Zombie 2nd mortgages are coming to life, threatening thousands of Americans' homes, NPR, 5/18/24
https://www.mprnews.org/story/2024/05/10/npr-zombie-second-mortgages-homeowners-foreclosureIt's impossible to meaningfully excerpt 4 paragraphs or 5 or 6, so here is MY DESCRIPTION of this long article
PROGREERIAN DESCRIPTION OF LONG ARTICLE
For example, a lot of 2nd mortgages were issued in the housing bubble years when homebuyers didn't have enough money to make the down payment, so they were given a 2nd mortgage to make the down payment in what was known as an 80/20 loan
Home owners were told that these 2nd mortgages were forgiven in loan modifications in the housing bust years, and the 2nd mortgage company stopped sending statements,
but really they weren't forgiven, and now that home values have doubled and more, debt scavengers who bought up bundles of mortgages including these 2nd mortgages, e.g. First Amercian National, are collecting on them -- by foreclosing on the homes if the homeowners don't pay up on the 2nd mortgages that have in some cases doubled or more because of hefty interest and late fees.
But since I'm allowed 4 paragraphs, might as well:
This was happening to millions of Americans. It was happening to so many that the federal government launched a nationwide intervention — a loan modification program to save at least some people from foreclosure. In 2008, McDonough was able to get her first mortgage modified to lower the interest rate and make it affordable again.
... McDonough says her mortgage company told her not to worry about the second mortgage anymore, that it was written off and forgiven.
"I was talking to a representative ... and he told me I would never have to make a payment again on the second mortgage," she said. "And I just didn't question any of it 'cause I was so grateful that the loan was modified." ... The same company had given her both mortgages. She says that after a while she stopped getting statements on the second mortgage. She thought it was dead. Then, in 2020, she received a letter in the mail from a company she had never heard of, First American National. It said she owed the company money. ...
They eventually foreclosed on her home, but she is still living there, fighting in a class action lawsuit because they (the mortgage company and First American National, the mortgage bundle buyer), didn't follow all the rules. For example, Regulation Z, which is part of the Truth in Lending Act. It requires that monthly statements be sent if there is interest assessed on a mortgage.
and First American National was fined in 2022 by the state of Massachusetts (the state where McDonough lives in her foreclosed home) for operating as unlicensed debt collectors. ... it was ordered to stop. McDonough's lawyers allege it then foreclosed on her house anyway, in violation of that agreement.
PROGREERIAN COMMENTARY (at last something short)
I helped a friend get a loan modification in 2008 or thereabouts, so I'm now wondering if there is something in all that we did that might leave her vulnerable to the greed bangers.
= new reply since forum marked as read
Our government spent trillions bailing out the US banks - because the alternative was unthinkable at the time. And yet, this is the predatory behavior that some banks were engaging in.
So explain to me why they deserved to be rescued....
and they're still fucking them. Plus, flaws in the federal program, the Home Affordable Modification Program, hastily thrown together after the collapse. Whoops! Forgot to actually forgive those 80/20, 2nd mortgages. Sorry.
Yes, if you borrow, you have to pay it back, as one of the vultures stated in the article. But lenders ALSO have a duty to NOT lend money if there's a significant chance the borrower won't be able to pay it back. Two way street that Wall Street conveniently avoids through "moral hazard". If THEY collapse, the feds will bail them out since the repercussions of a systemic financial collapse are unthinkable. In a just world, the price of the federal "back stop" should be vastly more restrictive regulation than we have now. But Wall Street has tons of money and lobbyists so that won't happen. Same as it ever was. 
