Tag Archives: phoenix

Widespread Fraud at Bank of America

Bank-of-America-300x285Orange Beach, Alabama Better late than never, the Attorney Generals of Nevada and Arizona sued Bank of America for “widespread fraud” on the bait and switch of promising that a loan modification is in progress and then foreclosing and selling the house out from under the homeowner at the same time.  The Times and the Wall Street Journal describe the complaints as harshly worded, but working in the Phoenix area with Arizona Advocates & Actions, my experience is that they understate the severity of the theft and deceit by a long shot.

Frances Gomez’s home still says it all for me, and is a continuing indictment of Bank of America’s horrible bad faith, because her case was a situation where Bank of America was caught red handed in exactly this kind of fraud.  She had been approved for a modification and then in the same week Bank of America foreclosed and sold the house.  We raised holy hell and Bank of America publicly admitted that they had made a mistake.  They had foreclosed on her because they had overlooked her income figures.  Bank of America representatives – the local lawyer they retained for this mess assured Ms. Gomez and me they were buying the house back and that they wanted to remedy the situation rapidly.  It all sounded great, but that was now six (6) months ago, and Frances Gomez is perhaps farther today from moving back into her home of 30 years than she was then.

The negotiation process has been Kafkaesque or in more American terms a classic situation of Bank of America and its lawyer never seeming to know who is on first and what is on second.  Months after we had gone back and forth, the lawyer would act like he was surprised that Frances was not back in her house, even though no terms or modification had been agreed and worse the only solid offer they made was to reinstate the original terms of her loan, meaning that she could start paying again on a $300,000+ note for a house that had been appraised at $125000 to $150000 and sold at foreclosure for about $165000.  That’s not a modification at all, but simply the same problem that led to the problem in the first place, and the modification that they had been working on at the point of foreclosure was completely forgotten, while the attorney pled, perhaps sincerely at some level, total ignorance.

Subsequently pushing for a real modification, and trying to make sure that Bank of America was not trying to pretend that Frances had reoccupied her old home and thereby try to argue that she was incurring more arrearage even as she tried to strike some kind of deal to come back home, everything stretched painfully along as Bank of America continued to once again pretend that they could not figure out Frances’ income.  Frances is self-employed as a stylist and hairdresser at her own salon with long time customers.  Surely before the recession and her husband’s death, the salon had been larger with 3 or 4 the number of workers, but she had never been out of work or bereft of income.  The problem is that in the “new” world, Bank of America doesn’t have “stated income” loans which make it very difficult for the self-employed.  Frances keeps submitting her bank statements and monthly cash flow on her business, and Bank of America and its lawyers keep pretending that they do not understand her income and that she is being unresponsive.   I don’t want to give the impression that the situation is going back and forth like this, because really the situation is going nowhere.  Bank of America clearly just hopes that this “fraud” goes away.

Meanwhile the house deteriorates.  Frances drives by and cries.  Bank of America does nothing to maintain the house.  Vandals have been about.  The pool is moving almost beyond repair.

In the Wall Street Journal spokesfolks for Bank of America claim that they are open to revisions in the “dual track process,” meaning the process that has a modification moving forward at the same time that a foreclosure is also moving ahead.  This is the situation that sank Frances Gomez and her 30-year family home in Phoenix.

Of course Bank of America is lying.  They could stop the dual track process in a minute and with a memo.  They prefer the shuck and stall process which in silence finally strips away the home and hope of people like my friend, Frances.

For six months we pled with the Arizona Attorney General’s office to do something about this.  We argued that it would even help Attorney General Goddard in his election campaign for Governor if he stepped up for foreclosure victims.  We are delighted that it is finally happening, but this is the 11th hour for Goddard with his term expiring in about two weeks.

This is how “widespread fraud” works and how it is allowed to continue bumping from one failed program to another from one scandal to another and still taking homes from people, destroying neighborhoods, and pulling down whole cities around the greed that echoes from Charlotte to Wall Street to San Francisco to Chicago and the other headquarters of the perpetrators leaving the victims to live with the ruins.

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Frontlines in Phoenix Foreclosureville

Phoenix    under-water1 A block away there was one sign still standing that said Holiday Gardens – “covenant restricted” — while the other was nothing but brick since the sign was long gone.  A couple of blocks away an old neighborhood watch sign said this was Heatherbrae or some such neighborhood.  Side by side both areas spoke of in-city subdivisions built in the late 50’s and hard 60’s for working families with solid, lower middle class jobs, and hopes for the future in the City of Phoenix.  Brick bungalows with two and three bedrooms where little was pretentious and improvements might mean paving part of the front to park another service pickup or car.  The kind of area where when asked, people described it as “mainly quiet,” and where you knew a lot of families had been raised here over 50 years.   I lived for 10 years as a boy and teenager in New Orleans in a similar neighborhood in Oak Park that the Levee Board had reclaimed from swamp and sand, just as this land had probably been pulled from the desert.  These are good neighborhoods.  Not for everyone, but they work for a lot of people and a lot of places.

Within 100 yards of either direction of the folks I was visiting, there were perhaps 8 to 10 houses that had been foreclosed; including the house I was being shown.  There were a couple of “for sale” signs, but mainly the houses were dark and abandoned, big 80 gallon garbage cans rolled up in the front yards.

The house I visited had gone underwater and been lost on a “short sale.”  A brother-in-law of a friend had a wife’s cousin who had lost the home and my friends had rented as a favor.  There was talk of buying.  The price was almost ridiculous:  $22000!  The house was laid out nicely with new cabinets in the kitchen, paint only a year or two old in the bedrooms, and tile almost brand new.  The owners had had a notion to close in the back patio, probably as a den or family room, and it was almost finished.  Nothing is perfect.  The air conditioners were shot, so it had been a hot Phoenix late summer.  The water heater was out, so cold showers were the rule, but at $22,000 these were relatively small problems.

In saving neighborhoods this would be a good example of a house that would be a perfect match for people who wanted to love it.  Even at $22000 and a note with taxes and insurance that would be only a shade over $400 per month on the terms being offered, it would still be cheaper than rent, but with no subprime lending market or stated income loans, where would even that small sum be borrowed?

Risk investment pools had been created it seems.  For $6000 down and closing, my friends had been offered a loan at 9% — double the prevailing rate – for 5 years with a balloon payment at the end.  The investors probably didn’t really care what would happen to house or homeowners.  Given the 1 to 1.5% interest out there on money, they stood to recover quickly on such a modest loan at these rates or they could flip the house again and hope that in 5 years when the even the Phoenix housing market might start recovering that reselling would gain more.  The market is so far down now, anything might look like up, and only the families that have already lost their homes or who are begging for modifications along with their bankers have any real memory that 2 years ago the house might have been priced and mortgaged over $150,000.

Here in Foreclosureville it’s hard to see any happy endings yet for families, houses, or neighborhoods, and I don’t see one here yet either.  Banks are clueless and without a plan.  Cities and states are either broke or in Arizona’s case broke and disinterested in anything that might look like a helping hand.  Another 10 houses on this long stretch of block not far from Camelback and this area could be at the tipping point of a horizontal ghetto of broken and abandoned properties.

I don’t even think governments and banks really understand what is happening in Foreclosureville, but having visited once again and spent time here, I can guarantee it won’t  be pretty even with all of the hustle and bustle to try and start something fresh that I found in this one house along a dark stretch under the starlit sky of Phoenix.

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