When the foreclosure rate went up in Prince George’s County, the ensuing crisis was created by many things. A main contributing factor was predatory lending, which took advantage of many homeowners in the county.

“Certainly there were irresponsible lenders in the market that were qualifying lenders for way above what they should have,” said Michael Cerrito, president of the Prince George’s County Association of Realtors. “They were doing that because they were able to sell that to somebody. Anyone who was able to buy would take the chance because for a long time, real estate had been a safe investment.”

Companies like American Brokers Conduit were among some of the alleged offenders in Prince George’s County. American Brokers Conduit was a subsidiary of the now-bankrupt American Home Mortgage Servicing.

The company played its role in the subprime loan scandal just as many other companies did and continues to pay for it in an ongoing federal court case. It offered adjustable rate mortgages (ARMs), loans where the interest rate changes, usually in relation to indices. That type of loan, combined with allowing buyers purchase or refinance for the most they could while the ARM was at the lowest rate, was a recipe for disaster.

When the crisis struck, and interests rates increased, the payments on those ARMs went up, often way up, for people across the country. Add on late fees and missing a month, along with hours and wage cuts, job losses, etc. and it led to many people being forced out of their homes, to lawsuits.

Now many of the lenders who practiced those unscrupulous tactics, including American Home Mortgage Servicing and its subsidiary American Brokers Conduit, are out of business.

There was more than just irresponsible lending going on. There were cases of outright fraud as well, and perhaps no case in the county was as infamous as the case surrounding Joy Jackson and Jennifer McCall, respectively president and CEO of the Metropolitan Money Store.

The Lanham-based company defrauded customers by taking titles to properties and charging exorbitant fees.

“When I first became aware that things were not going right, by people knocking on my door and mail coming to my house, I contacted the company to try to find out what’s going on and straighten things out,” Angele Reid, a victim of Metropolitan Money Store testified during the trial. “I was suspicious. I went into the office. I was told that I was guilty of fraud because I questioned what they were doing.”

Reid went on to testify that when she finally met with Jackson, she was told all her issues would be resolved. Four days later, Metropolitan Money Store was closed due to a federal investigation. Jackson and McCall both received sentences of over 11 years.
Many say these unscrupulous practices hurt the country immeasurably by causing residents to make hard choices about their futures. Many like Reid, took their fights to court, but others just cut their losses.

“People have walked away from their mortgage and simply said ‘goodbye’ to the debt,” said James Dula, chairman of the Maryland branch of the Southern Christian Leadership Conference and former chairman of the Prince George‘s County Chamber of Commerce. “Now, their credit rating is affected for at least the next seven years and their purchasing power is tremendously affected in many ways therefore, they will not be able to reinvest in the county or state in which they live.”

This choice has become so prevalent across the country that it has a name – strategic default. People are finding the policies of mortgage companies, according to housing counselor Gloria W. Cornish – like slow responses, no efforts to help before a mortgage is two months behind, being unwilling to accept less than the total amount owed including fees once a mortgage is three months behind – are making it untenable to repair their problems and it’s easier to walk away. While she does not advocate giving up, she said, “Some people get tired of fighting, throw up their hands and move on.”

Prince George’s is not sitting down on the job. The county’s state’s attorney’s office, with the help of a statewide grant, set up a Mortgage Foreclosure Fraud Division in Sept. 2008 to combat the issue. The office has been so effective in prosecuting mortgage fraud that it was used as a model by the Governor’s Office of Crime Control and Prevention to help train other law enforcement agencies on the local, state and federal level.

 

George Barnette

Special to the AFRO