Zombie 2nd mortgages are coming to life, threatening thousands of Americans' homes, NPR, 5/18/24 [View all]

[progree]

https://www.mprnews.org/story/2024/05/10/npr-zombie-second-mortgages-homeowners-foreclosure

It'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:

...the terms of many of those housing-bubble-era mortgages had a time bomb inside them. After two years, the interest rates on the loans were set to explode and go up much higher. ... In 2007, McDonough's first mortgage adjusted, and the monthly payments were suddenly $700 a month higher, which she couldn't afford.

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.