Mortgage Crisis Strikes Elderly
By Jane Ogilvie
On February 13, 2008 there was a U.S. Senate Special Committee on Aging Hearing that addressed how the elderly are being affected by the current mortgage crisis. Senator Herb Kohl of Wisconsin presided. Click here to watch the webcast.
Five people testified at the meeting. Mr. Robert Malone was the first. Mr. Malone is in his early 70’s and was a victim of what the panel referred to as "Foreclosure Rescue". I see this as falling into the category of Financial Abuse and it is my opinion that it should be prosecuted, as are other financial abuse cases.
The salesman that targeted this gentleman preyed upon his religious faith, recognizing and commenting on some religious items he saw in the house. He then told Mr. Malone that he’d been a preacher. Mr. Malone fell captive to the salesman, and ended up signing the title of his house over to him. He did not get what he was promised. Luckily, he found an attorney that was recommended by AARP who helped him file charges and they contacted the lender service to renegotiate a payment that was workable.
This victim had lived in his house for 30 years, raised 8 children there, was the owner of a construction business, and still working. He got behind on his mortgage payment because he was not getting paid for the work he was doing.
The second panelist was Catey Doyle. Ms. Doyle is chief staff attorney for the Legal Aid Society of Milwaukee. Ms. Doyle testified that the current mortgage crisis " isolates, paralyzes, and stresses" the elderly. The stress alone can cause death. She says that the "courts need to be educated about how these mortgage problems damage the homeowners". She said that "Wisconsin restricts mortgage scammers and sixteen other states are passing or have introduced legislation addressing this problem.
Next to testify was Maryland Secretary of Labor, Licensing, and Regulation, Mr. Thomas E. Perez. Mr. Perez quoted an old but well-known phrase, "If it's too good to believe it, don't". He said there have been "hundreds of victims in Maryland that cross economic and age lines". Maryland is passing reforms to protect against this type of scam, and it "will be the second state to ban this rescue scam".
Mr. Perez said that often victims are presented with a stack of papers to sign by the scammer. Thinking this is the only solution they have, they sign them. Many times one of the documents they sign is a "Quit Claim" form that turns the homeowner into a renter of his own home. Some have signed over Durable Power of Attorney powers.
The Secretary advised that states need to retain their ability to defend homeowners and requested close attention is paid to the takeover of Countrywide by the Bank of America. Mr. Perez suggested that more non-profit financial planners needed to be put in place to advise homeowners. He thinks they will provide a 3rd party, non-biased approach and that this will better serve the homeowners.
Secretary Perez says that currently only 1% of homeowners who have been hit by this mortgage crisis have received help in getting their loans modified. 70% of homeowners have not received help.
The third party to testify before the Special Committee was a licensed, second-generation real estate broker from Minnesota. Mr. Anderson stated the crisis is "emotionally and financially crippling".
Next, mortgage fraud specialist Mrs. Rachel Dollar speaking on behalf of Mortgage Bankers Association spoke to the issue. Her comments can be read by clicking here and then clicking on the Testimony button:
Mrs. Dollar gave a toll free number for people to call for mortgage advice. That number is: 1-888-995-HOPE. She too warned "If its too good to believe, don't".
The Federal Trade Commission was also represented on the panel testifying before the Special Committee. Peggy Twohig presented testimony. You can read a summary of what the FTC is doing to combat "Rescue Fraud" and find a link to Ms. Twohig’s testimony by clicking here:
Ms. Twohig said these mortgage scams are "False Promises". She spoke of a program called the Hope Now Initiative and Project Lifeline. They are supposed to be "ramping up" the number of people who can answer questions that homeowners facing foreclosure have. As I understood it, The Lifeline Project kicks in if you're 90 days in arrears with your mortgage payment. If you're able to contact your lender service/loan provider, they supposedly give you another 30 days before you have to be out of your house. During this 30-day period, assistance is given to the homeowner in reaching their lender if they've been unable to, and/or helping to get assistance in renegotiating the terms of the loan or the loan itself, so that you can afford to make the payment and stay in your house.
When the panels’ presentations were completed, Committee members made comments and asked questions. I was impressed with Arkansas Senator Blanche Lincoln, who recognized the difficulty seniors could have understanding the difference between the Lifeline Project, and their Lifeline emergency alert devices. It seemed as though she were the only person there who had any idea that this could cause great confusion in the elderly population. Details like this are often overlooked it seems when programs and projects for the elderly are created.
Other important comments I heard during this hearing were:
- It is taking weeks to get the Hope Now Initiative in place and there are not enough people in place to answer the calls that come in.
- Victims of foreclosure and "Foreclosure Rescue" fraud are told to contact their lenders, however testimony given by the first gentleman indicated that though he tried to contact his lender and left messages, they never returned his calls.
- Scammers are using direct mail to generate business. They're threatening people by saying if they do not call the number that is listed, they will lose their houses in 3 days. Scammers also contact people in person and over the phone. They tell people NOT to call the police or authorities.
- "Equity in the home is the primary asset" for many people. "Seniors are three times more likely to be targeted for sub prime loans".
- Many older homeowners DO NOT find or seek legal assistance to help.
- The FTC will make use of a law related to "Unfair and deceptive practices" to prosecute those who have been involved in these scams.
- It can be hard to prosecute these people and when they do, it can take a long time to get through the case. Many people have lost their houses waiting for a judgment, and it is possible that an elderly person will die before the case is completed.
- Mandatory counseling should be required before any reverse mortgage is signed onto. People who work for non-profit organizations should be doing the counseling, as they would be non-biased.
- It was suggested that lender services should be held accountable.
