Opinion

Felix Salmon

Annals of unncessary foreclosure fees, Harlem edition

By Felix Salmon
August 17, 2009

Three cheers for Justice Emily Jane Goodman, who threw out a ridiculous foreclosure case that was brought by Washington Mutual against Imar Hutchins, a man who made repeated attempts to make his mortgage payments, all of them rejected by the bank, which then served a foreclosure notice on one of his renters.

It’s unclear why Hutchins had this particular mortgage in the first place: he took it out the $470,000 loan in May 2006, and then in May 2008 missed a single mortgage payment of $3,730. He had a lot of positive equity in the building: the price was $675,000, which means that his downpayment of over $200,000 was more than 30% of the purchase price. Yet even then, within two years of getting the mortgage, his mortgage rate was already at about 9%.

But the fact that WaMu insisted on initiating foreclosure proceedings after a single missed payment is still revealing. Hutchins, with his $200,000 of positive equity, was no deadbeat jingle-mailer. But the fees that a servicer gets from foreclosure proceedings are high, and the costs fall overwhelmingly on the homeowner. Maybe the fact that he had such a high-interest-rate mortgage served as some kind of signal to the bank that they should try to rip him off even more by tacking on unnecessary foreclosure fees.

A mortgage isn’t a credit card: you shouldn’t be slapped with fees and lawsuits just for missing a single payment. But maybe, for mortgages taken out at the height of the boom in mid-2006, that’s exactly where banks like WaMu thought they were going to make their money. If true, that’s utterly depressing.

Comments
10 comments so far | RSS Comments RSS

How is this WaMu’s fault? Isn’t Chase the one to blame–as the successor? WaMu does not exist except as shell holding company.

Posted by Bagley | Report as abusive
 

Can it really be true that foreclosure is so lucrative for a servicer? I’m definitely no expert, but I was always under the impression that servicers wanted to prolong the repayment period as long as possible to continue collecting the servicing fees. Do they somehow make more in foreclosure (even when the borrower could / would continue to make monthly payments, as apparently is the case here)?

Posted by ab | Report as abusive
 

This is nothing new. My father lost the family home in a very similar manner. He had the house payments coming out of his military retirment check and the bank he went through was bought out by a bigger bank, they refused payment even after the army lawyer showed the courts the payments were tried to be procesed to the institution that he had been going through for years. End result the court sided with the big buisness and the family home went up for auction. My uncle bought it then sold it to my brother and myself but the banks,courts and lawyers got their cut.

Posted by Steven Tindall | Report as abusive
 

The “telling” statement is that the foreclosure notice was served on “one of his renters.” This indicates that the property was an investment property …. not a primary residence … and therefore subject to a higher downpayment requirement (25-30%) and a higher interest rate (9% on an investment property sounds about right). So let’s all quit the blathering and get the facts straight.

 

Commercial propery requires a 25-30% down payment this type of property is considered investment. In most states any dwelling that consist of more than four apartments would be commercial property.

 

The whole point of the article is to point out the fact that banks could care less about wether or not they hold property on their books. They only care about making as much money in any devious or legal way they can. Emphasis on devious.Truly I am surprised the court did not side with the bank.After all, the former top brass at GS bank and others all hold the key positions in gov’t finance posts.They hold all the money and the cards.Now they want all the property too. Just the fact that it is commercial property and the guy had to make a substancial downpayment which gave him equity should warrant at least a one time per year leniency to be late so long as the late payment is made with the next one payment by or before the due date of the next payment. Get real.

Posted by Matt | Report as abusive
 

Depressing indeed! The above being true, no mortgage is safe. For the lendee that is. Borrowers have had neither rights nor usury law protection for some years now. It is high time the usury laws were re-enacted. These so called interest rates charged by corporate criminals like WaMu can reach over 800 percent per year. That is the rate charged my stepson eldest for a ‘payday advance’ (in actuality a loan taken out by a poor or inept managing borrower who finds himself/herself with too much month left over at the end of the money)! Many years ago finance companies who ran into the then usury laws went to charging ‘fees’. The fees did not have to be logical nor have a clear sensible purpose, just sound ‘technical’ and hope the suckers did not know how to read so as to enable more efficient fleecing of him/her. These eventually became so outrageous that those companies, like ‘Household Finance Company’ (on of the better and more fair ones), were regulated and forced to stick with interest as the prime income. Those companies, unable to continue loan sharking at rates that would make the mafia blush, shifted out of the loan shark business. One company actually had a stuffed shark in his office over the manager’s desk. The turning point came when Washington State, which had a twelve percent limit on credit card interest, was threatened by a cartel of loan companies and banks to scrap its usury laws in a direct threat of stopping all credit to that state in the late seventies. Washington found no allies in a federal government controlled by rapacious republican banker bribed fat cats, so knuckled under. Other states saw that handwriting on the wall and followed suit and the rest is history. WaMu, insolvent, even tried to open a store front loan sharking hole in the wall ‘check cashing’ shop in my town but it was closed before it stole a single tainted dollar. As long as there are drunks, welfare cases on limited income, and unemployed, there will be the unscrupulous that will exploit them; and it is up to government as the constitutional protector of the people to do its job and control the overpopulation of corporate monopolist rats infesting society.

Posted by Chester Drawers | Report as abusive
 

This story didn’t get all the facts as nobody forecloses after 1 delinquent payment. The servicing organizations don’t want to push loans to the special servicers — they’re just regular people trying to get their jobs done, not devious investors trying to screw borrowers. Without the servicer’s side of the story, you can’t make judgements on this.

Posted by suspicious | Report as abusive
 

who is this idiot?
“This story didn’t get all the facts as nobody forecloses after 1 delinquent payment. ”

yes, they do (or tried to)

“The servicing organizations don’t want to push loans to the special servicers — they’re just regular people trying to get their jobs done, not devious investors trying to screw borrowers”

For one, “organizations” ARE NOT ‘PEOPLE’, idiot!

For two (i promise i wont go much higher due to your poor math skills)
The bank stood to gain a cool 300,000 on the deal PLUS fees!
Any lowlife looking to raise his ‘profit rating’ would authorize this.
Besides, what some banks have is a software program (run behind the scenes by people) that RECOMMENDS actions to take – if you want to do something else, i.e. NOT forclose, you have to do a complicated override process. In this case though, there was no rogue software program. A human SLUG(s) was behind this!

Posted by suspicious_is_an_ass | Report as abusive
 

WAMU’s merchant account scam has been holding my two companies hostage and depriving me of the right to earn a living for almost a year now. My case against them is pending with the courts and because of this non-sense my landlord took me to court to put me on the street because I owe him money that he no longer wants to wait for. This is the last straw so I am not worried about it because God is in control of the situation. What was meant to harm me will ultimately turn out the be a blessing in disguise. My landlord hired a pitbull lawyer to make the case and put me on the street….but little do they know that they put me on speed-dial to something bigger and much better. I am ready to move out of death valley.

 

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