The Great American Foreclosure Story: The Struggle for Justice and a Place to Call Home

by Paul Kiel [ 1] Pr oPublica, , Apr il 10, 2012, 3 a.m.

Note: This stor y is not subject t o our Cr eative Commons license. This stor y is also being published as an ebook for all devices in par tner ship w ith Open Road, and is being made available [ 2] in par tner ship w ith Am azon.com as par t of Amazon's Kindle Singles pr ogr am. Sheila Ramos' grandsons, 10 and 13, star ted cr ying. They want ed to know wher e the house was. Ther e wasn't one. There was only a tent. They had flown fr om Flor ida, after Ramos had fallen hopelessly behind on the mortgage for her three-bedroom hom e, to this family-owned patch of rural land on H awaii's Big I sland. Ther e, on a July night in 2009, they pitched a tent and, with no electr icity, star ted a new life. I f Ramos were in her 20s, living off the land might be a marvelous adventur e. H awaii is beautiful, and t he weather is mild. I n the near ly thr ee years since she moved her e, her family has built a semi-permanent tent encampment, and they now have electr icity. But it's not how this 58-year-old grandmother, who has custody of her t hr ee grandchildren, imagined spending her retir ement after working for mor e than 30 year s nine running her own businesses. She r egularly scours the local dump and r ecycling center for items she can salvage. The story of how she ended up in a tent is the story of how America ended up in a foreclosure crisis that has not ended, t hat still drags down t he economy and threatens to for ce millions of families from t heir homes. Alr eady, banks have for eclosed on more t han 4 million hom es since the crisis began in 200 7. With almost 6 m illion loans still in danger of foreclosure, 2012 could ver y well be the wor st year yet . Ramos' st ory is remar kable not because it's unique but because it isn't. H er st ory doesn't fit any of the conventional nar ratives. Ramos is not a helpless victim. She made m istakes. But she didn't take out her mor tgages to splurge on luxuries or build a new wing for her house. She took out her first mor tgage to live the fr ee-market dream of star ting her own business. She took out later m or tgages to cope with injuries sustained in a car accident. Ever y step of the way, from her first subpr ime loan to for eclosur e, her downfall was abetted by a m ort gage industr y so profitdriven and disconnect ed from hom eowner s that the common inter ests once linking lender and borr ower have been severed. The lending ar ms of t he nation's lar gest financial instit utions helped plunge the countr y into cr isis thr ough their abuses and blunders, and they r esponded t o that cr isis with still mor e abuses and blunders this time in how they handled people facing foreclosure. For subprime borr owers like Ramos, it has been as hard to wor k t heir way out of tr ouble as it was easy for them t o get t he loans t hat started t heir downfall. The millions of pr ime bor rowers who thought they were doing ever yt hing right, only to be caught in a historic wave of unemployment, have been forced to endur e a similar gauntlet of delays, err or s and tr aps. The industr y developed tactics of dubious legality not just robo-signing, which most Amer icans have hear d of by now, but an arr ay of business practices, some dating to the 1990s, that wer e designed to skirt the law and fatten pr ofits. The feder al and stat e governm ents lar gely toler ated these pr actices until they pushed Ramos into a tent and all of us into the Great Recession. Even then, the feder al government, facing an electorate bitter ly divided over how and even whether t o help "ir responsible" hom eowner s, r esponded in ways that proved ineffective. To be sur e, the gover nment 's effor ts wer e unprecedent ed, as Obama administration officials have r epeatedly insisted. But those efforts were also halfhearted. Only r ecent ly, after t he banks admitted t o widespread law-br eaking, did the gover nment launch a response t hat m ight pr ove comm ensurate with the calamit y. This grandmother's st ory outr ageous and com plex is our stor y, the Am er ican for eclosur e st ory. L i vin g th e Am er ican dr eam Bor n Sheila Fer guson, Ramos was one of seven childr en. The family lived in t he small town of H aiku on the island of M aui, where her father did maintenance work at state parks. At 17, she marr ied a m an she'd m et in high school, dr opped out of school and had t wo sons, but divor ced when she was just 19. She kept his sur name, Ramos, but wanted a new life. M aui suddenly seemed small and confining, and she wanted "to get off the rock," as she puts it. So she t ook her two sons, aged 2 and 3, and left for Alaska. She lived in Anchor age for t hr ee decades, building a life wit h her curr ent partner, David Backus. After get ting her GED and an associate's degree in cosm etology, she wor ked in various salons for sever al years, doing women's hair and giving facials. Fr om t here, she jumped t o selling cosmetics in department stores, eventually wor king her way up to a m anagerial post at J.C. Penney a role she loved. "I was a typical cor por ate diva," she says, always im peccably made up and dr essed. As the year s r olled on she wor ked at the company for nearly a decade she gr adually became disenchant ed. When her br other died at 51, she decided "life was t oo shor t" to r emain in a job she no longer enjoyed. What came next was another r einvention. H er par tner , Backus, was an electr ician with a side business building large concr ete vaults that house electr ical equipm ent. Ramos began dabbling with the concrete, mixing and pouring it to m ake stepping stones for her gar den, then planters for small tr ees. Soon she'd taken char ge of t he business and landed a contract to supply an Anchor age electric com pany with the utility vaults. Wor king in a small war ehouse behind the Anchorage house she shar ed with Backus, she managed two em ployees as they mixed gr avel, cement and wat er , poured t he mixture into 1 -ton for ms, and moved t hem t o a truck to be delivered. Ramos laughs when she r ecalls the amazement of fr iends and family at how she'd exchanged business suits and high heels for old sweatpants and r ubber boots. "I t broke my heart to give up t hose suits," she says, but jokes that she'd just traded slinging one t ype of mud for another . She gained custody of her three young gr andchildr en after one of her sons and his wife were imprisoned on drug-related char ges. Around the sam e time, her father had begun suffering fr om Alzheimer 's, so her parents moved in. A fr iend, Elaine Shear er , r em ember s seeing Ram os wor king with concr ete behind the house with a baby carr ier on her back. Occasionally, when Ram os

had to deliver her pr oduct at night, the childr en would join her , sleeping in car seats. Still, t he job allowed her to set her own hours and stay close to home. I n 2004, her business took a major hit when another company under bid her and won the contr act that had been her pr incipal source of income for six year s. Soon after , she packed up and decamped to Flor ida with her three gr andchildr en and her 83-yearold, recently widowed mot her, ready for warmer weather and another reinvent ion. Backus r emained behind but planned to r ejoin t he family once he retir ed. On the Gulf Coast, about two hours nor th of Tampa, lies t he com munit y of Pine Ridge with well-kept, r anch-style homes, equest rian riding t rails, a golf course, tennis courts and a comm unity center . For less than $300,0 00, Ramos bought a 2-year-old house with 2,600 square feet and a swimming pool out back. Com pared to Anchorage, it was paradise. Using the pr oceeds fr om the sale of her par ents' H awaiian home, she was able to buy t he house free and clear. No m ort gage, no debt . She wanted the freedom she had enjoyed wor king for her self. So, in t he fall of 2004, she took out a mor tgage on her new house for $90,00 0 and used the m oney to buy a local lawn-care business. Fir st by herself and t hen wor king with one of her sons, she'd m ow lawns, cut hedges and blow debris. "I love to mow," she says. The business grew to about 40 customers, she recalls. "We were doing good." "A li ttle bi t m or e to catch up" I n June 20 05, Ramos was dr iving a few miles fr om the house with her mother and all three gr andchildr en. A car pulled out fr om a side road and cr ossed her lane. Traveling at 40-45 miles per hour, Ramos couldn't stop in t ime, and her minivan plowed int o t he ot her car . Ramos suffered a br oken ar m and injur ies to her knee and hip. H er mother and gr anddaughter , t hen 10, injured t heir backs. H er car , little more than a year old, was wr ecked. The police r epor t puts the blame on the other dr iver, a woman who was 19 years old at the t ime and visiting fr om New Jer sey. I n a single moment, Ramos had lost her car and ability t o work. Customers dropped off one by one. Soon, the mor tgage paym ent of $790 per month that had seemed well within her means became a burden. She began r unning up debt on her credit car ds. About six months after the crash, she r emembers, she fell behind by one mor tgage payment. Collection agencies began t o hound Ramos. When Shear er visited her fr iend, "I would hear the calls com ing in. I t gets to a person after a while. I did see Sheila being worn down." The wom en had been fr iends for two decades, but "this was the fir st time where I heard her calling m e and crying and saying, 'Elaine, I don't know where to go, I don't know what to do.'" I t was around t he holidays, Ramos recalls, when a postcar d came from Equity Tr ust M or tgage, proclaim ing her eligible for another m or tgage. She thr ew out that postcar d, but the company r an classified ads at the time under the headline "REFI NANCE NOW, LOW RATES" and pr omising, "Aggressive Pr ograms: Fast Appr ovals, Fast Closings. Progr am s fr om good to poor credit. Non-income OK, limited cr edit OK. We can tailor a pr ogram for you. Call 24 hr s." Ramos remember s thinking, "M aybe I 'll just get a little bit mor e to catch up." She landed a $140,000 mor tgage and paid off the $ 90,000 one she had used to launch her business. Before moving t o Flor ida, she'd never taken out a m ort gage, she says, and was inclined to tr ust t he mortgage broker, Stan Peter sen, who ran Equity Trust M or tgage. H e assured her it was OK, she recalls, and she didn't pay much at tention to the details when she signed the paperwor k. After t he old loan and numerous fees wer e paid off, the new loan br ought her enough to buy a car and pay off her ot her debt but little else, she says. Then ther e was the monthly payment: I t star ted at $1,150 , m or e than the one on her last m ort gage, which she hadn't been able t o pay. She swor e off credit car ds. Still, she says, the new m ort gage left her "just sur viving." I t was a subprim e loan, so the worst was yet to com e. After two year s, the initial fixed inter est rate of 9.25 percent would switch to an adjust able r at e. I t could never dip below the initial rate but m ight r ise as high as 14.25 percent. I f Ramos attempted to escape t he loan by refinancing or selling the house before t he r ate hike, she'd be liable for a penalty of about $5,00 0. Around this tim e, one of her sons wanted to live on his own. So, five months after getting her new m or tgage, Ramos took out another $28,00 0 loan against her hom e to purchase a tr ailer for him. I t didn't add to her expenses because her son made t he m onthly payments. But Ramos was doing what so many Americans did at that tim e: using her home as an ATM as the fr enzied buying of the bubble year s r aised the value of nearly ever y house in the countr y. From 2004-06, Amer ican homeowners extracted nearly $1.5 tr illion out of their homes [ 3] , pr oviding a huge boost to the economy. While a lot of that m oney went to gener al consumer spending, part icular ly hom e impr ovem ents, the largest am ount went to pay off other debt. Ramos was typical in using the money fr om her var ious mor tgages to keep her head above water . M any also used t he funds, as she'd done, to star t a business. At t his tim e, she, her m other and gr anddaughter were still being tr eat ed for their injuries. She'd hired a lawyer to pursue a settlement with the other dr iver's insur ance company, but that was dr agging on. After working for mor e than 30 years, she was convinced it would be just a little bit longer before she was healthy and back at her business. I nstead, she began falling behind on her payment s again. To stay afloat, Ramos borr owed fr om friends and relatives, which weighed on her , her friend Shear er says. "She was never one t o owe anybody anyt hing befor e." Ramos would get occasional calls fr om Petersen, her m ortgage broker . "H e was like my best fr iend," she r ecalls. "H e'd say, 'H i, Sheila, how ar e you doing?'" H e knew about the car accident and that she was str uggling, she says. But when she asked whether she should just put her house up for sale, she r ecalls, he said there was no need because she could get yet another loan, one t hat would allow her to pay off her cur rent ones plus give her some m oney to make the first payments on the new loan. That would t ide her over until she got the accident settlement and could work again. "We'll send an appr aiser out, and we'll get you this loan," she remember s Pet er sen saying. "You've got plenty of equity, don't wor ry.'"
L ess t han a year after her fir st big refinance, her second m ajor loan was much lar ger : $ 262,00 0 . H er home, however, had been appraised at $ 40 3,00 0, which, if t rue, meant that i t was gaining about $40 ,0 00 in value every year. Seen t hat way, t he loan seemed alm ost conservat ive.

As with all her other dealings with Pet ersen, she recalls, he himself did not appear; inst ead, a wom an came in t he evening with a stack of papers. Ramos r em ember s that the wom an was r unning late and hur riedly prompted Ram os t o initial or sign her way thr ough. The whole whirlwind cer emony at her kitchen table, she says, t ook about 15 minutes. The thr ee-bedr oom home in Flor ida t hat Ramos The new loan was also an adjustable r ate m ort gage, and her initial m onthly lost to for eclosur e. (Paul Kiel/ Pr oPublica) payment was about $2,200 per month, near ly tr iple that of her first mor tgage. To make those payments, she r ecalls, Petersen had told her she could use the pr oceeds fr om the refinance. After paying off her t wo pr evious m ort gages, t he penalties for paying them off early and var ious loan fees, she would r eceive $65,0 00 in cash.

As Chr istmas appr oached, t he money had yet to arr ive. On Dec. 19, Ramos overdr ew her checking account t wice when she made t wo debit-card pur chases for $9.09 and $7.50 at a Winn-Dixie superm ar ket. The two overdr aft fees came to $66. The next day, a $37.50 check and a $35.66 char ge at Km ar t cost her $66 more in over draft fees. A day later, a $9.95 pur chase brought another $33 overdr aft fee. But that day Dec. 22 the $65,000 finally landed in her checking account, and it was a new day. She repaid fr iends and r elat ives from whom she'd bor rowed thousands. H er bank r ecor ds show she caught up on her taxes, her cable, inter net and ut ility bills. She got her car fixed. She bought Chr istmas presents. She t ook her grandchildren t o a resor t near Disney Wor ld "to give t hem a treat because they'd been so str essed," she r ecalls. Within two months, about $30 ,000 was gone. Looking back t oday, she can't remember wher e it all went: "I t seem s like a dream." T h e W all Str eet m or tgage m ach in e Ramos signed the paper s for her $262,00 0 m ort gage in Decem ber 2006. She didn't know it, but she was riding the last wave of t he subpr im e boom. Arr anged by her local broker , Peter sen, the loan was m ade by a nationwide subpr ime lender called M ortgage Lenders Net work USA. M onths ear lier, the company, then the nation's 15th-largest subpr ime lender , had broken gr ound on a $100 million, 30 0,000 -squar e-foot headquarters building in Connecticut. But less than two weeks after issuing Ram os' loan, the company stopped funding new ones. I t soon fur loughed employees. By Februar y 20 07, it had declared bankr uptcy. Before it collapsed, M ort gage Lender s Network sold Ramos' loan to Wall Street. The buyer was M err ill Lynch, which bundled it with 6,282 other mor tgages totaling $1.4 billion and packaged them into a secur ity, the "M er rill Lynch M or tgage I nvestors Trust, 2007-M LN1." I nvest ors were invited t o buy different classes of the securit y, arr anged fr om least to most r isk. M ost of the m or tgage loans, like Ramos', had been made to bor rowers with poor credit histories. Nevertheless, the cr edit-rat ing agencies M oody's and Standar d & Poor 's gave AAA ratings t o the secur ity's safest classes, m eaning they were supposedly investments of t he "highest quality, with m inim al credit risk." The 326-page offer ing document does include war nings. On page 17 it says, "I n r ecent months, delinquencies and losses wit h r espect to r esidential mortgage loans gener ally have increased and m ay continue t o increase, par ticularly in the subprime sector ." What's m or e, most of the loans, like Ramos', had adjust able r at es that might jum p after t wo years, which could lead t o mor e defaults and foreclosures. Also, a decline in housing prices could make it impossible for borr ower s to sell their homes or r efinance, tr apping them in foreclosur e. And most of the loans went to people with poor credit. I t goes on. M any subpr im e lenders like M ort gage Lender s Network wer e str uggling or failing because their loans wer e per for ming so poorly. They were also being accused of fr aud, t he document says, though it just notes the gener al trend and doesn't say that M or tgage Lenders Networ k faced that charge. Despite t hose caveats, the document asserted t hat the loans in the pool had been made accor ding to reliable underwriting guidelines, meaning t he borr ower s' histor y, assets and income had been car efully reviewed by M or tgage Lenders Networ k. "The consumer 's ability to pay is of pr imary importance when evaluating applications," it said. Still, M er rill Lynch could not "provide any assur ance that M LN had followed the stated guidelines with respect to the or igination of any of the M ortgage Loans." The security found buyer s, including the governm ent-backed mor tgage behemoths Fannie M ae and Fr eddie M ac. I n a federal lawsuit filed in September 2011 against M err ill Lynch, the feder al agency overseeing Fannie and Fr eddie claimed the companies were swindled when t hey pur chased t he pool t hat included Ram os' loan (and 87 other securities sold from 2005-07). M err ill has denied wr ongdoing. As in dozens of other cases filed in r ecent year s by investors in subprime secur ities often pension funds that wer e looking for safe, AAA-r ated investments the suit argues that the mor tgages were wor se t han the offering docum ents repr esent ed them to be, leading to lar ge losses. According to the complaint, the appr aisers, working with lender s and broker s, inflated t he value of homes. I n the case of Ramos' pool, the suit claim s that mor e than a quarter of the loans exceeded the value of the homes, while t he offer ing had said t hat none did. The offering also misrepr esent ed the number of propert ies that were actually investm ents, not primar y r esidences, the suit says. Those ar e seen as riskier loans because the borr ower is likelier to abandon the pr operty. Then there's the issue of how much m oney the bor rowers were making. While subpr ime loans were by definit ion given to people with poor cr edit histories, t hose borr ower s wer e supposed to have sufficient income t o make t heir paym ents. But, the suit char ges, m any didn't. Lender s and brokers often failed t o verify t he borr ower 's income or just made it up. Sheila Ramos' loan was ar ranged by Peter sen, her br oker. M ortgage broker s wer e the gr ound tr oops for the subprime boom. M or e than 200 ,000 people began wor k as m ort gage broker s dur ing the boom , according to t he Financial Cr isis I nquir y Com mission's r epor t [ 4] . Not only did they steer a borr ower t o a cert ain lender, they typically pr epar ed the paperwor k for the loan. They often purported to be acting in the best int erest s of the bor rower, but t hey had a financial incentive t o steer their customer s to more expensive loans. Their compensation was often tied to the interest rate; t he higher the interest rate, the mor e t hey wer e paid. And they had no long-ter m stake in the loan: "For br okers, compensation generally cam e as up-fr ont fees," st ates the FCI C report. "So t he loan's perform ance matter ed litt le." Fraud was widespread in the industr y. Peter sen's company had a big payday for or iginating Ramos' loan, accor ding to the loan documents. From Ramos, the company r eceived $8,200 in fees just for setting up the loan. But Peter sen also got $5,238 from M or tgage Lender s Networ k for or iginating a high-inter est-rate loan. The company collected a total of $13,438. Peter sen's haul was big even for the boom year s. Back then, br oker s com monly ear ned about $10,00 0 for subpr ime loans the size of Ramos', says Fred Arnold, a dir ector of the National Association of M ort gage Professionals. Rules enacted since the housing cr ash par ticularly by the Federal Reserve [ 5] have since restr icted how br oker s are paid. Ramos says she clearly explained her situation to Peter sen: that she wasn't working because of her injur ies and that her family was making do with her mother's Social Security payments and what little ot her income t hey could muster. Pet er sen had the oppor tunity to ver ify her meager ear nings. The m ort gage file, r eviewed by ProPublica, includes an authorization for m allowing Peter sen to examine Ramos' bank st atements and tax ret urns. Fift een mont hs later , when she was facing for eclosur e, Ramos began to investigate the facts of her loan. She r equested her loan documentation from Peter sen's office, which pr ovided it. She says she was shocked to find that her loan application listed her income as $6,500 per m onth. The application, r eviewed by ProPublica, includes other inaccur acies. I t lists her as actively self-employed, but her business had fallen apar t by that point. I t also states that she was not curr ently delinquent on any mor tgage even though Peter sen's company, according to t he loan file, had r eviewed documentation showing that she was.

She called Pet ersen, she says, and asked why he'd falsified her incom e. She recalls his answer: "Well, you got your loan, didn't you?'" I t was "extraor dinarily comm on" for homeowners who took out m ort gages during the boom t o be lat er surpr ised by what their m or tgage br oker s had put on their loan applications, says Robert Br idges, a for mer mor tgage loan audit or. H is job was to check m or tgage files and call homeowners who'd fallen behind on t heir mortgages to see whether there were any misr epr esentations on t he loan application. Over the past sever al years, he's investigated thousands of cases on behalf of mor tgage insurance companies t hat wanted to make sure they didn't pay out on any impr oper ly issued loans. Often, Bridges says, he'd tell a homeowner how m uch incom e the loan application said they wer e making. "They'd go, What? Where'd you get that number? I f I made that much m oney, I wouldn't be in this situation.'" After Ramos found that her incom e had been m isstated, she complained to everyone she could think of. She sent lett ers and emails to t he FBI , the Florida gover nor 's office and the state's Office of Financial Regulation. "M y stated incom e was falsified and none of the infor mation I gave him was confir med," said her 2008 let ter to the FBI M ort gage Fraud Division. Then, echoing what Bridges said he had hear d from so many homeowner s, Ram os wrote: "H e st ated m y income at 6,500 per month. I f I had t his I would not need a loan." Reached on his cell phone, Petersen declined to comm ent, saying only that "the company's closed." H e has not been charged with a cr im e. Neither M ortgage Lenders Net work nor any of its execut ives have been char ged with a cr ime, either . But in an unusual court filing, federal prosecut ors have confir med the company's pr actices are under investigation. I n early 2011, the tr ustee overseeing t he liquidation of the company proposed, as a cost -saving measur e, destr oying a warehouse full of mor tgage files. The Justice Department objected, arguing that the files shouldn't be dest royed until investigator s had had a chance to thoroughly review t hem. The company's "loans ar e the subject of many ongoing investigat ions," said the submission to the bankrupt cy cour t. Representatives for the defunct com pany declined t o comment. The mor tgages bundled into "M er rill Lynch M or tgage I nvestors Tr ust , 2007-M LN1" have not far ed well. As of October 2011, about 40 percent of them had been for eclosed on, as shown in the char t below, taken from investor report s. Another 21 percent of t he borr ower s are behind on their paym ents and facing for eclosur e. H ow H om eow n er s Ar e Far in g i n th e Secu r i ty th at I n cludes R am os' M or tgage M oody's and S&P now rate the safest classes of the security once judged as having "m inim al" r isk as having "ver y high" risk. I t's a junk bond. Sim ilar securities have also fared poor ly. Am ong t he 88 M er rill Lynch secur ities target ed by the Fannie M ae and Freddie M ac lawsuit, all have high rates of foreclosure and delinquency. When the suit was filed last fall, on aver age, a little more than half of the homeowner s had eit her already lost their homes to foreclosure or were in danger of doing so. Sour ces: Deutsche Bank tr ust r epor ts, Pr oPublica analy sis The collapse of hundreds of securit ies like these pr ecipit ated t he 2008 financial cr isis and plunged America into the Great Recession. T h e m or tgage ser vi cin g i n dustr y One day in the m ail, Ramos r eceived a notice that she had missed a mortgage payment. The notice came from a company she'd never heard of, Wilshire Credit Cor p. "I was confused," she says, because she'd sent her payments to her lender , M ortgage Lender s Network. Why was this other company, Wilshir e, suddenly asking her for payments? I n a bygone er a, the bank that m ade the loan held onto it and collect ed the payments. I n today's system , that 's r ar e. I nstead, the job of actually dealing with homeowners and collect ing loan payments falls to mortgage ser vicer s. Ser ving homeowner s is decidedly not the mor tgage-servicing industr y's focus. Servicers rarely have a stake in the loan itself. They are m iddlemen, collecting payment s from homeowners, keeping a small cut and passing the bulk to investor s. They make money keeping costs low. H ir ing employees to speak to borr ower s about avoiding foreclosure, for example, increases costs and diminishes profits. So, in general, servicers make money by providing as litt le service t o hom eowner s as possible. Dur ing the housing boom , the industry under went a dr amatic consolidation. I n 2004, the 10 lar gest servicers handled about a quarter of the country's mor tgages. By late 2008, the five largest handled about 60 per cent. I t was a high-volum e, low-cost business that boiled down to processing payments. I nter action with the customer was minimal and, when it did occur, involved call-center employees who often made as little as $10 per hour . That model humm ed as long as r elatively few people fell behind on their mor tgages. With the housing crash and ensuing r ecession, ever ything changed. Delinquent homeowners stopped sending their m onthly checks, so instead of processing payment s that had come in like clockwork, ser vicer s suddenly had to shoulder the m uch mor e expensive tasks of making collection calls, considering the homeowner for som e sort of modification or payment plan, and seeking foreclosure if the hom eowner fell far enough behind. Ser vicer s wer e unpr epar ed. Their employees lacked sufficient training, and ther e were t oo few of them. They lacked pr oper equipment and r elied on out dated computer system s. And ther e was little financial incentive t o spend time wor king with customer s. H andling a delinquent loan cost s the servicer more than 10 times as much as a loan on which the bor rower is making t he monthly payments, according to an estimate by federal r egulator s [ 6] . Just as Ram os didn't know that M err ill Lynch had bought her loan and then sold it to investors, she also didn't know that M err ill Lynch had selected its own subsidiar y, Wilshire, to collect her payments. A small ser vicer based in Beavert on, Ore., with about 800 employees at the time, Wilshire specialized in handling subpr ime loans. I n the offer ing documents for the secur ity that included Ramos' mor tgage, M er rill Lynch assured investors t hat homeowner s would be in good hands. Wilshire had ample exper ience with borr owers who wer e "exper iencing financial difficulties." Their employees wer e hands-on, prepared for "substantial per sonal interaction with t he obligor s to encourage them to make their payment s tim ely, to work with t hem on m issed payments, and to str ucture individual solutions for delinquent obligor s."

Typical for mor tgage servicer s, those phone calls would com e from t he com pany's collections depar tment. At the same time, hom eowner s would hear via letter s and phone calls fr om Wilshire's "loss m itigation" team, which was charged with deciding whether to foreclose or pur sue a "viable workout oppor tunit y." The offering docum ents give little detail on how for eclosur e might be avoided. H owever , the com pany said it would be quick in deciding to for eclose if necessar y. Ramos, of cour se, had taken out the loan because she was "exper iencing financial difficulties." The loan had bought her time, but how much? She was st ill injured and unemployed, leaving next to no income for the household, which was now saddled with a $ 2,200 m onthly mortgage payment. H er checking account went one way: down, month after month. By t he middle of 20 07, lit tle m or e than half a year after the $65,000 had landed in her checking account, the m oney was gone. Nevertheless, she had hope. She'd taken in an elder ly family friend with Parkinson's disease to take car e of alongside her mother , and his Social Security payment s provided a little addit ional income. One of her brothers had also moved in after discover ing he had leukem ia. H e agr eed to help with t he paym ents while he under went treatm ent. She star ted housecleaning because, even with her weak left arm, she could do that work: She and her teenage granddaughter labored together for the few clients she was able to find. Altogether, she figured, it might be enough to make the m ortgage and get by. H er lawyer s also had finally launched a suit over t he car accident, and she was hopeful they'd win som e extra damages beyond paying for her t reatments. But she was continually falling behind and catching up, a patter n t hat began even before the loan funds had run out. She says she often thought she'd made a tim ely payment only to find t hat Wilshire considered it over due. Late charges and other fees made her climb steeper. The com pany's employees often called and pressed her to m ake her payments, but she says no one could clearly explain the reason for cer tain char ges or what she needed to do to catch up. Ramos had enter ed the maddening, Kafkaesque maze of dealing with servicers. H er complaints echo t hose of consumer advocates and tens of thousands of bor rowers who say ser vicer s r outinely lost documents, didn't answer questions, kept hom eowner s on endless hold or transferr ed them to people who knew nothing about their situations. I ndeed, servicer er r ors have often m ade bad situations wor se [ 7] , sometim es even pushing borr ower s into foreclosure. The accounting problems have been exposed in bankr uptcy proceedings [ 8] , which can for ce servicers to disclose exactly how they handled loans. Bankruptcy judges, who som etimes get so angr y they scold servicers from the bench, have penalized companies for improper ly pr ocessing payments, attempting to collect money t hey're not owed and char ging unwarr anted fees. "Everyone gave me the runaround," Ramos recalls. When she t ried to get answers, she oft en found herself being transfer red to t his or that person, only to end up leaving a voice-m ail message for someone she knew wouldn't call her back. "You just don't understand how hard she wor ked at this," says Shear er , her friend, who r ecalls watching Ram os spend hour s on t he phone. "Nobody knew anything, and they'd pass you fr om one person to the next . I t just seemed like she never could get the hor se by t he tail." After near ly a full year of falling behind and catching up, Ram os tr ied to m ake a payment in M ar ch 200 8, but Wilshir e refused it. At t he time, she was less than a month behind, accor ding to payment r ecor ds kept for investor s in the security. But Ramos r em ember s being t old that she was too far behind on her payments to m ake any more and that she should expect to hear from another Wilshire employee about what would happen next. Ramos had reached the brink of foreclosure. She reached out for help from housing counseling nonpr ofits. "M y loan com pany will not work with me Please Please help me save our home," she wr ote t o one. A w i n -w in Ramos was part of a growing wave of defaults. H ousing prices had been tum bling for more than a year after peaking in 20 06, m eaning that many delinquent borr ower s could no longer sell their homes to get out fr om under their debt , because their homes were now worth less than they owed. For a subprime ser vicer like Wilshir e, the downtur n m eant that nearly half of the subprime loans it handled wer e delinquent. That was a pr oblem for lender s, for the Wall St reet banks that had bought such loans, for the invest ors who'd purchased securit ies Wall Street concocted out of t hese loans, and, of cour se, for borr ower s who wer e losing their homes, their savings and t heir creditwor thiness. For policymaker s, the solution was clear: Get str uggling homeowner s into affor dable loan modifications. To be sur e, modifying a loan by r educing the interest rate, for instance, would m ean a loss or lower pr ofit for t he investor . But if for eclosur e was likely to result in even higher losses, then a modification was prefer able. Given plum meting home values, a m odification would often save the investor m oney. I t seemed like the ult imate win-win. The ear liest governmental pr ogram had a m odest aim: to make sure the ser vicer m er ely consider ed a modification befor e pursuing for eclosur e. I n October 2007, Pr esident Geor ge W. Bush's adm inistr ation launched the H ope Now Alliance to provide a forum for ser vicer s and housing counselors t o communicate. "The first step t o avoid a foreclosure was for t he ser vicer and borr ower to talk to one another," wr ote former Treasury official Phillip Swagel in a 20 09 narr ative of the financial crisis, "but this was not happening in a sur prisingly high proportion of instances som e estimates were that half of for eclosur es started without contact between borr ower and lender or ser vicer ." So, at the administr ation's prompting, servicer s backed the launch of a hotline (888-995-H OPE) t hat homeowner s could call to speak with a housing counselor , and the companies agreed to send notices to delinquent borr ower s about it . Pr esident Bush him self r ecor ded a public service announcement encour aging hom eowner s to call. But even if a hom eowner contacted a counselor and qualified for a m odification, there was no requirement that the servicer offer one. I n fact , t her e wer e no requir em ents at all for ser vicers. The alliance was administer ed by the Financial Services Roundtable, a powerful banking industry trade group and headquar ter ed in its offices. Loan modificat ions were indeed a win-win for ever yone except t he ser vicer s. And it was the servicers who wer e the deciders. They deter mined whether hom eowner s like Ramos got loan modifications. Ser vicer s ear n their main revenue through a small fee for handling each loan, usually between .25 and .5 percent of the principal each year , depending on the type. (Riskier loans like Ramos' netted mor e.) But servicer s have another big income stream: penalty fees and for eclosur e-related char ges. Ramos' case shows how lucrative such fees could be. I f Ramos had made all of her payments on time, Wilshire would have r eceived only about $1,300 (.5 percent of her outst anding principal) in the fir st year of handling her loan. But if Ram os was mor e t han 10 days late with a payment, it gener ated a late char ge of 10 per cent of the over due paym ent in her case, about $220 . That amount would t hen be due on top of what she owed. Experts say these terms were especially punit ive even for subpr ime loans, which t ypically gave borr owers mor e tim e and penalized them less for being late. While Ramos no longer has records showing how much she paid in late fees, an August 20 08 breakdown by Wilshir e of unpaid charges on her account shows outstanding late fees of $770 and a r etur ned check char ge of $50 an extr a $820 on top of its base of $1,300.
I f Ramos or other troubled homeowners could som ehow scr ape toget her the m oney t o pay such fees, great. But t he tr ue genius of the business model is t hat it didn't m att er whether bor rower s could pay t he fees. I f a hom eowner went bust and t he house was sold t hrough for eclosure, no pr oblem. The secur it izat ion cont ract s ensur ed t he servi cer was first in line t o collect .

I t was a virtually fail-safe income str eam . I n 2008, Ocwen, a subpr im e servicer similar to Wilshire, r eceived about 19 percent of it s mor tgage-ser vicing income from such fees. I n fact, som e servicing executives assured analysts that m ounting delinquencies would actually help t heir companies. David Sam bol, chief operating officer for Countrywide, t hen the countr y's largest subpr ime lender and servicer , pitched t his idea to stock analysts during a fall 2007 ear nings call. H is company, he claimed, would benefit fr om "gr eater fee incom e from item s like late charges" and t he com pany's "count er-cyclical diversification st rategy" of running businesses involved in foreclosing on homes, such as proper ty inspection ser vices. As m ore and mor e homeowners r an int o trouble and t hen foreclosur e, the servicer could count on m or e shor t-term income, not less. I n 2010, the Federal Trade Comm ission sued Countrywide, accusing it of a widespr ead scheme t o profit from delinquencies and foreclosures by hitting homeowners with bogus or m ar ked-up char ges. Countrywide set tled the suit without admitting any wrongdoing. I t agreed to stop over charging bor rowers and pay $10 8 m illion t o consumer s who'd been affected. Com par ed to Countr ywide, Wilshir e was tiny and hasn't been charged wit h wr ongdoing. But t he larger econom ics wer e the same: I f Ramos kept paying, Wilshir e made money. I f she lost her hom e, Wilshir e made m oney.

Ram os show s a br eakdow n by Wilshir e of unpaid char ges, including outstanding lat e fees of $770 and a r etur ned check char ge of $50 . (Paul Kiel/ Pr oPublica)

The one option that didn't m ake financial sense for servicers was spending money on staff and equipment to m ake sur e that hom eowner s like Ramos were adequat ely r eviewed for m odifications. Tr ained employees would have to spend valuable time analyzing the bor rower's situation and, in effect, re-under wr ite t he loan. Wor rying too m uch about unnecessar y foreclosures would cut into ser vicers' pr ofits. Ser vicer s also wor ried that investors might object to cut ting hom eowner s' payments and sue to r ecoup any supposed losses. No forum for servicer s and borr ower s to "talk to one another " was going t o change the fundamentals of the ser vicing industr y: Collect payment s or foreclose. I n the r ar e event t hat a hom eowner did receive a m odification, it didn't typically lower the homeowner 's payments, accor ding to a 2008 r epor t by federal banking regulators. About a third of the modifications gr ant ed in 200 8 [ 9] act ually made the payments go up, because all the ser vicer had done was lump the arr ears and fees into the pr incipal and then amor tized the new, higher balance over t he life of the loan. About a quart er of the tim e, the payment s stayed the same, and only about 42 percent of the tim e did t hey actually go down. As a result, most modificat ions mer ely delayed for eclosur e. By the end of 2009, accor ding to regulator s [ 10] , m ore than two-thir ds of the homeowners who'd r eceived modifications in 200 8 had fallen behind again. I n 2008, M er r ill Lynch, Wilshire's cor por ate parent , r eacted to the downtur n not by expanding but by freezing hir ing at Wilshire. No new staff was added, and depar ting employees were r eplaced by t emp workers, many of whom had scant exper ience in the m or tgage industr y. For M er rill, the logic was clear : The bubble had popped; investor s were no longer willing to buy packages of subprime loans, so there would be few if any new loans for Wilshir e to handle. So what if m ost of the old loans would now require far more time and effor t? Wilshire would just have t o m ake do with the staff it had. "D ear V alu ed Custom er " I t was through the H OPE Now hotline that Ramos found a housing counselor with Consumer Cr edit Counseling Ser vice, a lar ge Atlanta-based nonprofit that has since changed its name to CredAbility. She went through all her incom e and expense infor mat ion, and the r esulting worksheet, pr epared by the counselor, shows Ramos with monthly income of $4,700, which was enough to cover her r egular monthly m ort gage payment s (not including fees) as well as her living expenses with about $300 left over . The counselor t old her she was a good candidate for a mortgage modification, meaning t hat it would not only help Ram os but be in the best financial interest of the investors. H ere was a case of that win-win. With home prices plumm eting, kicking Ramos out of her hom e meant a cert ain loss for invest ors. Even a generous modification would likely cost them less. All that was r equir ed was for the ser vicer to put its own inter ests maxim izing fees and m inim izing costs to the side. Studies have shown t hat homeowner s wor king with counselors have far ed bet ter than those working on their own (a low bar to clear ), but counselor s have often complained that they spent a lot of their time just tr ying to get homeowner s' applicat ions acknowledged and reviewed. Delays and lost documents have been the rule [ 11] . So it went with Ramos and her counselor: Their major hur dles were logist ical getting someone, anyone fr om Wilshir e on the phone and getting that per son to acknowledge r eceipt of document s that they had sent to the company. Ramos' counselor sent t he same docum ents several times, Ram os r emembers. Even though Wilshire was a mem ber of the H OPE Now Alliance, Ram os r em ember s a Wilshir e employee telling her that ther e was no need to go thr ough a counselor : She could simply contact the company dir ectly which, of course, she'd had no luck doing. Ramos knew she couldn't r ely on Wilshire for help. I n the months that passed while she wait ed for an answer to her application for a modification, she looked for other options. She listed the hom e for sale wit h the help of a fr iend who offer ed to waive her commission if it sold, but there wer e no taker s. She began sear ching for a hom eless shelter in the area that could take all seven people in the house if they wer e suddenly evicted, but found that no shelt er could. She got help fr om neighbor s. One day, dur ing one of her many conversations with Wilshir e employees, she recalls t hat an employee told her the company might allow her to r esume making payments if she m ade a lump-sum payment of ar ound $5,00 0. She told one neighbor, Dave Shea, about the offer , and Shea decided t o make t he r ounds in the neighbor hood asking for donat ions. "I knocked on a lot of doors," Shea said. "I know a lot of folks." H e told them their neighbor was facing for eclosure and needed help getting caught up. One by one, they handed over $50, $100, som etimes sever al hundred dollar s. I t wasn't a har d sell, he says. "These people are just willing to help." Eventually, he delivered about $5,0 00 to Ramos. Elated, she went wit h her br other to his cr edit union to deposit the money and conver t it into a cashier 's check, she r ecalls. Wilshir e, as do many ser vicer s with delinquent homeowner s, r equired payment with guaranteed funds. They m ailed it off, hopeful they'd finally stopped the snowballing growth of her debt, she says. But wher e those funds went whether they wer e deposited and not applied to her m or tgage or simply lost she still doesn't know. H ow ser vicers handle payments is often a m ystery to homeowners, who often com plain that they'r e lost or misapplied. On July 12, 200 8, Ramos got her fir st clear response to her efforts to catch up: a sum mons. "A lawsuit has been filed against you," it said. Wilshir e had decided to for eclose. Ramos' chances for a modification at Wilshire, it turns out, wer e dismal. I n 2009, as par t of a report on Wilshir e's servicing performance, the credit-rating agency Fitch analyzed how people in Ramos' situation subpr ime bor rowers who were delinquent in ear ly 20 08 had fared. A year later , only about 12 per cent had either caught up on their payments or managed to pay off their loans (mostly thr ough selling or refinancing). The r est fully 88 percent had already lost their homes, wer e in the foreclosure pipeline, or wer e st ill behind and likely destined for foreclosure.

Bank of Am erica spokesman Rick Simon, speaking for Wilshir e because the bank later acquired t he company, says the servicer had r eviewed Ramos numerous times for some sor t of for eclosur e alternat ive. Back in Februar y or M arch 2008, ther e had been "a discussion of setting up a form al six-mont h payment plan," he says, but Ramos hadn't agr eed. Ramos has no memor y of such a conver sation. The payment plan was Wilshir e's preferr ed solution to delinquency in 20 08, accor ding to a M oody's repor t, and a favorite industr y tool: The servicer sim ply tacked missed payments and fees onto r egular payments. The r esult, of cour se, was even higher payment s for t he struggling borr ower . Three m onths lat er, in June, Simon says, Wilshire declined Ram os' application for a modification. The com pany then r eviewed her for another paym ent plan but r ejected that, too. Sim on declined to provide the reasons for the denials or evidence that Ram os had been not ified. Ramos, for her par t, doesn't r emember ever hear ing about any of this befor e she was sued. I nstead, almost a week after Wilshire launched a for eclosure suit, it sent her a lett er, which read in full: Dear Valued Customer : I n connection with the above refer enced loan, Wilshire Cr edit Cor por ation ("Wilshir e") has r eviewed your r equest for a M ODI FI CATI ON. Please be advised that after car eful consideration, Wilshire has declined t o approve your r equest. I f you have any questions, please contact us at our toll-fr ee num ber above. Sincerely, Loan Wor kout T h e bailout I t was in 2008 that the full force of the for eclosur e crisis hit. H ousing prices went into fr ee fall by year's end, Tampa hom e pr ices had tumbled about a thir d from their peak [ 12] . For eclosur es skyr ocketed, rising about 80 percent fr om 200 7. I n September, the investm ent bank Lehman Brothers went bankr upt, and the beating hear t of the financial system seized up. "I felt t hat t his is som ething like I 've never seen befor e, and the American public and Congr ess don't fully understand the gravit y" of the cr isis, legendary investor War ren Buffett r ecalled in a 20 09 int erview with The Wall Str eet Journal [ 13] . "I thought, we ar e r eally looking into t he abyss."
Though t he cri sis had spr ead far beyond real estate, m or tgages like Ramos' bundled, sold, bundled again, insur ed and insured against wer e t he absolute epi cent er. Banks and insur ance compani es car ried billions of dollar s of mort gage-related assets on t heir balance sheets, and t hose assets were plunging i n value by the day. Yet , H OPE Now, with i ts goal of encouraging homeowners and servicers m er ely t o comm unicate, was still t he government's chief effor t t o st em t he dam age.

For refor mer s, the near collapse of the financial system and the ascension of an energetic new pr esident whose par ty contr olled both houses of Congress provided an opportunity t o act boldly. Until that point, the idea of using taxpayer dollars to st em for eclosur es suppor ted by some Democr ats and economists in the Bush administr ation's Tr easur y Department had been a political nonstarter because of the per ception that it would reward ir responsible behavior. But in October, Congress passed legislation creating the $70 0 billion Tr oubled Asset Relief Pr ogram [ 14] , mor e comm only known as TARP or simply "the bailout." The TARP plan, form ulated by Bush's Tr easury Departm ent, was for the gover nment to buy up the "tr oubled assets," m ainly those securities backed by mor tgages that were defaulting in dr oves. Democr ats agreed but pushed for a clause that would mandate the gover nment to modify the loans contained in the assets it purchased. With the gover nment as the dom inant owner of the assets, the thinking went, it would be in a position to dictate how they were handled. After the bill passed, the stage seem ed set for the government to rescue not only the countr y's largest financial institutions but

Ram os r eview s a cour t docum ent . (Paul Kiel/ Pr oPublica)

also millions of homeowner s. Less than a m onth after the bill passed, Tr easury Secr etary H ank Paulson changed cour se. Buying up t he assets would be too complicated and take too long, he decided. The financial syst em needed quicker inter vention. So, t he Treasury Depart ment invested directly in the banks. Along wit h the billions being loaned daily by the Feder al Reser ve, the move stopped the economy's free fall. But it did nothing t o addr ess foreclosur es. O bam a's opti on s I n the wake of that decision, t wo broad alternatives em erged. Federal Deposit I nsurance Cor p. Chairm an Sheila Bair, appointed by Bush, had been agitating since at least 20 07 for m odifications. Now, she proposed a system of incentives [ 15] to make affordable modifications more attractive to servicers and investor s. Using a $24 billion pool of TARP funds, the FDI C would pay ser vicer s $1,000 for each modificat ion. That m oney would help offset t he costs of evaluating the bor rower and compensate the servicer for for saking the quick retur ns fr om for eclosur e. The FDI C would also pr ovide insurance on any modified loans by shar ing the loss if t he homeowner default ed again and ended up in foreclosure. For investor s, Bair thought, modifying loans through the pr ogram would be a no-brainer , and they would lean hard on servicers to push them thr ough. M any Democr ats supported t he idea. I f the FDI C plan was about dangling car rot s, the other option was all st ick. Called "cram down," it r elied on bankruptcy cour ts to force a m odification on investors and servicers. Cur rent law allowed judges to slash cr edit-card and other kinds of debt (even mor tgages on second hom es), but t he debtor 's pr im ar y mortgage on a pr incipal residence was off limit s. That's why Ram os hadn't declar ed bankruptcy. She didn't have much debt outside of her mortgage, so at m ost, declar ing bankruptcy might have slightly delayed her for eclosure. But if the law were changed, then bankruptcy might have made sense for Ramos. A bankruptcy judge would have assessed her financial situation and the tr ue market value of her home. I f the judge found Ramos had enough income to keep t he home, then he could cr am down her debt by r educing the interest r ate, t he pr incipal, or both. I n fact, the carr ot of incentives and the stick of for ced modificat ions probably wor ked best together: The t hr eat of a bankr uptcy judge stepping in would provoke ser vicer s to m odify loans. "That was always t he thought, that judicial modifications would make voluntary modificat ions work," says North Carolina Rep. Br ad M iller , one of several Democr ats who wer e pushing cramdown legislation. Republicans and the banks vehemently opposed cram down. "I t under mines the foundation of t he capitalist economy," says Swagel, the for mer Bush Tr easur y official. "What separates us fr om [ Russian leader Vladimir] Putin is not retroactively changing contracts." Banks, of cour se, didn't want a t hir d par ty slashing their loans and potentially costing them billions in lost inter est and wr itedowns. "Ever y now and again an issue com es along t hat we believe would so fundamentally undermine the natur e of the financial system that we have to take major effort s to oppose, and this is one of them," Floyd Stoner, the head lobbyist for the American Bankers Association, told an industry magazine.

Democrats tr ied and failed to include cr amdown in the TARP legislation, in part because then-presidential candidate Bar ack Obam a, who was leading in t he polls and was consulted by Congressional leader s, thought something so contr over sial might "cloud this thing with part isan polit ics," as he put it [ 16] , and im per il the bill's passage. But cramdown's backers remained optimistic. After all, Obama had campaigned on it and, shortly aft er r ejecting t he idea of including it in the TARP, had called it [ 17] "the right thing to do, to change our bankruptcy laws so that people have a better chance of staying in their homes." H e pr omised Democr at s he'd "push hard to get cramdown into the law," M iller r ecalls. Cr amdown would change the law, requir ing an act of Congress. But Sheila Bair 's incentives could be enacted unilater ally by the executive branch. Less than a m onth into his pr esidency, Obama announced his new plan [ 18] . "I n the end, all of us ar e paying a pr ice for this home m or tgage cr isis," he told a cheering crowd in M esa, Ar iz. "And all of us will pay an even steeper pr ice if we allow this cr isis to continue t o deepen a crisis which is unraveling homeownership, the m iddle class and the American dream itself. But if we act boldly and swiftly to ar rest this downward spir al, then ever y Amer ican will benefit ." The pr ogram, he pr omised, would "enable as m any as 3 to 4 m illion hom eowner s to modify the ter ms of their mor tgages." Even as he spoke, Tr easur y Depar tment officials wer e still scr ambling to work out the details rules and calculations that would bear enormous consequences for m illions of homeowners like Ramos and for the American econom y. "We didn't have much on paper at that time," Laur ie M aggiano, policy director for t he new progr am , would later say. I n the end, the H om e Affor dable M odification Progr am, or H AM P, plucked a few ideas fr om Bair 's carr ot appr oach: For example, servicers would receive $1,000 immediat ely upon gr anting a m odification to er ase their incentive to foreclose and compensate t hem for evaluating hom eowner s' ability to afford the modified loan. That incentive was not based on hard evidence. "I t was just a guess that $1,0 00 might be enough," says Karen Dynan, a for mer senior economist at t he Feder al Reser ve. But the administration's final plan lacked an incent ive Bair consider ed crucial: having the gover nment bear half the loss of any m odification that failed. The administr ation balked. To have taxpayer s eat the losses caused by deadbeat bor rower s was seen as political dynamite. A Gallup poll [ 19] taken in t he fall of 2008, for example, had found that 79 percent of Amer icans cited "people t aking on too m uch debt" as the main cause of the financial cr isis. ("Banks m aking risky loans" was second, at 72 per cent.) I nstead, Tr easur y designed the system to pay investors for m odifications, but only in increment s and only if the borr ower continued to make payments. The pr ogram only "paid for success," the administration boasted. On aver age, investors could hope t o reap about $15,00 0 in subsidies over five year s. Bair saw another flaw she consider ed fat al. "I n addition to the lack of economic incentives," she later explained, "the oper ational complexity was mind-boggling. The big ser vicer s do not pay or train their staff as well as they should. The tur nover is ver y high. That's the r eality. You r eally have t o m ake it simple for the pr ogram t o be operationally effective." I n her view, the car rot needed to be juicy, sweet and easy to get because there were no penalties. Ser vicer s didn't have to part icipate at all; if they volunteered for the progr am, they signed a contr act with the Tr easury Departm ent agreeing to follow the r ules in retur n for the incentives. I n the view of many on the left, the pr ogr am put the gover nment in a weak, almost supine position. But that was still too much for som e on the r ight, who attacked the plan as a bailout for "losers." The day after Obama announced the creation of H AM P to that cheering cr owd in Arizona, CNBC comm entator Rick Santelli excoriated the progr am in a r ant [ 20] that is widely cr edited as sparking the Tea Party movement, which jolt ed American politics t o the r ight . "H ow m any of you people want to pay for your neighbor 's mortgage t hat has an extra bathroom and can't pay t heir bills?" Santelli thunder ed. Do Amer icans, he asked, "really want t o subsidize the losers' mor tgages"? Cr amdown's pr oponents saw H AM P as mer ely a fir st step. Publicly, the administration still suppor ted cr amdown, but its supporters saw worr ying signs. The White H ouse "kept punting" when Democr ats pushed for cramdown to be attached to lar ger pieces of legislation such as the stimulus bill, says form er Rep. Jim M arshall, a moderate Democr at from Geor gia and cr amdown backer. I n pr ivate meetings, Treasur y staffers began conversations with congr essional aides by saying t he administ rat ion supported cr am down and would then "follow up with a whole bunch of reasons" why it wasn't a good idea, says an aide to a senior Democr at ic senator . The administration fear ed the consequences for the nation's biggest banks, which had been r escued just months ear lier. I f too m any consumer s wer e lured into bankr uptcy, t hey wouldn't have only their mor tgages reduced. They might ver y well have other debt s slashed, such as home-equity loans and credit-car d debt. The cum ulative effect could devastate the banks, plunging the nation back into a financial crisis. Cr amdown's Democr atic suppor ter s needed the pr esident 's vigorous suppor t, because the m easur e faced powerful opponents: not just t he too-big-to-fail banks but small banks and credit unions. "The community banks went bonkers on this issue," says former Sen. Chr is Dodd, D-Conn., then head of the Senate banking comm ittee. Democratic leader s offered to exempt smaller banks fr om t he legislation but couldn't r each a deal. After nar rowly passing the Democrat-controlled H ouse, cramdown was defeated in the Senate when 12 Dem ocrats joined Republicans [ 21] to vote against it. Some like Rep. Barney Frank, D-M ass., then head of the powerful H ouse financial services com mittee, don't blam e the White H ouse for the failure of cr amdown. But other s cer tainly do. "Their behavior did not well serve t he country," says Rep. Zoe Lofgr en, D-Calif. I t was "extremely disappointing." When cr amdown failed, Bair felt the complicated, weak incentives in H AM P doomed that progr am to failur e: "I think Tr easury wanted a pr ess release. I think [ Treasury Secret ar y] Tim Geithner and [ t hen Obama economic advisor ] Lar ry Summer s wanted to be able to tell the president that they were doing som ething on loan mods." "I got all dr essed up" Ramos' for eclosur e made just as little sense to her as Wilshir e's actions had. Suddenly, a company named Deutsche Bank was suing her . "This lawsuit that has been filed against me was ver y shocking since, I do not know who the plaintiffs are, or ever hear d of them," she wr ote in a handwr itten note to the judge. "I have been paying thousands of dollars t o another company 'Wilshir e Cr edit Cor p' (which never r etur ns my calls, or acts upon paper wor k they r equest from m e)." The full name of the plaintiff was "Deutsche Bank National Tr ust Company as Trustee for the M LM I Tr ust Ser ies 20 07-M LN1." For Ramos, it might as well have been another language. When M err ill Lynch assembled her securit y, it had hir ed Deutsche Bank, a m assive Ger man bank with a large U.S. pr esence, to be the tr ustee. The trustee's job was to channel payments fr om the servicer to the investors and act as the investor s' r epr esentative. That meant Deut sche Bank appeared on foreclosur e suits as the plaintiff, even though it was the servicer, Wilshire, that had chosen to foreclose and hired attor neys t o pursue it. Ramos tried to get an at torney but found they were either too expensive or said they couldn't help her . The Florida Bar ran a pr oject to provide borr ower s with free legal help, but it was only for people who hadn't been sued by their lender s yet , they infor med her in a letter . Fighting foreclosure alone has been the nor m for homeowner s dur ing the cr isis. Although many jurisdictions don't tr ack the number of unr epresented homeowner s, it 's clearly the over whelming majority of cases, according to a Brennan Center for Justice r eport [ 22] . I n New Jer sey, for instance, 93 percent of for eclosur e cases in 2010 had no attor ney on record.

Ramos did her best to r epr esent herself. One legal-services organizat ion dir ected her to anot her county's court house, wher e a "self-help" area was set aside for borr ower s who want ed to contest their foreclosures. No attor neys were ther e to help, but the court did pr ovide information about t he pr ocess and sample for ms. She drove thr ee hour s and then car efully followed the model t hey had there for filing an "answer " to the motion to for eclose. I n the three-page document she later filed with the cour t, she laid out her case in number ed par agraphs. She was a victim of pr edator y lending, she alleged. And since she'd lear ned dur ing her long hours of r esearch online that M ort gage Lender s Network had gone out of business shortly after her m ortgage went through, she alleged ther e was no way that Deutsche Bank or anybody else could have r ecently acquir ed owner ship of it. For her court hear ing, she bought a matching skir t and top at a secondhand store. "I got all dr essed up, because I didn't want t o look like a ragamuffin." She even donned heels, a throwback to her depart ment stor e days. She ar rived at the court house nervous but ready to plead her case. But her hearing had been rescheduled, she learned, t hough no one had told her. She didn't know what it meant. "I thought maybe they went through my r ecor ds and evidence, and that's why it was canceled." At the ver y least, it m eant she'd have a few more months in her home.
Three and a half m onths lat er , she recei ved a notice that her case was back on. H er hear ing would be in 10 days. I n response, she filed a five-page "M ot ion to Dismiss wit h Pr ejudice" and at tached about 100 pages of everyt hing she thought was r elevant: news art icles and cour t filings about M ort gage Lender s Net wor k, let ter s fr om W ilshir e and her em ails t o the governor and FBI about t he mi sstatem ent of her i ncome on her loan application. N o one could mistake it for a filing by a lawyer, but she thought it was enough t o show somet hing was wrong. "I thought t he cour t syst em would at least quest ion it."

Ram os and her par tner Dave Backus sear ch for useful objects at the local dump and r ecycling center . (Paul Kiel/ Pr oPublica)

H er hear ing, of which ther e is no transcr ipt because the Citrus County court s don't tr anscribe for eclosur e hear ings, didn't last long. Ramos ar r ived with her neighbor , Dave Shea, but t hey say a cour t officer wouldn't let him in. She found her self in front of Citrus County Judge Carol Falvey, who was sitting by her self at the end of a long t able. Wilshire's attor ney was on the speakerphone. "I instantly felt int imidated," Ramos r ecalls.

At one point, Ramos objected that Deutsche Bank hadn't shown it owned the loan. The voice on the phone said the com pany had filed papers showing it had pr oper standing to sue. Ram os had never r eceived them. She remem ber s the judge saying the attor neys should send her those documents. The voice agr eed. Nevertheless, the judge signed a judgm ent of for eclosur e. Ramos' home would be sold. None of the accusations she'd made in her filings had been dir ectly addr essed, either in a written r esponse fr om Wilshir e's lawyers or in the judge's order. "I t was like I 'd never filed the paper," she says. The whole hear ing had lasted a few minutes. An addr ess an d a GPS She emerged stunned and confused. She and Shea decided to see those documents themselves. The clerk's office was just downstair s, after all. They pulled her case file, a folder of about 200 pages, roughly half of which wer e Ramos' own submissions. What t hey found in t he ot her documents was bewilder ing. I n October, Wilshir e's lawyer s had filed what they called the "Or iginal Assignment of M ortgage [ 23] ." But the document purpor ted to t ransfer her mor tgage fr om a lender called M or tgage Lender's Acceptance Corp. to the Deutsche Bank tr ust. H er lender had been M or tgage Lender s Networ k. Who was M ortgage Lender's Acceptance Corp.? The document gave an address in near by Ocala. They decided t o go check it out. Following the dir ections fr om a GPS device, they found themselves at an office park. There was nothing like a M or tgage Lender 's Acceptance Cor p. to be found. H oping t o find the building's m anager, they called the number on a sign advertising space for lease. "We get the guy who's been the manager of that building for five years," Shea says. H e told t hem no business by that name had ever been ther e. Convinced they'd found still mor e fraud, the pair decided to go immediately to the author ities. "We walked right in the front door of the state At tor ney Gener al's office," r ecalls Shea. Attor neys fr om the office spoke to them in t he lobby for about 20 minut es. "I was hoping they would stop the fr aud," says Ramos, but instead they asked her to send a wr itten complaint. She says she did so but never heard back. Ther esa Edwar ds, a for mer assistant attorney gener al in Florida, says the office was inundated with such complaints. The assignm ent is unquest ionably an er ror . M ortgage Lender's Acceptance Corp., to start with, was not her lender and never had any connection to her actual lender , M or tgage Lenders Networ k. The assignment even has an er ror in how the wr ong company's name is written; the apostr ophe is misplaced, present ing the name as Lender 's instead of Lender s'. A company called M ortgage Lender s' Accept ance Corp. was once active in Florida, accor ding to an incorpor ation filing, but not since the late 1990s. Two par ties ar e responsible for the m istake. The fir st is Wilshir e, which employed the woman who signed the document. The other is the law firm wor king on Wilshire's behalf, Sm ith, H iatt & Diaz, a large Florida fir m that handles thousands of foreclosures a year what critics would call a for eclosure m ill. Generally, t he ser vicer 's attorneys prepare t he assignments and send them to the ser vicer t o be executed. Whoever actually enter ed in the wr ong lender, Wilshir e's employee signed off on it, and Smith, H iatt & Diaz filed it wit h the court. Attor neys at Smit h, H iatt & Diaz did not respond to multiple calls and emails r equesting comm ent. That's who's responsible, narr owly defined. The real culprit, as with alm ost all servicing pr oblems, is the bottom line. To save m oney, ser vicer s usually do not document ownership of a mor tgage until it 's necessary to for eclose. I nstead, ser vicer s keep on file blanket author izations for their employees to sign on behalf of the lenders whose loans they handle. As a result, a single ser vicing employee might sign hundreds of documents in a day on behalf of as many as a dozen or mor e different lender s. Oft en, that lowlevel em ployee will sign as a vice president of this or that bank. The process has produced laughable er rors, transferr ing the m ort gage to "Bogus Assignee" or dating a docum ent "9/ 9/ 9999." "People just ar en't paying attent ion," says Edwards, the former Florida assistant attor ney gener al who now defends borr ower s from foreclosure. "They'r e running t hem thr ough so quickly they make m istakes." While working with the attor ney gener al's office in 2010, Edwar ds and a colleague cataloged examples of the industr y's documentation pract ices in a presentation for county officials titled "Unfair , Deceptive and Unconscionable Acts in For eclosur e Cases." [ 24] * At som e servicers or com panies wor king on their behalf, employees for ged the signat ures of other employees. The most famous of t hese is "Linda Green," an actual employee of DocX, a company that specialized in document pr oduction. H er nam e, with a signatur e obviously penned by many differ ent hands, ador ns tens of thousands of docum ents filed acr oss the U.S. Gr een and other for mer employees of DocX, which was shut down in 2010 , t old 60 M inut es [ 25] that m anagement instr ucted them to sign on Green's behalf. Last year , one of the servicers that had hir ed DocX sued the com pany [ 26] in a Texas cour t, alleging that more t han 30,000 docum ents had been im properly executed. The servicer, Am er ican H ome M or tgage Servicing, claimed it had been ignorant of what DocX ter med "sur rogate signing," and is suing for damages. Lender Pr ocessing Ser vices, DocX's parent company, does not dispute that its employees wer e for ging signatures but said the company had gone back to fix the affect ed assignm ents [ 27] and is contesting t he suit.

While servicers say employees shouldn't sign anot her per son's name, the servicers insist there's nothing wrong with their employees signing on behalf of other companies as long as pr oper author ization has been gr anted. But in some cases, servicer s have filed documents without any authorization. I nter nal documents obtained by Pr oPublica show t hat t he nation's fifth-lar gest ser vicer, GM AC M or tgage, did just that [ 28] . GM AC, a subsidiary of Ally Financial, wanted to pursue for eclosur e against a New Yor k hom eowner , but the original lender had gone out of business. "The pr oblem is we do not have signing authorit y," Jeffrey Stephan, the head of GM AC's "Document Execution" team, wr ote in an email. Stephan went ahead and signed a document pur por ting to be an officer of t he defunct lender anyway. A GM AC spokeswoman acknowledged Stephan didn't have authority t o sign the document and said the company was planning to pur sue foreclosure on the loan after it resolved the problem. T h e M ER S m ir age What is shocking about Ramos' case the false transfer of her mortgage fr om a defunct company that had never been connected t o her loan is t hat it is anything but unusual. H er s and thousands of similar cases could be wr itten off as err or s, shoddy and outr ageous per haps but mostly unintentional. But alongside those err or s was som ething else entir ely: The m ort gage servicing industr y deliberately avoided publicly documenting owner ship of loans. I ndeed, the indust ry had cr eated a sophisticat ed str at egy t o avoid filing legal documentation of who actually owns a mor tgage. The str ategy involves a kind of shell company, one that exists t o avoid gover nment fees and allow gigantic financial institutions to t oss mor tgages to each other as easily as if they were baseballs. I t is a system t hat takes the once public and legal record of ownership who t he homeowner owes money to and embeds it inside a pr ivat e company. The document t hat tr ansferr ed Ramos' mortgage to Deutsche Bank is signed by a woman pur por ting to be an "Assist ant Secr etary" of "M ortgage Electr onic Registration Systems, I nc. as nominee for M or tgage Lender 's Acceptance Cor p.," a seemingly hopeless tr ail of abstractions. But M or tgage Elect ronic Registr at ion System s, or M ERS, is an industry creation. When lender s r ecord a mor tgage or assignm ent, they have to pay a fee to a county office. To avoid billions in fees and make it easier to transfer m or tgages, t he industry launched M ERS in the 1990s. M ERS does two things. I ts computer system keeps track of loans. But mor e im portant, M ERS poses as the tr ue lender in public r ecords. I f a mor tgage states that M ERS is the lender 's "nom inee," then M ERS can take its place at least on paper. I n the county clerk's office, the mor tgage is r egistered not to M or tgage Lenders Networ k or M er rill Lynch or Deutsche Bank or any other institut ion that actually lends money to a homeowner, but t o M ERS. And any changes in real owner ship of the mor tgage, such as when M ortgage Lenders Net work sold Ramos' mortgage to M er rill Lynch, is recorded only inside M ERS, not in public records. With M ERS, no m atter how many times a loan is bought and sold, ther e's usually no need to file anything else or pay any extr a fees unt il it's tim e to for eclose. The system cur rently contains roughly half of the nat ion's active mor tgages, or about 30 million. Even though M ERS has only a few dozen employees, the company has authorized at least 8,000 people at hundr eds of other companies typically ser vicer s but also law fir ms and other companies t o sign as officers of the company. That's how Ramos' assignm ent came t o be signed by a Wilshir e employee in Oregon purporting to be an "Assistant Secretar y" of Vir ginia-based M ERS. M ERS spokeswoman Janis Smith said the Wilshire employee had been pr oper ly appointed as a M ERS officer. M aybe, but a number of municipalities have sued M ERS, seeking to recoup lost fees and charging the com pany with fr aud. The latest and biggest suit, in ear ly February, came from the New York att orney general, who charged M ERS and three major banks, including Bank of Amer ica, of widespread document fraud [ 29] . New Yor k's suit charges that t he industry's use of M ERS t o facilitate foreclosures has led t o filing "false and deceptive" docum ents. M ERS says [ 30 ] the system is legal and t hat it will fight the suit. The involvement of M ERS explains why Ramos and Shea didn't find any lender at the office park. The addr ess listed for Ram os' lender the no-longer -oper ating-in-Florida M ort gage Lender s' Acceptance Cor p. was actually M ERS' r egister ed Florida addr ess at t he time. M aintained by a separ ate cor por ate ser vices company, t he address existed merely to satisfy state law and r eceive mail. I n tr ying to find an actual lender at the addr ess, Ramos had been chasing shadows. "Y ou feel pow er l ess to h elp" On the mor ning of Apr il 13, 200 9, Sheila Ram os waited at home to hear whether her last chance to avoid for eclosure had been successful. This time, she had her own lawyer, who was at that mom ent ar guing her case to the judge. Ramos was hopeful. After all, how could a judge give away her home on the basis of the phony paper work she had uncovered? That couldn't stand. Finally, they'd have to deal wit h her. They'd have t o acknowledge her loan was fr audulent in the fir st place. After a year of fighting and com plaining to ever y authority she could think of, she would finally be hear d. Just finding an att orney to r epr esent her had been an or deal. One she'd contacted told her he couldn't help but suggested Janet Varnell, a prominent consum er advocat e attorney in centr al Florida, so Ramos gave her a tr y. Varnell was hesitant. An experienced litigator , she'd never handled a for eclosur e case. The Florida Bar, however , had been pushing attorneys to take cases no matter their experience in the area because of the over whelming need in the st ate. Legal aid organizations couldn't keep up. Var nell, who r uns a pr actice with her husband, felt a responsibility t o try it. "Despite never having done a day of foreclosure defense in my life, I knew bett er than the aver age attor ney what to do," she says. And Ramos had a str ong case, Var nell thought. Not only was Ramos a vict im of predatory lending, she t hought, but the documents used to foreclose on her wer e clearly flawed. "Ther e's someone on every corner in Florida who's in desper at e need of help, so you don't just go r unning ar ound offering help to people who don't have substantial claims," she says. Varnell not only t ook the case for fr ee but paid the $50 fee to r eopen the case. About two weeks before Ramos' home was scheduled t o be sold, Var nell submitted a m otion t o cancel the sale, over tur n t he judgment and dism iss the for eclosur e suit altogether. At t he cent er of her argument was the fault y assignment. Typical of the ser vicer 's last -minute r ush to collect the documents necessary to for eclose, the assignment was actually dated a day after Smith, H iatt & Diaz, Wilshir e's law fir m, filed suit against Ramos. The or iginal com plaint had asser ted that "Deutsche Bank National Tr ust Company as Tr ust ee for the M LM I Trust Series 2007-M LN1" was the holder of t he not e and mor tgage, but offer ed no documentation to suppor t that. I nstead, all that had been attached was a copy of t he not e and mor tgage made out to M or tgage Lender s Networ k, the original lender. The assignment, dated t he next day and filed mont hs later , couldn't fix that problem , she ar gued. I t only made matter s wor se that the assignment was itself obviously flawed, confusing things fur ther by r efer ring to the wrong lender. The ear ly signs for Ram os wer e good. Smith, H iatt & Diaz r esponded t o the motion by im mediately m oving to cancel the upcoming sale. A hear ing was quickly scheduled. Var nell would have Judge Falvey's ear for a 15-minut e phone call.

Falvey wasn't impressed. Again, because the county does not tr anscribe for eclosur e hear ings, ther e's no transcr ipt, but Varnell r em ember s the judge being dismissive of the flaws in the mortgage's document s. The for eclosing par ty appeared to have the note and mor tgage, and that was good enough for her . When asked about the ruling, Falvey's assistant said the judge doesn't com ment on individual cases. Ramos was crushed, and so was Var nell. "Frankly, it came as a shock," the lawyer r ecalls. "I remem ber cr ying when I knew the judge was not going to give us our day in cour t ... crying mor e for m yself because you feel power less to help." I n the wake of the legal defeat, Var nell struck a deal with the attor ney from Smith, H iat t & Diaz: I f Var nell did not appeal Falvey's r uling, Wilshir e would indefinitely postpone the for eclose sale and evaluate Ram os for a modification. Knowing what she knows now, Var nell wr estles with this decision. I t was a kind of capit ulation but a r ealistic one, she thinks. At t he time, in ear ly 20 09, few Florida state court decisions clear ly established that the lender needed to clearly establish owner ship of the note and mor tgage in or der to for eclose. "The law was not r eally well advanced at the tim e," she says. Since then, a num ber of similar cases have made their way to the appellate level. I n late 2011, Florida's 4th Distr ict Cour t of Appeal overt urned t wo dist rict decisions because, as in Ramos' case, the lender hadn't execut ed an assignment befor e the complaint. "I f I had been in this sit uation today," says Varnell, "I pr obably would have gone on and filed the appeal, and I feel I would have won." Since losing Ramos' case, Var nell has represented more than a dozen other homeowner s and had much mor e success, even getting some of the for eclosure suits thrown out. From the perspective of the m ort gage industr y, borr ower s are just finding a "technical legal ar gument to get out of paying your m or tgage" by seizing on flawed documents, said Tom Deutsch, executive dir ector of the Am erican Securit ization Forum, which counts the countr y's biggest banks am ong its members. When m or tgages like Ramos' wer e sold to Wall Street banks like M err ill Lynch, agr eements clear ly laid out t he tr ansfer s, he says, and there's no "role for the cour t there to look any far ther than that clear chain of t itle." M any judges haven't agreed, sometimes dealing the banks high-profile defeats [ 31] , as the M assachusetts Supr eme Cour t did in ear ly 2011. "They're basically saying, 'Don't hold us to the rules because we're r eally doing the right thing; just trust us,'" says Edwards. About a week after Ramos' hearing, on Apr il 20, 2009, Wilshire signed a contract with the Treasur y Depar tment to join H AM P. As par t of its gener al agr eem ent to follow H AM P's r ules, Wilshire would be required t o review all eligible loans for modifications. Loans in foreclosure like Ramos' wer e explicitly defined as eligible. I f Ramos did get a modification thr ough the progr am, her m onthly payments would be cut alm ost in half. A con stan t ch u r n i n g H AM P was just r am ping up. The Obama administration's foreclosure-pr evention pr ogram r elied alm ost entir ely on servicers and inside t hose companies, em ployees wer e scr ambling. Wilshire hir ed Justin Gersey as the H AM P pr oject manager to oversee t he company's implem entation of the gover nment 's pr ogr am. The government's plan to over haul the servicing business in a m atter of months was unr ealist ic, he says, especially for servicers lar ger than Wilshire. "That's just r idiculous that they could expect somebody to tur n something ar ound that quickly." While hundreds of thousands of bor r owers were calling, desper ate for help, servicers were taking a tr iage approach to the new pr ogr am, he says, deciding which guidelines to implem ent fir st and which ones to postpone. The Tr easury Departm ent was developing the pr ogram as it was being implemented, so it issued new r ules and clar ifications ever y so often. "I t was this constant chur ning of t hings," says Ger sey. The lar ge ser vicers wer e "all basically oper ating on giant, mainframe systems that are pr obably 20 years old," the legacy of years of cost-cutting, says Steven H orne, who worked as an advisor to Fannie M ae in 20 07 and now runs Wingspan Por tfolio Advisor s, a company that specializes in handling tr oubled loans. That r estricted their "ability t o be nim ble and adjust quickly to m onthly changes in H AM P," he says. "And then r etr ain a staff of 10,0 00? Ver y, very difficult." I n fact, in the fir st several months of the pr ogr am, the biggest challenge was just get ting som eone, anyone, at the ser vicers t o pick up the phone. Accor ding to gover nment data, borr ower s complained about this basic pr oblem mor e than any other . M aking matters worse was t he continuing surge in delinquencies because of the ever -increasing unemploym ent rate. Overall, m or e bor rowers fell behind in 2009 than dur ing any other year of the crisis. I n Januar y of t hat year , about 4.3 million hom eowner s wer e two or more months behind. By December , m ore t han 6 million were. The Tr easur y Depar tment exacerbated the pr oblem by requiring borr owers to send in a stack of docum ents to pr ove their incom e, say cur rent and form er ser vicing employees. Servicers were already prone to losing bor rowers' documents. That the Treasur y r equir ed ser vicer s to collect bor rower s' signed tax r eturns in addition to pr oof of incom e such as pay stubs and a wr itten statement of hardship didn't help. The r equirement was later changed so that homeowner s just had to send in a signed for m author izing the servicer to r equest the r etur n from t he I RS. But critics such as H orne think get ting tax r etur ns was unnecessar y: "I find it deeply ironic t hat these loans are being under wr itt en 10 times m or e str ingent ly for a modificat ion than they wer e for t he or iginal ext ension of credit," he says. The voluminous document r equir ements wer e put in place to ensure that the homeowners who received help were deser ving. H AM P would not "rescue the unscrupulous or ir responsible by throwing good taxpayer money after bad loans," Obama said when announcing the progr am . "I t will not r ewar d folks who bought homes they knew from the beginning they would never be able to affor d." Cr itics see a double standard. "I n a nanosecond, we gave over $125 billion to nine big banks, with very few effective controls on t he money," says Bair, the for mer FDI C chair man, r eferr ing t o the Treasury's fir st use of TARP funds in October 2008. "But when we star ted talking about helping bor rowers, then all of the sudden we had to be ver y car eful about political pushback." All t hese factors unprepared, understaffed servicers; evolving and detailed gover nment r ules and document requir em ents; and t he explosion in delinquencies created a catastr ophe. Administration officials had touted the progr am as a way to ensure t hat m illions of homeowner s could be efficiently and rationally consider ed for modificat ions. I nstead, chaos r eigned. "W e have a faxi n g pr oblem " When H AM P was launched, Chris Wyat t was an em ployee at a company similar to Wilshir e: Litton Loan Servicing, another small subprime servicer bought by a Wall Str eet bank, in this case Goldman Sachs. As at Wilshir e, there was constant pr essure to keep costs low.

H AM P initially seemed at tract ive for the ser vicer, he says, because of the taxpayer subsidies it offer ed, such as the $1,000 that governm ent officials guessed might be enough. Litton deliberately delayed dealing with some delinquent homeowners until the pr ogr am was launched, Wyatt r ecalls, in or der t o put them into H AM P modifications and collect the incentive payment s. I n the first few months of it s par ticipation in the pr ogram, Litton put tens of thousands of homeowners into tr ial modifications. That was easy, because nothing had to be documented. Under t he agr eements, if the bor rower made the lowered payment s for t he t hr ee-month tr ial per iod, they'd receive permanent modifications. The hard par t was for Litton to collect the borr owers' papers and crunch the numbers t o verify the terms of the permanent m odifications. That, he says, "turned out to be a total disaster ." Wyatt led Litton's "Executive Response Team," which was charged with handling customer com plaints. Litton employees, over whelm ed and undertr ained, fr equently made basic er rors when calculating a hom eowner 's income, he says. H AM P guidelines often wer en't followed, because Litton was "way understaffed" and couldn't keep up, he r ecalls. But the worst par t was the way Litton dealt with homeowners' docum ents, he says. When homeowner s faxed their documents, t hey didn't go t o Litton, Wyat t says. They went to I ndia, where a low-cost company scanned and filed the documents but often m isfiled or lost them. Wyatt says Lit ton routinely denied modifications because hom eowner s had not sent their documents when, in fact, they had. I n a process internally r eferr ed to as a "denial sweep," Litton's computer s would automatically generate denial letters for ever y hom eowner who, accor ding to Litton's r ecor ds, hadn't sent their docum ents. But untold numbers of t hose documents had been lost on another continent. Wyatt complained about the practice in multiple meetings with senior management, he says, but m anagers were chiefly worr ied about reducing the overwhelming backlog. I n gener al, Wyat t r ecalls, Litton was much m ore careful about gr anting modifications than denying them. Yes, H AM P gave financial incent ives for each modification Lit ton and other ser vicers m ade, but modifications also meant closer scrut iny fr om the pr ogr am's auditor s. As of the end of 20 10, fewer than 12 per cent of the bor rowers who'd applied for a H AM P m odification with Litton wer e granted one. The vast major ity of those denials, Wyatt says, wer e not legitimate. Goldman Sachs' emphasis on maxim izing pr ofits rather t han pr eventing foreclosures is typical of the servicing industry, he says, particular ly the lar ger banks. "They could have addressed t he crisis way earlier . H ad companies changed their philosophy and said, You know what ? We'r e not going to beef up our collections staff; we'r e going to beef up our loss m itigation staff.' H ad they done that and come up with loan m odification scenar ios that were r easonable and put people into mor e affordable payments early on, we wouldn't be where we are now." A spokesman for Goldman Sachs said the company disagreed with Wyatt's account but offer ed no specifics. At Bank of Am erica, by far the country's lar gest ser vicer , an employee who wor ks in one of the bank's many call centers finds the pr ocess as m ystifying as do the borr owers to whom he speaks every day. The employee says homeowners have been regularly routed to him after being rejected from H AM P for unclear r easons. Sometim es it's news to them they'd been denied at all. H e says he's lear ned not to put any st ock in those pr evious denials the income infor mation in Bank of Amer ica's system enter ed by som e other employee in another depar tment is oft en incor rect. The best he can do, he says, is to persuade the homeowner to start over with him . Of course, homeowners ar e typically wear y after months of mist akes, denials and lost documents. A little more than a year aft er H AM P was launched, ProPublica sur veyed almost 40 0 hom eowner s [ 32] . The average r espondent had been seeking a m odification for m ore t han a year, sent in the same documents six times and spent sever al hours each m onth on the effort. So, when the Bank of Am erica employee asked such homeowner s to star t all over again, well, it took some coaxing. "I would say to them, Listen, I 've gotta get some document s.' They'd be like, Oh no, please don't ask me for docum ents.' I 'm like, 'Listen, I know what you've been thr ough. We all know we have a faxing pr oblem here. Just r esend them. I 'll look for them in t hr ee days,'" he says. I f they weren't in his system, he'd ask the homeowner to r esend them, he says. Thr ee days later , he'd look again. "Usually by t he thir d t ime, I 'd get it." Why does this employee wait thr ee full days to look for a fax instead of just walking over to the machine? Because Bank of Amer ica, like Litton, uses a company in I ndia t o scan and file docum ents that bor rowers send. Those paper s get lost all the time, he says. "The whole documentat ion collection thing has got t o be pur posely not funded. Like, I can't get a fax. I wor k for a huge bank that has tons of money, and you'r e telling me that I can't get a fax?" The disor ganization pr ovides numer ous oppor tunit ies for borr ower s to be denied a modification. And because it's so much easier t o decline t han approve a modificat ion, many employees have taken advantage of t hose opportunities. As he r ecalls one of his colleagues putt ing it to him, "I 'm in the declining business." Bank of Am erica did not r espond to questions about the employee's account. T h e w ave h its pr i m e bor r ow er s As the economy collapsed, hundreds of thousands of Americans lost their jobs, and suddenly, it wasn't just subpr ime borr ower s like Ram os whose hom es wer e in jeopar dy but homeowners with prime mortgages, those given to borr ower s with good cr edit. Today, near ly t wice as many pr im e as subprime bor r owers face foreclosur e. Thomas Sander son of Chicago was among the hundreds of thousands of prime borr owers calling his ser vicer in the first months of 2009. A civil engineer who ran his own consultancy, he has a college degree and far mor e financial and legal sophistication t han Ramos. But the recession dealt a m ortal blow to his business, and he'd fallen a couple payment s behind before he found another job. M odifying Sander son's loan should have been an easy call, saving investor s far mor e than a for eclosur e would cost them . After all, he had a new job and could make his mont hly payments again. H e just couldn't catch up on the back payments, he says. But instead of helping Sanderson avoid for eclosur e, Chase pushed him into it. A bank em ployee told him to m ake payments on a H AM P "t rial" modification, but when the lower payment s made him fall even further behind, Chase launched a for eclosur e suit. I n the end, it took almost two year s and m ore t han 200 conver sations with Chase employees, he says, before he finally won an elusive modification. H e has pages of notes det ailing his t alks with Er ic, Dustin, Cat hy, Leanne, Lucille, Angela, and on and on. H e was successful, he says, only because he played har dball. After Chase's lawyer s filed suit against him, an assignm ent was execut ed transferr ing his mortgage fr om his original lender to the 2004 security into which his loan had been bundled. I t was signed by a notar y and two employees of Lender Pr ocessing Services purpor ting to be vice presidents of M ERS.

Through a listserv for bor rowers facing for eclosure, he found others with the same signator ies who were investigating their paper work. One m an had sent off t o get t he not ar y's application from t he state of M innesota, and offer ed to share it with Sanderson. When Sander son put the applicat ion, which bor e the notary's signatur e, side by side with his assignment, he found t he signat ures bore no r esemblance to one another , raising t he question of whether the notary's signatur e had been forged. That all thr ee signatories were employees of Lender Processing Services, t he parent com pany of DocX, only incr eased his suspicions. A spokeswoman for Lender Pr ocessing Ser vices declined to comment on t he documents. Nevada's att orney general r ecently filed suit [ 33] against Lender Pr ocessing Ser vices, alleging widespr ead document fraud, among other t hings. The company says the charges ar e untr ue [ 34] but is in settlem ent talks with the at torney general. I n the 20th month of his quest for a loan modification, and after yet anot her denial, Sander son finally lost his pat ience. For most of that t ime, he'd been making payments, though som etim es Chase had rejected t hem . H e'd also been paying his second m or tgage, a smaller mont hly sum that was also with Chase. H e thr eatened to stop paying both, he r ecalls. H e told a Chase employee he'd fight it out in cour t. "I was like, Screw you guys. I 'll stop paying and drag this out for ever and live for fr ee,'" he says. H e ment ioned t he suspicious m or tgage assignment and pr oblems wit h the note. "Boom! Right after t hat, t hey sent me a permanent modification." The modification, which he signed and has been paying since, set his payments to about what he'd been paying before he fell behind. Like t he overwhelming major ity of modifications since the launch of H AM P [ 35] , his was achieved out side the progr am. Christine H olevas, a spokeswoman for Chase, didn't respond t o Sanderson's exper ience other than to say the com pany was "pleased we were able to pr ovide the borr ower with a modification" and that r ecently Chase had significantly reduced its backlog of customer complaints. H AM P's false h opes Under H AM P r egulations, Ramos should have been automatically consider ed for the pr ogram. And of cour se, Wilshire's attorneys had pledged she'd be reviewed. But Ram os and Varnell, her attorney, heard nothing from t he com pany. M eanwhile, Varnell wasn't optimistic about her prospect s for a modification even if she was r eviewed. Since the summer when Wilshir e had fir st launched foreclosure pr oceedings, Ramos' br other had passed away, leaving the family with less income. That and Ramos' past dealings with Wilshir e didn't give much r eason for hope. I ndeed, in Ramos' secur ity, ver y few homeowner s had won m odifications. Ever y month since the security was issued in 20 07, its t rustee, Deutsche Bank, has issued repor ts for the investor s. Those r epor ts do not show a single m odification until Septem ber 2010. By t hat time, a year and a half after H AM P's launch, mor e than a third of the loans in the security had already been foreclosed on. For ecl osur es an d M odi ficati on s i n th e Secu r i ty th at I n cludes R am os' M or tgage Sim on, the spokesman for Bank of Amer ica, argues that the reports were likely inaccurate. "Wilshire was ver y active in modifications and other wor kout pr ogr ams from the star t of the economic cr isis and well before the int roduction of H AM P," he says. "The appar ent lack of m odifications in t he secur itizat ion pool m ay be a r eflect ion of how they were r eported [ to Deutsche Bank] ," he said. "Wilshir e may not have specifically flagged t hem as modifications.'" (Bank of America acquired Wilshire when it bought M err ill Lynch in late 20 08. I n ear ly 2010 , it sold Wilshire to I BM but r et ained servicing for all the loans that Wilshire had been handling.) Sour ces: Deut sche Bank tr ust r epor t s, Pr oPublica analysis There's not m uch evidence that Wilshir e r eally was "very active in modifications." A r ecent analysis by Amherst Securities, a firm that pr ovides r esearch on mortgage-backed secur ities, showed that Wilshir e had been t he stingiest of all t he major subprime servicers on gr anting modifications. The analysis found a similar tendency at Bank of Amer ica's ot her subsidiaries, which all r anked at the bot tom of a list of 19 servicer s. Bank of Amer ica declined to r espond to questions about it s servicer s' low rate of m odifications. Some hom eowner s have sued Wilshire, alleging it ignor ed H AM P's r ules. I n Florida, a marr ied couple in the same secur ity as Ramos endur ed a similar ordeal. Wilshir e had led the couple to believe they wer e being evaluated for H AM P but pursued foreclosure anyway, according to t heir appeal of the for eclosure judgment. They also allege that Bank of Amer ica, which assumed servicing for the secur ity in 20 10 fr om Wilshire, was no better and sought to sell the house while they were still waiting for an answer to their modification application. Their appeal center s on the servicers' false pr omises and a flawed mor tgage assignment sim ilar to Ramos'. I n t his couple's assignm ent, the lender appear s to be accurately named, but as with Ramos', the assignment was executed after Wilshir e launched t he foreclosur e suit. The couple's attorney, Daniel Rock, argues that the late assignment m eans the plaint iff (Deutsche Bank National Trust Company, As Tr ustee for The M LM I Tr ust Ser ies 200 7-M LN1) never had standing to sue, so the for eclosure should be t hr own out. H e adds that the couple isn't looking to get a fr ee house, just a m odification. "For goodness' sake, it's just silly not to take these people. They'r e well off enough t o cover the debt service." Bank of Am erica's Simon says the company doesn't comment on pending litigation. Over all, H AM P has fallen well shor t of the administration's goal of helping 3 to 4 million homeowner s. As of January 2012 [ 36] , 951,319 hom eowner s had r eceived modifications under the pr ogram, while mor e than 2 m illion had been r ejected. Administration officials have argued that, by and large, most of those reject ed simply didn't qualify for the progr am. The main culprit is widespr ead unemploym ent, they say [ 37] ; H AM P had been designed in r esponse to the subprime crisis and its unaffordable loans, not to help pr ime bor rower s r eeling fr om job losses. Under this theory, most people sim ply didn't make enough to affor d even modified payments. The under lying assum ption, of course, is that servicers have been corr ectly denying applicants despite the widespread outcr y from homeowner s [ 32] and housing counselors [ 38] about wrongful denials. I ndeed, according to the Tr easury's own numbers,

t he most com mon reason servicers have cited for reject ing homeowner s is that they failed to send in all of t heir documents [ 39] . Given ser vicer s' notor ious tendency to lose paper s, ther e's reason to think many of those denials wer e illegitim ate. Over sight of the pr ogram has been astonishingly lax. When ser vicers signed contract s with the Tr easury to par ticipate in the pr ogr am, they agreed to submit to inspections by gover nment auditors. I n 20 10, through the Freedom of I nfor mation Act, ProPublica sought the audit s for 10 of the lar gest ser vicer s in the progr am . After stonewalling the request for m or e than a year , t he Treasury finally agreed to release only the audits for one ser vicer , GM AC, the fift h-lar gest, because t he com pany had explicitly consented to their release. The other companies refused, and the Tr easury continues to withhold audits of those ser vicer s. The documents showed [ 40] t hat GM AC hadn't undergone a major audit until more than a year into t he pr ogram. When an audit r eport was finally completed, it found that GM AC had seriously m ishandled many loan modificat ions, miscalculating homeowner income in m ore t han 80 percent of audit ed cases, for exam ple. Yet, GM AC suffered no penalty. GM AC itself said it hasn't rever sed a single for eclosure as a r esult of a government audit. Treasur y has sent m ixed messages about its ability to penalize banks over the course of the progr am [ 41] , t hr eat ening "m onetary penalties and sanctions" in late 2009 and then saying it lacked the power to enforce such penalties. Thr oughout, Treasury has r eacted to r ule violations by r equesting that ser vicers m ake improvements. Treasur y finally departed fr om its cooperative approach in the summer of 2011, m ore t han two years after H AM P's launch, when it wit hheld incent ive paym ents [ 42] fr om three of the top 10 servicers. (GM AC was not among them.) The companies would not receive the public subsidies for complet ing m odifications until they m ade cer tain changes. By M arch 2012, all of the withheld subsidies had been r eleased. Nearly thr ee years after the intr oduction of H AM P and several m onths aft er feder al regulators r equir ed the major banks t o impr ove their oper ations, any impr ovem ents seem meager. Ser vicer s now must provide a "single point of contact" model, m eaning that borr ower s, inst ead of having to call an 800 number and never r eaching the same per son twice, must have one person in charge of their application. The curr ent Bank of Amer ica em ployee says he's supposed to be the bor rower 's source of inform ation, but he frequently finds him self searching for answer s his m anagers can't provide. H e and his colleagues could use a "single point of contact" themselves at Bank of Amer ica to get answer s, he says. "We are absolutely clueless." Tr aining was inadequate, and a new computer system spits out tasks for him to complete that he often doesn't understand. "All we do is t alk to the cust omer and give them excuses all day." "I gave it m y bi ggest fi gh t" I n June 20 09, Ramos finally decided to give up and m ove out . Wilshire could seek again to sell the home at any time, Var nell told her . Ramos was also haunted by what it actually looked like to be kicked out of your hom e. That Februar y, she'd been st ar tled to see several of her neighbor s' belongings lined up along the curb. The Pillas, who lived just t wo houses down from Ramos, had been evicted that day and wer e tr ying to keep hold of what they could without a moving tr uck. "A lot of people came by thinking it was gar bage," said Vito Pilla, 63, a disabled Vietnam vet who's been fight ing t hr oat cancer for several year s and lived in the house with his wife and teenage triplet boys. The couple had fallen behind when his wife injur ed her back ar ound the same time that their m ort gage payment s had jumped. Pilla knew he was facing for eclosur e but thought it might be delayed because he was still in communication with his ser vicer, Wells Far go. A Wells spokeswoman says t he ser vicer had m ade "multiple attempts to help" but that "we were unable to find an option to keep the bor rowers in the home." What t he family hadn't managed to get out of t he house was put out near the str eet . "A little at a tim e is what we did dur ing the day," Pilla says. For ced to choose what to save, they prior itized fam ily heirlooms. Ramos remember s salvaging wedding pictures fr om am ong the piles of possessions t o make sur e the Pillas kept them. "We didn't want t o go through that," Ramos says. The only way to be sur e they'd avoid it was to move fir st. "All these people was depending on m e, and I gave it my biggest fight to save that home, and I couldn't." For tunately, Ramos had somewhere t o go. H er longtime part ner, Dave Backus, owned a plot of land on H awaii's Big I sland. I t was way up in t he north, a rur al ar ea far fr om any resorts and beaches. Ramos had planned on eventually selling her Florida hom e and using the pr oceeds to build a home ther e and r etir e, but now it would have t o serve as is. Wit h no st ructur e on the pr operty, they'd have to pit ch tents. Even so, it was clear ly the best option for the family, says Stacey O'Rourke, a child welfare ser vices counselor with the nonpr ofit Devereux who wor ked on the case. Ramos had appr oached the organization, which is licensed by Florida's Depar tment of Childr en & Families, for help. "We try to keep childr en in their hom es," O'Rourke says. But if Ramos had lost the house and stayed in Florida, she says, "The kids would have ended up in foster care." Since Ramos had adequately car ed for t he childr en for several year s and "wanted so bad to keep t hese kids," it was a no-brainer to keep t hem t ogether . The problem was getting Sheila, her mother and all three children to H awaii.
O'Rour ke put toget her a fundr ai sing effort that i ncluded an ar ti cle [ 43] i n The Citr us Count y Chronicle: "Gr andmother , fami ly lose hom e." I t's somet hing O'Rour ke says she hadn't done befor e and hasn't done since. "I t was a desperate si tuation t hat called for desperate m easures." O'Rourke says she raised about $ 1,80 0.

With Backus cover ing the plane tickets, the funds helped get new t ires and gas for the car to dr ive first to Alabam a, where they put their most valued possessions in stor age, and then to Atlanta, where their flight depar ted. On the fir st night of their new life, Backus, lit by flashlight, mowed a patch of land to pitch a tent. They had running water but little else. They cooked on a camping st ove and kept their per ishables in cooler s. To shower , t hey war med water over the fir e pit and then hauled a bucket back into the woods, wher e t hey'd r igged a makeshift shower on a tree. Everyone shared the one outhouse t hey'd built in the woods.

Ram os in the t ent that she uses as a kitchen. (Paul Kiel/ Pr oPublica)

Over the past 2 years, they've built the campsite int o a full-fledged settlement. Sever al lar ge t ents built of tarps, canvas, bungee straps, r ope, wood and m etal poles are spr ead over one corner of t heir 20 -acre plot . There's a kitchen t ent, what m ight be called the master bedroom tent about 20 yards away, and a few other s wher e the childr en and Ram os' mother sleep. Backus is a capable builder , and now ever yone has access to a r eal shower and a flush toilet. Near the end of their first year , they finally got electr icit y. Now they have a washer, dr yer and r efr iger ator. Ramos and Backus m ake fr equent tr ips t o t he local dump to look for discar ded or donat ed items to salvage. The kitchen, with its sink, hanging pots and pans and oven, seems like any other kitchen except for the lack of walls. The hilly plot over looks the ocean, and on a nice day and most days there are nice you can understand why Ram os would say, "I don't know if I 'd want to go back to the house at this point." The family has even been joined by a cousin of Ram os', a retir ed federal employee who lives ther e with her husband, because what's left of her r etirem ent wasn't enough to live com fort ably elsewhere.

Four months after Ramos left Florida, Wilshir e's attorneys again sought to for eclose on the hom e. Together with the var ious foreclosure and late fees, the inter est that had been accr uing since Ramos made her last payment in ear ly 2008 added up to a debt of $314,000 about $52,000 more than the or iginal loan. While the home had been appraised at $403,00 0 in late 2006 when the loan was m ade, it was wor th nowhere near that when it was put up for auction in Decem ber 2009. As a result, Wilshir e chose instead to take possession of the home and sell it later . The next month, it was listed for $204,900. I t stayed on the m arket for six months until it finally sold for $171,500. The security's investor s bore the loss, not t he ser vicer , which r ecouped all fees and expenses. A subsequent r eport to invest ors listed the realized loss fr om Ram os' mor tgage as $167,430, 64 per cent of the original loan. Epilogu e I n the fall of 2010, thr ee years into the for eclosur e crisis, feder al and state law-enforcement agencies and banking regulator s finally cracked down on banks. Servicer s had adm itted t hat they'd filed tens of thousands of false affidavits t o courts in foreclosure cases acr oss the countr y. Employees had sworn they'd per sonally examined borr owers' inform ation when they r eally hadn't. The revelation prompted investigations beyond just r obo-signing, as the pract ice was dubbed. Suddenly, longst anding ser vicer abuses and pr oblems, which had been allowed t o endur e without serious consequences, were getting new scr utiny. I n February, a coalition of 49 st ate attor neys general and the feder al government announced a $25 billion set tlement with the five biggest mor tgage servicers. Along with widespread problem s with foreclosure documentation, investigator s had found a r aft of servicer abuses, including charging bogus fees, im properly denying modification r equests and giving false infor mation to bor rowers. Still, the outcome fr om the settlement [ 44] is mainly forwar d-looking. The banks agreed to follow a new set of rules for hom eowner s applying for modifications in 2012 and beyond. This time, violations would be punished, law officials said. "I f people are eligible for a loan modification, the banks won't screw up those decisions anymore," said I owa Attorney General Tom M iller. For homeowner s like Ramos who've alr eady lost their hom es, of course, the new rules come too lat e. The settlem ent will offer t hem a small sum , about $2,00 0 on aver age, as compensation. Separately, federal banking r egulator s ar e overseeing a m assive "I ndependent Foreclosure Review." [ 45] The r eview covers hom eowner s who wer e in the for eclosur e process at any tim e in 2009 or 20 10. Accor dingly, both homeowners like Sanderson who didn't lose t heir homes and those like Ramos who did will be eligible about 4.3 million in all. To conduct the reviews, the banks have hired outside consultants, which in tur n have hired hundr eds of temporary employees t o do the wor k. That's angered some m ember s of Congress [ 46] , who noted that job postings for the temp spots call for some foreclosure or mor tgage ser vicing experience but little else. For the banks, t he r eview and settlement ar e a way to put the foreclosure cr isis behind them. When we sent Bank of Amer ica a list of 26 quest ions about Ramos' case, the spokesman Sim on declined t o respond point by point. Bank of America believes Wilshire appropriately handled her loan, he wr ote, but "we are suggesting that M s. Ramos and others who raise similar concerns consider applying for the new governm ent-mandated and -m onitored independent for eclosur e r eview. We believe this will be a m ore pr oduct ive, fair , conclusive and efficient pur suit for ever yone than continuous give-andt ake around pointed questioning and speculation inher ent in the report ing pr ocess." For Ramos, the r eview is likely to be the last word on her foreclosur e. She plans to subm it the "Request for Review For m [ 47] ," on which she'll ar gue that Wilshire m ishandled her account in a number of ways, didn't appropriately review her for a modification and filed faulty documents to foreclose on her . A temporary employee of Promontory Financial Gr oup, the consultant hir ed by Bank of Am erica, will likely be the one to review her claims against Wilshire's file. Eventually, pr obably somet ime in 2013, Ram os will r eceive a let ter . I t will infor m her of the exact dollar amount of t he "financial injury" she suffer ed through t he pr ocess, and if t he num ber is above zer o, a check will be included. The decision will be final. Olga Pier ce and Kar en Weise contr ibuted r epor ting t o t his stor y. * Edwards and a colleague, June Clarkson, wer e for ced to r esign their positions in M ay 20 11, a few m onths after a newly elected attorney gener al, Pam Bondi, took office. Crit ics alleged the move was meant to quash the duos foreclosur e fr aud investigations. Top officials hired by Bondi said t he pair was fir ed for performance issues. I n response, Edwards and Clar kson have pointed to a positive performance review from their direct super visor . A state inspector gener al r epor t [ 48] clear ed Bondi of wr ongdoing.

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23. http:/ / www.propublica.org/ documents/ item/ 329745-assignment-of-mortgage.html 24. http:/ / documents.latimes.com/ florida-ag-report-on-foreclosure-law/ 25. http:/ / www.cbsnews.com/ 2100-18560_162-20049646.html?pageNum=2&tag=contentMain;contentBody 26. http:/ / www.prnewswire.com/ news-releases/ american-home-mortgage-servicing-inc-files-lawsuit---seeks-recovery-from-lenderprocessing-services-inc-and-docx-llc-128242928.html 27. http:/ / www.prnewswire.com/ news-releases/ lender-processing-services-inc-responds-to-american-homes-press-release128263413.html 28. http:/ / www.propublica.org/ article/ gmac-mortgage-whistleblower-foreclosure 29. http:/ / www.ag.ny.gov/ media_center/ 2012/ feb/ feb03a_12.html 30. http:/ / www.mersinc.org/ newsroom/ press_details.aspx?id=348 31. http:/ / blogs.reuters.com/ felix-salmon/ 2011/ 01/ 07/ the-ibanez-case-and-housing-market-catastrophe-risk/ 32. http:/ / www.propublica.org/ article/ homeowner-questionnaire-shows-banks-violating-govt-program-rules 33. http:/ / ag.state.nv.us/ newsroom/ press/ 2011/ lpspressrelease.pdf 34. http:/ / www.lpsvcs.com/ LPSCorporateI nformation/ NewsRoom/ Pages/ 20120131.aspx 35. http:/ / www.propublica.org/ article/ despite-praise-from-banks-treasury-in-house-loan-mods-provide-less-help/ 36. http:/ / www.treasury.gov/ initiatives/ financial-stability/ results/ MHA-Reports/ Documents/ Jan%202012%20MHA% 20Report_WI TH_SERVI CER_ASSESSMENTS_FI NAL.PDF 37. http:/ / voices.washingtonpost.com/ ezra-klein/ 2010/ 10/ the_treasurys_defense_of_hamp.html 38. http:/ / www.calreinvest.org/ system/ resources/ BAhbBlsHOgZmSSI yMjAxMS8wNy8xMi8xMV8xMF8yN185ODdfSEFNUF9SRVBPUlRfRklOQUwucGRmBjoGRVQ/ HAMP% 20REPORT%20FI NAL.pdf 39. http:/ / www.propublica.org/ article/ by-the-numbers-a-revealing-look-at-the-mortgage-mod-meltdown 40. http:/ / www.propublica.org/ article/ secret-docs-on-foreclosure-watchdog 41. http:/ / www.propublica.org/ article/ loan-mod-program-crippled-by-lax-oversight-and-deference-to-banks 42. http:/ / www.propublica.org/ article/ govt-finally-penalizes-major-banks-for-mortgage-mod-failures/ 43. http:/ / www.chronicleonline.com/ content/ grandmother-family-lose-home 44. http:/ / www.propublica.org/ article/ breaking-down-the-mortgage-settlement 45. http:/ / www.propublica.org/ article/ our-faq-on-the-foreclosure-reviews 46. http:/ / www.propublica.org/ article/ flaws-jeopardize-new-attempt-to-help-homeowners 47. http:/ / www.propublica.org/ documents/ item/ 263343-request-for-review-form 48. http:/ / www.palmbeachpost.com/ money/ foreclosures/ investigation-clears-attorney-generals-office-in-lawyers-firing2085840.html?printArticle=y

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