Pfc. Aaron Collette came home to Bend from Iraq in June to a warm welcome from family and friends. But the welcome from JPMorgan Chase wasn't so friendly: It was taking away the home his father, Tim Collette, bought five years ago.
Tim Collette, a building contractor, put $125,000 down and took out a $230,000 mortgage. He made the payments faithfully for 15 months. But then the real estate market crashed and burned, taking Collette's business with it - and Collette became one of the millions of Americans facing the loss of their homes in the Great Recession.
Collette contacted Chase to try to get his mortgage modified so he'd have a more manageable monthly payment. At first, he says, the bank told him he had too much money in savings to qualify. Then, after he'd depleted his nest egg, the bank told him he didn't have enough money.
Despite all that, Collette still thought he was on track for a mortgage modification. He actually was on the track to foreclosure.
Last fall, saying Collette hadn't been paying enough, Chase notified him it was starting foreclosure proceedings. "They waited until I owed $9,000 to call me and tell me I'm not making the right payment," Collette told a reporter. On Aug. 9, the bank took Collette's house.
If Tim Collette was the only person who's been jerked around by a bank we wouldn't bother writing about it. But horror stories like his have been repeated - and continue to be repeated - tens of thousands of times across America.
Homeowners who apply for mortgage modifications encounter month after month of delays and excuses from their banks. They're told the necessary paperwork hasn't been filed, or was filed improperly, or "got lost" and needs to be filed again.
If you think all this is an accident, we've got a real nice beach condo in Kansas to sell you.
The sordid truth is that banks stand to lose very little, and gain a lot, from foreclosures. They don't really own the loans - they were "bundled" and sold to investors as soon as they were written. And then the banks bought other instruments, called "credit default swaps," that pay off if the mortgages default. In some cases the swaps are worth many times the amount of the actual mortgages.
"What is now becoming apparent," as real estate analyst George W. Mantor wrote, "is that it isn't in the best interest of the banks to voluntarily modify most mortgages."
Oregon State Rep. John Huffman (R-The Dalles) wants to set up a legislative task force to see if something can be done at the state level about the mortgage modification runaround, and Democratic Sen. Jeff Merkley wants to push federal legislation. Given the clout of the banking industry in both Salem and Washington, though, we can't muster up a lot of optimism.
The best we can do for now is to wish Huffman and Merkley well, and give THE BOOT to Chase and other banks that are putting the security of Americans in jeopardy with their predatory practices.