86-year old Collis McDuffie chokes back tears when he thinks about losing the home that he bought back in 1963, to foreclosure.
“When you go through what I’m going through. Lord have mercy,” McDuffie said, as he questioned his future.
“At my age, where am I going to go?”
His daughter Zella is blunt.
“And this is where the banks are making money. They’re making money off of people. It doesn’t matter. Who cares if you’re living on the streets,” said Zella McDuffie-Smith.
Making money off of people? Big banks profiting from foreclosures? That news stunned many South Floridians who responded to questions from the CBS4 I-Team.
“I think it’s wrong,” said one man.
“Well, appalled of course,” was a woman’s reaction.
Another woman told us, “I think it’s disgraceful. That’s what I think.”
This shopper in South Dade was very pointed, “That’s criminal.”
In fact, it just might be criminal.
Fifty state attorneys general are currently investigating the foreclosure fiasco.
Legal Services of Greater Miami’s Jaqueline Ledon is helping Collis McDuffie, fight to keep his home.
“The practical thinking is, why would a bank want to own a property, maintain it, pay the taxes… all that,” said Ledon.
According to some critics, the practical or old way of thinking doesn’t hold up anymore. Why? It’s estimated that 95% of all mortgages are not even owned by the bank that loaned you the money. Most banks have sold them off.
In the most simplistic terms… banks bundled mortgages much like a gift is boxed, wrapped and tied up with a bow.
That way, they looked safe to conservative investors, such as the people who buy long-term investments for pension funds.
But when the housing market unraveled, much like a bow comes untied, it left the investors holding, in essence, a nicely wrapped empty box worth very little.
In many cases… nobody even knows who really owns the mortgages anymore.
“They’re worthless,” said Ledon. “They’re worthless. The mortgage itself is worthless.”
Since the bank that originally made the loan sold it off, foreclosure is not even a risk to them anymore, according to Weston attorney Roy Oppenheim.
“Typically the way the servicers were compensated, they would receive more compensation through a foreclosure than through a modification,” Oppenheim explained.
So what is a servicer? It’s a bank or financial company that handles your mortgage, doing such things as collecting your monthly payment.
As a servicer, they get to collect fees, fines and penalties. Servicers are also the first in line to collect even more money once a property is repossed.
“And therefore, it was in their interest to have the foreclosure go through the process versus a modification,” Oppenheim told CBS4’s Chief Consumer Investigator Al Sunshine.
Basically, you, the borrower are asking for a modification from the very same people who can make more money from your foreclosure, than if they offered you a cheaper, or modified mortgage, in order to keep you in your home.
Isn’t that an inherent conflict of interest?” Al Sunshine asked attorney Oppenheim.
“The whole process is wrought with conflicts of interest. It’s just a rotten bag of apples,” Oppenheim concluded.