23 January 2010
Al Lewis: Dark Horse Battles Predatory Lender - Sarah Schrock
This information is from Al Lewis via Fox Business.
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Friday, January 22, 2010
By Al Lewis -- A DOW JONES NEWSWIRES COLUMN
FOXBusiness Another two million homeowners will suffer foreclosures by the end of this year. One of them, I am afraid, will be Sarah Schrock, 51, who lives in a quaint, yellow house near Kansas City, Kan.
Schrock isn't perfect.
She has a low credit score. She has had trouble holding on to jobs. She is deaf because her mother contracted rubella during pregnancy. She reads lips, but she was once denied a promotion after her boss complained to her face that she just doesn't hear so well.
Schrock had long been taking care of her sickly mother. When her mother died in March 2006, she was forced to take out a new mortgage on the house they had shared.
The deaf, grief-stricken, worn-down caregiver, living alone with her dogs, cats and birds, was the perfect target for a predator.
Schrock has now been fending off a foreclosure petition since March 2008.
Her best remaining hope comes from an imaginary horse named Hayseed that she has been drawing since 1981.
"A horse may save my home at the last minute," she wrote as we communicated via email.
Surely, you've heard the song: "If wishes were horses, then dreamers would ride."
Schrock's first children's book, which she both wrote and illustrated, will be published in April.
Rudolph Alvarado, CEO and publisher of Caballo Press of Ann Arbor, Mich., told me he discovered Schrock's work online and struck a deal to publish "Hayseed's First Race." It is about a horse that isn't perfect but must race against an uppity equine that thinks it is.
To win, Hayseed must overcome derision from "Prince Perfect," and all the self-doubt that comes with it. Hayseed remembers his mother's words: "Love yourself for who you are never let anyone tell you that you don't belong."
Schrock remembers what her mother said and isn't letting lenders tell her she doesn't belong in her house. She has been crying out to regulators, government officials and organizations for victims of predatory loans. But foreclosure keeps grinding toward her like a bulldozer.
In 2006, Schrock had the misfortune of dealing with a mortgage broker called Soldi Financial LLC. Soldi's license was revoked in 2007, and last year one of its regional managers, Monty J. Kinman, then 27, of Overland Park, Kan., was sentenced to two years and six months in federal prison without parole for mortgage fraud, unrelated to Schrock's loan.
Schrock claims a Soldi loan broker falsified her income to get her into a loan whose monthly payment exceeded her income.
Loan documents that do not bear Schrock's signature claim she had a monthly income of $3,655, but tax returns show she made $5,896 in 2006 and $12,477 in 2007, according to a review of her case by the Kansas State Banking Commission. Her monthly payment was more than $1,034.
Schrock said the Soldi broker padded the loan with a cash payout to help her make payments until she either refinanced again or got a better income. Schrock said she felt she had no choice but to take this gamble.
Schrock also said she thought she was getting an ordinary fixed-rate loan when she was getting a huge balloon payment at the end of 30 years. And she didn't understand she would be paying an annual interest rate of more than 11%.
"I didn't even know what a subprime loan was," Schrock said.
In April 2009, an official from Kansas' banking commission fired off a letter to Wells Fargo & Co. (WFC: 27.3, -0.74, -2.64%) CEO Richard Kovacevich: "In light of the questionable circumstances surrounding this transaction, our office would appreciate any additional assistance you may be able to provide this customer."
Schrock said Wells Fargo never responded. But the story is complicated.
Near as I can tell after calling all of the companies with their fingerprints on Schrock's mortgage, she owes her monthly payments to a mysterious pool of investors.
Wells Fargo is merely the trustee on her mortgage as it floats around in this pool like a belly-up corpse.
Coppell, Texas-based American Home Mortgage Servicing Inc. now services Schrock's loan. And Option One Mortgage, a shuttered a division of Kansas City-based H&R Block Inc. (HRB: 22.24, -0.46, -2.03%), funded the loan.
So my inquires went like this:
A Wells Fargo spokesman referred me to American Home Mortgage, saying it would have initiated Schrock's foreclosure.
An American Home Mortgage spokeswoman referred me to Option One, since it funded the loan and had a division that likely serviced the loan at the time the foreclosure was filed.
Option One folks didn't return my emails and a phone call.
I also tracked down the very Soldi broker who wrote up Schrock's schlock loan.
She is now doing sales for another company. I am graciously leaving her name out of this column for now. But when I called to ask if she remembered handing complicated loan documents to a deaf lady with no interpreter, she declined comment.
I am not sure what can be done at this point except to watch the legal machinery strip Schrock of her house. Schrock, after all, is down to living on food stamps.
Soon, though, I hope she'll be able buy a new house. And with the way foreclosures are going, she'll be able to pick one up cheap.
Schrock's publisher says he has been surprised by the reception that "Hayseed's Last Race" is getting as its publication date looms. (My review: Two big hoofs up. Check it out at: http://www.caballopress.com/Hayseed )
Alvarado said he plans to publish a whole series of Hayseed books that, with a bit of luck, could lead to film, TV, merchandising and other ancillary royalties. Schrock's luck, he says, may just be about to change.
"If I had discovered her a year earlier, we might have been able to stop this," he said.
(Al's Emporium, written by Dow Jones Newswires columnist Al Lewis, offers commentary and analysis on a wide range of business subjects through an unconventional perspective. Contact Al at firstname.lastname@example.org or tellittoal.com)