thought she was getting “a good deal”
but is now facing foreclosure.
Helen Williams certainly doesn’t know anything about credit default swaps, collateralized debt obligations, or mortgage-backed securities. It turns out there is a lot she didn’t even understand about the $395,000 mortgage she got to refinance the three-family house she owns and lives in on Corona Street in Dorchester.
What she does know is that the nice young man from Home Run Mortgage in West Roxbury, someone she was referred to through a friend of her daughter’s, seemed eager to help. He was full of assurances about how her loan would let her clear up credit card debt and also pay for needed repairs to the house she’s owned since 2000.
“When I went to the closing, the lawyer, she just put papers in front me,” says Williams. “She said, ‘You’re going to sign this, you’re going to initial that.’ But it wasn’t like I took the time to say, ‘What am I signing?’ It just didn’t enter my mind, because I thought I was getting a good deal. He told me I was getting a good deal,” she says of the nice man from Home Run Mortgage.
It was a loan the 71-year-old retiree, living on $703 a month in Social Security plus $2,669 in rent from the two apartments above her own, had no business getting, and one she found it impossible to keep up with. Today, she nervously awaits word on whether the current owner of her mortgage will follow through on a foreclosure notice originally filed in 2007 and move to take her house.
Her refinancing loan was made by Argent Mortgage, a division of the now-defunct — and notoriously predatory — lender Ameriquest Mortgage, on whose board Gov. Deval Patrick once sat. Wells Fargo Bank subsequently acquired the loan and initiated the foreclosure process. But the notice filed with the Suffolk County Registry of Deeds spells out in more precise, if inscrutable, detail the investors who actually own the mortgage, on whose behalf Wells Fargo says it is acting: “The Certificate Holders Park Place Securities, Inc. Asset-Backed Pass-Through Certificates Series 2005-WCW1.”
The subprime loan for the three-family house with fading blue shingles is one of millions that made their way to Wall Street, where they were packaged into bonds, called mortgage-backed securities, and sold to investors here and abroad. For a period of time in the middle part of the decade, there was a nearly insatiable appetite among investors for mortgage-backed securities, which paid healthy returns that seemed to come with virtually no risk during the go-go days of the real estate boom. It led to a frenzy of mortgage lending that, at its height, seemed to be governed by virtually no underwriting standards.
“This is a catastrophe of monumental proportions,” says Elizabeth Warren of Harvard Law School, an expert on bankruptcy and family finance issues. “The business model was premised on selling high-priced mortgages to people who had low probability of repayment, and over time that was unsustainable.”
Indeed, when thousands of borrowers started to fall behind on their payments and the run-up in housing prices ended, it all came crashing down. The impact of the shaky loans made to people like Helen Williams started to reverberate through the financial system in ways few could have imagined. It is a system, we now see, that was increasingly built on a something-for-nothing foundation, which infected the thinking of players at every level. The cascade of effects on stocks and credit markets has now brought the global economy to its knees and prompted the federal government to commit $700 billion to try to stabilize the financial system.
But it’s in neighborhoods such as Williams’s, a tough section of Dorchester off Geneva Avenue, or in parts of Lawrence, Brockton, and other urban centers, that the fallout in Massachusetts is hitting the hardest. “It tears the fabric of those areas apart,” says Boston Mayor Thomas Menino.
foreclosure rate in Massachusetts.
Entire neighborhoods have been turned upside down by the foreclosure crisis, pockmarked by vacant houses that are attracting vandals, drug users, and the homeless. “Some days it feels like all of Wall Street was out to make money off little guys making $20,000 a year, and it’s wreaking havoc on the city,” says Tamar Kotelchuck of Lawrence CommunityWorks, a community development corporation in the Merrimack Valley city that has the highest foreclosure rate in the state (see Head Count).
Communities are now trying to pick up the pieces. With the crisis far from over, the first goal is to stanch the bleeding and keep as many owners in their homes as possible. In the worst-hit areas — generally, poorer cities where local government always has more on its plate than it can handle — everyone from local health inspectors to police and fire officials are straining under the added burden of dealing with a whole set of problems brought on by hundreds of empty properties owned by far-away banks. Meanwhile, policymakers are grappling with a set of broader issues raised by the financial crisis, with growing calls for more oversight of a system where free-market thinking turned into an unregulated free-for-all.
Backward accounting
A lot of things didn’t add up about Helen Williams’s refinancing loan. To begin with, when she finally looked at the copy of closing papers sent back to her after she signed them, she was shocked to see her monthly income listed as $7,500. That is $4,000 more than she actually brings in, including rental income from the two apartments in her house.
“If I made that kind of money, why would I refinance? I would have been sitting pretty,” she says, noting that $7,500 a month would have been enough to cover all her repairs and clear her credit card bills. And though she was under the impression she was getting a fixed-rate loan (“I kept saying I want a conventional loan,” says Williams), she ended up with an adjustable rate, starting at 6.25 percent, which has now jumped to “7.2-something.”
“Everything on that application is wrong,” she says. “The only thing that’s true is my name and Social Security number.”
Williams had already refinanced in 2003, drawing money out of a new $317,000 mortgage, plus she took out a separate $30,000 home equity loan to pay for new porches on the house and other repairs. While the new $395,000 loan, which folded both her existing loans into one, should have given her nearly $50,000 to cover the additional repairs and maintenance issues, her loan settlement papers list an astonishing $10,522 in closing costs, an amount that was simply rolled into her new mortgage. What’s more, the mortgage originator, Jay Harris — “If that’s his right name,” says a now-chastened Williams — told her he earned no fee directly from Home Run Mortgage, so she obliged his request to sign over a check to him at the closing for $5,000.
In February 2007, after falling behind on her monthly mortgage payments of $2,400, and still facing some $20,000 in credit card debt, Williams received her initial foreclosure notice. Four months later, she filed for bankruptcy. Although the bankruptcy court has worked out a payment plan for her credit card debt — she’s paying $475 a month for five years — current law does not allow a court to order a modification of mortgage loans on primary residences. A bankruptcy filing does, however, trigger a temporary stay of foreclosure, which remains in effect until the lender voluntarily reaches a workout plan with the borrower or petitions the court to vacate the stay. The payments on Williams’s adjustable rate loan have jumped to $3,000 a month, but she says she can only afford $2,000.
In September, Williams wrote to Countrywide Financial, yet another firm involved in the loan, this one acting as the “servicing” agent that collects payments, asking for a loan modification that would bring her payments down to this amount. This could involve extending the term of the loan to 40 years, lowering the interest rate, or reducing some of the principal. As of mid-December, she had received no reply.
It seems clear that Williams, a high school graduate unwise in the ways of personal finance, got in way over her head. “I made some mistakes,” she says, seated at a table in her sparsely furnished living room with a pile of notices and documents related to her loan on the table in front of her. But doesn’t as much — or perhaps even more — of the responsibility fall on the high-flying captains of Wall Street, who sanctioned the lending that has Helen Williams in deep trouble, the economy in shambles, and taxpayers now on the hook for billions in bailout money?
Until recently, mortgage lending was associated with dour bank officers who enforced tight underwriting standards. It was a “pokey, low-rate-of-return, but steady, profit area,” says Warren. Banks were interested in making sound loans, because that’s how they made money. They were wary of lending to those at high risk of defaulting, because that’s how banks lost money. But that was in the day when most lending was done by traditional banks, which held and serviced most of the loans they made. That all changed with the growth of mortgage securitization, which packaged home loans into investment vehicles. Mortgage originators quickly sold loans and were off the hook for any subsequent default. And even those who acquired the loans on the secondary market and packaged them into bonds had no stake in their repayment once they were sold to investors.
Subprime loans became particularly profitable for investors during the real estate boom. These loans had high interest rates — and, consequently, high rates of return to investors — because the borrowers were deemed at greater risk of default, often those with marginal income or credit scores. The looming default risk from subprime loans was even further magnified, however, because some of the lending was done not simply with looser underwriting standards, but with virtually no standards at all.
who profited off loans like
hers “should go to jail.”
That’s certainly what seemed to happen with Helen Williams and her refinancing loan from Home Run Mortgage. Virginia Pratt, a foreclosure prevention counselor at the Jamaica Plain housing nonprofit ESAC, says during the height of subprime lending mortgage originators often pushed loans to the limits of what they thought an appraiser would allow, and then calculated the amount of income for a borrower that should be listed on the application to qualify for the loan. “They would do it backwards, in other words,” says Pratt.
Says Warren, “The lender — the one who was supposed to say, ‘I need to see that you can repay this before I lend you the money’ — that part of the equation just dropped out. It was just gone.”
House prices stopped rising and began to fall in late 2005 and early 2006, and things started to unravel quickly. Until then, investors only saw the upside to the high-paying bonds from securitized subprime loans. In a rising market, people getting hit with big upticks in adjustable rate mortgages could refinance into a fixed-rate loan. If they simply couldn’t handle the mortgage, fixed rate or otherwise, they could always just sell their home, walking off with the gain from recent home-price appreciation as a consolation.
With values suddenly falling, however, owners couldn’t refinance loans that were now for amounts greater than the value of their homes. And they lost what used to be the fail-safe option of selling their house, since they would have to pay money, instead of receiving some to get out of their mortgage.
“It could go on as long as house prices were rising,” says Warren. “If you notice that it looks like a Ponzi scheme, you’d be right.”
Mass. impact
As of mid-December, one in seven US homeowners was “underwater,” with a mortgage balance greater than the value of their house. Although subprime loans make up 11 percent of all US mortgages, they account for 52 percent of the foreclosures that are taking place, according to the financial services firm Credit Suisse. More than 3.2 million American households have lost their homes to foreclosure since 2006, with Credit Suisse estimating that as many as 8 million more will meet that fate over the next four years.
Massachusetts has been spared the worst of the foreclosure epidemic, which has particularly ravaged areas that some have dubbed the “sand states”: Nevada, Florida, Arizona, and California. In national news stories, the picture of the crisis is often of a recently built subdivision of modest tract homes that has been turned into a virtual ghost town as scores of new homeowners go under. Massachusetts, which has far less new development, is in the middle of the pack nationally, ranking 28th in the rate of foreclosures, with one foreclosure for every 1,1,93 housing units during the month of November.
“The fact that we don’t have all that massive housing development to some extent has saved us from some of the excesses of this housing bubble and foreclosures,” says Jim Campen, an emeritus UMass–Boston economics professor who studies Massachusetts lending patterns. “It made the foreclosure problem more concentrated here, and made middle-class neighborhoods hit much less hard. More of the story here lies in the targeted, predatory lending areas.”
In other words, it is urban neighborhoods like Williams’s, many of them with high minority populations, that are being hit hardest by foreclosures in Massachusetts. Last year, 15 communities accounted for half of all foreclosures in Massachusetts through the end of November, the most recent month for which figures were available at deadline. The number of foreclosures in the state has soared since the middle of the decade, going from 3,130 in 2006 to 7,653 in 2007 and 11,486 through the first 11 months of last year.
While Boston, Springfield, Worcester, and Brockton are the top four cities in terms of number of foreclosures, Lawrence has the unenviable distinction of claiming the highest foreclosure rate in the state, with 40.4 foreclosures per 1,000 residential properties for the first 11 months of last year. One of every 16 properties in the city has been foreclosed on since the start of 2006.
“I always say, if you want to know the health of the country, take the temperature of the cities,” says Michael Sweeney, the city’s planning director. Lawrence, with upwards of 500 vacant properties and hundreds more somewhere in the foreclosure process, is spiking a fever.
These days, Sweeney doubles as the city’s czar of foreclosure mitigation. Twice a month, he chairs a foreclosure task force in which police, fire officials, and representatives of other city departments gather to share information about the foreclosure problem in Lawrence. Just keeping tabs on who’s responsible for empty houses is practically a full-time job. Early last year, the city passed an ordinance requiring banks to register any vacant property they now own with the city and have an authorized representative available within 25 miles of Lawrence. That has helped, but it doesn’t change the reality of block after block of empty dwellings, especially in the Arlington and Lower Tower Hill neighborhoods on the city’s north side, where the foreclosure problem is most acute.
All those empty buildings have become tempting prey. “Residential burglaries have skyrocketed,” says Lawrence police chief John Romero. The city had recorded 470 burglaries last year as of early December, compared with 337 for all of 2007.
Last spring, the state announced a revolving loan fund of $22 million for nonprofit groups to acquire foreclosed properties, do repair work, and sell them to new owners. Lawrence CommunityWorks, the local nonprofit developer, has acquired five properties so far and has offers out on 10 more, says Tamar Kotelchuck, a project manager at the agency. But given the huge inventory of bank-owned properties, she worries that they are outmatched by other buyers who may have less of a stake in stabilizing the city’s neighborhoods.
“There are a whole lot of investors buying up properties in Lawrence right now,” she says. “Some of them are good and we know them. But it’s also clear that the slumlords that have been making money off the city for a long time are buying up properties now, and that makes us tremendously nervous.”
For the compact city of 70,000, which has been an immigrant gateway to the American dream for more than a century, the foreclosure crisis has been a devastating setback to revitalization efforts that were beginning to bear fruit. “This is a city that was recovering,” says Kotelchuck. “It had been struggling for a long time. But people were newly interested in investing in Lawrence again. And it’s going to take 10 years to get back to that place.”
In Boston, the city response to a Dorchester neighborhood with the city’s highest concentration of foreclosures was to buy four dilapidated, bank-owned, three-family houses on a single street and sell them to a local developer committed to rehabbing them. It is an effort to reverse what had become a downward spiral on Hendry Street, where abandoned cars and crime are a plague on those trying to maintain a semblance of order in the neighborhood.
Mayor Menino says the first victims of the foreclosure crisis are those who got taken by irresponsible lenders and lost their homes. “The second part is people who are living in those areas who are paying their mortgages,” he says. “They’re getting taken too.”
The Center for Responsible Lending, a national research and advocacy organization, projects that more than 1 million Massachusetts homeowners will lose a combined total of $7.9 billion in home equity as a result of house value decreases attributable to their proximity to foreclosed properties that were financed with subprime loans. Nationally, the center estimates 40.6 million homes will lose an average of $8,667 each in value due to nearby subprime foreclosures.
In Brockton, Louis Tartaglia, the longtime executive director of the municipal board of health, frets about the 500 to 600 vacant homes in the city — and the scores of multifamily homes that are now owned by banks, but are still occupied. “Once that bank takes the property over, they own the tenants that are there,” he says. Though the banks assume all the legal obligations of a landlord, they aren’t always meeting their duty. “We’ve started to get complaints — no heat, no hot water. And it’s going to get worse when the pipes start freezing,” says Tartaglia.
Vacant houses, many of which were already in rough shape at the time of foreclosure, are getting hollowed out by thieves who operate like vultures picking at the bones of a carcass. “They’re getting stripped of copper pipes or of any kind of metal that’s valuable,” says Tartaglia. Meanwhile, homeless people are setting up camp in some properties, setting fires in the bathtubs to stay warm.
Tartaglia has a staff of four housing inspectors who try to stay on top of things. A fifth divides his duties between housing inspections and restaurants. He says 80 percent of the staff’s time is now spent on foreclosed properties. His one code enforcement officer spends virtually all of his time checking on the safety of bank-owned properties. At a time when he could use more help, not less, Tartaglia lost one code enforcement officer and a secretary last year to budget cuts. Looking to the grim financial year ahead for the state, which Brockton relies on for close to half of its annual budget, he says, “It’s not likely they’re going to be throwing confetti our way.”
A Quincy–based nonprofit, Neighborhood Housing Services, set up an office in Brockton early last year to deal with homeowners facing foreclosure. Until then, the mayor’s office was often the stop of last resort for distressed residents. Bob Martin, the city’s human services director, says he and his staff began referring to a small conference room off the mayor’s office as “the crying room.” It’s where they would lead homeowners “as we were trying to figure out what we could do,” he says.
(Not so) niche marketing
While huge national lenders and Wall Street executives ultimately called the shots that drove the subprime lending crisis, someone had to sell the loans at the ground level that everything was built on. “What happened, to be quite frank, is a lot of people were taken advantage of by people in their own community,” says Brockton Mayor James Harrington. Adding a particularly unseemly dimension to the foreclosure crisis, the vast subprime enterprise that paid off so handsomely for top finance executives counted on foot soldiers who looked like, and could therefore win the easy trust of, borrowers to close the deals.
Manny Goncalves saw this play out in ways that make him shudder. A respected figure in Brockton’s large Cape Verdean community, Goncalves has run his real estate broker’s office on Main Street for 21 years. He says he turned away lots of would-be homebuyers in recent years because they simply didn’t have the assets or income to handle the purchase. “I’ve lost clients because I told them the truth,” says the 64-year-old Goncalves.
He says there were plenty of other Cape Verdean brokers, however, who were willing to step in: “A lot of people got misinformation from their own people. Taken advantage. ‘Sign here, sign here, I’m trying to get you your dream house.’”
On Corona Street in Dorchester, Helen Williams tells of similar misplaced faith. “I put my trust in someone,” she says. “When you’re African-American and you get a broker who’s black, you think he’s going to help you. That’s the honest truth. You think your own people are going to help you.”
Santos, with their daughter Bendily
(at left), are the type of residents
Brockon leaders are counting on
to help stabilize the city.
In Brockton, like other hard-hit communities across the state, part of the mop-up involves getting new owners into foreclosed homes to stabilize neighborhoods. Helping with that will be $54.8 million in federal funds that Massachusetts is receiving as part of an aid package approved last summer by Congress to deal with the foreclosure crisis. The Bay State cities with the most foreclosures — Boston, Worcester, Springfield, and Brockton — are getting direct appropriations of $2 million to $4 million each (Brockton will get $2.1 million.) State housing officials will distribute the remaining pool of $43.4 million to a broader set of affected communities. Brockton plans to use the money to acquire foreclosed houses, rehab them, and assist buyers willing to take on the properties. Some buildings that are too far gone may need to be razed.
Brockton didn’t wait for the federal help, though. Last April, a group of seven banks and credit unions — the local “bricks and mortar” lenders that did little or no subprime lending — committed $35 million to make fixed-rate loans at about one-quarter point below prevailing interest rates to moderate-income buyers of foreclosed homes. The program will loan up to the full sale price of a house, but it will require solid income documentation and credit scores. Bill Eastty, vice president of Crescent Credit Union, one of the participating lenders, describes the target market in terms that would have been unnecessary five years ago. “We’re making mortgages to sustainable homeowners,” he says.
Joaquim Deandrade and Maria Dos Santos are the sort of residents Brockton leaders are counting on to help stabilize a city that has been hit by more than 1,000 foreclosures since 2006. The Cape Verdean immigrant couple and their daughter, Bendily, 16, had been renting a two-bedroom apartment and saving for a house. Three years ago, they thought of buying, but were nervous about being able to handle the mortgage on a decent, single-family home in Brockton, with such houses going for more than $300,000 at the time. “Who wants to buy something and then later on, trouble is coming and you lose it,” says Deandrade, 38, a manager for a Marshfield auto parts distributor.
In June, working through the bank-sponsored “Buy Brockton” program, they closed on a handsome, four-bedroom colonial on Riverview Street for $200,000. The house sold for $309,000 just three years earlier to buyers who lost it to foreclosure in March of last year. Sitting in the living room of his new home with his wife, who manages a local Dunkin’ Donuts outlet, and daughter, Deandrade says the market plunge and rash of foreclosures have been a gift to his family’s finances and their quest to own their own home. But he’s mindful that his new home was someone else’s dream that slipped away. “Some people win,” he says. “But on the other side, some people lost. You think about that a lot.”
Rewriting the rules
To help those who haven’t yet lost their homes, some say it’s time for lenders to assume more responsibility for what has happened. Steve Meacham, a community organizer with the Boston housing advocacy group City Life, says lenders should write down loans to current home values for borrowers in danger of foreclosure. That could be an amount considerably less than the outstanding mortgage, but it is as much as banks will be able to make if they foreclose on a house and then sell it in today’s market, Meacham says. What’s more, he argues, because of their reckless appetite for shaky subprime loans, lenders bear lots of responsibility for driving home values to the unsustainable levels seen at the top of the market, when prices had risen nationally by more than 80 percent from late-1990s levels.
“People think of all these exotic loan products as chasing the rapidly rising values,” Meacham says of the idea that banks stretched their lending standards to accommodate borrower demand. He says it’s the other way around, that banks developed and marketed risky loan products to some of the lowest-income homeowners and homebuyers to satisfy investor demand. “They created the rapidly rising values,” he says.
Now agreeing with the left-leaning activist is no less than the man most responsible for the no-holds-barred, free-market policies of the last 20 years. “The big demand was not so much on the part of borrowers as it was on the part of the suppliers who were giving loans which really most people couldn’t afford,” former Federal Reserve chairman Alan Greenspan told Newsweek 15 months ago. “We created something which was unsustainable. And it eventually broke. If it weren’t for securitzation, the subprime loan market would have been very significantly less than it is in size.”
Some of the finger pointing has also been directed at Fannie Mae and Freddie Mac, the two huge quasi-governmental finance companies that were also investing heavily at one time in subprime securities (see Washington Notebook). But the two firms, whose massive losses led to government takeover last September, were more guilty of trying to keep pace with the Wall Street appetite for risky loans than of driving the whole scheme.
Efforts in Massachusetts to get lenders to write down loans voluntarily have not produced big results. Meanwhile, in December, the US comptroller of the currency reported that more than half of all delinquent borrowers nationwide who did get loans modified in recent months had already fallen behind on their new payment plan. But it is unclear whether the report demonstrates that many troubled borrowers are not suited to handle homeownership under any terms or whether loans aren’t being modified in ways that actually make it possible for borrowers to keep up. Some modifications fold delinquent payments into new monthly payments that are actually larger than the original ones.
Harvard’s Elizabeth Warren is chairing the congressional oversight panel that is monitoring the government’s distribution of the $700 billion bailout fund. The panel’s first report, issued in December, asks why the Treasury Department has not mandated that lenders receiving bailout money also adopt foreclosure mitigation measures for homeowners, such as the model imposed by the Federal Deposit Insurance Corporation when it took over IndyMac Bank. FDIC is modifying former IndyMac loans so that payments are not more than 38 percent of a borrower’s income, which is the sort of standard that once governed home lending in the first place. To create incentives for lenders to modify loans, Congress is also weighing an amendment to federal bankruptcy law to allow bankruptcy judges to write down a portion of the mortgage.
Apart from anything done to help those currently facing possible foreclosure, however, what’s needed are reforms to minimize the chances of a meltdown like this repeating itself in the future. Just as we have a Food and Drug Administration to ensure food and drug safety and a commission to ensure safety of household products, Warren says we should create a Financial Product Safety Commission with broad oversight of consumer finance issues. “It’s not possible to sell a toaster in America that has the same one in five chance of exploding, but it’s perfectly legal to sell a mortgage that has a one in five chance of ending in foreclosure,” Warren says. Sen. Richard Durbin of Illinois has introduced legislation to establish such a commission; Massachusetts Rep. William Delahunt is the lead House sponsor.
“We really turned buying a house into yet another asset class, like a stock or a bond or a commodity,” says Nicole Gelinas, a finance expert at the Manhattan Institute, a free-market-oriented think tank in New York. The problem, she says, is that we haven’t regulated it as such: “You can’t open a brokerage account and borrow 100 percent of the stock. If you are a middle-class person you can’t put money in a hedge fund. It should have been the same thing with these exotic mortgage products.”
Above all else, there needs to be a basic level of soundness to a home loan based on a borrower’s financial standing and ability to handle the terms of the mortgage. In 2007, federal regulators raised the possibility of requiring that lenders ensure that borrowers can meet the highest-cost terms of adjustable rate mortgages after any initial lower rates expire. Countrywide Financial, one of the most aggressive subprime lenders in the middle of the decade, conceded that 70 percent of its recent borrowers would not meet such a standard.
That lenders must be ordered to make sure borrowers can repay a loan seems to turn underwriting on its head. But that’s a sign of just how broken the market became, with the usual alignment of incentives that guards against imprudent lending thrown completely out of kilter.
In Massachusetts, Attorney General Martha Coakley has sought to block foreclosures by invoking a similar standard under the state’s Consumer Protection Law. Last February, a Suffolk Superior Court judge granted an injunction sought by Coakley’s office that bars subprime lender Fremont Investment & Loan from foreclosing on Massachusetts homeowners. The ruling, which the state Supreme Judicial Court unanimously upheld in December, ordered the lender to work with the attorney general’s office and modify any loans shown to be unfair and deceptive. The case alleges that Fremont made adjustable rate loans that borrowers would be unable to repay once resets kicked in and failed to document borrowers’ income. “It sends a message that, going forward, the behavior around loan origination is going to be scrutinized very carefully,” says Coakley.
A further avenue being pursued to bring some accountability to the chaotic hand-off of loans is to make owners of mortgages, even if they did not originate them, responsible for any violations of predatory lending laws or other improprieties that may have occurred in grant-ing the loans. Imposing such “assignee liability” in mortgage lending is part of an anti-predatory lending bill sponsored by Sen. Christopher Dodd of Connecticut. Massachusetts Rep. Barney Frank, who has been a key player in addressing the fiscal crisis as chairman of the House Financial Services Committee, has said this reform will be a priority for Congress in the new year. Currently, Wall Street investment firms that have acquired loans can wash their hands of any wrongdoing that occurred upstream.
For all her admitted naïveté about the world of finance and lending, Helen Williams, who saw the questionable mortgage for her Dorchester home sold and resold on its way up the Wall Street food chain, adds a needed moral compass to the logic of such a reform. “When you buy stolen goods, you’re just as guilty,” she says.
Williams has plenty of anger for the young man she put her trust in who walked her into the loan that could drive her out of her house. She has similar feelings for those at the top of the whole system, who profited so richly off loans like hers and now have their hands out to Washington for a bailout. “They should go to jail,” she says. Vengeance, though, is not the first thing on her mind. “But if they go to jail, would that help me save my home?” she asks. “That’s the only thing I want, to save my home.”
