KOJO NNAMDIYou're tuned in to The Kojo Nnamdi Show on WAMU 88.5, welcome. Later in the broadcast a new monument to military women will be unveiled at Arlington National Cemetery this weekend. But first, the nationwide housing crisis of 2008 had a particularly negative impact on Prince George's County. At the time unscrupulous lenders took advantage of the situation and ensnared homeowners with predatory loans. These loans are under scrutiny as residents struggle with the economic hit of the coronavirus. The combination has locals wondering if the county will be facing another housing crisis. Joining us now is Dominique Maria Bonessi, WAMU's Maryland Reporter. Dominique, thank you so much for joining us.

DOMINIQUE MARIA BONESSIThank you, Kojo.

NNAMDIDominique, you have been reporting on how Black homeowners in Prince George's County continue to deal with the fallout of predatory loans from years ago. But remind us, what happened in the 2008-2009 crisis that led to this now decade long issue?

BONESSIRight, so that was also known as the subprime mortgage loan crisis. It left thousands of homeowners in Maryland, which was third in the country for foreclosures strapped with these initially low interest loan before ballooning dramatically. And many banks were caught practicing predatory lending. Many Black homeowners particularly in Prince George's and in Baltimore City, Prince George's was hardest hit in the state for foreclosures. They were often targeted for these predatory loans and many didn't find out about the high cost of these loans until receiving a notice with intent to foreclose. And this was years after the housing crisis had supposedly ended.

NNAMDIDominique, at its peak, how many foreclosures were there in Prince George's County?

BONESSISo the county reached its peak in foreclosures in 2010 with more than 12,700 foreclosures. Last year, before the pandemic, there were more than 3,000 foreclosures filed compared to a little more than 1100 cases filed in Montgomery County. And Maryland still remains high in the list of foreclosures, even though there's a moratorium on evictions for government backed mortgages.

NNAMDIWhat are most recent numbers -- I guess you just gave me some of those. But do we know how many of those numbers are due to those predatory loans from a little over a decade ago?

BONESSISo the county couldn't really provide me with any estimates on how many foreclosures were due to predatory subprime loans. But experts to the county's NAACP say that a large majority of the more than 3,000 foreclosures from last year were due to subprime loans.

NNAMDIIn 2008, Prince George's County was hard hit by the housing crisis. Now it's reeling from the economic effects of the pandemic. Tell us about some of the homeowners you spoke with recently. And I think one of them is on the phone with us. But you go ahead and tell us first.

BONESSISo I spoke with upper Marlborough resident Michelle Corals Washington. She's actually currently fighting a wrongful foreclosure in court. She and her family refined their home in 2008 and they got one of those pickup payment interest only loans. So that means you're only paying interest on the loan for the beginning of the loan. So the family maintained their ability to pay the loan as many that I spoke with did. But in 2016, the payments began increasing by $400 each month. And they received a notice with intent to foreclose. And the current moratorium on evictions prevents them from being, you know, kicked out of their homes. But there's a lot of uncertainty on the status of the foreclosure in circuit court currently.

NNAMDIOkay. And the other person you spoke with is on the phone right now. And that is Zalie or is it Zaley Harris. You're on the air. Which is it?

ZALEYZaley Harris.

NNAMDIZaley Harris, thank you so much for your call. I know that you are one of the people that Dominique Maria Bonessi spoke with. But you can tell us your story yourself. And go right ahead

ZALEYWell, yes. Okay. Yes, we purchased our home in 1987, and in 2006 we refinanced and unbeknown to us we refinanced into what was already a pool in the service agreement where our house property had been purchased in a pool in the service agreement and was already a predatory loan. We was not aware that we were in that situation until 2010 when we had financial difficulty with a contract that was lost. And at that time we learned that the annual percentage rate had increased. Oh, my God and, you know, of course, not knowing predatory lending rates, not knowing racial gentrification, not knowing that the house was already sold into a pool in the service agreement, you know, it really put us into a financial situation.

NNAMDIYeah, because from Dominique's reporting your monthly payment was about $2600 and then by 2008 it jumped to over $8000 a month.

ZALEYYeah. It was -- it got pretty expensive. And when, you know, of course, unable to make those kinds of payments, you know, very short order we were in a foreclosure situation.

NNAMDIAnd you're still in that foreclosure situation, but because of the pandemic they can't foreclose. What do you think is going to happen afterwards?

ZALEYYou cut out on me, I'm sorry. I'll I heard was pandemic. What was the question? I'm sorry.

NNAMDIWhat does the future hold for you at this point?

ZALEYWell, we're out of the property, and we did file an appeal just before foreclosure. And the special courts of appeals denied our case. And so we're contemplating a lawsuit with a couple other homeowners that are in the same predicament. And we're making sure that, you know, we can decrease the amount of foreclosures by doing a lawsuit.

NNAMDIWell, Zaley Harris, thank you so much for sharing your story with us. And good luck to you. Joining us now is Beth Jacobson, a Lead Paralegal and Expert Witness at Strategic Housing Solutions and organizing legal support to prevent and to fight foreclosures. Beth, thank you so much for joining us.

BETH JACOBSONThank you.

NNAMDIBeth, predatory loans, subprime loans, gets a little confusing, doesn't it? Can you tell us what these loans really entail and why at first they seem to be so appealing?

JACOBSONCertainly. Just as way of background I originated mortgages, specifically subprime mortgages as a loan officer at Wells Fargo. And so the subprime loans stared approximately 2007. So a subprime loan is not necessary a predatory loan. A subprime loan is just the definition of a loan for a borrower that may have had credit issues, a previous bankruptcy or late pays. The majority of subprime loans are predatory, but not everyone.

JACOBSONA predatory loan is generally defined as a loan that a borrower gets put in without the ability to repay that loan. And so when we were talking about the borrowers, who had loans where the payments increased, those were typically ARMS, adjustable rate mortgages. For example, most subprime loans that were predatory loans had a 228 ARM, which meant for the first two years the interest rate would be set, for example, at five percent.

JACOBSONAt the end of the first 24 months, the rate could go up to eight percent and then in the next six months it could go up to 11 percent. So the interest rate could more than doubled within a three year period. But the borrower was qualified to make the payment at the lower rate. So once the interest rate increased, the homeowner was no longer able to make those payments.

JACOBSONSo a lot of the foreclosures that we were seeing, even the ones -- recently the foreclosures that were filed in early 2020 were a result of two different things. A predatory loans from 2000 to 2008 and people that were put into loan modifications as a result of being in a predatory loan, a loan modification such as HAMP, where the interest rate then adjusted up after they were in it for five years. And so they were back into that situation where they couldn't make their mortgage payment.

NNAMDIBeth, there seems to be some confusion as to whom these loans are even paid to. Can you explain that?

JACOBSONCertainly. Most people pay what's called the servicer and people assume that that's the owner or the investor of their loan. The servicer is a middle man. That's the person that's collecting the payments from the homeowner and then paying the taxes and insurance in most cases and then paying the investor. The investor could be a federally backed loan such as Fannie May, Freddy Mac, FHA insured and VA insured or it could be a loan that was sold on the secondary market through the process called Securitization where it's sold multiple times and then it ends up with a group of investors who purchase the stream of income.

JACOBSONAnd it's really, really important for the home owner to know who the investor is on their loan. You need to know who the investor is because the investor dictates the guidelines as far as the loan modification. So if a homeowner is attempting to get a loan modification they need to know who the investor is.

JACOBSONAnd specifically under the CARES Act you need to know whether or not your loan is federally backed, which would be the FHA, VA, Fannie or Freddy loans, because those are the loans that were covered under the CARES Act. The other loans, which is about 50 percent of the loans that are out there, are secure ties or owned by private investors. And those loans are not covered under the CARES Act.

NNAMDIBeth, part of the reason you're an expert on this is because for many years you worked at Wells Fargo making these very -- subprime loans even ranking as the top subprime loan officer at the company. Bring us back to that period of time when subprime loan was not such a dirty word and even big national banks like Wells Fargo did it on a large scale. What was the landscape then? And what would you describe of the -- and would you describe any of the subprime loans from that period as predatory? We only have about a minute left in this segment.

ZALEYYes. I would say most of those subprime loans were predatory loans during that period, which would be 2002 through 2007. And at that time even the borrowers, who could have qualified for what they call prime loans or A loans were steered into subprime loans, because there was more money to be made in a subprime loan. It was in the best interest of the loan officer and the mortgage company to sell subprime loan as opposed to prime loans because you made more money. Literally --

NNAMDIOh, literally, Beth seem to be dropping off at this point. So we'll attempt to connect her even as we go into this break. I'm Kojo Nnamdi.

NNAMDIWelcome back. We're talking about predatory loans and how they continue to burn many Black homeowners in this region and Prince George's County. We're talking with Dominique Maria Bonessi. She's WAMU's Maryland Reporter. And Beth Jacobson is a Lead Paralegal and Expert Witness at Strategic Housing Solutions, an organization providing legal support to prevent and to fight foreclosures.

NNAMDIWe're taking your calls at 800-433-8850. Beth Jacobson, when we dropped you were talking about subprime loans from the period back in the 2000s, in the early 2000s that would be described as predatory, and about the fact that you worked at Wells Fargo during that time. Tell us a little bit more about how what you did at Wells Fargo shaped your work with homeowner's now today.

JACOBSONWell, when I was working at Wells Fargo, I was not looking into the future of what was happening at the end of two years when these loans started to adjust. I was, as you say, drinking the Kool-Aid at Wells Fargo. Now that I'm on the other end of this and I see so many homeowners that have been harmed by the predatory loans, I can see that the borrower was never informed of what they were getting into. In fact, I'm talking working with borrowers whose loans originated from all different lenders and different brokers. And the amount of fraud that I see is amazing, where homeowners didn't even fill out the application. The loan officer inflated somebody's job. For example, I'm working with a teacher. The loan officer put on her application that she was a principal and increased her income by over 30,000. The homeowner didn't realize this until she fell into foreclosure and then started to receive the documents and said, "That's not the application that I filled out."

JACOBSONAnd a lot of homeowners were so sold that they were going to get a 30 year fixed rate. And they got to the settlement table and all of a sudden it's an unadjustable rate, an ARM. And the homeowner says, "That's not the loan that I wanted to be in." And it's basically "take it or leave it." And during that time from the 2002 to 2007, it was totally a seller's market. So if somebody wanted to purchase a home, they literally would take that loan even though they felt that it's left a bad taste in their mouth. And then they may have been ultimately been foreclosed upon. And then the second tragedy in all of this is the court systems where homeowners are looked at deadbeats and the courts are not looking at the fraud committed by the banks as to how the homeowner ended up in this situation.

NNAMDIHere now is Nicole who is in Montgomery Village, Maryland and who may have spoken to me earlier this year. Nicole, you're on the air. Go ahead, please.

NICOLEHi. Hi, Kojo. Yes, we spoke earlier in the year when I was in the process of trying to buy a home. I lost my home in a foreclosure back in 2009. It was one of the predatory loans. They tried to give me a larger loan than I could even take. And I remember telling them, I don't think I can afford this. And still somehow it went through. Immediately regretted it and lost the house. So it took me seven -- eight years just to be able to even be considered to have a house. So finally I was in that position in March, and I made an offer on a house and luckily they accepted it.

NICOLEAnd one week later, the whole country shut down. So I called and spoke to you about I didn't know if I was going to get my home or not, because at that point the bank was being very tight with money, because they weren't sure what was going to happen. But ultimately I did end up being able to buy my house. It was really hard to do. And it's a much better loan. It's not what I had done before. But I learned so much. But it was such a shame that I was young homebuyer at 27 years old and that the bank would sell that to me even. They knew it was going to end up ruining me financially and they didn't care.

NNAMDIAnd in current situation, are you working? Are you able to pay your mortgage on a monthly basis right now?

NICOLEI am in home improvement and I do custom closets. And we've been busier than I've ever seen it in 22 years. It's really kind of crazy. It's really weird. But so luckily, I was able to maintain it and have been able to actually pay more on it just, because I'm so afraid of what happened last time. So I pay more than what my mortgage is because I just don't want to go through that ever again.

NNAMDIWell, good for you, Nicole, and thanks for reaching back out to us again. Beth, do the homeowners you work with generally have an understanding of their rights and fighting a notice of intent to foreclose? What options do homeowners have to fight this and what is the county, Prince George's County, doing to help?

JACOBSONWell, homeowners usually do not understand their options. So the first notice they receive is that notice of intent to foreclose. And then within 90 days after that a foreclosure filing, which is called an order to docket is filed in the circuit court. And then with that is a document called a preliminary loss mitigation affidavit. Forty-five days approximately after that is a final loss mitigation affidavit, which allows the homeowner then to request mediation. And many homeowners do request mediation.

JACOBSONBut it's literally sending the lamb into it with the wolves, because the bank will tell them, Oh, don't worry. We're not going to sell your house. We're going to review everything for a loan modification. Don't worry about that. Even though there's an administrative law judge sitting there to mediate the process nobody ever tells the homeowner that once they leave that mediation, they only have 15 days to file a motion under Maryland Rule 14211. And if they do not file that motion they could extensible wave all of their rights to any foreclosure defense that they may have.

JACOBSONAnd so we recently had a case that we lost in the court of special appeals where a homeowner untimely filed a motion under 14211 where clearly it was a solid case. The note was not endorsed as it was supposed to be. There was a lost note affidavit from the servicer that didn't get filed with the order to docket, which meant that the affidavits contained in the documents were fraudulent and there's perjury committed. But the court said, you filed it too late. There's case law out there, even if you file your motion, one day late, the homeowner may be barred from waving any defenses. And most homeowners don't realize this.

NNAMDIDominque, even though in your reporting you found that less than one-third of foreclosure cases in the county circuit had a hearing, local attorneys never the less say there's a backlog of cases. Tell us more about that and the county's response.

BONESSIRight. So the county's circuit court faces its own dilemma sort of figuring out how to deal with all these foreclosure cases especially related to the subprime mortgage loans. And attorneys that I spoke with in the county say that the backlog has sort of existed since the 2008 to 2009 housing crisis. And it's going to continue after this moratorium is lifted. If you go into the clerk's office in the circuit court, you'll see thousands of orange folders. And I was told while I was there that there's even a separate warehouse with folders all containing foreclosure cases that date back years.

BONESSIYou know, the other issue really here is that, you know, the foreclosed homeowners have trouble getting a hearing. There's only one judge that hears the foreclosure cases and compared to other counties where there are multiple judges that hear the foreclosure cases. And really NAACP has been trying to push the circuit court to have more hearings so homeowners can have their day in court.

BONESSIYou know, as I said, during the height of the foreclosure crisis in 2010 there are more than 12,000 foreclosure cases filed. But there's only 725 hearings held. And that's according to a public information act request that we made. And in the same year Montgomery County saw more than 6700 foreclosure cases filed, but only 317 hearings.

BONESSINow Montgomery -- sorry. Pardon me. Now Prince George's County response, April Waldon is a spokesperson for the circuit court. She responded to the allegations of a backlog via email by saying the court is quote, "able to effectively and efficiently manage the foreclosure caseload by having a magistrate, several clerks and paralegals exclusively assigned to processing foreclosure cases."

NNAMDIDominique, is there a statute of limitations with foreclosure cases?

BONESSISo in 2014 Maryland passed a law that put a statute of limitations on a lender to collect on residential mortgages within three years. That law only applies to foreclosure cases that went into effect after July 1st, 2017. And the court of appeals has not yet definitively ruled on the statute of limitations.

NNAMDIBeth, the federal, state and local moratoriums related to evictions and mortgages payments all due to the pandemic. Tell us about those and what could happen when they're lifted. We only have about a minute left.

JACOBSONSure. That only applies to federally backed loans, which is why it's really important that a homeowner knows, who the investor is on their loan. And I just read a statistic that in July of this year 120 day delinquencies jumped to that rate that hasn't been that high in 21 years. It was 2.4 percent. In fact, that rate was double than what it was in 2009.

JACOBSONSo if we're looking at the numbers from 2009-2010, if these people that are 120 days late end up going into foreclosure, we're going to be looking at the same numbers that we were, the 12,000 plus foreclosures that we saw in 2010 for the post-COVID. And then we still have the existing foreclosures for people that were put into the predatory loans that are still going on.

NNAMDIIn the 30 seconds we have left, are there laws in place now, Beth, that would prevent predatory loans like we saw?

JACOBSONThere are under RESPA, under the Dodd-Frank Act where it basically says that you can't put a borrower in a loan without their ability to repay the loan, which seems like it's common sense, but they actually had to put that law in place.

NNAMDIBeth Jacobson, Dominique Maria Bonessi, thank you both for joining us. We're going to take a short break. When we come back, a new monument to military women being unveiled at Arlington National Cemetery this weekend. I'm Kojo Nnamdi.