Hyde Parkers snared in subprime crisis

¶ Cases like Harris' sympomatic of larger problem, lawyer says

Tommie and Louis Harris found themselves in a hole $854,000 deep.

The Harrises assert that they were caught in a predatory loan perpetrated by Mark Diamond and OSI Financial and have filed a civil suit against Diamond; OSI; Terry Diamond, Mark’s brother and a contractor for United Construction.

The suit claims that loan terms were misrepresented at the closing as a fixed interest rate mortgage when it was an adjustable rate mortgage and that documents were intentionally withheld at the closing.

The Harris’s lawyer, Al Hofeld with Edelman, Combs, Latturner & Goodwin, LLC, said loan documentation can be extremely complicated and a trained lawyer should always look over closing paperwork.

“Let’s face it, most people don’t read the hundreds of pages of closing documents they receive at the closing,” Hofeld said. “Unless you’re really educated and know which documents are the key documents to get the key information about the loan terms from, you’re not going to look at those.”

Hofeld said that even if the Harrises had been able to understand all the documents provided at the closing, they still would have not have been able to discern the full terms of the loan, as they were not provided with all the required paperwork.

The Harrises’ daughter, Pam, who sought out an attorney after she became aware of her parents’ mortgage, said Mark Diamond abused her parents’ trust and convinced them not to hire an attorney to look over the closing documents.

“The only understanding I could get out of [the loan documents] was it was an adjustable rate loan and in a couple years they wouldn’t be able to afford it,” Pam said. “I asked [my father], who read over the paperwork? He said he and my younger brother looked over the paperwork.”

“Homeowners should have access to an attorney of their choosing that should be paid for, we feel, by the industry,” said Michele Rodriguez Taylor, a community reinvestment organizer at the National Training and Information Center, 810 N. Milwaukee Ave. “But I think a lot of the confusion and deception that occurs around the closing could be prevented if the person had an attorney with them that was really representing them, not an attorney that shows up because of the lender, but is really looking for the best interests of the homeowner to look over the documents before they sign to really make sure that the homeowner is signing what they believe they are signing.”

Hofeld said that many people may not realize that they need an attorney for a refinancing or home loan. Homeowners may not comprehend the complexity of the transaction until they are at the closing and often feel pressured to sign.

“It’s an extremely complicated transaction — most lawyers don’t understand it. Most lawyers don’t read their closing documents, most judges I’m sure don’t,” Hofeld said. “For closing, when you’re purchasing a home, it’s standard to have an attorney, but that’s not true when it comes to refinancings — (the Harrises) were not represented by an attorney.”

Taylor said that many in the industry don’t feel comfortable tackling a closing without an attorney.

“When I sat down at my closing, and I’ve been working on predatory lending and foreclosure issues, and still the stack of papers in front of me is overwhelming and you’re relying on the lender, broker or whomever is sitting across from you to summarize page by page,” Taylor said.

Hofeld the Harrises were under a lot of pressure at the closing and they were not given time to assess the mountain of documents they were presented.

“These closings were rushed and there was pressure on them to sign sign sign,” Hofeld said. “Things weren’t explained to them, plus, they didn’t get any documents. There wasn’t really a lot that could have tipped them off.”

Taylor said many homeowners don’t understand that if something doesn’t seem right at a closing they can do something about it.

“If at closing [the homeowners] don’t have an attorney and the terms are different, they have every right to get up and walk away,” Taylor said. Taylor said brokers rely on the immense pressure of a closing and the sense of trust they’ve gained with the homeowner to convince them to sign a contract that is not in their best interests.

“The people who are out there to make some money off of this, the sharks the predatory lenders, they’re good salesmen,” Taylor said. “They’re good at what they do as far as trying to gain the trust of someone and deceiving them in a way that sometimes you wouldn’t even know.

“They will do and say whatever to get their foot in the door to get people to sign these papers because they’re going to walk away with $5,000 in their pocket and they could care less if the person isn’t going to be able to afford the loan in one or two years or else they’ll be back in one or two years saying you’re mortgage is going to adjust, I can refinance that for you and then they pocket another $5,000,” Taylor said.

Pam described Mark Diamond’s rapport with her parents as overly friendly. Tommie and Louis described how Diamond would come over to chat and how he wouldoffer favors and services unassociated with his position as a mortgage broker.

“I think this guy, Mark Diamond, from everything I hear about him, is very smooth and charming.” Hofeld said. “I think he really did ingratiate himself with them and gain their trust — something else that enabled him to pull the wool over their eyes was the fact that they never got any disclosures.”

Hofeld said cases like the Harris’s are fueling the sub prime mortgage crisis.

“The root cause of this entire sub prime credit crunch is this kind of fraud, the kind of fraud you see in this transaction: Where brokers and sub prime lenders either intentionally — usually the brokers intentionally — committed fraud in the transaction and got people into loans that they couldn’t afford, and the lenders who are making the loans look the other way or condone what was going on,” Hofeld said. “In many cases, they knew what was going on, and they were making so much money — and they were making their money up front at the closing table — that they didn’t care what happened to the loan after it was sold to an investor on Wall Street.”

Taylor said the market has a threshold before a corrective action is taken.

“Wall Street got hit, Wall Street started losing money and now all of sudden they realize maybe it is better to keep someone in their home at a 6 percent interest rate than getting paid at 10 percent interest rate because at least there is still going to be money flowing,” Taylor said. “When Wall Street started getting hit and losing money, that actually had a ripple effect and servicers gained more flexibility in the work out options to keep someone in their home.”

Taylor said the first step for someone who thinks they may be the victim of a predatory loan is to seek professional help.

“My first thing is go to a counselor. Because a counselor or a community group that works on these issues is familiar with the workout options that are available or may have contacts at their lender,” Taylor said. “It could help streamline the process or get quicker results.”

Munai Newash, a national processor at ACORN Housing, 209 W. Jackson Blvd., said a housing counselor can help identify a predatory loan and determine the next step for a homeowner.

“It gives them basically more bargaining power,” Newash said. “Where if they do have a bad loan and they can prove it was predatory, it just allows them to bargain a little bit more and then the lender will usually do a little more for them than if people just got behind.”