San Diego example of Freddie Mac's work

La Mesa's Heather McGuire buried in loans, paperwork

La Mesa's Heather McGuire bought a condo in 2006, got married the next year, and before long got into a fight — not with her new husband. She moved in with him. Her battle — still raging — is with the U.S. mortgage finance apparatus, which despite federal government reform efforts, still has a perverse economic incentive to push a home into foreclosure, where the fees are fat.

McGuire, who is a public school special educator, is finding that out, despite the claims of one mortgage servicing company that it is not trying to string her along.

After initially renting her condo out, she put it up for sale in a depressed market. In spring of last year, she tried to get a loan modification, which is a deal with the lender to make the borrower’s payments more affordable.

Strike one. McGuire has a first and a second loan on the property — both made through the former IndyMac Bank of Pasadena, which massively churned out Alt-A loans — ones made without verification of borrowers’ financial information. They are called liar loans. IndyMac drowned in the lies and was seized by the Federal Deposit Insurance Corporation (FDIC) in July of 2008. Then that agency recruited billionaire financial swingers such as George Soros and John Paulson to form a successor, OneWest Bank. The agency took over many of the bad loans and agreed to share in the losses.

OneWest and its predecessor demanded that McGuire supply reams of documents for the loan modification, then thumbed it down on a technicality that, she says, it had known about from the very beginning. “These guys [Soros, Paulson, et al.] have no motivation to do a loan modification,” says Bob Hertzog, president of Summit Home Consultants in Phoenix. “The FDIC subsidizes them. They paid pennies on the dollar [for the failed institution] and are guaranteed 80 percent of the loss that they take for the next ten years.” The federal agency denies that it made an overly generous deal.

A New York state judge said OneWest’s actions in one foreclosure were “harsh, repugnant, shocking and repulsive.”

When OneWest finally rejected her for a loan modification, McGuire tried to get a short sale, in which the lender agrees to take less than what is owed on the mortgage. Partly because of new federal incentives that went into the rulebook this year, short sales are burgeoning across the United States. Lenders often prefer to take a loss on the sale rather than be burdened with handling a foreclosed home.

McGuire’s first mortgage had moved from OneWest to Freddie Mac, or Federal Home Loan Mortgage Corporation, which buys mortgage loans, securitizes them, and sells them to investors. Such securitization almost drove the world’s financial system off the cliff in 2008, when the beleaguered Freddie was seized by the U.S. government.

Freddie is willing to do McGuire’s short sale. But first, the company that services the second loan must agree. Strike two. The servicer is a major hang-up in many short sales. Lenders or holders of the pools of securitized mortgages pay loan-servicing companies to service the debt — collect payments of interest and principal from borrowers.

Diane Thompson of the National Consumer Law Center says that servicer fees, such as late fees, create an incentive to “keep borrowers in default and ultimately give the servicer an incentive to complete a foreclosure.”

Wrote Peter Goodman of the New York Times last year, “Even when borrowers stop paying, mortgage companies that service the loans collect fees out of the proceeds when homes are ultimately sold in foreclosure. So the longer borrowers remain delinquent, the greater the opportunities for these mortgage companies to extract revenue — fees for insurance, appraisals, title searches and legal services.”

Freddie says that it will do McGuire’s short sale if the servicer of the second mortgage, Green Tree Servicing of St. Paul, Minnesota, will settle for a payment of $3000. (It could still pursue McGuire for the $53,000 face of the loan.) But Green Tree wants $7450, not $3000. Brian Yui of HouseRebate.com, who is handling the matter for McGuire, says, “I told her not to make this side payment,” which he considers a violation of industry guidelines.

Green Tree’s general counsel, Brian Corey, explains that his company wants 5 percent of the anticipated home sale price. But others in lending administration say that 10 percent of the unpaid principal is the industry standard. In this case, that would be a lower sum. Corey denies that there is such an industry standard.

McGuire wrote her congressman, Duncan Hunter, whose aides passed the message on to Freddie. She wrote that Green Tree is “asking that I (or the buyer) send…$4450 in advance so that the funds will not have to show on the HUD-1 Settlement Statement, and then they will issue a short sale approval of the $3000. I would be responsible for the remaining balance of the debt.”

So was Green Tree asking that misleading information be passed on to the federal government’s Housing and Urban Development monolith? In a carefully worded letter to me, Corey stated that “Green Tree adhered to its written policy that representatives must ‘never provide instructions to settlement agents or the customer on how to fill out the HUD-1 settlement statement.’”

Green Tree is not telling the truth, says McGuire. Before I talked with her, she had told other people that Green Tree wanted information withheld from the HUD-1 document.

She says that on the day Green Tree received its copy of the complaint letter sent to Hunter, an executive phoned her. She was visiting her parents in Pennsylvania when he called. “This man was so nasty that I was sitting in the subway with my mother crying,” says McGuire. The Green Tree executive “told me that he has cancelled my short sale; they won’t even accept the $3000.” She says he warned her that Green Tree would get her $53,000 “voluntarily or involuntarily.”

I asked Corey if that call was made. His reply: “Ms. McGuire was told that if the short sale lien release offered by Green Tree was not accepted, then Green Tree would neither release its lien nor participate in the transaction and would consider pursuing collection alternatives.” Rough translation: our way or the highway, basically, as McGuire says.

I also asked him if the company was deliberately stalling McGuire’s short sale to maximize its own fees. His response: “No.”

Says Hertzog, “Green Tree has motivation to stall out as long as possible. If it does go to foreclosure, it gets all these penalty fees that are owed. Green Tree is notorious — extremely difficult to work with.” Blog sites such as complaintsboard.com contain similar gripes from borrowers.

Short sale “negotiations may become contentious,” conceded Corey, but his company has been reducing complaints, he insisted.

Says Yui, “People shouldn’t fall into a trap. This is commonplace with some [servicers]. A lot of people are not aware they can get into trouble.”

Heather McGuire has not yet struck out.■

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how completely despicable these agencies r

keep swinging Heather...and thx for bringing us this yet another greedy Mortgage Lender story Don...

another home run for u homey

Response to post #1: You called me "homey." Did you mean "homely?" Yes, Heather is fighting hard. Best, Don Bauder

i would NEVER call u homely POOH Best Nan

Response to post #3: Why not? Everybody else does. Best, Don Bauder

Maximum possible hustling.

Maximum plausible deniability.

Which equals (eventually) lowest imaginable credibility. (Once the Golden Goose is cooked, there will be no more golden eggs, as the few remaining will think twice about cooperating. [This may be good news])

But people need to realize that PEOPLE (some kind of genetically modified organism, apparently with chameleon genes inserted) are the problem, not the front names of the corporations which can be dissolved and reappear in new raiments in a Wall Street Asocial Parasite Minute.

Response to post #5: Yes, but the Supreme Court gave corporations First Amendment rights. Best, Don Bauder

Response to post #7: Twister is right: when the goose is cooked, the egg production ceases. Best, Don Bauder

4...don't be bursting my Don Bauder bubble Pooh

u crack me up Founder....hahahahahahaha

Thanks for all your hard work and this article, Don. Not sure if it will do anything, but at least their indiscretions were memorialized in writing. BTW...I was at "Subway" (the restaurant) with my mom, not "the subway"...no subways in Pennsylvania! Thanks again...all the best to you!

"Wah, Wah! I lied about my income on my loan application and now I must face the consequences. Wah! Wah! Had I not lied on my loan application, I would still be able to make payments on this condo loan, no matter what its market price might be." --Heather McGuire

This is a very one-sided article, where you portray the debt owner (she's not a home owner, since she has no equity, just a loan owner) as the victim.

Those of us that have been kept out of the housing market for the past 7 years are the real victims. Liars like Ms. Heather Mcguire lied their way to a loan, bid up home prices beyond the reach of those of us who refused to lie on our loan applications. They should have never been allowed to bid on something they couldn't afford, but they lied and were allowed to.

We are forced to wait around until this bubble deflates to proper price to rent ratios and price to income ratios. Now these liars get loan modifications to allow them to stay in the homes they lied their way into, while those of us who were prudent, fiscally responsible, are left to wait even longer until they end up defaulting on their modifications 5 years from now when the 2% teaser rate they're being given expires.

Government-peddled Loan Modifications = today's subprime/Alt-a Liar Loans.

Corporations can die at their convenience, arise from the dead in a new form, and damn us all to hell at their whim. Just who do these "people" think they are?* You can't talk to "them," only to their machines. This is equality? Now they are taking over the Internet, the last hope for some kind of quasi-community to balance their unlimited power.

We have fed willingly on their bread and circuses, and will be slaughtered literally and figuratively, directly and indirectly, or starved in body, mind, and soul. Even Huxley and Orwell couldn't imagine this route to, and level of, degradation.

Bloody Petroleum's murders and incompetence, for example, with its emphasis on spinning off the costs onto the taxpayers via the Coast Guard and other governmental agencies, not to mention refusing to act to compensate victims in any kind of timely way (except as it suits their window-dressers and spin-merchants), is just a shot across the bow. All we can do is hide, now--make ourselves as inconspicuous as possible, outside of the system to which we have become addicted. You can start by staying off and out of "face-spaces." But that's only a start.

*Feudal Lords, who must be obeyed.

Response to post #13. You assume incorrectly that Heather lied to get her loan, and if she had not lied, she would be able to make the payments. Heather did not lie. Heather made her payments on-time. However, she eventually got married, moved in with her husband (me), and had to put her condo up for rent. As a result of the market collapse, and her circumstances, she was losing nearly a thousand dollars a month on the difference between rent and her mortgage payment. So...get off your high horse and tell me if you would be able to afford losing that kind of money every month for an indefinite period of time because the market took a dump? I doubt it.

Response to posts #9 and 10: "Don Bauder bubble?" Bubbles are bad. Best, Don Bauder

Response to post #12: My error. When you said subway, I thought Philly or Pittsburgh had a subway. I guess I should have checked. Keep fighting. Best, Don Bauder

Response to post #13: IndyMac drowned in Alt-A loans, or liar loans, but that does not mean that Heather McGuire had such a loan. IndyMac made other kinds of loans, too. And, obviously, not everybody who got an Alt-A loan was a liar. Best, Don Bauder

I agree not to judge consumers so harshly. Remember, many were "guided" on how to fill out their loan apps by their mortgage brokers, who told them "trust me". If you have ever purchased a home in the last ten years, the amount of paperwork is stupifying. Most would sign anything put in front of them after the first hundred pages or so. I'm not saying it's right, it just is.

Response to post #19: So many of the mortgage peddlers were just con men. Consumers need more protection. I hope Elizabeth Warren is named to head the agency that will oversee consumer lending. It was set up by the financial reform act. Best, Don Bauder

So...get off your high horse and tell me if you would be able to afford losing that kind of money every month for an indefinite period of time because the market took a dump? I doubt it.

How much did your wife's trip to Pennsylvania cost? Why is she traveling to PA when she cannot pay her bills? I am not convinced that you and your wife cannot tighten your belts and meet your financial obligations.

Wait, hold on. It does not make sense. Heather was able to afford the loan before she moved in with her husband. After that, she rents the place out but decide to sell the place. Why? And why did she need the second mortgage? What did she do with $53K? Didn't she take this money with the promise of paying back? Or did she promise to pay it back only when she makes the money from selling her condo?

I am not sure what Heather really wants to do here. First, even if Heather manages to get the loan modification, can she continue and is she willing to make the payment? If not, what is the point of loan modification using our tax dollar? Then she tries short sale. So who cares if a property goes into short sale or foreclosure. Either way, Heather is losing her home. Sure the impact on your credit would be different between short sale and foreclosure. So perhaps Heather should focus on repairing her credit.

Who cares about the alleged verbal abuse by the lender? It is here-say. Every news paper article adds some alleged claims to make a point. That is manipulative and dirty. No evidence or recording to suggest this abusive behavior was mentioned. Only proven fact here seems to be that Heather has two loans in which, I guess, she made a legitimate promise to pay back every penny. And she is getting upset when it is time to pay back.

Sure, losing home is a difficult ordeal. But life goes on, get over it. You made a bet, and you lost. You are the cause of our recession.

Whether you get your line of bs from the system or the street, it's still bs. The ego evolved for survival. Egocentrism works fine for real tigers, but it backfires on paper tigers. Corporate goons are paper tigers, snarling and slashing out in hopes the fable they have swallowed will come true. Old Chinese proverb: To catch a tiger, sometime you have to be a pig.

Belated response to post #15: A lot of people have taken a beating because of the market collapse. Financial institutions, too, have taken a beating. But the big ones have been bailed out by the government. Heather isn't being bailed out. Best, Don Bauder

Response to post #21: Possibly her parents paid for her trip to Pennsylvania. Beyond that, I have trouble agreeing with those who feel sorry for the banks in this mess, and say consumers are to blame. Not so. It was true that many consumers, wrongly believing that real estate prices would never go down, bought more house than they could afford. But who convinced them to do so? In most cases, crooked mortgage peddlers. Who set up the international network of securitized mortgages and other derivatives -- gambling that nearly drove the world's economies off a cliff? It wasn't consumers. Best, Don Bauder

Response to post #22: Don't blame consumers for the Great Recession. Remember: this is a recession based on a financial collapse. Bad mortgages were part of that collapse -- no question about that. But the major guilty party is the financial industry -- particularly in the U.S. Securitized mortgages weren't the only problem. Trillions of dollars of derivatives were based on stocks, commodities, all manner of assets. It was up to the major financial institutions -- filled, as they are, with self-professed financial experts -- who should have seen that this whole edifice was a very rickety structure, indeed. Regulators are to blame, too. The Fed didn't see it coming. Bush's Treasury Department didn't see it coming. Remember, this was accompanied by massive fraud; financial institutions were concealing their liabilities in offshore tax havens. And they still are. The guilty party is greed. Some consumers were greedy, others were conned. But the greedy individuals that should have seen this coming were on Wall Street. Best, Don Bauder

Response to post #27: It's that line of b.s. that everybody got from the Street -- Wall Street -- that brought the system down. Unfortunately, it looks like it may be going down again. Best, Don Bauder

There is no indication that Heather is incapable of paying off her loan. Getting married, in fact, probably increased her level of affluence. The story does not describe any real hardship, except a bad investment.

She appears to be like so many other Americans who bought into the bubble. She doesn't want to pay her debts because the investment went south.

I am so tired of hearing that people like her deserve help because the banks got bailouts. All those bailouts come at the expense of people like me, renters who pay taxes without any of the obscene writeoffs given to so-called property owners.

Bailing her out, which is what allowing her to walk away from debt means, is like picking someone to get in a lifeboat based on the fact that they helped sink the ship. Meanwhile, those who did no wrong will be more likely to drown.

Go ahead. Say I'm on a high horse, even though I'm under the horse's hooves.

My Social Security and other retirement funds are being destroyed to help people who bought real estate escape their responsibilities. This woman made a bad investment. Passing the consequences along to me if she can afford to pay her debt is murderous.

Response to post #28: What is annoying to people like me is that the government and central bank started out at the top -- bailing out the financial institutions first before there was any help to people who got taken by the mortgage hucksters. The reforms should have started at the bottom -- bailing out the distressed homeowners first. That process would have helped the banks. Best, Don Bauder

Reply to #29

Those with the Big Money to "fix things", did not know any of US, but they DID KNOW all their friends at the Financial Institutions...

While the Big Financial Institution's bottom line got "fixed"

all the Home Owners also got "Fixed", but like dogs...

Add to that the banks are now recovering vast sums of money by foreclosing and reselling these properties. It might be expensive for them to go through the foreclosure process, but they still come out way ahead.

What is annoying to people like me is that the government and central bank started out at the top -- bailing out the financial institutions first before there was any help to people who got taken by the mortgage hucksters.

I disagree. Very few borrowers were taken in by the hucksters. Most of the borrowers who took out questionable loans clearly understood the nonrecourse laws, and knew they would not be held liable for repayment in the event of default.

The government should do what it did during the S&L crisis. The Feds would walk into a shuttered S&L and rifle the files looking for fraudulent loan applications. Then, the DOJ would send out hundreds of letters a week to borrowers with questionable loan applications (without an investigation) advising them that if they did not sign and return the enclosed misdemeanor plea bargain agreement, they would be charged with felonies. Almost all returned the agreements in exchange for no jail and very few had to be charged with felonies. The same tactic should be employed for real estate appraisers and mortgage brokers.

If there is a bright side to all of this, it could be that the consumers will finally understand that you can't trust any corporate entity and simply stop signing any agreement of any kind. Just do without the baubles and let the next bubble be theirs. If all politics is local, let all business be local.

I remember when the first "paper millionaires" started showing up in the late 1950's. I was sitting poolside with Lloyd Sigmon, head of Golden West Broadcasters (that's where "Sig-Alerts" came from) and the brains behind the Autry financial "empire." He told me that those people would never get anywhere in Big Business because if your word was broken once, you were out.

Unfortunately, he was dead wrong. They multiplied like schmoos, and now they own the world. It's going to be rough, and the smug will finally find themselves with no goose-suckers left to strangle. It will take more than a "gated community" and a gang of goons to keep the rabble out, and they will find themselves with nothing left but the feathers of their victims to eat and no friends at court. "Up drawbridge!" will be heard across the land, and the Giant Sucking Sound will be but a last breath for the greedy. They will have to feed upon the last of the rabble, then turn on themselves. "Upon what meat doth this, our fair Caesar eat, that he hath grown so great?"


The Beginning of the world may be near. On the other hand . . .

Response to post #30: Good way to put it. Best, Don Bauder

Response to post #31: Lenders have more foreclosed properties than they would like, but in the end, they will make their money. Best, Don Bauder

Response to post #32: Certainly, that is true for some of the borrowers. But others -- maybe the majority -- got hoodwinked completely. Those mortgage documents are lengthy and complex. People didn't understand them. Best, Don Bauder

Response to post #33: Appraisers and mortgage brokers and salespeople were a major part of the scam. Best, Don Bauder

Response to post #34: The kings' moats will have alligators in them. Best, Don Bauder

What I really want to know is why Green Tree is not being prosecuted? It wouldn't do a whole lot, but it would give the Feds some power to force them to negotiate. The minute they asked someone to pay them money outside of escrow they were conspiring to commit federal loan fraud. I happen to be a realtor and am representing a buyer who is trying to purchase a condo that Green Tree is holding the 2nd lien. They tried to do the same thing. They wanted the buyer to pay $3,995 outside of escrow to close the deal. The seller's agent and I both balked knowing that it could mean losing both of our licenses. Now Green Tree is trying to get the seller to sign a deficiency agreement to pay off any leftover amount of the 2nd lien. Green Tree is as dirty as the day is long and something ought to be done.

Response to post #40: Green Tree has an interesting history. The original company had one of the most obscenely paid chief executives in the country. Then Green Tree was bought by the insurance company Conseco, which had a CEO who was even more outrageously overpaid. Conseco paid too much for Green Tree and went bankrupt. The current Green Tree came out of the bankruptcy. Best, Don Bauder

But why aren't the fed going after them?

Asocial behavior has been ever more WIDELY institutionalized; it always has been INTENSE within SOME institutions. Time was, asocial behavior among individuals was subject to social control (ostracism, a population capable or recognizing flim-flammery when they saw it, etc.), but as the practice grows wider, it has contaminated everyday social intercourse to the extent that it is not only considered the norm, it is CELEBRATED as a POSITIVE rather than a negative. To paraphrase Jim Wright, "we can't go on just selling cardboard pizzas to each other."

But it's far from restricted to the financial or real estate industry, it permeates the globe--as in "globalization." There was a great cartoon which pictured a commencement speaker exhorting the graduates: "Now, go out there and get YOURS!" was the caption. Not go out there and be the best person you can be and you will get by somehow. The little darlings all seem to think they can all win the lottery. If they think at all.

Response to post #42: It's the typical federal faux enforcement. The government is going after the little offenders and subsidizing the big ones. Best, Don Bauder

Response to post #43: My late mother was born in 1900. She used to tell me that when she was young, money had a distinctive odor. Someone who had earned his money in a malodorous way was ostracized. No longer. For decades, there have been prominent attendees at San Diego Beautiful People soirees who belonged in prison, and everybody there knew it. Best, Don Bauder

Response to 44:

Goat or lamb, sacrifices are a result of somebody crossing somebody. It's all eyewash, window-dressing, shinin' on, megadeception.

Don, you are the ONLY one I know of who has the talent and competence to take these principles national, nay worldwide. San Diego, big as it is, is only a drop of oil on the fouled beach now owned by the Waste-Makers. The contamination of our society by Affluenza will require the proliferation of T-cells cultured by your pen and pixel. I am grateful that you are sticking with the old home town, but it is only one sore in an epidemic. You are in the best position to stimulate the social immune system worldwide to avert misery, degradation, death, and possible extinction.

I'm not a big fan of email petitions, but what do you think of this one: http://www.peaceteam.net/action/pnum1054.php ?

Response to post #46: And if I stick to San Diego, will I be blamed for humanity's extinction? Best, Don Bauder

Response to post #47: Well, I'm all for peace. Best, Don Bauder

Bailing her out, which is what allowing her to walk away from debt means, is like picking someone to get in a lifeboat based on the fact that they helped sink the ship. Meanwhile, those who did no wrong will be more likely to drown.

Go ahead. Say I'm on a high horse, even though I'm under the horse's hooves.

My Social Security and other retirement funds are being destroyed to help people who bought real estate escape their responsibilities. This woman made a bad investment. Passing the consequences along to me if she can afford to pay her debt is murderous.

By molly23

While I see your point of view-I must say that followed to a logical conclusion, then every company that filed BK and wiped out their debts are also passing THEIR DEBT along to you.

That may be true-so should we outlaw BK courts??????

If you cannot pay-for whatever reason- it is in everyones BEST interest to do a work out.

Response to post #50: Yes, the concept of bankruptcy, corporate or personal, is one thing that distinguished America from other countries at our nation's founding. We don't have debtors' prisons here. Bankruptcy is bedrock America. Best, Don Bauder

But bankruptcy was originally intended for protection in the event of some catastrophic event, such as a father getting cancer and being unable to meet his obligations. I do not equate that with some homeowner who maxed out their equity line thinking their home value would never cease to skyrocket and financed boats and cars and plastic surgery. I know one person personally who used equity to buy a tanning bed, among other things, and when the market crashed, declared bancruptcy. She kept all the stuff. This is stealing, as far as I am concerned.

Reply #50, #51 & #52 True, bankruptcy to me was initially designed to protect against some catastrophic event but NOT GREED, and it, like so many of our other LAWS TODAY has morphed into an "out" for the rich, so that they can escape being held responsible for any of their "bad" (unprofitable) financial decisions.

Now, not only can people and Corp.'s change their name to wipe their slate clean "skipping" any financial responsibility but they can also just electronically change Countries to seek further insulation from any "imperial entanglements" as Obi-Wan (Ben) Kenobi said in the Star Wars Movie...

As technology has advanced, so has the layers of Corp. insulation that makes it ever harder to determine "whose on first", and that's not funny! Today, even our Congressional and Local Leaders are almost all playing the "within the Law" game instead of doing what is "Right" for US.

The Rich are now fiddling, while the once employed Middle Class and the Poor Yearns...

Response to post #52: There is no question that bankruptcy is abused by some consumers. But consumer abuses pale by comparison with corporate bankruptcy abuses. Best, Don Bauder

Response to post #53: Your analysis is correct. When will Americans figuratively storm the Bastille? Best, Don Bauder

I'm late to this, as I've just found the article.

Green Tree is a very abusive servicer. My 2nd mortgage was transferred to them from B of A right after the first of the year.

I now send my payment to them via certified mail so I know when they receive it. In the meantime they call and harass you for the payment before the 'grace' period has passed. During those calls they will threaten you. They continue to call even after they have received the payment. Plus it takes them 2 days to post it. I now keep a log of the payment, when it was received by them, the days/times and phone numbers of the phone harassment.

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