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A Letter to Barney Frank

Posted by: Chris Palmeri on April 27, 2009

Bank of America officially dropped the Countrywide name on April 27, but the problems of borrowers continue. Here’s a letter sent to us recently by a reader named Scott.

April 17, 2009

Congressman Barney Frank
U.S. House of Representatives
2252 Rayburn Building
Washington, DC 205152252

Dear Congressman Frank:
Washington, DC 20515
I’m writing on behalf of my daughter who, as a working mother with two small children, has very little time to spend seeking the help from her elected representatives.

My daughter recently applied to refinance mortgage on her house in Northborough, MA under President Obama’s new re-financing program. As it is for people who bought their homes in the last few years, the value of her house has fallen to a point where she can’t get a conventional 80% mortgage, so the administration’s program is her only hope for reducing her monthly payments.


Her mortgage lender, Countrywide, said she qualified and offered her a much reduced rate (5% vs the existing 6.75%). Countrywide’s representative encouraged her to move quickly to “lock-in” the reduced rate and said that her monthly payment would be reduced by approximately $450. All of this is very positive, but there’s a catch.

Countrywide said there was no point in ‘shopping around’ because the government’s program was limited to re-financings with the current mortgage holder, and then they told her that there would be over $6600 additional principal on the new note because of points and fees. Fees alone are over $3000. There’s a “lender’s fee” of $775 and an “application fee” of $400, which I assume go to Countrywide along with the $3500 charges for points. There’s a fee of $786 for new title insurance to replace the title insurance now in effect. Countrywide says this is a state requirement, buy why the state should require anyone should pay twice for the same thing is difficult to understand. There’s a “survey fee” of $150 (no new survey is needed – nothing has changed since it was last done in 2007), a “tax service fee” (what ever that is) of $90, municipal lien fee of $90, closing costs $675 and the list goes on. Countrywide apparently admitted that there was no new “closing” per se — the process was simple, they’d generate new documents (probably with a few mouse clicks) and send them to my daughter for signature. “Send them back and the deal’s done,” said Countrywide.

I’m sure it was not Congress’ intention to enrich mortgage lenders by allowing them to charge outrageous amounts to refinance mortgages under the government’s program, but apparently that’s exactly what’s happening.

President Obama’s program to “help the middle class” may lower my daughter’s monthly payments, but by allowing mortgage lenders to charge outrageous points and fees, it will also put her deeper in debt.

My guess is this is going on all over the country — mortgage companies generating profits from charging points and fees to people desperate to lower their monthly payments. I strongly urge you to something to stop this rip-off of middle-class working people.


***** ******

Scott says he also sent the letter to his daughter’s Congressman and got a quick email back saying that if it was an urgent matter he could contact his local office. “I did and got a referral to a local ‘home ownership agency’ that I have not yet been able to reach,” Scott said. “The person I spoke to in the Congressman’s office was sympathetic. He was a father who’d just been through this with his daughter. He told me — and get this — his daughter’s loan modification ‘improved’ the terms of her loan, but actually RAISED her monthly payments by $60 or so. I find that hard to believe, but perhaps with large fees and falling home prices anything is possible.”

We asked Scott for another update last week. Here’s what he said:

“As for updates — of the two congressmen and two senators I sent letters to only one, my daughter’s congressman Jim McGovern (D, MA 3rd district), bothered to write back. He suggested that we contract his local office, which we did and they referred us elsewhere. Frank (my congressman), Kennedy and Kerry have not been heard from — not a hot enough issue perhaps?

My daughter went ahead and did the deal with Countrywide as it was the only real option she had for lowering their monthly payment. Given costs involved, it will take several years to “break even” — but the re-fi has improved their monthly cash flow, so in a sense I guess it’s helped. I just find the thought of paying Countrywide — one of the prime movers in causing this fiasco in the first place — over $5000 to generate 15-20 pages of new documents appalling.”

Reader Comments


April 28, 2009 1:34 AM

The forces of free market and capitalism give consumers better service, lower price and higher quality goods and services. To ensure competition of a free market, Congress passed the Sherman Anti-trust Act and later the Clayton Act in the late 1800s. After the crash of '29, the SEC was created to ensure a level playing field in the security markets. But the hearts of regulator and politician are easy corrupted. Throughout the pasting years, regulators and politicians have destroyed the policing powers that were necessary to ensure a free market. For some timely contribution, these officials covered their eyes and pretended as if there were no law violated as large corporation grew larger after devouring smaller one and mergers became mega-corporations. The over concentration of economic power at the hands of a few mega-corporations lead to the abuse of consumers even to the point of irony where the consumers are obligated to bailout these failed mega-corporations. Instead of relying on a free market to regulate business, Americans have increasing looked to the same corrupted government bureaucrats and same ineffective regulators as their saviors. America’s leaders, politicians, and regulators have betrayed her free market system and in the process have destroyed America's industrial might. As an example: tiny island Japan has Toyota, Honda, Mazda, Nissan, Suzuki, Daihatsu, Subaru, Mitsubishi, and Isuzu while America is about to have only one viable auto maker. Unless the American revive its moral standards these are ominous signs for America's future.

Debra Brown

April 30, 2009 8:34 AM

Countrywide has run me around in circles. I first called to get information and was told that a representative would call me back. I was told it was a "reservation" to talk about my mortgage options under Obamas plan. Informed that it would take 2 weeks, I waited patiently. After not hearing back, I called again. At that point, I hadn't missed a payment and was given the same option as the original blogger. Reduced rate to 5% but high fees tacked on to my loan. I asked the rep if I should just wait until someone caled me back because I thought that I could get more assistance under Obamas plan. I explained that I was on the brink of missing my first payment in 23 years of home ownership. The rep told me not to worry, to just keep them informed from time to time about when I might be able to make my payment. He suggested I wait to get help from the making home afordable act. I waited, still no call back from Countrywide, so I called. Now I was told that since I missed my payment, I was inelligible to re-fi with Countrywide. As of this date, I have been told by Countrywide that I will be receiving info in the mail in April or May, directing me as to what my options are under Obamas plan. I am beside myself and really don't know what to do next.

Patricia I. Buckridee

May 28, 2009 9:10 PM

Don't know if this is the right forum for this so here goes:

W. Bruce Johnson, Interim CEO & President
Sears Holdings Corporation
3333 Beverly Road
Hoffman Estates, IL 60179

Dear Mr. Johnson,

I am writing you this letter to let you know how disappointed I was to learn that my Sears MasterCard account had been canceled effective the expiration date of my card, wholly without justification on the basis of my history with you.

My very first credit card ever was a Sears Card which I applied for and obtained at age 18 in 1978. Since then, Sears had been a preferred shopping destination for me. In my over thirty-year history as a Sears Cardholder I never paid late and I never defaulted. Through the years, I was granted ever-increasing credit lines as well as the eventual upgrade to a Sears Gold MasterCard.

After an extended period of unemployment many years ago, when I finally found a job, with my first paycheck, I invested in a recliner for my husband- at Sears! Thereafter, any big ticket items that were acquired for our household were purchased at Sears. Refrigerators, dishwashers, clothes washers, dryers, cameras, camcorders, TVs, etc. were all bought at Sears. Likewise, I frequently recommended Sears to colleagues, friends, and family whenever I was solicited for an opinion on where to buy something. I even stepped those efforts up, when I learned of your policy of making up the difference between the wages of the military and their job at Sears, for your reservist employees who were called into active duty as a result of the war in Iraq.

When the sale of our old home fell through in 2006 (after we already had moved into our new home), we were unable to sell the property for almost two years as a result of the ailing economy. Moreover, my self-employed husband did not take a salary because he wanted to pay his employees, as his business slowed considerably as well. In that time, we exhausted our savings, cashed out our life insurance policies, closed out an IRA, borrowed against my 401K, and maxed out our credit cards just to be able to pay bills and feed our children. When we still were not able to sell the home, both of our properties went into foreclosure, because at this point we could not meet all our obligations. During this time, I was still making my Sears MasterCard payments each month on time without fail. Thank God I still had my job.

When we finally sold our old home in December, 2008, we paid off all our credit cards and got current on the mortgage, however, our credit rating had suffered significantly.

Recently, my husband and I went to our local Sears store to purchase a pressure cooker. When I presented my Sears MasterCard to pay for the one we wanted, it was declined because it was expired. When I called the credit hotline to inquire why I had not received my replacement card as I had for the last 31 years, I was told that my account was canceled. No explanation was given, however a few days later I received a notification in the mail, which explained that due to credit reports they periodically review, my account had been canceled.

As a businesswoman myself, I can tell you that the relationship that you establish with your customer is gold. Choosing to ignore the THIRTY year history that you have with me, one that clearly demonstrated my integrity AND my credit-worthiness, in favor of a computation from a third-party organization, is mind-boggling at best. So I am certain that you can appreciate my profound dejection upon finding out that I had been shunned by the very company I revered and went out of my way to support.

The result is sadly that I have no more incentive to patronize Sears without my Sears MasterCard. I have no other alternative than to take my business elsewhere to establishments that can and have appreciated that even though I had fallen on some hard times through no fault of my own, I have bounced back, and though the credit rating lags behind, it will also recover. These companies did not forsake me, or report me to the credit agencies, but hung in there, because they knew, based on my history with them, that I was a customer worth keeping for the long haul.

And assuming I am not the only one to whom you have given the heave-ho, be assured- this will trickle down to your bottom line… eventually.

Patricia I. Buckridee, B.S., MBA

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BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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