One disabled woman struggles to stay afloat.....Karen Mims is available for interviews, contact Jackie Wright, Wright Enterprises, 415 824.3990.
 


"The Katrina of Home Foreclosures"
by Gina Snow, Associate of Wright Enterprises



During The Great Depression, one by one, businesses failed. People lost their jobs. Families lost their homes. The beginning of the Great Depression in the United States was associated with the stock market crash on October 29, 1929, known as Black Tuesday, and lasted ten years before recovery began.  

Since then, many economic safeguards were put in place so that America would never experience such a desperate financial time again. And, yet, in the first decade of the 21st century, the unthinkable is happening. Today, we are in the worst financial crisis this country has seen since the 1930's.

This time, the prime cause is associated with the "crash" of the sub-prime mortgage housing market. As a result of unscrupulous and deregulated mortgage lending practices, thousands of middle-class home-owners are being drowned in a sea of inflated interest rates and foreclosures across America. Revised bankruptcy laws no longer allow the home buyer to protect their investment, or help them get on their feet. In what seems like a complete reversal of logic, many bankruptcy lawyers across the nation are advising their clients to stop paying their mortgages and simply walk-away from their homes leaving them to be foreclosed upon.

The impact has not only affected the Stock Market, it has resulted in banks being engulfed in a giant wave of Tsunami-like debt.  Despite the widespread affects being felt across the nation, it is important to remember that this is not a faceless phenomenon. It is a struggle by real individuals on a daily basis.

Karen Mims, an Oakland resident, has owned her home for over a decade. Until a year ago, although she struggled, she was able to make her mortgage payments. As a disabled person on a fixed income, when her financial life circumstances changed, it became increasingly difficult to make the monthly payments that were already stretching her to the max.

She tried to negotiate lowered mortgage payments with her bank, but they denied her request and her situation continued to decline. Just over a year ago, she sought out what she thought was a solution to her conundrum -- refinancing her mortgage. At the time, refinancing opportunities even with sub-prime credit, were still plentiful. Ultimately she went down that path like so many others.

In just over a year, Mims now finds herself facing interest rates that will increase her mortgage payments $1,000 per month with a balloon payment of $21,000 due in September-- a payment she will not be able to make. "I'm in the Katrina of mortgage foreclosures. I’m being flooded out," says Mims.


Interview between Gina Snow and Karen Mims (condensed):

Q. How did you get to this point? What happened that you are now facing the foreclosure of your home?

I was placed in a loan that was unaffordable. I don't think they (mortgage brokers) were really concerned about my needs...It's a relationship. You trust their expertise. (I was) trusting and not really understanding the mechanisms of how the mortgage institution or the banks operate.

Q. Were you able to ask questions of them (before you signed the refinanced loan agreement)?

Basically, the way everything is written, the language isn’t really clear. I did really feel when I was signing the documents, that I should have someone who really understands the language explain it to me. Even if an opportunity might be given to ask questions, you don't really recall it. Nothing is taped and you go back to your notes. You have to have perhaps a background in understanding real estate law and contracts really...There is no place to go, at least that I was aware of, that you could go to say 'would you look over this before I sign'?

Q. Was it (the new mortgage loan) unaffordable to begin with?

It was unaffordable to begin. By August or September I could be paying an additional $1,000. It seems it may also adjust in a month, or so. The real estate broker, they set up these "packages." They do the looking and more or less set up the whole thing. It's a relationship where you rely on their expertise . . . I'm only just recently being educated to the fact, that I didn’t know that they (bank/broker) had this relationship that existed. That yours is not necessarily their interest.

Q. What is the status currently? Are you in foreclosure?

I am technically, but I’ve been trying to negotiate with my lender. Actually, my loan was recently sold to another lender. So, I’m continuing the negotiation process with this lender.  What they did agree to do was if I agree to make several payments, a payment on the 17th of June, 17th July, and 17th of August, they said they may, without any guarantee, set me up in possibly a loan modification. But again, they don't give me any guarantees. And after that, they said the loan is to $21,000 something, which they know I don't have the ability to pay. This is for my rearages. And, like I said, they don’t give me any guarantees of anything.

Q. What deadline is this? What is the time frame?

I have until September when possibly I have this huge, astronomical balloon payment of over $21,000 dollars. Then I was told that maybe in August or September, I have an additional $1,000 added to my payments.

Q. Have you been able to find any government or community programs that can help you?

No. I've been exhausting as many resources as possible. I'm talking to people in the government. I've made calls to different organizations like ACORN and even NACA. There is no other provision other than the one that the President is threatening to veto to help people like myself. ACORN has two bills in the local legislature. If that passes, it would help people possibly in my circumstances or relative circumstances. I think if you’ve gone through foreclosure, I think they can't take your house...it would be make it difficult for them to take your property. . .And there’s something else where brokers can't receive kick-backs from the banks. That would stop that...

Q. So the brokers make-out, they get money, even if your house goes into foreclosure?

Going through some of the workshops in terms of preventing foresclosures, I was informed (of this). I was just unaware of the fact that they (banks/brokers) have a relationship.

Q. Did your problems really start with this refinance? You’ve had this home for ten years and were making the payments without a problem?

I was making the payments. . . The payments were also astronomical. So, what I did is try to negotiate personally with the (original) lender...
 
Q. So you were seeking the refinance to help with this initial situation?
Right.

I was told to have a conversation with the bank and try to work something out. Which I did do. But, once again, it’s like a David and Goliath situation. They have the upper hand. I did tell them that the payments were too high, and if they were to lower the payments it would give me an incentive to remain with them. But, it got worse, so I got out of that. So, I went from the skillet to the frying pan, actually.

Q. What are you planning on doing?

I'm talking with my (new) lenders trying to work something out still. I have taken on some roommates. I'm trying to help myself. I do believe that God helps those who help themselves. I am not just being passive. I’m praying, but I'm not praying and not working. I’m trying to help myself basically. Do as much as I can do.

Q. What does your home mean to you?

I've lived here for ten years. I've developed relationships in the community. I have my neighbors who look out for me and I look out for them . . . It's my house. It's my shelter. It's a protection, I thought anyway, from just being thrown out onto the streets, from not having any kind of say-so over your own life. But, I can see that's not really the case either.

Q. If, in fact, your house is foreclosed upon, what would your next steps be?

I really don’t know. That is the honest truth.

Q. Do you have any relatives?

I have a relative that is in the same similar situation. They have lost the fight. I could have gone there, but now they don’t have a place. I have another relative, but there are lease issues.

Q. Are you working currently?

No. I’m on disability.

Q. So you are on a fixed income?

Correct.


Q. You went into the loans with the understanding that you had this fixed income?

. . . At one time my relatives were helping me, but they have their own obligations, and things just come up in life.

Q. When you originally got the loan even on a fixed income…you could cover the loan payments. Then your life circumstances changed and the interest rate changed. That’s what happened basically?

The interest, but not only the interest. Due to my life circumstances, I didn't get good counseling or any counseling. It just was unaffordable.

Q. Well, you’re not alone. People across the country are in the same situation. It is being recognized that many of the lenders were unethical. It was a situation too good to be true... They put out the bait.
 
I think we're aware of that now . . .

Q. You mentioned ACORN and NACA. What is NACA?

NACA (Neighborhood Assistance Corporation of America), is an organization that helps people in situations like myself . . . They try to work something out with the lender. But, what is challenging for them is that there is no law really to give them any meat or muscle to fight with. So that is the whole dilemma. But, they are trying. And, there are some people that they do help. But, I'm sure they could help more or a larger group of people if there was something there that would support what they were doing.

Q. Is there any piece of advice (for others)?

It would be nice if there was something structured in the communities. I don't know if it would be through legal-aid whereas they would look over your papers before you signed. You feel kind of pressured to sign because you don’t really know what you’re reading. They would give you more time to more thoroughly look it over so you would have a better understanding, a clearer understanding...I think the language should be changed so an everyday lay person could read it without having to have a legal background.

Q. What you're saying is that it would be helpful if there was an organization that would be able to translate for the lay person the legalese and look over financial documents before someone would purchase a home or enter into a financial agreement?

Right. And, one other thing that I want to say is that the people who work for the corporations, the banks, lenders and mortgage companies, I'm sure they have relatives who are in this situation, because it's a crisis. It's happening to so many people. So, if they would keep that in mind that they are not untouched by it either. And, hopefully that would make them more sensitive to the needs of other human beings, to their clients, to make them more willing to be more flexible in terms of working with them.

I just feel like this country, America, we help so many people all over the world. So, why can't we, shouldn't we help our own? Shouldn’t charity begin at home?


Q. Well, that seems to be the question a lot of people are asking. New Orleans was a perfect example of that.

I kind of feel like I'm in the Katrina of mortgage foreclosures, and I'm being flooded out . . . Ed McMahon (facing foreclosure on his $4.3 million dollar house), he's well known. Hopefully that will point out that you don't have to be middle-class. You don't have to be impoverished. This man is (was) wealthy. Obviously, there is something wrong.
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There have been extensive news reports about minority and low-income homebuyers being hit the hardest by predatory and unethical real estate/broker mortgage loan practices. Due to the sub-prime mortgage crisis, there is now escalating pressure from regulatory agencies and consumer protection groups to better inform multicultural and low-income consumers regarding all facets of the real estate transaction and home-buying process.

Mims couldn’t agree more. “If only I had known about an association where I could have gone to have them look over my papers before I signed . . . I needed an organization that could translate all of this legal language into lay person’s language.”

PRACTICAL STEPS TOWARD FINANCIAL LITERACY

As minority markets and first-time homebuyers become a larger and more powerful segment of the U.S and world economy, it is important to become financially literate.  Potential homebuyers should seek advice and local contacts from ethical companies and national organizations that teach “financial literacy.”

Organizations that strive to teach financial literacy for traditionally underserved communities and help them become empowered to achieve the “American Dream” of homeownership, even in this current economy, include:

•    Association of Community Organizations for Reform Now (ACORN), the nation’s largest grassroots community organization of low- and moderate-income people with over 400,000 member families organized into more than 1,200 neighborhood chapters in 110 cities across the country (www.acorn.org).

•    Neighborhood Assistance Corporation of America (NACA), a national non-profit community advocacy and homeownership organization providing the best homeownership program in America. It provides loans to low and moderate income people and those who are considered to be subprime borrowers. (www.naca.com)

•    Neighborhood Housing Services of America (NHSA), a national nonprofit working to revitalize neighborhoods and strengthen communities across America.

•    Operation HOPE, Inc., a social investment bank and a national provider of financial literacy and economic empowerment programs.

•    The Greenlining Institute, a multi-ethnic coalition that promotes homeownership and inner-city economic development.

•    The Asian Real Estate Association of America (AREAA).
 
•    The National Association of Hispanic Real Estate Professionals (NAHREP).

•    National Association of Real Estate Brokers (NAREB).