Her Day in Court
When I was in California in 2009, creditors seemed to be foreclosing slowly, or at least erratically. In 2011 a group of mortgage investors who used Bank of America as their servicer were awarded billions of dollars for losses suffered due to delayed foreclosures. Their lawsuit revealed that the bank had been taking an average of a year and a half from a default to foreclosure. Other mortgage servicers were having similar, though perhaps less extreme, difficulties dealing with all the delinquencies. That’s one reason why savvy borrowers like Cindi, Amanda, Balty, and Bibi San Antonio had the leeway to investigate their options and, on occasion, even time their ousters to suit their own convenience. But that wasn’t the case for everyone.
There had been over half a million repossessions in California between 2007 and 2009. Many of them involved agonizing uncertainty, as I was reminded when I attended a court session in the predominantly black city of Richmond, California.
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There were no microphones in the Contra Costa County courtroom, so I missed a lot of what was said. But at one point the defendant, a solid woman with a strong voice, asked, “When will this happen, Your Honor?”
The judge replied with an emphatic iambic: “The house belongs to them!”
The evictees in Wells Fargo v. Epps were a sixty-year-old woman and a tall, elderly gentleman so frail he seemed slightly transparent.
“Mr. Dorsey is claiming tenancy in the property,” the bank’s lawyer explained to the judge.
“You were a bona fide tenant before the foreclosure procedure started?” the judge asked the frail man. (A tenant has ninety days to vacate after a foreclosure.) Mr. Dorsey handed papers to the bailiff. The judge and the bank’s lawyer mumbled over the rent receipts and leases. Something predated something else, I thought I heard. For that or other reasons the documents weren’t good enough to delay the eviction.
Mrs. Epps tried another tack.
“I had been working with the mortgage company for a year for a modification. They told me I could go to NACA”—the Neighborhood Assistance Corporation of America is a private organization whose counselors help homeowners negotiate with their mortgage servicers—“but two weeks later they took the property.”
“If someone misled you,” the judge said, cutting her off, “you may have a cause of action in another court. But not in this court.” And once again he uttered that iambic finality: “The house belongs to them.”
Mrs. Epps shoved her papers into her purse and headed toward the hallway. She still had some will in her walk, but Mr. Dorsey moved like a wraith.
I was at the courthouse to meet a blind woman in a wheelchair who was also losing her home. A Legal Aid lawyer had already set up the interview. All I could do was pursue this Mrs. Epps into the hallway to see if I could meet her later.
“I fell behind to bury my son,” she explained as soon as I introduced myself. “He was killed in an unsolved murder … I called them [the mortgage company] and said, ‘I have to bury my child; I need two months. Will you work with me?’ They said …”
I asked if we could meet for lunch, but Mrs. Epps, a home health aide, was going straight back to her patient. She suggested that we meet at the Mexicali Rose in Oakland that evening.
“My Head Feels Like a Pincushion”
When I arrived at the restaurant, Alice Epps was already seated. Alone in a booth for four, she looked small, but she reinflated when we started to talk.
“I can’t believe what happened today … Put ’em on a separate plate,” she told the waiter when I said I’d skip the French fries that come with the pork chops and rice and beans. “I’ll take ’em home.”
The word “home” seemed to remind Mrs. Epps about the imminent visit from the sheriff and the four floors of furnishings waiting there. “I hear they hold your things ten days before they dump ’em.”
Mr. Dorsey was also waiting back home for her. “I phoned him to come eat with us. He said he felt too weak to get off the bed.” Mr. Dorsey is a diabetic. The county pays Mrs. Epps to care for him a few hours a week. By a separate arrangement, she’s also his landlady.
In her agitation Alice began telling me about the many mortgage “shams”—that was a word she used frequently—that she’d encountered. Mrs. Epps had bought her house in Richmond for $35,000 in 1972. By the late 1980s she’d paid off her mortgage and owned the house free and clear. During the housing boom Alice got letters and almost daily phone calls offering her first tens of thousands and then hundreds of thousands of dollars in refinance loans against the increased value of her home. She ignored them until her daughter started college.
“I saw what she was paying for rent, and I said, ‘Eight hundred dollars a month!’ You could be paying off a house note for that money.” Meanwhile, her married son was renting next door. “I was so comfortable with my child next door to me.” This was the son who was killed. So Alice made the fateful decision to leverage her primary asset.
“I borrowed against my house and purchased the house next door for my son. I paid $22,000 to get the loan in his name, and I found a house for my daughter in Vacaville. Cost me $40,000 to get her into a house.
“It was an adjustable rate—no, they wouldn’t give me a fixed rate—that started at 7.9, call it 8 percent. It was supposed to go down if I paid for two years, but instead it went up to 17 percent.”
Did Mrs. Epps really believe that the interest on her adjustable rate mortgage would go down as a reward for paying on time for two years? Did the loan salesman mislead her or outright lie about how much the payments could go up when the initial or teaser rate adjusted?
Investors who bought mortgage-backed securities have won big settlements from banks because they were given fraudulent or misleading information about the riskiness of the mortgages. But it would be hard to win compensation for borrowers when the fraud (if it occurred) went on during a sales pitch with no disinterested witnesses around.
Whatever she was told, or wishfully believed, Alice, like millions of others, couldn’t keep up when her adjustable rate mortgage payments rose by hundreds of dollars a month.
“When my son got killed, I called and told them I need to bury my child, I need two months. So they said I should go ahead and bury my child: ‘We’ll work with you.’ So they offered me, what do you call them things Obama’s giving?”
“A modification?”
“Yeah?”
“And you got it?!”
“Yeah, took a couple of weeks.”
A couple of weeks?! Alice Epps managed to get a loan modification in a matter of weeks when a cool head like Balty Alatas couldn’t wade through the paperwork in a year and a half?
“My note became $4,939, close to $5,000, per month. I worked two, three jobs at a time and paid it. One month I earned $12,000. Then I tried to get away from Litton by refinancing but …”
“Litton!”
“But they [a new mortgage originator] sold my mortgage right back to them [Litton].”
Suddenly I understood how she got a modification. To most underwater homeowners, the word “modification” referred to an ineffective government program meant to keep people in their houses. But there are many ways to modify the terms of a mortgage. Litton Loan Servicing is known among consumer advocates for offering mortgage modifications that fail and leave homeowners owing more than ever.
This is how that works out profitably for them: Normally, a mortgage servicer passes along all of the interest and principal it collects to the banks or investors who own the mortgages. The servicer earns its money from regular service fees, late penalties, and special charges like the ones involved in modifications.
But a mortgage servicer normally can’t offer a modification (a change in a loan’s basic terms) without the consent of the loan’s owner. This, as we’ve seen, can be hard to get. But Litton and its associates buy up delinquent or otherwise malodorous mortgages at a discount. With the original investors out of the picture, Litton is free to grant modifications in its own interest.
During the course of most Litton modifications or “trial” modifications, the homeowner’s payments can consist almost entirely of fees and new interest. By offering one likely-to-fail modification after another, Litton can collect payments like Alice Epps’s $4,939 a month for as long as the homeowner can pay. The company is free to raise or even lower the payments if it decides that’s the best way to squeeze out a few last drops. But since almost none of the money goes to paying off the mortgage debt, the recipients of Litton modifications often wind up owing more than they would have if they’d never been granted the favor. When they’ve paid all they can, they lose the house.
Litton had been leading people in poor neighborhoods through this Kafkaesque modification maze well before the Great Recession. After the crash it came under press scrutiny because it had been acquired by Goldman Sachs. The calm, cool, and collected Financial Times took a stab at describing Litton’s modification procedures in a story of June 16, 2010, titled “US Consumers Rage Against Goldman Unit.” In its accompanying human interest feature titled “ ‘A Quick Fix’ That Added More to Debt,” the Financial Times’s sample Litton customers are a white couple reduced to near lunacy by Litton’s modification process.
Alice knew the term “modification” in connection with her Litton loan, but she had also heard about what many in her neighborhood call “Obama modifications.” She pursued that angle too, or at least she’d started several times.
NACA, the organization she’d mentioned to the judge, holds traveling Save the Dream conclaves where distressed homeowners gather in places like civic centers to meet counselors who might be able to get a concession from their mortgage company right there over the phone or at least get legitimate negotiations started.
Other groups, both altruistic and not so altruistic, offer similar services. Alice had tried both kinds.
“I went to five different community agencies. I waited all day in Pittsburg [California]. But it was a sham. All those agencies getting money from the federal government saying they are helping people. They’re shams and frauds. Do Obama know what’s going on? So I hooked up with Help-U-Modify. They charge $3,500.”
“And you paid them …?”
“Thirty-five hundred dollars. Come to find out, Help-U-Modify wasn’t even licensed. They was taking people’s money—they’re still taking people’s money—but they don’t do nothing. The Legal Aid told me they weren’t even licensed.”
“You went to Legal Aid?”
“They told me that they were too busy, had too many cases. I asked the judge today, ‘Don’t I get no papers?’ He says, ‘I’ll give them [the bank’s lawyer] a writ.’ I don’t even know how long I got to do anything. So I called this attorney today that I’m going to see tomorrow.”
“He said, ‘Bring $250 with you tomorrow.’ I said, ‘I’m about to lose my house. I went to Legal Aid, they referred me to you.’ He said, ‘Nah, I want $250.’ ”
“Alice,” I’m practically pleading, “it’s too late for lawyers. You have to think about where to move.”
“But the judge, he said maybe I could go to another court. That’s why I called that attorney.”
Alice Epps isn’t stupid, but she has a way of giving things a twist, a consistent way of mishearing official or legal talk that sets her off on these wild-goose chases. That morning in court the judge said that she might have a case in another court if someone deliberately misled her. But here, here in his courtroom, she had lost, absolutely. It was his forceful and frustrated way of cutting this thing off. Alice heard all the words but processed them as an invitation to go to another court.
“I just can’t believe this is happening to me,” she said. “I been living in that house thirty-eight, forty years. What’s the bank want my house for?” That was certainly a reasonable question. The streets of her neighborhood were dotted with derelict bank-owned houses.
“I’m going to the bank tomorrow myself, in person, and ask them to come out to the house or say, ‘Can I tender rent till I can get my stuff out of here?’ And I hope they don’t tell me they can’t talk to me, to go to an attorney, ’cause a lawyer in Berkeley told me …”
“THE HOUSE BELONGS TO THEM!” I wanted to bellow. Instead, I began asking Alice about family and friends who could help her find a temporary place to move.
“My sisters, my daughter, they don’t know a thing about what happened to me today.” Like Bibi San Antonio, Alice hadn’t told anyone, not even her daughter, about the impending eviction. “I’m used to giving help, not getting help.”
“But they’ll want to help you,” I said. I described how unemployed bankers, “million-dollar executives,” aren’t embarrassed to “network” when they need something like a job. “They call everyone they ever met. By the way, do you have e-mail?… Okay by phone.”
I listened quietly while Alice listed relatives and old friends she could call. Each had his own economic worries at the time. “What can they do for me?”
“You can never imagine in advance what you’ll hear once you start asking,” I said.
“Like what?” she asked. By then I had realized how limited her lucky breaks were likely to be, but I toughed it out.
“Look, I went to court today to interview a blind woman. I needed a story, I stopped a complete stranger, and I got to you.”
Then Alice really got to me.
“I kept saying, ‘Lord, I don’t know if this is good for me. I don’t know what she is doing.’ And I prayed about it, and then I said, ‘I’ll go meet her. I’ll go because she is tiny. She can’t do me no harm.’ ”
Oh, God, I can’t hurt her, because I’m small. “No, I’m not going to do you any harm,” I said, “but I’m not going to do you any good. That’s the problem.” Then I moved to Alice’s side of the booth and cried because my books never do anyone any good.
Mrs. Epps said she understood because all her patients always die. “The doctor tells me it will be four months, but I’ll keep ’em a year or two. That’s my job, to keep ’em. But in the end, they pass.”
I learned more about Alice’s son that evening. He’d worked for a moving and storage company. If he were alive, he’d know how to handle the packing and where to store her things. But if he were alive, that wouldn’t be necessary, because she wouldn’t have paid $12,000 to bury him, so maybe this wouldn’t be happening.
“I don’t know how I’m going to sleep tonight,” Alice said. “My head feels like a pincushion.”
Mrs. Epps insisted on driving me to the bus stop because she felt it was dangerous for me to walk in the neighborhood at night. “I can’t say that I’m sorry that I bought my children homes,” she said, “but if I had knew what I know today, I would never have borrowed against my house.”