Countrywide Cashing in on Surprising Group of Homeowners

August 15, 2008

Hurricane VictimsAs the foreclosure crisis tightens its grip on most of the country, a surprising part of the United States is experiencing the opposite of declining property values.  Louisiana and Texas, still recovering from the ravages of Hurricanes Katrina and Rita, are displaying a remarkable rebound in the housing market. 

The West South Central region is the only part of the country that reported an increase in housing prices for the first quarter of 2008, according to the latest report by the Office of Federal Housing Enterprise Oversight.  Texas showed a 4.7% increase in housing values and Louisiana a 3.3% increase.

Hurricane Victims Targets for Foreclosure

While that sounds like good news, it’s actually making hurricane victims targets for foreclosure. “They’re trying to steal my home,” said Hurricane Rita victim and Countrywide borrower Derrick Haley.  Haley’s Lake Charles home was severely damaged by Hurricane Rita in September of 2005.  Shortly after the storm, Countrywide Home Loans enacted what they called a “Hurricane Relief Program.” 

Homeowners in declared disaster zones were instructed by Countrywide that their mortgage payments would be suspended to help them through the recovery period.  “We were told in no uncertain terms that this would have no negative financial impact-no late fees, no penalties, no hits on my credit,” Haley said. 

Borrowers throughout Louisiana, Texas and Mississippi were put into the “relief” program and told they would not be required to make a lump sum payment after the suspension period, they would simply resume their payments and the missed payments would be tacked onto the end of their loan. 

Haley ended up in the suspension program for a year, while his heavily damaged property was repaired.  At the end of the suspension period, he called to begin making his payments again and that’s when the trouble started. 

“I talked to customer service and they told me to make my payment of $421 for October 2006 and to call back before I made my November payment.”  Haley did exactly as he was told, but when he called back in November, he says Countrywide changed the rules.  They told him he no longer qualified for the work-out plan they promised hurricane victims.  “They told me I had to apply for a hardship waiver in order to qualify.” 

“It’s absolutely unconscionable,” said Jill Bowman a Florida Attorney representing hurricane victims in class action lawsuits against Countrywide.  “They promised these people help and got all the good publicity that went along with that, but now that the cameras have turned away, they’re trying to stick these disaster victims with the very penalties and financial hardship they promised they would not impose.”

Save My Home

Haley says even though Countrywide was reneging on its promise to help, he wanted to save his property.  So, he applied for a hardship waiver and continued to pay the amount requested on his monthly statements.  Despite making those payments and his status as a hurricane victim, Countrywide denied his hardship request and he received a notice of default two months later.  It said he would have to pay all of his missed payments from the suspension period, a total of $4,798 in a lump sum, or they would proceed with foreclosure. 

“I was in shock.  I couldn’t understand why they were doing this.  They promised one thing and now they were acting like their hurricane relief program never existed.”  Over the next several months, Haley continued to send Countrywide checks hoping it was all a misunderstanding that would get cleared up, but that didn’t happen.  The company continued with the foreclosure action and even began returning his checks to him- one for $485, another for $960 and finally one for $1500. 

“This is ridiculous,” Haley said.  “I wasn’t behind in my payments before the hurricane and I wouldn’t be behind now, if they did what they said they would do.  I don’t deserve this.”

No matter what he tried to do to save his home, Haley says Countrywide seemed intent on foreclosing.  He believes Countrywide was trying to cash in on his rising property value.  His loan amount was for $65,000, but he estimates his property is now worth between $85,000 and $110,000.  In other words, if Countrywide forecloses on the property, it can sell it for more than what he owes. 

It’s contrary to all the PR spin that lenders always lose money on foreclosures.  “These lenders are very sophisticated and know when they can cash in on a property.  If a home has enough equity it offsets the costs of foreclosure,” said Attorney Bowman. 

Former Employees say Homeowners Misled

Randall Crum is a former Countrywide employee who worked in the collections department at the time Hurricanes Katrina and Rita hit.  He says employees were instructed to be very understanding when talking with hurricane victims calling in for help.  “We told them not to worry– that they’re payments were being suspended,” he said.  “At first it was for 30 days, then 60, then 90, and after that, it was extended for people who needed it.”

Crum says he and his co-workers told homeowners there would be no negative financial impact for missing their payments, and that Countrywide was looking at just tacking them onto the end of their loans.

 “I told people not to worry, that if they had 27 years left on their mortgage, it would just be like they had 27 years and 6 months left.  We’d just tack the missed payments on the end,” he said.   “People were left with the impression that they would just have to resume their monthly payments after the suspension.”

Cynthia Conedy another former Countrywide employee who worked as a foreclosure specialist at the time of the hurricanes says her team was also told to tell borrowers not to make their payments and that they would suffer no negative financial impact.

She says she became concerned for borrowers, however, a couple of weeks into the relief program. Employees received a script to follow which said homeowners would be contacted by the work-out department after the suspension period.  At that point, she says, it became clear to her that Countrywide did not intend to live up to its promise, because the purpose of the work-out department is to restructure loans, which generally costs the homeowner more money. 

“I felt terrible about misleading borrowers this way, making it seem like Countrywide was helping them in the midst of a disaster and knowing that the customers would likely end up paying more at the end.”

Conedy says she was disturbed by what the company was doing and could not understand how this would actually help the hurricane victims. “If borrowers used the suspended payments to cover home repairs or extra living expenses caused by the Hurricanes – as we implied they could, how could they bring their payments current after the suspension period?”

Fighting Foreclosure

Haley is now fighting the foreclosure in Louisiana District Court.  He has sent Countrywide and its attorneys all of his paperwork and proof of his efforts to pay.  In March 2007, the company dismissed the foreclosure, but then turned right back around and re-filed it in April.  Since then, he’s filed repeated complaints with Countrywide and gotten them to delay his sheriff’s sale five times, but the company refuses to cancel the foreclosure.

This July, as a sheriff’s sale date loomed once again, Haley decided to go above Countrywide.  He called the office of the Parish of Calcasieu 14th District Court Judge handling the case and begged them to do something.  A judge reviewed his complaints against Countrywide and canceled the sheriff’s sale, until his complaint can be heard in court.

Haley is now awaiting his court date.  “I’ll fight this to the end.  I did everything they asked me to do, and now I’m getting punished because I trusted them,” he said.  “I think they were malicious, deceptive and calculating, and they need to be held accountable.”