Faces Of Foreclosure

Excerpted from The New York Times, DemocracyNow.org,

Poor Wells Fargo. Not only are they incapable of working with federal funds to help restructure home loans, they have absolutely NO control over their employees. No one at the bank seems to know what the person next to them is doing . . . and few at Wells Fargo seems to like/respect their employer. I wonder why?

The story: Up until two years ago, Elizabeth Jacobson was the top producing loan officer in the subprime division at Wells Fargo. Today she is speaking out against the practices of her former company.

Earlier this summer, she filed a sworn affidavit with a federal court in support of the city of Baltimore’s lawsuit against Wells Fargo for pushing high-interest, subprime loans onto African Americans in Baltimore and the Maryland suburbs, leading hundreds into foreclosure. “We just went right after them,” said Ms. Jacobson, who is white and said she was once the bank’s top-producing subprime loan officer nationally. “Wells Fargo mortgage had an emerging-markets unit that specifically targeted black churches, because it figured church leaders had a lot of influence and could convince congregants to take out subprime loans” . . . Wells Fargo, Ms. Jacobson said in an interview, saw the black community as fertile ground for subprime mortgages, as working-class blacks were hungry to be a part of the nation’s home-owning mania. Loan officers, she said, pushed customers who could have qualified for prime loans into subprime mortgages.

(Note: This happened also to Hispanic families — not necessarily through Wells Fargo Bank but often, sadly, from relatives new to the mortgage industry who talked them into neg am loans when the family could have qualified for a conventional loan. A friend who works at an ethical and responsible bank (unlike Wells Fargo) has been working with those families to get them new loans at reasonable rates and help save their homes.)

In a recent interview with Democracy Now!, Wells Fargo whistleblower and ex-subprime loan officer and sales manager Elizabeth Jacobson speaks out on some of the predatory lending practices allegedly engaged in by her former employer.

1. On the incentives for Wells Fargo loan officers to allegedly bulldoze every would-be borrower into a subprime loan:
   • I was at Wells Fargo for nine years, and I originated loans. Wells Fargo had two separate divisions: the prime division and the subprime division. And you could not originate prime loans if you were in the subprime division. So that’s what I did for nine years at Wells Fargo, is originate the subprime loans.
   • In the beginning years at Wells Fargo when I started, there was no filter system. So, if you had somebody come into your office and you could sell them a subprime loan, even if they qualified for a prime loan, that’s what you did. The compensation worked out that you had a huge incentive to put people into a subprime loan. Even the prime loan officers would make as much money on a [...] subprime loan, referring it over to the subprime division, that they would make doing a prime loan. So there was an incentive for the prime loan officers to refer the business to the subprime side.
2. On her company training putting borrowers into exploding adjustable rate mortgages:
   • Well, when I was hired by Wells Fargo, I had never worked in the mortgage industry at all. I had been a paralegal. So I took everything that Wells Fargo was telling me, that this is the way things were done. I didn’t question the fact that we were putting people in a 55 percent debt-to-income ratio and that we were only qualifying them based on the two years at the lower interest rate. The whole goal was, every two years you’re going to refinance that loan. So, it was sold as a two-year loan. These people were never intended to be in the loan for thirty years.
3. On her experience on the question of allegedly seeking the assistance of African American churches in Baltimore to target their members for subprime loans:
   • A lot of this was information that I would receive on conference calls as a sales manager. And people on the call, the management there, would encourage the loan officers, the subprime loan officers, to go into Baltimore city and target the churches, the African American churches, to get a relationship going with the minister or the reverend at the church and try to get that person to schedule some sort of meeting. They would call it a “wealth-building seminar” to get the parishioners of the church to attend. And any loan that was funded by Wells Fargo, whether a purchase or a refinance, $350 would then be donated to the church. And so, that was the incentive for the church to want to have these seminars there.
   • But what would happen is the only loan officers that would attend these seminars were generally the subprime loan officers. And on these conference calls, at one point, somebody made a joke who happened to be a white loan officer and said, “Well, will I be able to go to these seminars?” And they were told right there on the conference call, unless you were of color, you could not attend these conferences, these wealth-building conferences. So it seemed me—Wells Fargo didn’t come right out and say this; this is just what I saw—is that they wanted the African American Wells Fargo loan officers to sell loans to the African American community.
4. On her resignation from her position as sales manager and top producer in the subprime division at Wells Fargo (originating approximately $55 million a year in subprime loans):
   • I happened to see a news report with the CFO of Wells Fargo, and he was questioned about the subprime division and denied at that point that Wells Fargo even had a subprime division. So here he is, the chief financial officer, where the subprime loans were supposed to be paying for the fixed costs of the company, and he’s denying that Wells Fargo even did subprime loans. That was just the final straw of total disillusionment, and then I put my resignation in.

From the New York Times: “They confirm our worst fears: that this is not just a case based on a review of numbers and a statistical analysis,” said the city solicitor, George Nilson. “You don’t have to scratch your head and wonder if maybe this was just an accident. The behavior is pretty explicit.”

From June 6, 2009 New York Times: “As she describes it, Beth Jacobson and her fellow loan officers at Wells Fargo Bank ‘rode the stagecoach from hell’ for a decade, systematically singling out blacks in Baltimore and suburban Maryland for high-interest subprime mortgages. These loan, Baltimore officials have claimed in a federal lawsuit against Wells Fargo, tipped hundreds of homeowners into foreclosure and cost the city tens of millions of dollars in taxes and city services.”

The foreclosure paradox: Foreclosures breed foreclosures. Cutting you a deal to keep you in your home is a win-win-win, the lender would keep getting payments, the housing market and the economy might begin to recover.

Who is harmed by the lenders’ hideous actions:

REV. ALMALENE “EMILY” WADE: I’m homeless. And it’s just hard. It’s a struggle. It’s devastating. It’s upsetting. It’s unbelievable. But it’s real. I don’t have a home anymore, and I’ll never forget this as long as I live.

This is a house that I grew up in most of my life. I came here in 1961 with my mother and my father. I’ve been here a lifetime. And I went to school here. I went to junior high school, went to high school, went to college. And we used to have a church next door, and the neighborhood was just home. This was just home.

I wanted to do assisted living here. I wanted to help people. And the property wasn’t in the proper condition that it needed to be, so I was advised to take the equity out of the property, some of the equity, and do a loan and start my project that way.

The loan was for $28,000. It’s really sad that all of this was lost over $28,000. The monthly payments was close to like $300 a month, but I was on a fixed income, and it was just—it just got to be too much. Wells Fargo was the mortgage servicer, and that’s who serviced my loan and who I got the loan through. I really, at that particular time, didn’t know all the ins and out of a mortgage loan. I just took it by faith that I was going to be OK.

You’re trusting your mortgage broker. You’re trusting the settlement people. You’re trusting the bank. And what else can you do? You really don’t have a clue. You’re just happy to have someone say, “Yes, we will finance you. Yes, you are approved. Yes, you can go to settlement.”

Tags: Baltimore sues Wells Fargo, foreclosure, negative amortization, sub prime loans

This entry was posted on Sunday, September 13th, 2009 at 11:38 am and is filed under in the news, what's going on?. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.