Mortgage Settlement Leaves Some Foreclosure Victims Wanting

On September 25, 2010, Monica and Ricardo Zapata should have been out celebrating their tenth wedding anniversary, or enjoying a candlelight dinner inside their five-bedroom home 30 minutes inland from West Palm Beach, Fla.

Instead, the couple packed and left their dream house behind. After two failed attempts at a mortgage modification and what the Zapatas describe as a suspiciously timed foreclosure sale, the bank managing their loan ordered the couple and their two children out. That day, the Zapatas lost more than $100,000 in mortgage payments. In the months that led up to the foreclosure and those that followed, they also racked up thousands of dollars in stress-related medical bills and family loans. Ally Financial, whose predecessor, GMAC, handled the Zapatas' mortgage, declined to comment on the details of the Zapatas' claims.

Now, under the terms of a government settlement with Ally and four other companies that allegedly mismanaged millions of loans and introduced fraud to the foreclosure process, nearly 2 million homeowners are slated to receive a negotiated measure of justice. About 1 million homeowners who owe their banks more than their homes are worth will be eligible for a principle balance or interest rate reduction, making it less likely that these people will default. Another 775,000 borrowers who lost their homes between 2008 and 2011 will be eligible for a one-time payment of up to $2,000.

Borrowers will not release any claims in exchange for a payment. And $3.5 billion will go to state and federal governments to be used to repay public funds lost as a result of mortgage servicer misconduct and to fund housing counselors, legal aid and other similar public programs determined by the state attorneys general.

It remains unclear how effective these additional remedies will be. And some say that the payout is restitution that falls far short of a foreclosure's real costs.

"I try to be a grateful person, really I do," said Monica Zapata. "But it's almost a slap in the face when you consider everything we've been through."

Zapata's faith, family and prescription for the anti-anxiety drug Xanax have sustained her though nearly four years of housing hell.

In 2006, Ricardo Zapata's four-year old electronic component business was thriving, selling millions of small parts essential to taxi meters used throughout Latin America.

The Zapatas bought a 3,800 square foot house on Newhaven Point Lane in Wellington, Fla., for $500,000. They paid $250,000 more the previous owner had in 2004. Florida was in the middle of an unmistakable real estate boom.

In late 2007, Ricardo Zapata's business began to slow. By 2008, both Zapata and his clients were having a hard time getting the credit they needed to trade across international borders. Zapata laid off all 12 of his employees, then officially closed the business but continued selling what was left of the company's inventory.

Worried that the family's $15,000 emergency savings fund would not last, Monica Zapata contacted GMAC, the bank that managed her mortgage and payments. GMAC assured Zapata that the bank would consider changing the terms of her mortgage.

"I remember that application was like 40 pages," said Zapata. "I think I spent $15, just putting it in the mail."

Months passed. Monica Zapata developed a routine. She called GMAC every few weeks. Each time, staffers assured her someone was carefully considering her application. In April 2010 –- nine months after she first applied -- the bank sent a letter. GMAC planned to foreclose on her home.

Ricardo Zapata, 59, was stoic, Monica Zapata said. She was a wreck. In the months before the foreclosure notice, Zapata developed gastrointestinal problems and ulcers aggravated by stress, problems she had never experienced before. Two days after the foreclosure notice arrived, Zapata experienced the first in a series of what emergency room doctors explained were panic attacks. Zapata, who has health insurance through her travel agency job, owes about $3,600 in medical bills.

About a week after the foreclosure notice showed up, Monica Zapata saw a story on a local Spanish-language television station about a Saturday event at the Miami convention center. A national nonprofit profit planned to bring together borrowers and banks to work out mortgage modifications. The Zapatas pulled into the convention center parking lot at 8:30 a.m.

"There were already more than 100,000 people there," said Monica Zapata. "There were people who had slept there. It was just this horrible scene straight out of the Great Depression."

After working closely with the Zapatas, the nonprofit sent a new mortgage modification application to GMAC two weeks before a deadline set by the bank, Zapata said. GMAC confirmed that the 40- to 50-page application had been received, Zapata said.

"When [the nonprofit] called GMAC a few weeks later, they said they never got the paperwork," said Zapata. "GMAC said, 'It's not on time so we can't help them.' Case closed."

The bank scheduled a May court hearing, one part of Florida's foreclosure process.

"I was in a state where my daughter said, 'Mommy why are you acting like this?' I was really just so embarrassed," Zapata said.

When the couple went to court, Zapata noticed a woman with a Gucci handbag waiting to talk to the judge about her foreclosure case. When it was their turn, the judge assured the Zapatas that under Florida law, they had a right to talk with GMAC in a formal mediation session.

"We were thrilled. We were thinking, finally someone is going to sit down with us and listen," Monica Zapata said. "Then the letters started."

The first letter arrived a few weeks later, rescheduling the mediation session from June to July. A second pushed the session from July to Aug. 3. Then, a third letter arrived. It claimed the Zapatas would have to cover the $400-an-hour cost of the sit-down. Florida law requires the bank to pay for mediation. But the Zapatas didn't know that.

"I called and said, Listen, we don't have $400," Zapata said. "We can't pay. They said, 'Well, then you can't mediate.'"

On August 3, the bank sold the Newhaven Point Lane house in a foreclosure sale. The Zapatas received a letter a few days later stating that the family had 30 days to vacate.

"GMAC Mortgage strives to find a sustainable and affordable alternative to foreclosure whenever possible and keep borrowers in their homes," Susan Fitzpatrick, an Ally Financial spokeswoman, told The Huffington Post in an email. "In this particular case, the process GMAC Mortgage followed was in full compliance with the Florida guidelines for mediation programs."

The bank declined to respond to the Zapatas' specific allegations.

When the Zapatas found a landlord with a rental unit in a townhouse just a short distance away from the Newhaven Point Lane house, which would prevent their children from having to change schools, the landlord wanted a $6,600 deposit. Family members on both sides of the Zapata clan had to chip in.

Settled into a new life -- one with a low credit score in the 500s that makes buying a car or even connecting utilities a more expensive proposition, in a neighborhood populated mostly by senior citizens instead of middle-class families with kids -- Monica Zapata's anxiety is under control. Ricardo Zapata has a new job managing a Cuban restaurant. The family has a lot less money and little hope of owning a home again in the next decade. Those aren't the things that sometimes leave Zapata fighting back tears.

At least once a week, her 9-year-old son, Sebastian, asks when they can go back to their old house on Newhaven Point Lane.

"He doesn't understand foreclosure," Zapata said. "He thinks a bank just stole our house. And I really don't know what to tell him."

Comments

[kljw5]

01:03 PM on 08/24/2012

The Bank Did not steal or take there house. They took part in what the majority of america took part in. They overspent what money they did not have. Bad decisions. This letter fails to mention the new car they probably owned. etc.. the banks should not have passed these mortgages for the blown up prices of real estate and they too are at fault but that's just pointing fingers. Both Sides Failed. The house sold 2 years prior for 240,000 and they paid 500,000. no red flag there??? Do your research before you buy and ensure you have the funds to support your purchase even if things go south jobwise. hell i washed cars to pay for my mortgage when i was unemployed. just venting. I am sorry for the family and there loss. now they can live simple and be happy.

[jims1950]

09:35 AM on 02/14/2012

they sould be made to pay billions in fines and then be closed down.

[Mark Udy IV]

10:29 PM on 02/12/2012

having a good attorney that you can afford is important at these times.. it may make the difference between getting by and get all that you deserve greatlegalbenefit.com/mjudy/

[Clayton139]

07:26 PM on 02/11/2012

Perp walk for the ones that caused this !

Including Bankers, Congress, Senators !

[grumpy2]

02:19 PM on 02/11/2012

This is a JOKE right? Anyone laughing? (besides the banks and wallstreet)

[jac silv]

09:38 AM on 02/11/2012

GOD this is a sad story......

[Jean Leftwick]

06:31 AM on 02/11/2012

It is not just America where this has happened, Europe also. It is a disgrace and there seems to be nothing that can be done about it.

[Tricia W]

08:33 PM on 02/10/2012

These are several factors why the the housing bubble got so big:

LEGASTRATION made real estate investments more attractive. Interest rates got low, and nontraditional loans proliferated. People who had been burned in the sock market started investing int he housing market.

In 1996. President CLINTON sponsored legislation giving huge tax exemptions to the sale of personal residences. When a married couple can make up to $500,000 tax free over their basis every two years, that's a major incentive to start moving into a new house every two years in order to fix it up, or at least hope for a gain in fast growing areas. But the value increase for what was a one time systemic shift whetted appetites,

Then interest rates got low. This meant prices had the leeway to rise, as most people buy homes based mostly upon the payment.

Up until this point, things were within reason. But into this situation stepped the lending BANKSTERS, particularly the sub-prime lending community. Starting about 1997, more and more Banksters started being willing to loan 100 percent of the value of the home.

Forty year loans start making a comeback, where they were all but extinct, and fifty year loans are introduced. Sub-prime underwriting standards are loosened until they ignore what happens when these hybrids adjust (or Option ARMs recast).

And a larger and larger portion of purchasers were forced into the sub-prime market - if they wanted to qualify. . .

[concerned tax payer]

11:22 PM on 03/20/2012

Yes... but it was the leverage that created the crisis...facts are facts...their greed was not justified - and the bailout was pure bribery and commission.

[ConnieDr]

04:57 PM on 02/10/2012

Looks like obama's friend buffett made out well in this deal! Just like he did when obama axed the Keystone pipeline$$$ Obama's friends get richer while the rest of us gets screwed! Sanfu....situation normal!

[T4]

04:11 PM on 02/10/2012

Whats' sad is that this fraud is allowed to continue as the american people bleed - the state have sold tot he corps again at the expense of the people - no onw will be held accountable - no one and their families will suffer the way these poeple made others suffer. For each foreclosure remember that it is Obama that took their jobs, their homes and put them on the street. Who bailed out the banks and paid their bonuses without controlsor accountability, who created a smoke screen program for modifications that failed for the banks, who has done nothing and brought no banker to trial, etc.etc. the answer is Obama.

[ChasG]

04:08 PM on 02/10/2012

Everyone wants to punish banks for “intentionally caused the financial crisis."   But facts don't quite match up with myth.  The bursting housing bubble caused the financial crisis.  Who created the bubble?  Not the banks.

The bubble was created by supply and demand, and by everyone in the housing market: buyers, sellers, speculators, real estate brokers and agents, mortgage brokers and agents, lending banks, investment banks, investors, the Fed (under Greenspan), and three decades of government deregulation we the people voted for.  

People selling their homes during the bubble were giddy with capital gains—unearned income in quantities they’d never seen, which required no labor, and were tax free up to $500,000 every two years.  No one is asking these people to give back their enormous profits.  Where’s the outrage?

Banks don’t intentionally lend to people who cannot afford to buy homes, but they had an incentive to take greater risks when the federal government expanded Fannie Mae and Freddie Mac, which bought mortgages from banks and assumed the risks.  This government effort to help people buy homes back-fired and hurt the very people intended to be helped.  Increasing these markets in 2003 directly corresponds with the steepest climb in housing prices just before the bubble burst in 2007.  This was the single largest cause of the bubble, and now they are estimated to cost taxpayers at least $150,000 billion in losses on bad loans.  Where’s the outrage?

There’s compassionate sentiment to compensate everyone who lost money in the housing bubble by giving them a reduction of the principal that they owe, which is an outright gift, a price cut on their home paid for by the bank, not by the home seller who profited from the original sale.  Is this justice?  What about those who lost home value but didn’t need to modify our mortgages?  Where’s our gift?  If these gifts leave banks with less money to lend, there will be fewer buyers, and housing prices could fall further, putting even more homeowners under water.  This puts practical limits on mortgage modifications.  Take too much from the banks and existing homeowners will be hurt by prices falling even further.  If mortgage modifications are done with those most likely to succeed, and banks return to tougher lending standards (as they should), fewer homeowners will be hurt by the resulting slow down in home sales.  Some can be helped.  Some can’t.

[William Brighenti]

11:24 AM on 02/10/2012

Great article, Janelle. I published a video and transcript of your entire interview on Cenk Uygur's TYT on my blog. It can be found at the Barefoot Accountant's website if you would like to share it.

Excellent reporting, Janelle. Thank you.

[DanInLA]

11:02 AM on 02/10/2012

One day later and this article isn't even on the front page of Huff Post anymore. I had to search for it. And yet the video of a fake wooly mammoth is still there. LOL.

[Tricia W]

06:58 PM on 02/10/2012

"a fake wooly mammoth is still there "

(✿◠‿◠) Lol with you!!!

[Arch9enius]

08:37 PM on 02/12/2012

It's a bear with a fish in it's mouth btw

[mikkiegg]

10:36 AM on 02/10/2012

BANKERS CODE HOW TO MAKE MONEY lend to those who cant afford it, then foreclose on their customers who they should not have lent to in first place.
Give youselves big bonus.
Then nearlly go bust (get bailed out with taxpayers money) say it not our fault give youeslves big bonus.
Cut rates for savers cut dividends to shareholder give yourselves another big bonus out off taxpayers bailout.
Charge borrowers big APR on new morgages and loans give yourselves bigger bonus.
Finally open up PAYDAY LOAN OUTLETS lend money to those who can lest afford to borrow at up to 5000 APR give yourself even bigger bonus AND AT NEXT CRASH SAY IT WAS'NT OUR FAULT.

[Tricia W]

09:59 AM on 02/10/2012

Let's say I hire an armed gang to expel you from your house. My gang removes all of your belongings, changes the locks, and warns you that you'd better not try to come back. I then sell your house to someone else.

You call the police, but the armed gang I hired actually are the police. You go to court to stop me, but the court is on my side, because I deliberately lied to the courts.

Then I did the same thing thousands of times to other people as well. And you can prove it.

I'd be in pretty big trouble, wouldn't I? And you'd be entitled to a pretty substantial damages award, wouldn't you?

Not if your one of the five Big Banks. Then, I simply negotiate from my position of incredible strength, relative to both the State and the Individual, and move on.

$1500 to $2000 per home.

Do you remember that scene in a Tale of Two Cities, when the rich man's carriage, speeding through the marketplace, runs down and kills a young boy? He throws a coin out the window of the carriage and moves on. That's the settlement agreement.

It makes no sense to be angry with the attorneys general for reaching this agreement. Given the power differential, they did the best they could.

They didn't negotiate away civil suits by private parties -- although they will be much harder to bring, because states will be closing their civil investigations.

[seanwol]

01:09 PM on 02/13/2012

Let's say I decide to go into the local grocery store and take $1,500 worth of groceries without paying. Then I go back to the same grocery store for the next 24 months and each time I take $1,500 worth of groceries but don't pay.

What would happen to me? I think after the first time I didn't pay the authorities would pay a visit to me since I'm not honoring my financial commitments.

You made a commitment to the financial institution that you were an adult and could manage your finances.

You don't make any payments for 24 months costing the bank an average $60K, and you are upset that you only got $2k. You shouldn't get anything!

That armed gang that is expelling you from your house has been trying to get you to pay your bills for (on average) two years. You have been taking their product for two years, but you are not paying for it.

If you don't want an armed gang showing up, then start acting like a responsible adult and pay your bills. If you have lost your job, I feel for you. But then you would be better off renting for a fraction of the cost.

So what you are saying is that after I have taken $1,500 worth of groceries each month for two years without paying, I somehow should be able to get another $2k from the grocery store?

That is some messed up logic..........

[Tricia W]

10:43 PM on 02/13/2012

These are several factors why the the housing bubble got so big:

LEGASTRATI­ON made real estate investment­s more attractive­. Interest rates got low, and nontraditi­onal loans proliferat­ed. People who had been burned in the sock market started investing int he housing market.

In 1996. President CLINTON sponsored legislatio­n giving huge tax exemptions to the sale of personal residences­. When a married couple can make up to $500,000 tax free over their basis every two years, that's a major incentive to start moving into a new house every two years in order to fix it up, or at least hope for a gain in fast growing areas. But the value increase for what was a one time systemic shift whetted appetites,

Then interest rates got low. This meant prices had the leeway to rise, as most people buy homes based mostly upon the payment.

Up until this point, things were within reason. But into this situation stepped the lending BANKSTERS, particular­ly the sub-prime lending community. Starting about 1997, more and more Banksters started being willing to loan 100 percent of the value of the home.

Forty year loans start making a comeback, where they were all but extinct, and fifty year loans are introduced­. Sub-prime underwriti­ng standards are loosened until they ignore what happens when these hybrids adjust (or Option ARMs recast).

And a larger and larger portion of purchasers were forced into the sub-prime market - if they wanted to qualify. .

[seanwol]

09:18 PM on 02/13/2012

Let's say I went in to a local grocery store and took $1,500 worth of product without paying. What would happen? Would someone call the police on me? What if every month for three years I took $1,500 worth of groceries and never paid. What would happen?

The reason why someone is kicking you out of the house is that you haven't made a payment in over two years. That is why they are kicking you out of the house. If you don't want to be kicked out then pay your mortgage. If you lost your job, you have had a free house for the past two years. It is time to move out and rent.

I understand that the robo-signing incident was wrong. But it doesn't get to a robo-signer unless you have missed your payments for two years.

So now what we are deciding is these individuals who have been taking $1,500 worth of groceries every month now should get a settlement from the grocery for another $2,000?

Why are they getting anything?

[Tricia W]

11:11 PM on 02/13/2012

There was intense pressure on low-level mortgage lenders and brokers to sell and approve loans even to people without the income to repay the loan. Traditiona­l underwriti­ng standards had insisted on proper documentat­ion of income. In the go-go days of subprime, however, that was no longer required. In fact, regional managers of the large companies pressured employees to sell, sell, sell — no matter what. Smaller mortgage brokerage firms even engaged in fraudulent practices themselves — often with the actual borrowers unaware — through such schemes as inflating income figures on the paperwork to assure that the loans went through and they received their commission­.

In such a warped financial system, a mortgage lender or broker could make a million dollar loan with no documents almost as standard practice. The managers at big banks and loan companies were at best willfully blind to such practices and often encouraged them..
.
I choose not to blame the victims.