless interchanges with Wachovia and Wells led Rhue to file suit. Finally, in August 2012, though having written Rhue that her loan was under review, Wells Fargo sold the property to the Orange County investors.

Running out of money for legal help this spring, Rhue turned for assistance to the federal government and to OFF, hoping they could push Wells Fargo to buy back the loan and work out a new deal. In January, Rhue filed a discrimination complaint with the US Department of Housing and Urban Development, HUD, which has not acted on her complaint.

Rhue and supporting activists plan to reach out to local churches and community groups for support in the coming weeks and are calling on Wells Fargo account holders to move their money elsewhere in protest of the bank’s discriminatory practices.

Her case can be followed online at occupyfightsforeclosures.org.

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