The year was 1999, when Seifert’s guerrilla nonprofit, the East Side Organizing Project, was helping parents battle the bungling monster known as the Cleveland school district. That’s when ESOP members began to suddenly disappear. Their phones were disconnected. Their homes were mysteriously vacant.
Bankers had launched their assault on Cleveland.
Their weapon of choice: the subprime loan.
There was a day when banks refused mortgages to people with no money or bad credit. It was a cruel but wise practice: Broke guys simply aren’t fit to enter a 30-year debt involving large sums of money.
But by the late ’90s, bankers stumbled upon a keenly malevolent plot: By providing subprime mortgages with high fees and high interest rates, they could take every last penny these people had. And so they did. Though the plan couldn’t pass the St. Peter test, it did meet the far lesser standards of Ohio law.
Bankers, of course, weren’t entirely to blame. God Himself warned of the usurers 2,000 years ago. Trusting them with your financial future is like hiring a Labrador to guard your dinner.
But people ignored this essential truth. The banks were handing out money to damn near anyone, as long as they indentured themselves with the proper paperwork. “We’ve seen people making $750 a month, and they own five properties,” says Seifert.
Unfortunately, easy money begets a thirst for more. So banks launched even more aggressive tactics, best described as flat-out fraud. They would inflate people’s income, lie about appraisals — anything to get a loan approved. Countrywide and Charter One were brazenly funneling black customers into subprime loans — even when they had good credit. Cleveland’s mortgage industry had become as lawless as the Old West, only the terror came from paper instead of guns.
But there was one small problem: This was a scam with no shelf-life. People stuck in loans they can’t afford will naturally default. Seifert first saw it in black neighborhoods, where bankers have traditionally test-marketed their thieving. His members were losing their homes. Vacant houses were piling up on every street. The city was on its way to leading the nation in foreclosures.
Seifert tried to warn people. “Early on, when we approached elected officials, they thought we were crazy. ‘The banks would never do that. These people are deadbeats.'”
Stereotype made the problem easy to dismiss. On one side were black residents, who simply couldn’t handle their money, politicians theorized.
On the other side were the captains of finance — Key, National City, Bank One, JP Morgan, and Citicorp were all in on the scam. They were the kind who sat on all the important committees, broke bread at the best clubs, slapped backs at the finest parties. And they were dumping huge checks into campaign treasuries. It was easy to look the other way.
When Ohio cities tried to enact anti-predator laws, the legislature moved to stop them. Former Attorney General Betty Montgomery actually sued Cleveland to bar it from protecting residents. Her successor, Jim Petro, blamed the problem on stupidity. “We were told that people were not educated and he couldn’t do anything,” says Seifert.
Local pols weren’t any better. Though ESOP was compiling evidence of fraud by the pound, Prosecutor Bill Mason preferred to bag crackheads. It made for easier hunting, better headlines.
President Bush even named Roland Arnall his ambassador to the Netherlands. At the time, Arnall’s company, Ameriquest, was the biggest predatory lender in Cleveland [“All the President’s Men,” October 19, 2005].
So ESOP took matters into its own hands. It started protesting outside banks and executives’ homes, throwing rubber sharks and delivering jars of vaseline. Shame was its weapon. But it would be bankers’ own stupidity that eventually did them in.
As long as they kept to Cleveland’s black neighborhoods, everything was fine. Yet they started moving to the inner-ring suburbs and beyond, where laws are still upheld, and politicians actually care. “In the last two years it started hitting white people,” says Seifert. Bankers had foolishly created a more vigorous enemy: suburban mayors and legislators.
At the same time, the chickens were coming home to roost. The industry had been issuing bad loans for a decade. Foreclosures soared, and Wall Street began seeing default rates as high as 50 to 60 percent.
It’s one thing when Joe Sixpack goes bust. It’s quite another when some very big people start losing some very big money. The mortgage crisis was now sailing in full regalia.
Today, Seifert is charged with cleaning up the mess. ESOP has largely evolved into a financial activist group, its mission to bang bankers into working with those they’ve screwed.
Most banks have come to the table — not because they’ve rediscovered honor, but because it favors their wallets. Foreclosure will get them nothing. Rewriting loans on more reasonable terms will at least keep the money coming in — though it’s now honest and smaller. At its present rate, ESOP expects to save 800 people from losing their homes this year.
But the sins of the usurers can still be seen on any drive through the city. All those vacant homes turned drug houses? They’re likely owned by banks, reclaimed from foreclosure. Countrywide alone owns 300 homes in Cleveland. They’re left to decay and die from the banks’ neglect. After all, there’s no money in keeping blight from your street.
At least it makes for wonderful irony. The empty homes now provide free housing for the crack industry. When it comes to morality, the bankers are now among kindred spirits.
This article appears in Aug 29 – Sep 4, 2007.
You know I am so sick of these stories about the big banks scamming people out of their houses. It NEVER happened. The banks didn’t do it. The local mom and pop broker shops did it. None of the people mentioned that are losing their homes and getting blamed nor are the Brokers. The Brokers are the ones that solicited the business, or targeted these “suckers” more or less. Stated income loans, No Doc, NINA programs that were offered by the banks were used in order to get these people more house then they could afford. “Oh Mr. Jones just sign the 1003 here where it says you make $8,000 a month.” “But Mr, Broker sir, I only make $4,000 a month”. “Oh don’t worry about it, it’s a stated loan, you can get all the cash out you want on your refinance if we state $8,000 a month.” or “Oh sure of course you can afford to purchase the $200,000 home even though you work as a Cashier at WalMart, your have great credit Mr. Jones, we can put you into a No Doc program. The Bank won’t check your employment or see you have no reserves in your bank account.” Just sign the paper Mr. Jones, and they did. Yes while the banks and lenders had these programs they were abused by the shady Brokers and by borrowers that had eyes bigger than their wallets.
What ever happened to reading what you are signing? These borrowers signed 1003 (Mortgage Application) that had obvious lies on it. You cannot tell me that the majority of the people that chose a light doc option (Stated: Where no paystubs or W2’s are used. You simply stated a reasonable dollar figure for your income. No Doc: Exactly what you think, credit report only, you didn’t even need a job if you had the depth of credit and credit score over 700. NINA: No Income No Asset, no need for W2’s or stubs here either, with stated at least you had to show you had a pot to piss in this one you didn’t need to show anything other than you worked for 2 years)didn’t know what they were signing.
How about the appraisers too? These assholes were paid by the broker and in order to keep doing business with that broker shop you better make sure the value of the house is there otherwise have fun trying to get business. There were tons of Appraisers out there in the pockets of the brokers. At $350 an appraisal during the boom over the last couples years some of these guys were doing up to 10 a day 6 or 7 days a week. You do the math there. If you wanted to do make money you better have damn well have been inflating some of the values.
You Mr. Author have no real basis for your facts. You act like these people walked into Chase, Ohio Savings, NovaStar, Countrywide and asked for a fucking loan. It doesn’t work that way. While yes you can walk into a bank and apply for a loan if you have excellent credit but I would have to say at least 80% of these people you are talking about went through a broker. Who the hell walks into a bank for a home loan anymore? Are you living in some 1950’s Mayberry where you know the local banker and always waive high to the milkman in the morning? That shit hasn’t happened since the S&L scandals back in the 70’s and 80’s. Your utopia where the Smith’s walk into the bank to get a home loan is a fairy tale.
Yes, bad loans were made. There is no more smile and a handshake. It’s a business. On top of every adjustable rate mortgage that any lending institution does there is a disclosure that says in all caps and bold ADJUSTABLE RATE ARM DISCLOSURE. It comes down to common sense about what you are reading what you are signing. Ask questions before you sign anything. If it doesn’t make sense ask the damn question. “Well that means your rate will go up from 8.25% to 14% in 2 years.” Brokers used ARM loans to generate repeat business. Every two years the Smith’s would come back to refinance, and get cash out again. I saw people doing it every 6 months while property values were increasing. It was like getting free money to these people.
You my friend, do not know shit about the mortgage business. We were not all shady used car salesmen. We have homes, we have kids, we have spouses, we have family to care for. National City shut down home equity operations, NovaStar closed down all operations, First Franklin is on the brink, as well as Quicken, and Decision 1 went under too but is there a story about that in the paper? These are Cleveland based businesses, these people lost their jobs. Is it cool and fine because we were the dicks that made these loans? Add all of these employees togehter and it will rival one of the big Cleveland industrial or steel plants closing down, but who gives a shit since the mortgage industry has such a black eye right now. We are white collar criminals, right? Tell that to the 100 or so friends of mine looking to make ends meet right now in a city where there are no jobs you self-righteous prick.
To you my friend I say before you write another article that is so out of your league do more research than a week. Contact the people who lost there homes and ask for their 1003, ask them if they went light doc, ask them if they walked into the local branch for this loan. You are going to hear, no I went “Stated” and I went to ABC Lending. Ask to see the inflated appraisal, and the disclosure paperwork they signed at closing. Then come back and write your article.
I understand it is such a sexy story right now. The big bad bank stole my house, foreclosures on the rise, but it’s all smoke and mirrors my friend. Borrowers and Brokers alike with eyes bigger then their wallets buying stuff they can’t afford based on lies and deceptive practices. It’s not the big bad mortgage company it was the greed of the broker shops and the apathy and ignorance of the borrowers.
I read this again because it was such a piece of complete bullshit and I wanted you to know for the record while you might think this ending quote was cute; “At least it makes for wonderful irony. The empty homes now provide free housing for the crack industry. When it comes to morality, the bankers are now among kindred spirits.” but all it really does is make you come off as an even bigger asshole, no talent, hack reporter than the rest of your fabricated “article”.
I pray to God you respond to this because you are so far out of your league you have no idea. So keep watching the news stories and writing your Carl Monday-esque renegade journalism, and just know there comes a day when people who know what the fuck they are talking about will stand up and spell out the true facts. (Mind you with typos and errors), but then again neither of us are real journalists now are we?
You want to do an article? Do one on all of the jobless former mortgage industry citizens of the Cleveland area everyone is forgetting about. Let them tell you a real story. I am one of the “lucky” ones. I have a job in the banking industry still. For how long, I couldn’t tell you in this market that’s the only thing I am not certain about. But bullshit articles like this that are meant to tug on the hearts of the blue collar working class people against the big bad white collar banks don’t help the industry at all. All they do is scare people.
I say to those people still wanting to buy a home or refinance. Do it. Be responsible. Read your paperwork. Read everything you sign. Research what a Good Faith Estimate is on line and learn how to read it. Know how much the Broker is charging you. Understand what your rate is. Know the difference between a fixed and adjustable rate. And for the love of God if a Loan Officer even mentions something called a “Payment Option ARM” kick him directly in the balls or smack her in the face. Jesus there is even a Home Ownership for Dummies book out there. Just do the homework people. It’s the American Dream, it’s the most important financial decision you will ever make. Make those decisions yourself, don’t let someone else tell you what they think is right. They aren’t living in the house for the next 30 years and paying the mortgage, you are.
And another thing…when did this become a black thing? If it was a race thing like you say they could have sued the fuck out of the mortgage companies. If you look on a 1003 application Mr. Journalism you have the option to opt out of disclosing your race. How the hell would anyone know if you were black, white, red or purple? Once again like I said do some homework before writing shit like this. Scene should be embarrassed to have this kind of yellow journalism appear in print or on the internet for millions of readers to see. Seriously, what research did you do on this article? I am being honest because it is seriously that horrible.
The foreclosure “crisis” that is going on is for many Americans. It never has been racially motivated. It has put all races, creeds and colors out of their homes. If you want to talk your predatory lending bullshit look no further than those cash advance places all over the urban neighborhoods or rent-a-centers or that Blue Hippo computer bullshit. If it says weekly payments that probably means that it is predatory lending or walks a fine line of the definition.
Do you know what a net tangible benefit is by the way? Yeah most Lenders have to do a worksheet to see how we are benefiting the borrower on a refinance. If there is no benefit, such as the cash out does not exceed the fees on the loan, or lowering total monthly obligations, or lowering the rate and monthly mortgage payment or debt consolidation resulting in overall payment savings then we do not do the loan. Lenders do not target shit like that then rub their hands together and make an evil laugh. Lenders don’t target anyone but Brokers to do business to business transactions. It’s like you have this illusion that “Joe Sixpack” walks into Countrywide and applies for a mortgage, and it doesn’t work that way at all.
I can’t help commenting on how stupid and full of holes this article is. Shit, if you want my phone number next time you do a mortgage article give me a call. I can give you a crash course in writing facts rather than absolute fiction. It seriously is like you went to the bar and talked to some salty dude that lost his house and didn’t even bother to check out how the mortgage business even works. It’s just such a bad article. I can’t understand how I am the only one commenting on this crap. What amazes me is the Editor at Scene even allowed this to go to print. What was there extra space that you couldn’t get McCarthy’s to buy the half page add again and needed filler?
It’s a race thing?….come on. If you seriously believe this shit you are a true idiot.
Yeah I messed up this paragraph…my bad….here’s how it should read. My saltiness has gotten me distracted.
…Do you know what a net tangible benefit is by the way? Yeah most Lenders have to do a worksheet to see how we are benefiting the borrower on a refinance. If there is no benefit, such as the cash out does not exceed the fees on the loan we won’t do the loan. Or you can show a benefit such as lowering total monthly obligations, or lowering the rate and monthly mortgage payment or debt consolidation resulting in overall payment savings then we will do the loan. Lenders do not target shit like that then rub their hands together and make an evil laugh….
These are deadbeats. They took a risk and got loans at a low rate and didn’t repay them. This isn’t the banks’ fault. If rates had stayed low, we wouldn’t be talking about this. The people made contracts, let them honor them or get out. It is the deadbeats who killed Cleveland, not the banks.
Your article is accurate, lenders, brokers, appraisers all became greedy. Homeowners bare some. However, when professionals in a field are hired to work for you, you trust them and you expect them to have your best interest at heart. So when you questioned the arm and the broker tells you, thats what everyone does, and in a year you will refinance at a better fixed rate, so the arm is not important. You as the client and customer beleive that.
Everyone is guilty of wanting the American Dream of homeownership. It was ok when the problem was only affecting low income minorities, but now that it is affecting middle class white suburbia and wall street, it is a major issue.
Brokers, banks, and mortgage companies take responsibility for what you have done to others and your self. You have ruined the lives of many families (children) and people who once had good credit, who now can’t afford those inflated payments,are now deliquent and have bad credit.
Despite what your other readers have written, which is clear that they work in the “fucked up industry that is at fault”, your article is dead on and these bastards have a lot to give in account to. How dare you talk about your clients, that you duped!
Now they are ignorant and greedy, no you brokers, mortgagers and banks are GREEDY BASTARDS! Now you are paying the price for taking advantage of the people you were suppose to service with honesty and integrity. Yes people wanted more home for their buck, everyone wants more for their buck, it is the American Way, and you assholes took full advantage of that mindset, the mindset we all have. And you are a liar if you say you don’t live your life the same way. Why else do we jump on sales at stores and use coupons, or drive past 10 gas stations until we get to the cheapest one! That’s why the owners of Wal Mart are filthy rich, because everyone wants more for less! Everyone!!!!!!!!!!!!!
And you took full advantage of that, you are to blame not the homeowner. LIVE WITH IT!
Hey Billy Joe Dupree, proofread. You made me think this article was way more interesting than it is with your long-ridiculous posts. No offense hard-working CleveScene writer, just tell me something I don’t know.
LOL, thanks for the proof comments by the way. I was all fired up. A real writer doesn’t get all fired up like that. I wish I could write as well as some of you freaks at the Scene, but alas I deal with numbers for the most part not letters.
As for the other comments. I was not greedy. I got paid the same if I made a loan or didn’t quite honestly. Was there greed, yeah sure there was, but it was not just the banks, it was everyone. The banks saw this subprime market as a money maker and if Option One, Indy Mac and NovaStar were doing them then why shouldn’t they get in on the action too. I on the other hand was not ethically challenged, because I was not paid on approvals. I was paid a decent salary with bonus on the amount of volume I did and it didn’t matter if it was a decline or approval.
What I think everyone is missing here of my point is where exactly the borrowers signed their loan papers; at the broker shop. There is a difference between the broker and the lender. The broker finds a company that will finance the loan if it fits within those guidelines. The lender doesn’t deal with the actual customer at all. So when the article said lenders and banks were targeting minorities it was complete bullshit. We never saw the borrower so how would we know is they were black, brown, yellow, white or purple? We didn’t. The broker did though on the other hand so if they were targeting minorities then that’s all on them, not the banks.
While the programs were available (I say were because tighter guidelines on the light documentation program have pretty much made them a thing of the past)from the lender, the broker knew damn well they were cheating the system. Loan Officers are paid on commission and those shady sons of bitches aren’t going to waste their time filling out an application, pulling credit and all that fun stuff to not make a buck. So, they would seek out the ARM loans, the low FICO (credit score) lenders, and light doc income options where necessary knowing it was bullshit. The stated income loan is affectionately know as the “liars loan” in the industry.
The question is why were these programs made available in the first place. I honestly can’t tell you, but in theory they were for people with good credit that were self employed who didn’t want to dig up 2 years of taxes and all the bullshit. It was a convenience thing for people with good credit, and they would usually pay an extra .250 – .500 in rate to have that option. Somewhere along the way the lenders turned this convenience option into the liars loan. Where before you needed like a 680-800 FICO score they dropped it down to 580 to tap into the subprime market. Which was of course more or less the start of the downfall of the industry.
Money money money, yeah, greed. The lenders were willing to take the risk to potentially get the reward of a higher interest rate. So who is at fault? The lenders for making loosening the guidelines? The Broker for taking advantage of the guidelines and the customer? Or the customer not doing any due diligence or reading what he or she is signing? I guess all of the above. All I am saying is lets not just say it’s all the lenders fault because it seriously isn’t. It sucks, thousands have lost their jobs, people are losing their homes and broker shops are going out of business. But just don’t say it was a race thing, and say it was all the big bad banks fault because it’s just not true.
Yeah fuck it, I proofed this one too, I probably made a shit load of mistakes anyhow. I am still working with numbers, not letters.
USA Ambassador Roland Arnall Stole this cats house, The cat want’s it BACK!
http://www.youtube.com/watch?v=Ck8kekcqzUE
Roland Arnall Sucks Tour 2007
I have been hit by Predatory lending by Ameriquest Mortgage,HSBC is helping Ameriquest to keep us living with out our home on our small farm. We have been living without our home since January 2005. No one cares…and no one does anything to stop them…
Not The American Dream!