The current mortgage problem has nothing to do with infrastructure, in my opinion, nor anything to do with the disparities between the rich and not-so-rich (sorry, I'm not going to call people who buy homes "poor"). The problem, frankly, is stupid people who think the only criteria for getting a loan is finding someone equally stupid enough to give it to them. Just because someone is willing to finance a house (or car) doesn't necessarily make it affordable for the individual. More succinctly, just because "you can" doesn't mean "you should."....Ron
Ron, I didn't say that it did.
What I said was fairly clear I thought. I said that the problems with our infrastruction and the growing disparity between the rich and poor reflected the problems with our economy (not the current mortgage problem). And I do agree with you about the problems with the subprime lenders for the most part. Not long ago I reported a case here in Texas, however, where a poor, Black woman needed to make repairs on her house in Nacogdoches and a subprime lender was advertising loans at a very low interest rate. She bought it, being heavily pressured to do so. Later that lender bundled her loan into a package and sold it to another lender. The terms changed along with the sale and then the rates went way up. She lost her home. What brought about the problem was not the terms of the original loan but what happened down the chain when the loan was sold. Banking and lending practices are wildly unregulated in this area and I believe that currently Patrick Leahy is trying to put some brakes on the illegal practices that suckered many people into the subprime market landslide.
Below is my case report on the lawsuit.
Nacogdoches, 145th, Cause No. C18,445- 2002, Judge Hon. Campbell Cox, II, Case Style: Margie A. Murray vs. John C. Carlisle, Jr., Individually and d/b/a Champion Renovators, and New Century Mortgage Corporation
Fraud on Home Repair & Mortgage Loan Facts & Allegations: Plaintiff, Margie A. Murray, was an elderly African American woman. She sued the contractor and mortgage broker, Defendant John C. Carlisle, Jr., who had agreed to renovate her house and told her he could get financing for her as a mortgage broker in the amount of $100/month. He ended up being convicted in federal court on an unrelated matter (as to the facts of this case). His conviction arose as a result of fraud involving federally insured funds under HUD - he had been qualifying and assisting people who should not have been qualified to get HUD loans by doctoring documents (like W2s or bank statements) - they would default on their loans and the federal government was having to pay the lender. He is currently in Beaumont federal prison. In Ms. Murray's case, it was not a HUD loan and there was no insurance other than title insurance. The only Defendant at trial was New Century.
The Plaintiff contended that the Defendants collaborated to ensnare her into taking out a loan for worthless home repairs, the amount of the loan being $33,362 (over time the loan would have cost her in excess of $123, 000). There was evidence from an expert that not only did the repairs not enhance her home but actually decreased its value. Ms. Murray found Carlisle's service through a newspaper ad that advertised low-cost loans for people that needed home repairs. The loan charged the Plaintiff 13% APR when the prime lending rate was 6%. Champion Renovators was an outfit run by John Carlisle out of Houston (one of about a dozen different entities he had over a 10-year time frame). Carlisle was on probation at that time from incarceration out of the Southern District of Texas for fraud and conspiracy.
The allegations in this case were that Mr. Carlisle told Ms. Murray he would do a good job in his renovations and that he could get financing for $100/month. He assisted the Plaintiff in getting a loan through New Century Mortgage Corp., which took a lien on her house, but the payments ended up being over $300/month. Ms. Murray said that the workmen for the repairs came to her house and started working before she ever signed anything, and then in a 'Snidley Whiplash' fashion, after the work had commenced, a gentleman showed up at her home with loan papers from New Century that required her to pay $343 a month. She refused to sign and the gentleman told her it was a done deal because they had already started work, standing over her and kind of banged his fist on the table and told her she had to sign. He also got her to sign a document that falsely showed that those loan papers had been closed at a title company in Houston when they had been signed at her home and not notarized until later.
Plaintiff's theory against New Century was that any corporation acts through its agents, and that the lien that New Century took and then later sold on the secondary lending market was invalid. Plaintiff contended New Century's agent/salesman, Michael Buckley, and John Carlisle were "running buddies" and that they were such good buddies that New Century should have known that Mr. Carlisle was a shyster and a swindler. Mr. Buckley testified at trial that he did know Carlisle was in trouble with the law but did not know what it was about. Facts & Allegations He said that every deal he had with Carlisle had worked out to the satisfaction of the customer and that this was the first one that did not. Various evidence was allowed to support the shady nature of Carlisle, however, some evidence was excluded.
The Plaintiff claimed that rather than conduct the closing of the loan at a title company or some more official location (like a lawyer's office), one of the contractor's cohorts went to the Plaintiff's house and intimidated her into signing the papers and then took the closing papers back to the office. The contractor's wife notarized the papers after the fact.
Defendant New Century, based in California, argued it did not have knowledge of the lien's invalidity, and would have never given a loan had it known about Carlisle's history. It had a title insurance that insured the title and because this was a contractor the title insurance had to ensure that the contractor lien that Carlisle was assigning to New Century was valid. New Century argued that it relied on the title company to verify the validity of Carlisle's contractor lien. New Century claimed it sent a good faith estimate out within 72 hours to verify what anticipated payments would be to Ms. Murray. Two weeks later, New Century sold the note on the secondary market in a large batch of loans, but retained service rights.
Ms. Murray was unable to complete paying off the loan. When Ms. Murray first filed the lawsuit there was a promissory note for over $30,000, and New Century had a lien on the property.
New Century said that it eventually found that the lien was invalid. A claim was made against the title policy. The title company paid the policy limits, which was the amount of the loan. So once the loan was paid off, the lien was forgiven. New Century's view of the litigation was that it should have been dropped from the lawsuit once the lien was paid off.
Defendant argued that the secondary market is a limited market and it would not intentionally make a bad lien because it would get a bad name in the market if it did this kind of thing and also it only makes about 60 cents on a dollar when it has to foreclose on the property.
Also, the Defendant presented evidence that it gave good-faith disclosures indicating the loan was going to be $270. The loan ended up being $330 a month because she owed about $7,000 in back taxes and New Century paid that off.
A board certified real estate appraiser filed a report in the loan file indicating the property had been completed, in other words indicating the contractor had done his job. New Century contended it relied on that completion report in making its decision. Defendant used a blow- up of this completion report. The Defendant said it relied on the facts it had: 1) a title company saying it was a good lien; 2) an appraisal report said the work was done; and 3) and a title company making it look like the closing was done correctly at a title company.
Damages: The Plaintiff claimed she paid about $15,000 on the note before it was forgiven by New Century. She also contended she suffered mental anguish as a result of the whole ordeal.
Verdict: The trial was bifurcated. The jury found no fraud on the part of New Century, but did find that Defendant Carlisle committed fraud. Awarded:
$ 9,700 out-of-pocket expenses
$ 65,000 mental anguish
$450,000 punitive damages
$524,700 Total Award
A high/low settlement agreement with New Century was reached just prior to the jurors going into deliberations of $40,000/$15,000.
Verdict Date: 03-04-2005
Sidelights: Plaintiff's attorney reported that Carlisle's criminal convictions did not come into evidence in the trial until the second phase for punitive damages. He was convicted twice. This evidence was excluded during the first phase because typically prior bad acts are not permitted, in this case particularly because the cases were not related in that they were HUD cases, although had Carlisle been at trial as a witness, then Plaintiff would have used this evidence to impeach him. As it turned out, after New Century won its portion of the trial, counsel for New Century left the Courthouse. The jury then began to hear evidence with regard to punitive damages and Plaintiff's counsel brought in all the evidence about Carlisle's convictions at that time. That information did get in because there was no counsel present to object for Carlisle.
Carlisle was the subject of much negative media attention over the years including Prime Time Live on ABC, 20/20 with Diane Sawyer, and local Channel 13 ran a series on him, as well, for federal crimes on the HUD Title I insurance.
Defense counsel said that the Nacogdoches jury was not skewed in any one way; it was a fairly bright, very diligent jury.
The Plaintiff's attorney did not ask for attorney's fees as it is a legal aid program representing low-income folks. It falls under the legal services corporation, a private corporation federally funded to provide funding for legal aid programs.
Plaintiff's attorney said that there is a trend of predatory mortgage lending in so-called sub- prime lending today. He said the trend is for these companies to target poor people and people with bad credit and make high-cost loans that in most cases cannot be paid. They sell the loans off but retain service rights, get a discounted amount of money, but then charge enormous fees for collection efforts. This is a growing trend with some credit card companies, as well.
Sorry for the long post.