BOB HERBERT: A Swarm of Swindlers

NYT

Chicago

Like vultures, the mortgage lenders began circling the single-family house with the tiny front lawn on Merrill Avenue.

They knew that the woman who owned the house was old and sick and that her two aging daughters were struggling with illness and poverty as well. That was all to the good as far as the lenders were concerned. The predator’s mission is to home in on the vulnerable.

“The people that wanted to put through the loan called me about a hundred times,” said Rosa Dailey, who is 65 and going blind and needs an oxygen tank at times to help her breathe. “I kept telling them no, because I didn’t think we could afford it. But they kept saying how it was to our advantage. So I finally said: ‘All right, let’s see what we can do.’ ”

That was the beginning of a tragic spiral, with one unaffordable loan following another. As Ms. Dailey put it: “I feel like they led me down a dark alley.”

Ms. Dailey told me her story in the freezing living room of the house on Merrill Avenue, which no longer has a working furnace and is growing shabbier by the day. It’s all she has left. Her mother and her older sister are dead now. Her only income is about $1,300 a month from Social Security — less than the monthly note on the house, which is in foreclosure proceedings.

One aspect of the so-called mortgage crisis that hasn’t been adequately explored is the extent to which predatory lenders have committed fraud against vulnerable homeowners. They have pushed overpriced loans and outlandish fees on hapless victims who didn’t understand — and could not possibly have met — the terms of the contracts they signed.

In some cases, corporate con artists have deliberately targeted and seized the equity of financially strapped and unsophisticated owners. In some cases, homes have been stolen outright.

This is an issue crying out for a thorough federal investigation.

Ms. Dailey and her sister, Betty Jones, agreed to refinance the mortgage on their ailing mother’s home in 2000. Neither understood how deeply into debt they were slipping. They struggled to make the payments and hang on to the house after their mother died, although neither was working and their only income was from Social Security. Then Ms. Jones was hospitalized with a heart condition.

As illogical as it may sound, the two women were pressed to refinance yet again in 2005. There was no way they could legitimately qualify for such a loan, and the lenders had to know it. But they persisted.

On Aug. 8, 2005, a representative of the Argent Mortgage Company took Ms. Dailey from the Merrill Avenue house to her sister’s bedside at Kindred Hospital. There the women signed papers for a loan that they were told would bring their monthly payments down to a manageable level.

Betty Jones was dying. Ms. Dailey’s eyesight was too poor to read the papers shoved in front of her. Both women were frightened and confused.

“I was told that was the only way I could save the house,” Ms. Dailey said.

Thousands of dollars in additional fees were heaped upon them. And the required monthly payment was more than they could possibly have afforded.

Betty Jones died the following December. Rosa Dailey was left with the sick realization that she had been had, that in her confusion and desperation she had agreed to terms that were impossible.

“I’m terrified,” Ms. Dailey told me as she wrapped a sweater tightly around her to ward off the cold. “I can’t sleep anymore. They’re trying to take the house away from me, and I wanted to stay here until I died. That was what I was really trying to do.”

A lawyer, William Spielberger, has taken up Ms. Dailey’s case. He said she and her sister were clear victims of fraud, that the companies pushing loans on them had deliberately inflated their meager incomes on the loan applications, had inflated the value of their property, had imposed unconscionable terms and fees and were fully aware that the two women did not know what they were getting into.

He has filed a federal lawsuit on Ms. Dailey’s behalf against a number of companies, including Citi Residential Lending, a subsidiary of Citigroup that acquired Argent Mortgage this past summer.

A spokeswoman for Citi Residential said she could not comment on the case because of the pending litigation.

I asked Rosa Dailey yesterday how she’d be spending her Thanksgiving. She said her money for the month had run out, so she wouldn’t be doing anything special.

“I’ll be right here,” she said. “I’ve got some corn flakes and canned vegetables. That’ll be my Thanksgiving.”