Predatory lending tactics?

[berettafan]

Just got a letter from our mtg. company offering home equity $$. no surprise there right? i generally toss these things but as i'm working on starting a new co. and could use $50k or so once things are ready to roll i thought i'd see what they had to offer.

a quick scan showed they were offering 7 3/4% or so fixed rate and approx. $30k+ cash out. not a terrible rate for h.e. credit you say? the rate on our existing mortgage is 5 7/8% FIXED. the mtg. co wanted to REFI the entire thing at 7 3/4 to facilitate the $30k out!!!!

i understand many would say if you're dumb enough to sign up for such a thing you deserve what you get, and in a way i agree. but this kind of ***** is helping noone but the banks (or more correctly the currently employed execs at the banks who rely on performance bonuses; the banks, in the end, will suffer). these guys are right there with rent-a-center in terms of taking advantage of poorly educated consumers w/ self control problems.

IMO the people that think this **** up and put it into practice deserve a good arse whipping. the whole scheme (and i think 'scheme' is a perfect word here) is evidence of a total lack in ethics and concern for one's fellow human beings. just because there is a profit to be made doesn't mean it should be done. wtf is up with people?!

[Rick Lee]

I don't think there's anything wrong with it at all. I never open those things, so somehow I'm never preyed upon. Your present mortgage rate has nothing to do with rates after your loan closed. What you got was the cost of money at that time. So if it's a bad deal to refi the whole thing, then it's a bad deal. Doesn't mean it's a screw job. My current rate is 4.375% on a 5/1 ARM. So there's no current refi deal in the world that could make me even think about it until my ARM starts to adjust way, way upward. You don't have to refi your existing loan to get a decent HELOC if you have some equity and good credit. I'd go that route. Banks ain't in business to lose money by handing out HELOC's at below market rates on small balances, when they could get your refi business for the whole loan. Lots of folks with adjusting ARM's could use some cash out and a better rate. So my guess is the offer you got was looking for those kinds of folks.

[Christien]

Gotta agree with Rick here. Sure, it may not be in your best interest to refinance the thing, but I can't think of a reason in the world why they shouldn't be able to at least offer it. Now if they deliberately hid refinancing your entire mortgage at a new rate in tiny print and insane legalese, than you may have a point, but so long as it's disclosed as it should be, I see no problem.

[legion]

My favorite is the "Equity Accelerator" that my bank offers. They will switch your mortgage payments from monthly to once-every-four-weeks at the same dollar amount per payment. This will allow you to build equity faster as you end up making an extra payment every year. All for a "convenience fee" of $50 a payment.

My mortgage is $1100 a month. This program would only gain me $450 in additional equity a year but cost me $650 in fees. I just add $100 to every mortgage payment and come out $1200 ahead...

[widebody911]

Originally Posted by legion

My favorite is the "Equity Accelerator" that my bank offers. They will switch your mortgage payments from monthly to once-every-four-weeks at the same dollar amount per payment. This will allow you to build equity faster as you end up making an extra payment every year. All for a "convenience fee" of $50 a payment.

I never figured out what the deal was on those. Being a cynic, I ran the numbers and came up with similar bottom line, so I couldn't figure out what the benefit would be.

[berettafan]

rick & christien i hear you guys. as i said part of me agrees with that, but still a big part of me has a problem with dangling large cash disbursements in front of homeowners as a way to further eat into their equity. i have to think the board meeting where this strategy was introduced went something like 'homeowners still have lots of equity in their homes and are not afraid to use it. perhaps we could not only get the equity credit business but get the darn fools into a higher rate mortgage at the same time!'.

rick i suspect the poor folks out there kidding themselves about doing a refi when their ARMS get out of control (what do you think fixed rates will be doing at the same time? going down? i think not....) are not the target of this practice but rather folks who are happily settled in with fixed rates. there is a LOT more to be gained by getting me to refi at current rates vs. getting somebody with an ARM to do so. if rates keep trending up the ARM folks will be paying the highest rates of all so why get them settled in now? that would just limit the upside for the banks.

[legion]

Originally Posted by widebody911

I never figured out what the deal was on those. Being a cynic, I ran the numbers and came up with similar bottom line, so I couldn't figure out what the benefit would be.

And not to mention...if I get into trouble I can always scale back my payment to the normal amount. With the "equity accelerator", I'd be in default for missing a payment.

[Rick Lee]

Well, if someone actually bites at those refi or HELOC offers and the fine print is, indeed, too fine, they will get the full gamut of closing docs before they ink the deal. Hey, at some point, people gotsta be responsible for what they sign. I have a bigger problem with title loan places being all around military bases than the soft sell tactic of direct mail.

And regarding extra mortgage payments, one extra P&I payment per year will knock the last seven years (that's 84 payments) off a 30 yr. loan. That is HUGE if you plan to stay there for the long haul. You don't have to pay a fee for it. Just divide your P&I by 12 and add that much for extra princ. to each mortgage payment. It's free.

[NICKG]

Originally Posted by legion

My favorite is the "Equity Accelerator" that my bank offers. They will switch your mortgage payments from monthly to once-every-four-weeks at the same dollar amount per payment. This will allow you to build equity faster as you end up making an extra payment every year. All for a "convenience fee" of $50 a payment.

My mortgage is $1100 a month. This program would only gain me $450 in additional equity a year but cost me $650 in fees. I just add $100 to every mortgage payment and come out $1200 ahead...

chase? they just tried that crap on us...I just pay it weekly to the principle and then the regular monthly payment+ 100 principle

[legion]

National City.

[berettafan]

rick speaking of title loans did you see the washington post article i mentioned elsewhere? the one about the ex-stripper?

[berettafan]

Here's a clipping on it...


TEXT
Her Story:Joy Jackson
Joy Jenise Jackson glided down the aisle of the Mayflower Hotel ballroom wearing her handmade oriental silk wedding gown and tiara with Swarovski crystal rhinestones. Trailing her was a 42-foot train, it, too, adorned with bling.

The June 2006 reception was equally glitzy, captured, like the wedding, on video. Patti LaBelle serenaded Jackson, 39, a former exotic dancer turned mortgage broker, and her groom, Kurt Fordham, 38. Later, the video shows the couple and their 360 guests sipping Mo�t and Cristal champagne and dining on lobster and shrimp fried rice, followed by four wedding cakes. As gifts, the couple gave one of their attendants a Porsche, another a house, and a third a $10,000 check, wedding guests said.

The price tag for the nuptials, Jackson told friends, was nearly $800,000.

It was a fairy tale wedding born of a booming real estate market. But even as Jackson was basking in her platinum wedding, her dreams and those of hundreds of homeowners in the Washington area were crumbling around them -- just like the market.

Investigators and attorneys say it appears that Jackson paid for her wedding and her lavish lifestyle, in part, with money from an elaborate foreclosure rescue business she operated out of her Lanham-based Metropolitan Money Store Corp.

Last month, a class action lawsuit was filed on behalf of homeowners who say they have collectively lost as much as $60 million in home equity through her business.

"Joy Jackson concocted a scheme to defraud people," said Phillip Robinson, an attorney who filed the federal suit against Jackson, Fordham and 12 other defendants. "The sole motive seemed to be to enrich her lavish lifestyle. She took from people who were cash poor but were equity rich."

The red-hot real estate market of the past few years created billions in home equity for owners and opened up credit to those who thought they could never afford a home. But it also opened the door for foreclosure rescue operations, such as Metropolitan's, that require homeowners to turn over their deeds and, in effect, their equity to the lender.

Attorneys suing Jackson's company say as many as 400 homeowners lost at least $100,000 in equity. Some are now facing foreclosure.

Darrin Blackford, a spokesman for the U.S. Secret Service's Washington field office, said the agency is investigating Metropolitan for possible fraud, but he would comment no further. The FBI is also investigating the company, a law enforcement source said.

David Schickner, an investigator with the Maryland Department of Labor, Licensing and Regulation, said the agency has been looking into Metropolitan since November 2006.

Jackson and Fordham did not respond to requests from The Washington Post for comment; they have moved out of their Fort Washington house, and efforts to locate them were not successful. Jackson's business partner, Jennifer McCall, did not return calls for comment, and a man who answered the door at her Lanham home said she would not comment.

A longtime friend of Jackson's, Earl Bannister Jr. defended her, saying she is guilty of nothing more than working hard and trying to help others.

"I know Joy's not like that. She will be vindicated," said Bannister, a Baltimore-based clothing designer who created Jackson's wedding gown and, earlier, her exotic dancing costumes. "Any money she got, she earned."

Chris Duncan, 25, a former Metropolitan employee from District Heights, said his boss started out with good intentions but got in over her head.

"She was an ex-Private Entertainer who became a millionaire," Duncan said. "She started overspending and tried to move money around, and it wasn't covering the spread."

Kevin Schwapp doesn't need much prodding to remember Jackson's tenure at his nightclub in Temple Hills.

With her long hair and shapely figure, Jackson was one of his most popular dancers, earning well over $1,500 a week in tips, said Schwapp, who owns the Legend Nightclub. He said Jackson danced under the name "Night Rider" from 1997 to 2003. One of her most memorable stunts involved riding in on a white stallion, a la Lady Godiva.

"She was very popular, very creative," he said. "She stood out."

It wasn't just the patrons who noticed Jackson's act. Kurt Fordham, a popular disc jockey in Prince George's clubs, liked her, too, and the two started dating.

Jackson eventually stopped dancing to focus on her career as a loan officer, moving from one mortgage firm to another. In September 2004, she teamed with McCall, 46, to open Metropolitan. They advertised on gospel and R&B radio stations and other African American media outlets, promising to help homeowners with cash-flow and credit problems.

Veronica Savoy was two months behind in mortgage payments on her Waldorf home when she contacted Metropolitan in summer 2006.

She said the firm promised to keep her home from going into foreclosure and to get her a mortgage with a lower interest rate. She signed on. Now the deed is no longer in her name, and $100,000 in equity is gone, she said.

"I guess that's where the equity in my home went," Savoy said after hearing about Jackson's big day. "It went to her wedding."

* * *

Investigators say Jackson and McCall ran a sophisticated foreclosure rescue operation that included family and friends, many of whom Jackson taught the ins and outs of the real estate industry.

Essentially, the company would enlist investors with strong credit as "straw buyers" who would take ownership of the houses. The original homeowners could live rent-free for a year and then buy back their homes at the end of the year.

But when the homes passed to the straw buyer, Metropolitan would borrow as much as possible against the value, effectively siphoning out the equity and increasing the cost of the house, according to the suit. The original owners were often unable to repurchase their property; some said they were unaware they were signing over their deeds.

Industry officials say this is a risky business model that depends on the company handling the equity properly and depositing mortgage payments regularly, something federal investigators are examining in this case.

Duncan recalled acting as a "babysitter" with clients, talking to them when they called in a panic, assuring them the process was going smoothly even when closings took far longer than at most banks.

He said he believes that Jackson and McCall were in business to keep people from losing their homes. "Joy Jackson was doing a great justice in early 2006 for the community in regard to saving individuals' homes," Duncan said.

She was also making money -- and spending it.

Jackson and Fordham moved into an upper-middle-class neighborhood in Fort Washington, blocks from retired boxer Rid**** Bowe and other affluent African Americans. The couple began renovating the four-bedroom colonial, adding Versace marble floors and carpet, according to a real estate listing. They tried to cut down trees and add a swimming pool but met resistance from the neighborhood association.

Neighbors knew little about the couple but said signs of conspicuous consumption were everywhere. Eight cars were regularly parked outside their home, including a Jaguar, a Porsche, a Corvette and a Cadillac Escalade, several neighbors said. Fordham was seen each day outside wiping down his vehicles and moving them from space to space, neighbors said. A limousine arrived daily to take Jackson's 15-year-old son to a nearby private school.

"We knew when they came on the street they had a lot of drama. They weren't friendly at all," neighbor Roger Liggins said. "It was always about them."

* * *

[berettafan]

It was a partly cloudy summer day when Jackson, Fordham and their guests took over the Mayflower Hotel. Booking a wedding at the downtown hotel, especially in June, is never an inexpensive venture. The couple reserved a majority of the Mayflower's halls and banquet centers for their wedding ceremony and reception and 56 rooms for the night of the wedding.

Aside from LaBelle -- who gave a seven-song concert with "Lady Marmalade" as her finale -- gospel harpist Jeff Majors and R&B crooner Raheem DeVaughn performed, as did a Howard University choir.

At one point during the reception, shown on the video, Jackson stood in the middle of the dance floor as the master of ceremonies encouraged guests to bring their "dollars, fives, tens, twenties, fifties and hundreds. It's the Money Store, baby."

One man showered Jackson with dozens of bills as she stood under the cascading dollars. Meanwhile, Fordham appears in the video sitting behind her at a table counting and straightening the bills brought to him in a sack. The nuptials were later featured in a wedding advertisement in The Washington Post Magazine.

The good fortune wouldn't last.

Already, the real estate market had turned sour, making the foreclosure recovery business difficult, even when the process was working properly.

Investigators are looking into whether Jackson's company actually used the equity it drew out of homes to make the promised mortgage payments. Some of that money was shared with Fordham's investment company, Fordham & Fordham, according to investigators. State law prohibits foreclosure consultants from investing in firms that are owned by family members.

"I would say Joy Jackson got into a position where she was not able to keep her promises," Duncan, the former employee, said. "Her intent was good, but the sky started falling."

By the end of summer 2006, Metropolitan had begun to lay off employees. It stopped airing ads. Duncan said he realized something was wrong when he returned to his office one October afternoon and found employees having a "shredding party." All the documents on his desk, he said, were missing.

The company shut down in December.

In May, Jackson and Fordham put their house on Glasgow Court, with its designer carpet and marble floors, on the market.

In early June, an "estate sale" sign went up: Beds, expensive lamps, jewelry, designer clothes, even a rack of fur coats were for sale, neighbors said.


mmnfinancial


123 Posts
Posted - 08/30/2007 : 09:22:15 AM
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The Boys are coming: dated 8/30/2007
LINK: http://www.washingtonpost.com/ac2/wp-dyn/NewsSearch?sb=-1&st=Metropolitan%20money%20store&

TEXT COPY:
District Sues Mortgage Company Based in Prince George's County
Goal Is to Help Clients Retain Equity and Homes

By Ovetta Wiggins
Washington Post Staff Writer
Thursday, August 30, 2007; B01



The D.C. attorney general filed a lawsuit yesterday against Metropolitan Money Store Corp., hoping to recover lost home equity and prevent foreclosure for city residents who dealt with the Prince George's County-based mortgage company.

The complaint, which seeks restitution and damages, is the first filed by a legal agency against Metropolitan and its owners, who are under a federal mortgage fraud investigation.

"We have the evidence to make the case," Attorney General Linda Singer said in an interview yesterday. "Once we have proof, we're going to move forward."

Singer said she was driven to file the lawsuit to keep at least 27 District residents from losing their homes. Investigators say Metropolitan promised to rescue homeowners from foreclosure but instead drained the equity from clients' homes. "We think it's an outrage," Singer said.

In Annapolis yesterday, state lawmakers and officials vowed to introduce legislation that would address such foreclosure rescue operations and, more broadly, help residents at risk of losing their homes. The state's foreclosure rate has climbed 345 percent in the past year, and Maryland ranks 16th in the nation in foreclosures, up from 40th last year, according to statistics presented to the state Senate Finance Committee.

The D.C. complaint names as defendants Metropolitan, Joy Jackson and 11 others, including Jackson's husband, Kurt Fordham.

The defendants "unjustly enriched themselves by participating in a scheme that used misrepresentations and unconscionably high fees" to strip equity from the homes of District residents, according to the suit.

Jackson and Fordham, who were featured in a Washington Post article Sunday, have not responded to repeated requests for comment; efforts to locate them have not been successful.

The District suit seeks to keep the homeowners from going into foreclosure, to void the contract between the homeowner and the defendants, to order the defendants to pay restitution and to require the defendants to pay civil penalties up to $1,000 for each violation of the District's Consumer Protection Procedures Act.

The attorney general's office began investigating Metropolitan in May, officials said. The FBI and the Secret Service have also begun fraud investigations into the company's dealings.

A class-action lawsuit was filed in federal court last month on behalf of as many as 400 homeowners in Maryland, the District and Virginia who say they have lost $60 million in equity through Metropolitan.

Metropolitan operated a foreclosure rescue program that targeted homeowners with at least $100,000 in equity.

Investors would essentially get $10,000 and take ownership of homes that were about to go into foreclosure. The homeowners were told they could live rent-free for a year and buy back their houses at the end of the year.

But when the homes passed to the "straw buyer," Metropolitan would borrow as much as possible against the value, effectively siphoning the equity and increasing the cost of the home, according to the suit.

Labor Secretary Thomas E. Perez, who is chairman of the Maryland Homeownership Preservation Task Force, said foreclosures will be a "top priority" in the next legislative session. "People are calling, asking what can be done," he said.

Perez said he will suggest legislation to toughen penalties for mortgage fraud.

[MRM]

Originally Posted by widebody911

I never figured out what the deal was on those. Being a cynic, I ran the numbers and came up with similar bottom line, so I couldn't figure out what the benefit would be.

And what's better is that you can do it by automatic deposit all by yourself at whatever repayment level you want.

I could never even figure out what service the bank was offering. It always sounded like they wanted to charge $50 a month for arranging for an automatic deposit from your account. Are they agreeing to do the paperwork for me or what?

[slakjaw]

I think that predatory lenders should be put to death.

[Rick Lee]

This article, while I don't doubt has some truth to it, was written by someone who did not do much investigating. How can a seller just sign over a deed, when they're behind on their mortgage? You can't sell your house until the lienholder(s) have all been paid off. Every mortgage I've ever heard of becomes due upon sale of the house. And very few lenders will lend money to those already behind in payments and facing foreclosure. Sounds like these were some crooks, but they were only able to succeed because they preyed on STUPID people who will be poor forever no matter who helps them out, because life is hard on STUPID people.

[Rick Lee]

Originally Posted by slakjaw

I think that predatory lenders should be put to death.

Just not falling prey to their schemes would be far more effective and just. They'd disappear. What you call a predatory lender might be savior to someone else. And people with bad credit deserve higher rates and tougher terms because of the risk they pose to lenders and investors. The alternative is no credit at all except for the super credit-worthy.

[slakjaw]

Right STUPID people should not breed, and what not.

[slakjaw]

Originally Posted by Rick Lee

Just not falling prey to their schemes would be far more effective and just. They'd disappear. What you call a predatory lender might be savior to someone else. And people with bad credit deserve higher rates and tougher terms because of the risk they pose to lenders and investors. The alternative is no credit at all except for the super credit-worthy.

When I was 21 I screwed up and ran up a credit card to ~3k then lost my job and never payed. (It's settled now) but now I have no credit card's or any debt at all. I went and looked at a used Land Cruiser the other day asking 12k I offered to put down 5k and the best rate they could give me was 17% I was offended... I refuse to pay that kind of rate. So it costs 320 a month to take a taxi to work every day and you can ride a bike when its nice out. Thats why I hate these people. From my POV they just dry hole you till you bleed.

[Rick Lee]

You hate them because they offered you the best rate you could find? Or did you not look elsewhere? I don't know how old you are, but I did the exact same thing you did when I was 21. It took a while before my credit was repaired, but it's perfect now (I'm 36 now). Now I get more credit offers than I can sort through and when I bought my last car, the dealership gave me 3.90% which was far better than even my credit union could do. The same dealership probably gives 17% to some folks based on their credit history. Nothing wrong with that. Ask yourself if you'd loan your own money to people with charge-offs or low FICO's and for barely more interest than the rate of inflation.