Fed to Start Scam Warnings in Movie Theaters

It’s Saturday morning and even though I’d love the day off, I dragged myself out of bed this morning and drove two hours out to a place I’d never heard of called Menifee, California, so I could do an on-camera interview with a couple who saved their home at the last minute by using a loan modification company.

My camera crew had arrived early to set up the shot, so when I walked in we were ready to go. Their entire family was there… generations of family. Grandparents, parents, children and grandchildren all had come to see their parents talk to me about what had happened to them and how they managed to save their home. It was emotional for all of them. They were victors in a battle with their bank. Normally, I try to get interviews done in thirty minutes or less, but this couple I taped for over an hour. They were wonderful people who wanted a chance to talk to someone about what had happened and was happening to others.

I’ll be using their real names on the documentary, but since this article really isn’t about them, let’s just call them John & Mary for the time being. To make a long story short…

John and Mary have two beautiful children that looked to me to be about six to eight or nine years old. They both work. They bought a home in early 2006… bad timing you’d have to admit. They paid $445,000. Today, it would appraise for roughly $235,000, according to John. Some of the homes in the neighborhood had appraised for less lately, John told me, but he was confident that theirs would appraise for more since he proudly showed me the wood floors and beautiful patio he and his brother had put in themselves just after moving in. This was the couple’s second home… the one in which they planned to raise their kids and someday grandkids.

Their home was wonderful; it blossomed with the trappings of a close-knit family everywhere you looked. Photos were on the walls, the kitchen looked appropriately used, and toys and coloring books were on tables set up for the young ones to draw with grandma, while the parents and I talked under the bright and hot lights.

One year after buying this dream home, its value was cut in half by the meltdown, something John and Mary didn’t really understand or know too much about. But that wasn’t their problem… they didn’t really care. What they did care about was that their mortgage payment went from $1,800 to $4,000 in that same period of time. So, all in all they had about a snowball’s chance in hell of refinancing for… oh, say the next 20 years, if things go well.

When the payments hit four grand in December of 2007, they contacted their bank, the fabulously successful Washington Mutual, which since being seized by the FDIC last summer, has become Chase. They wanted to know what could be done. They couldn’t make a four thousand dollar a month mortgage payment and were always a month behind.

Each time they would call, they’d get transferred to the collections department, who didn’t know anything about anything except how to ask when the bank could expect to receive their mortgage payment. John explained that he couldn’t make the payment of $4,000 a month and still put food on the table. Was there any way to modify the loan? He told me that on more than one occasion, the Washington Mutual representative on the phone literally laughed. He decided to call every day until he reached someone in a position to say something besides “when can we expect your payment,” and he finally did; it was about a month later.

The bank supervisor told him that there was nothing that could be done, and that if he didn’t make up his payments by the following month, he’d be “out on the street”. Period. He got angry. He said he may have raised his voice. He told the bank that what they were doing wasn’t fair. No one had told him the payment would more than double in a year… at the same time the home’s value would be cut in half. He had done a bunch of improvements himself. His children had their own rooms. He had put 20% down, the proceeds from the sale of their last home. He got emotional. The bank supervisor hung up on him.

John admitted that he became depressed. On camera he said he drank more. His wife said they probably had less patience with their children. They couldn’t sleep. They worried constantly. Where would they go? What would they do? John’s boss told him that his work was suffering. He had to stay focused, but it was getting harder every day. I could tell that they had paid a price. Aged a bit, perhaps.

John and Mary saw that others in their neighborhood were losing their homes. It appears about half occupied today. The woman next door was 71 when she was given two days to move and evicted by Sheriff’s Deputies. They felt badly for the older woman. It didn’t seem right.

They called the bank again… and again… and again. For months. John and Mary said the people at the bank treated them poorly… like losers. Every time they would call, they’d be threatened, told that they would lose their home and still be sued for the balance of their loan. They were told that they’d never be able to buy another home. They never tried a government hotline. When I asked them why, they just laughed. “What’s the government going to do?” John said.

By the fall of 2008, John and Mary said that they had lost all hope. Every dime they earned was going towards the mortgage payment. They couldn’t afford to buy the kids an ice cream. Mary’s mother heard an ad on the radio for a company that said they helped homeowners negotiate with their banks and keep their homes. Neither John or Mary believed it… but since they had nothing to lose, they called the toll-free number, and started to feel better immediately.

The loan modification company’s representative drove out to their home within a couple of days. He brought paperwork to be completed and sat with them as they filled out the forms. He asked about all of their bills and all of their income. He explained exactly what he was going to do and John said he either called or answered the phone when they called every single time.

Less than two months later it was done. Washington Mutual had agreed to modify the loan. Their payment would be reduced to $800 a month! $800! From $4,000 to $800! It was beyond anyone’s imagination. It will adjust upward over five years, but it will never go above $1900 a month. It was like a weight had been lifted. They could live again. It was over. Mary cried.

Of course, it wasn’t free. John and Mary had paid the company $3,500 to handle their loan modification. John said that it’s the best money he’s ever spent in his life. I asked him on camera what he thought about the president saying that if you have to pay, walk away.

He said… on camera… that he thought it was the stupidest thing he’s ever heard. “Nothing’s free,” he said.

I have to admit I was misty by the end of the interview. I wiped the tears from my eyes when I turned to the window, pretending that I needed to stretch so that no one would notice. God damn it, I thought. This is unbelievable. I promised them I would write about it, and that I’d show their footage to as many people as I possibly could. Then I thanked them for their time and left, shaking everyone’s hand before I left.

I drove home. The whole way I kept thinking about President Obama telling everyone not to use a private sector solution. Telling people they should just call their bank themselves… that they didn’t need to pay a company to help with a loan modification. Why would he say something like that, when I’ve interviewed more than a dozen people in a row that tried just that… and failed miserably in each case?

When I arrived, I checked my email and here’s the article that someone had sent me:

WASHINGTON — Sandwiched between the soft drink and popcorn ads, you may soon see the Federal Reserve on the silver screen

The Fed wants to help you find the “nearest exit” from foreclosure scams that are increasingly preying on homeowners as the recession worsens.

Starting April 10, the Fed will run ads in movie houses across seven states — Arizona, California, Florida, Georgia, Michigan, Nevada and Ohio — that have been hard hit by home foreclosures. Scam artists have seized on the situation, charging people for help that is free from nonprofit groups working with the government, Fed officials say.

“Don’t be taken advantage of,” the Fed ad tells viewers. “It shouldn’t hurt to get help.”

The 30-second ads direct people to the Fed’s web site — www.federalreserve.gov — to get five tips for avoiding foreclosure scams. “It’s information you can trust from the Federal Reserve,” the ad says.
It’s the first time the Fed is turning to movie theaters to get its message out. The ads will run for seven days in 28 theaters in 14 cities.

Once on the Web site, the Fed offers some advice to homeowners struggling to keep up with mortgage payments and are in need:

— Work only with a counselor approved by the Department of Housing and Urban Development.

— Don’t agree to work with a counselor who collects a fee before providing any services.

— Be wary of “guarantees.” A reputable counselor will not guarantee to stop the foreclosure process, no matter the circumstances.

— Understand any paperwork that you sign. Don’t be pressured to do so if you haven’t read it.
— If it sounds too good to be true, it probably is.

A record 5.4 million American homeowners with a mortgage of any kind, or nearly 12 percent, were at least one month late or in foreclosure at the end of last year, the Mortgage Bankers Association reported. That’s up from 10 percent at the end of the third quarter, and up from 8 percent at the end of 2007.

Credit Suisse predicted late last year that there could be as many as 10 million foreclosures over the next four years, depending on the severity of the recession.

The information campaign will cost the Fed all of $9,000 for production and for placement in movie theaters. Fed officials hope the ads will boost awareness and prompt more people to visit its web site for tips on avoiding foreclosure scams.

You won’t get any close-up shots of Fed chief Ben Bernanke or rare peeks inside the Fed’s stately marbled building — one of Washington’s most mysterious institutions– in the ads. They feature still shots of individuals and families.

The Fed has done public services ads before. In the 1990s, then-chairman Alan Greenspan was featured in broadcast ads promoting financial education.

Well, isn’t that just great… just frigging great. I’m so glad the government is trying to “help”.