1. June Reyno of San Diego, California, has chained herself to her house to prevent a pending foreclosure. Yes, you read that correctly. Desperate times, etc.
2. “Good Samaritan” Marilyn Mock saved a total stranger’s home for her at a recent foreclosure sale in Pottsboro, Texas. The homeowner, Tracey Orr, had come to the sale to watch her beloved home slip away for good. She was stunned when Mock bid on the home, won it for $30,000, then turned around and said “This is for you.”

The Sheriff’s Office just sent out this email to those who, like me, wrote to the sheriff congratulating him on his bold action to raise awareness on this critical issue - thought others might be interested in it:

I would like to thank you for your email concerning the moratorium on evictions I instituted last week in Cook County, IL. The attention our office received helped to spark awareness of a matter affecting families across America. Here in Cook County, we have been overwhelmed by the effects of predatory mortgages and the resulting economic crisis, and already, the number of foreclosures has hit a record high.

Should our deputies again identify patterns of abuse, we will bring it to the attention of the judiciary and I will not hesitate to halt evictions again if necessary. Thank you for your support.

“My job here as sheriff is not just to follow orders … it is to make sure justice is done.  We shouldn’t be going about destroying people’s lives by winging it. ” - Sheriff Tom Dart

Sheriff Tom Dart of Cook County, Illinois is making headlines this week with his refusal to evict innocent tenants from foreclosed rental properties. His beef? The mortgage companies seeking the foreclosures in many cases aren’t giving appropriate notice to the tenants, who often get surprised by their belongings on the front lawn when they get home from work.

Yet they’re all up in arms over this, as you can imagine. A representative from the Illinois Bankers Association had this to say: “The reality is that by ignoring the law and his legal responsibilities, he is carrying out ‘vigilantism’ at the highest level of an elected official,” it said. “The Illinois banking industry is working hard to help troubled homeowners in many ways, but Sheriff Dart’s declaration of ‘martial law’ should not be tolerated.”

Sheriff Dart begs to differ. He sees it this way: “The people we’re interacting with are, many times, oblivious to the financial straits their landlord might be in. They are the innocent victims here, and they are the ones all of us must step up and find some way to protect.”  His officers are the ones who actually carry out those eviction orders and they’re seeing tenants who are completely taken by surprise by their arrival.

This is bold action, and there is in fact some legal exposure Sheriff Dart is facing for this move. Sometimes, acting against one’s own interests while standing up for what one sees as the greater good - justice, really -  will, in fact, bring negative consequences.

Knowing that, and doing it anyway? That’s the stuff of which heroes are made. Sheriff Dart’s decision will add to the national discussion on this crisis, and for that, I’m calling him a Consumer Advocate Hero.

In the immortal words of Little Richard: Good Golly, Miss Molly.  What the bejeebers is going on with this economy?!

Well, we pick up with where we left off last week. At the week’s close, we were debating the bailout and what to include. Despite the best efforts of some of the smartest and most dedicated consumer advocates I know (and know of), the big-biz-friendly Congress “declined” to actually help out the consumers whose foreclosure cases lie at the heart of this meltdown: there is no provision for bankruptcy cramdown in Chapter 13 within the proposed bailout legislation.

Then, on Friday came news of a troubling overnight development: the collapse of consumer finance giant WaMu and its subsequent asset seizure by the feds. Friday night, of course, Republican presidential candidate John McCain changed his mind and went to the debates, and never mentioned the middle class.

And over the weekend, the rumblings we heard last week about the proposed bailout became loud roars of protest. Judging from some of the mailbag entries at this MSNBC.com page, there are a boatload of angry taxpayers out there who do not think this bailout is such a good idea at all.

I confess, I remain committed to my initial thoughts - that the bailout was a regrettable necessity. But how it’s been pursued - and most importantly, what it includes and even more telling, what it does not include - these issues leave a very sour taste in the mouth of many, and I’m no different.

And then today we get the news that consumer spending has slowed.

In other news, water is wet. Ice, we hear, is also cold, but these reports have yet to be confirmed.

News isn’t encouraging this morning. After Senator Obama sold us out changed his mind and stated his belief that the mortgage reform angle was “probably something we shouldn’t try to do in this piece of legislation” predictably the rest of the party followed suit and declared the issue a “nonstarter.” Gee, thanks, Barack.

Why is it a nonstarter? What on earth is the justification for treating the greed-soaked monsters who created this mortgage nightmare and set us on the path to national fiscal crisis better than we treat the victims of the crisis who are most in danger of losing their homes?

Tell you what: I’ll even agree to put aside the “victim” lingo for a bit. Let’s assume (solely for the sake of argument) that the homeowners are just as much “bad actors” as the corporations getting bailed out for their bad choices. Apples and apples, then - and why are we helping one and not helping the other, especially when it’s SO easy to do?

This isn’t a case of “either/or” — it’s perfectly plausible to enable mortgage modification AND bail out the financial giants. One does not preclude the other. So what could possibly be the justification for this blatant nose-thumbing directed towards the working class homeowners who are struggling to stay in those homes?

Answer: nothing but politics, I fear. Big business = good. Middle class = bad. Very, very bad.

The Story So Far: Bailout Pending for the Big Guys Only

I read today in my email inbox that one of the professional groups I belong to that’s concerned with consumer bankruptcy issues has been communicating with Congressional staffers about the upcoming bailout (more on that in a subsequent post). The proposed bailout, make no mistake, is concerned only with helping Wall Street and the investment community - not homeowners, not consumers.

President Bush and his administration’s supporters are even now calling for a “clean bill” to pass quickly. What’s that mean? In Congressional code-speak, it means “Pass it fast and NO AMENDMENTS, buckos!” In short: Don’t even think about trying to help out the little guy. Just bail out our finance industry contributors, and then back away from the table slowly.

The Suggestion: Mortgage Modification for Chapter 13 Debtors

Hmm. I have a different idea. And so does NACBA, the afore-mentioned group: why not use this opportunity to help stabilize the economy AND help out the little guy? Surely we can all agree on that as a useful and productive thing for our legislators to do?

Here’s the idea: Pass bankruptcy reform legislation that’s been languishing for awhile now that will allow bankruptcy judges to modify residential mortgages as they do other forms of secured debt and thus allow Chapter 13 debtors some honest-to-goodness relief.

Bear in mind the modification of secured debt isn’t some new concept. It’s been around for awhile. It can’t be used for residences, however, and homeowners hoping to use bankruptcy to keep their homes can only do so at the often-inflated values at which they bought the property. In other words - no real relief at all, except for forcing a payment plan, albeit at the same terms. While that’s helpful to a degree, why not treat homes at least as well as we do the five-year-old upside down family car loan?

The Call to Action: What YOU Can Do

So here’s the kicker: we need to act NOW.  My sources tell me that if calls and emails will be helpful at all, they have to be made Monday and Tuesday - that’s 9/22 and 9/23.

So, do these things:

1. Go to Congress.org’s website. In the upper left corner of the page displayed, you’ll see a small text box that reads: “Find and contact your federal, state, and local officials.”
2. Enter your zip code into the text box below that sentence. Click “GO” - you’ll be taken to a new page where you can either add more information about your address or add your “zip + 4″ digits (this eliminates possibility of confusion in the event of split districts).
3. You’ll be taken to a results page where the President, VP, Congressional representatives, senators and key state officials are listed with links anchored to their names that will take you to their personal pages.
4. Click on those personal pages links and you’ll be given several options in a tabbed box - “Bio/Contact/etc…” What you want is “Contact.”

This takes less than one minute, maybe up to two if you’re a slow typist. Now, you can send your message to your representatives. Put it in your own words, or you can feel free to copy and paste the language below as a template. In any case, I do urge you to put your own unique thoughts into it. Tell them what you think! They NEED to hear it.

Suggested Letter to Elected Representatives on Bankruptcy Reform

Feel free to copy and paste the following, and add your own thoughts as you see fit:

I am your constituent. My peers and I sent you to Washington to protect not only the interests of big business and finance, but our own interests as well.  I urge you to think twice before rewarding the finance industry players who created this economic disaster without also helping those of us struggling to keep our homes in the midst of that disaster. To that end, I urge you to support legislation that would, along with the bailout, permit mortgage modification in Chapter 13 bankruptcies. It is only fair that homeowners be given some consideration simultaneously with those whose lax lending and underwriting practices helped put those homeowners in danger of losing their homes. Thank you for your consideration.

The S.C. Department of Consumer Affairs along with the S.C. Attorney General’s Office announced a new mortgage hotline on Monday. The hotline is expected to reduce mortgage fraud of all types. Anyone who suspects mortgage fraud or simply wants more information can call the Stop Mortgage Fraud hotline at (800) 553-7723 between 8:30 a.m. and 5 p.m. weekdays.

Passing the word along!

His biggest criticisms, though, are reserved for mortgage brokers and appraisers. As Bitner describes it, lenders like his company, which underwrote loans offered up by brokers and resold them to giants like Countrywide, spent much of their workdays trying to spot the stupid tricks brokers routinely used to get unqualified borrowers approved for loans. They’d say a buyer intended to live in a house when it was really an investment property. They’d falsify the buyer’s income by having a relative pose as his employer, or use scanners and software to forge W-2 forms. They’d find ways to hide debts (like a car payment) by looking for a credit report that omitted key data. They also routinely gamed the appraisal system, encouraging appraisers to look for “comparables” that were far nicer homes in better neighborhoods—all in an effort to drive up the appraised value of the home they were mortgaging.

OK — fair enough. The broker conduct described above is by any measure pretty sleazy and warrants censure.

But then I read this:

Disillusioned and realizing the subprime business was becoming less and less profitable, Bitner cashed out of the industry in 2005. And when the subprime market collapsed last year, he decided to tell his story in a new self-published book, “Greed, Fraud & Ignorance: A Subprime Lender’s Look at the Mortgage Collapse,” which is for sale on his Web site and at Amazon. Today he’s promoting the book full-time. “I could afford to take a year off and do this,” he says in an interview. “I want some positive change to come from this.”

Emphasis mine.

Yes, Bitner can afford to take a year off — because he brought in, routinely, an annual income in the “high six figures” (disclosed in the article). I’m not sure how I feel about someone who participated in the subprime industry meltdown now profiting off of it yet again.

It isn’t suggested that Bitner himself engaged in any wrongdoing, and I’m certainly not making that allegation here. In fact, it’s Also, I suppose, it’s better to have this information than to not have it, and who better to report it than an insider, as Newsweek suggests?

On the other hand, there’s this quote:

Bitner says his company did its best to figure out whether borrowers really would be able to repay their loans. But mostly it deferred to the standards set by industry behemoths to whom it resold mortgages.

Again, emphasis mine.

So, yes. It sort puts me off a bit to hear that a player in the get-rich-off-the-backs-of-subprime-borrowers game is getting even richer now by writing about it, even though he apparently has the best intentions now. Yet another sad result from this whole mess.

The mortgage company is suspected of widespread fraud, the paper said, which may have contributed to the subprime mortgage crisis that has rocked the U.S. economy.

The probe will examine underwriting and mortgage origination practices, and whether the company misrepresented losses related to subprime loans.

Bank of America which agreed to buy Countrywide earlier this year claimed it didn’t know about any FBI investigation.

Here’s an excerpt:

A confidential proposal that Bank of America circulated to members of Congress this month provides a stunning glimpse of how quickly the industry has reversed its laissez-faire disdain for second-guessing by the government — now that it is in trouble.

The proposal warns that up to $739 billion in mortgages are at “moderate to high risk” of defaulting over the next five years and that millions of families could lose their homes.

To prevent that, Bank of America suggested creating a Federal Homeowner Preservation Corporation that would buy up billions of dollars in troubled mortgages at a deep discount, forgive debt above the current market value of the homes and use federal loan guarantees to refinance the borrowers at lower rates.

(Bank of America is the institution, lest we forget, that arbitrarily (at least, as far as we know, since they’re not sharing their rationale) closes down consumer accounts, even without defaults or overdrafts, simply because they think it’s in the “customer’s best interests.”)

BoA’s proposal goes on to state that any solution must avoid the dreaded word “bailout.” They want one, mind you. They just don’t want you to find out that’s what it is.

Read the rest of the article yourself and think about it: what are the ethics of the situation? Does economic health outweigh the message to bad actors that it’s OK to screw up this badly, because your government will clean up after you?