The New York Times’s page one today is loaded with business stories.
My favorite is Peter S. Goodman’s excellent one on a homeowner falling through the cracks of the government’s less-than-overwhelming mortgage-rescue program. Goodman focuses on an Arizona woman who cash-out refinanced her home during the boom like just about everybody else, and has lost her job as the economy crashed.
It’s one heck of an anecdote because she’s yet to miss a payment and is sort of an American everywoman. And even though she’s eligible for a mortgage modification that would reduce her payment and help her stay in the house—and keep paying her loan!— her bank won’t give one to her.
Guess what bank that is.
Countrywide, now Bank of America. A leopard doesn’t change its spots:
But when Eileen Ulery called her mortgage company — Countrywide, now part of Bank of America — the bank did not offer to alter her mortgage. Rather, the bank tried to sell her a new loan with a slightly lower monthly payment while asking her to pay $13,000 toward the principal and a fresh $5,000 in fees.
So, even though the government is subsidizing banks to help their borrowers pay them, the banks are still after—at least in this case—the almighty fees, and screw the customers!
Somehow if Ms. Ulery were able to come up with $18,000 on her $143,000 note, she should not pay $5,000 in new fees to Countrywide—err, excuse me—Bank of America.
What would she get for her trouble? A higher interest rate! Shouldn’t that be illegal?
In April, she called the bank. The representative said the bank was not doing modifications for people like her, she recalled. He shifted the conversation: if she handed over $18,000, he could lower her payment to $967 from $1,046. Her interest rate would actually increase slightly, with the drop largely because she was putting down more money.
“I just laughed,” Ms. Ulery said. “It was a really good deal for them.”
Unreal.
It’s impossible to know just how much of this is still going on out there, but you can bet this isn’t a one-off thing.
Good for the Times and Goodman for spotlighting it.
My wife and I tried to refinance through Countrywide also. We haven't missed a payment but our income has decreased due her job in the service industry. We were told that we needed to make more money. Thanks, Countrywide...er..BofA.
#1 Posted by greg, CJR on Wed 3 Jun 2009 at 04:11 PM
Why don't your analysis on these matter ever include the word "usury?"
#2 Posted by Jeremiah, CJR on Thu 4 Jun 2009 at 10:08 AM
Jeremiah, I do indeed used the word "usury." check the archives.
#3 Posted by Ryan Chittum, CJR on Thu 4 Jun 2009 at 11:42 AM
The banks are monstrous and greedy in a way that's counter-productive for them. Lots of these loan mods would save the banks money compared to going to forclosure. Pound on that.
However, you let "everywoman" off too easily as "an Arizona woman who cash-out refinanced her home during the boom like just about everybody else, and has lost her job."
She owes close to $170k on a place she bought nearly 20 years ago for about $70k. Why? She should have almost no mortgage by now.
Lots of people did not take cash out when they refinanced for lower interest rates, even though the loan officers almost always push it. In 2002 I refi'd my house; my $75k loan went from mid eight percent to like 6.3 percent interest. The loan officer kept emphasizing that I could have $25k in cash for about the same payment. I said I'd rather have the $200 per month and took my payment down from mid $800s to mid $600s. In 2003 I got fired. Didn't lose my house though and didn't have to borrow against it, cause it (and I) was so cheap.
Yeah, the banks are rapacious and sleazy, but if you the customer don't play along, they can't win. Take cash out to pay for things that have a useful life commensurate with the mortgage: some home improvements, repairs, maybe college. If you remortgage to pay for a vacation or a car, you'll be paying for these for the next 30 years.
CJR (to say nothing of the NYT) ought to, once in a while, pound on that too.
#4 Posted by ed ericson, CJR on Thu 4 Jun 2009 at 01:16 PM
Countrywide er Bank of America is the worst mortgage company to deal with for anything!!! Refi's, shortsales, and especially modifications!!! Just because the people on the other end ot the phone now say BofA instead of Countrywide does not mean one single thing has changed!!! I tried to modify with them for 7 months!! Screw them they can keep the house but let it be known to the Government and everyone else COUNTRYWIDE/Bank of America HAS NOT, DOES NOT, and WILL NOT HELP HOMEOWNERS!!!!!! Please pass that message along to local newspapers, and media... Anyone who will expose them for the snake in the grass it is!!
#5 Posted by Hate CW, CJR on Tue 7 Jul 2009 at 07:19 PM
Oh, and Ed Ericson... By Countrywide and the other banks not locking everyone in at fixed rates and helping the good people instead of just the people who flat out stopped paying was what got us into this mess!! It is the bank's fault for giving anyone who asked for it money. Just because you or I made smart choices doesnt me they should let the whole economy collapse!! Trust me ... all the neg am loans and interest only loans they shoved down everyones throats brought us here!!
#6 Posted by Hate CW, CJR on Tue 7 Jul 2009 at 07:29 PM
I read this story and it sounds like the same thing we are going through. We were told and have the Letter to prove we qualified for the Making Home Affordable Program never missing a payment but the back now wants to renig. After one year and one month of keeping my end of the bargin. What can we do? This needs to get more exposure and find out everyone who is in the same situation.
Very Dissapointed & Helpless
#7 Posted by Minnie D. June, CJR on Mon 7 Jun 2010 at 05:02 PM