Like many New Jerseyans, Yolanda Andrews began having mortgage problems when the economy fizzled, which in turn was caused by the Wall Street meltdown as risky mortgage-backed securities went bad.
But the Newark resident may yet beat the odds. In August, Andrews said, Wells Fargo notified her that she qualifies for a modification of her mortgage loan.
Just one thing: It’s four months later, and the bank still has not forwarded the paperwork. In fact, Andrews said she has been unable to learn the particulars of the offer.
"They haven’t told me how much I would be paying,” she said.
The ongoing confusion about, potential solutions and bungled policies brought Andrews to the narrow street outside Gov. Chris Christie’s home one night last week.
About 50 people from housing advocacy, labor and religious groups were there, singing modified Christmas carols in protest of what they described as the governor’s “indifference,” “lack of leadership” and shifting of funds meant to fight foreclosure.
Andrews wasn’t complaining about her lender – she still hopes to get the promised break on her mortgage. But, like other participants in the protest rally, she cited a lack of transparency in the foreclosure process and a shortage of elected officials willing to stand up for people in danger of losing their homes.
“We’ve got to hold the politicians accountable,” Andrews said, extending that to the White House as well as the governor’s office. “We need to go down to Washington, too,” she said. “Remember how before the election Obama said he was going to fight for the people?”
The political system has produced some aid for distressed homeowners, but it pales beside the magnitude of the problem. In March, state attorneys general reached a: Ally (GMAC), Bank of America, Citibank, JP Morgan Chase and Wells Fargo.
This month, RealtyTrac, the Irvine, Calif., real-estate monitor, reported 1.5 million properties in foreclosure, with a cumulative value of more than $248 billion. In the third quarter alone, 193,059 homes in foreclosure or already bank-owned were sold, representing 19 percent of all residential property sales, the company found.
Even for the reported individual beneficiaries of the foreclosure settlement, the devilry is in the detailed financial statements.
Like some other governors, mainly Republicans but also California Democrat Jerry Brown, Christie used the state government’s share of the money to plug a budget hole instead of spending it on programs to prevent foreclosure. New Jersey has been slow to even administer federal aid intended to keep people in their homes.
The Office of Mortgage Settlement Oversight, established to monitor banks’ compliance with the settlement, estimated that so far they have allocated $21.9 billion for borrowers around the nation, with another $4.2 billion in trial modifications in progress.
But more than half that total, $13.1 billion, represents short sales in which borrowers still lose their homes, or deeds handed over in lieu of foreclosure, according to the office.
This means that after a plunge in housing values, the big banks agreed to accept current market prices on some homes worth less than their outstanding mortgage loans. During the third quarter, short sales narrowly surpassed the sales of bank-owned properties, according to RealtyTrac.
For a homeowner trying to sell in a down economy, that would be facing facts. But short sales account for $7.4 billion in deal compliance by Bank of America, the lender required to make the biggest contribution toward the deal. Of its write-downs, a majority came from investor-backed portfolios, not the bank’s own accounts.
Joseph Smith, the former North Carolina banking commissioner who heads the oversight office, pointed out these raw figures still must be analyzed under the settlement formula. That could discount the value of the short sales, requiring the banks to offer more reductions in first or second mortgages.
For New Jersey, the picture is slightly better, but less than a masterpiece. Of $599.6 million in New Jersey relief counted by Smith, $255.8 million would come from short sales, plus $684,741 from deeds in lieu of foreclosure. Smith calculated that extinguishment of second liens comprises the second-biggest chunk of the offered New Jersey relief -- $163.6 million. Modifications of first liens, which many borrowers in foreclosure cases have requested, came to $82.4 million.
If the banks complete all those offered modifications, more New Jersey borrowers would be able to stay in their homes, about 3,600, than lose them to short sales or deed surrenders, about 2,100, according to Smith.
But eight months into the process, Smith reported the banks have completed only $41.6 million of any type of adjustment here for just 933 borrowers. That is typical of the nationwide pace.
Meanwhile, the banks have moved faster to increase the number of foreclosure cases they are filing in New Jersey. Through Dec. 7, state court records show lenders had filed 29,300 new foreclosure actions this year. That is far below the flood of 66,719 recorded in 2009 in the depths of the Great Recession, which court officials believe to be the all-time high.
But this year’s growing total easily surpasses the 20,253 foreclosure cases filed in 2005, before the market in risky mortgage-backed securities began to unravel, leading to the Wall Street panic.
After American financial markets were effectively deregulated at the dawn of the millennium, mortgage sales exploded. Lenders began offering loans, often with little money down but at unsustainably high interest rates, to a wider population of borrowers.
Banks and brokerages repackaged the loans, slicing and dicing them, into securities for sales to investors, including major institutions like state pension funds. Although many of the underlying loans were inherently risky, ratings agencies paid by the lenders inaccurately certified them as safe.
When the investments eventually went belly up and crashed the housing market, even homeowners who had spotless payment records suddenly found themselves “under water,” with mortgage loans larger than the value of their properties.
The tremendous volume of foreclosures included many where bank officials certified documents without having reviewed, or in some cases, even seen them, practices euphemistically known as “robo-signing.” For instance, a review in San Francisco uncovered cases in which lenders foreclosed on homes whose titles they did not own.
Acting in response to reported cases of fraud and irregularity here and elsewhere, New Jersey Chief Justice Stuart Rabner acted. In December 2010, he ordered six major lenders and another two dozen especially active in New Jersey to demonstrate they have instituted protections against future use of false swearing and fraudulent documents.
Those reviews caused foreclosure filings to plunge to just 11,037 in 2011. The slowdown created a backlog estimated by state officials at 50,000 to 100,000 cases.
Of course, the review also created an opportunity for banks to take alternative steps, such as writing down the principal of mortgages on homes that have plunged in value since the price peak of the post-millennium housing bubble.
But in New Jersey, at least, it appears most banks have chosen to jump back into foreclosing. The number of new foreclosure cases so far this year outstrips the 20,253 filed in 2005, before the first signs of trouble in mortgage-backed securities.
In other words, the slowdown in filings for much of 2011 led to numerous reports that a lack of foreclosures would distort the housing market, preventing the banks from disposing of under-performing loans. But the surge of new foreclosures in 2012 is just as much of a departure from normal.
In his state report, the latest of a series, national monitor Smith described the settlement as a “bipartisan, state-federal response to a serious problem.”
He cautioned it is “too soon to judge the extent of the effectiveness,” but held out the hope that it “could change our country’s mortgage system for the better.”
But for one type of relief the banks could have offered under the settlement, “forbearance for unemployed borrowers,” Smith reported a total of zero.
That is all too applicable to Tom Bias of Sparta, another of those who gathered near Christie’s house on a wooded lane in Mendham Township. While he has been in his home for 34 years, he acknowledged making a key mistake.
“I never should have refinanced” with former lender Countrywide, he said. Known for its high-flying ways, Countrywide became a poster child for the housing bubble; it was absorbed by Bank of America when it failed.
“They didn’t even send a loan officer with the paperwork, just some college kid who spread it out on my kitchen table for my signature.” Bias said. “That should have been a warning.”
Still, it might have worked out, except that Bias was suddenly laid off from his job as a printer after 40 years. He is angry at the betrayal, but has moved on. Bias also has learned from experience, hiring a lawyer for his foreclosure fight. He just wishes the governor was concerned about his problems.
“Don’t get me wrong, we think it’s great the way Gov. Christie has responded to people who lost homes in Hurricane Sandy,” said Mary Szacik, an organizer of the vigil for New Jersey Communities United. “We just wish he would have the same concern for families losing their homes through foreclosure.”
Andrews isn’t unemployed, but when she bought her home on Underwood Street, she was holding down two jobs. Renting an apartment where the heat was out and the landlords had left after an acrimonious divorce, she was driving down the street one day and saw a “for sale” sign.
“I just fell in love with it,” she said.
Since then, however, one of her employers has gone out of business and the other has cut back hours, she said. Originally, she asked Wells Fargo to write down her loan. Now, she is hoping for some adjustment of the terms of her mortgage, because, she said, “If I lose my home, I’ve lost everything.”