voiceofsandiego.org: Opinion... Mike's Turn

Friday, July 31, 2008 |Contrary to the premise of Mr. Toscano's commentary, the San Diego City Attorney's Office is not seeking to create a foreclosure sanctuary for all subprime mortgage borrowers. Instead, as outlined below, we are aiming to assist only those persons who were the victims of predatory lending practices. Our lawsuit will create a forum in which both the lender and borrower will be given the opportunity to negotiate a mutually agreeable loan workout program based in equity and fairness.

Many homeowners who today face foreclosure were roped into taking out subprime unconventional loans. Research indicates roughly one-half or more of these borrowers could have qualified for more affordable, conventional rate loans.

Our lawsuit alleges that Countrywide originated loans with little or no regard for the borrowers' ability to repay the loans, and that Countrywide's lending practices were designed to increase the company's share of the national mortgage market by mass producing loans for sale on the secondary market.

The complaint filed by the City Attorney's Consumer and Environmental Protection Unit alleges that Countrywide made loans based predominantly on the foreclosure or liquidation value of a borrower's collateral. The company also engaged in “loan flipping” by inducing the borrower to repeatedly refinance a loan in order to charge high points and fees. Countrywide also engaged in fraud to conceal the true nature of the mortgage loan obligation.

We also contend that Countrywide engaged in these unlawful practices for the personal enrichment of several named defendants, whose combined profit exceeded $800 million.

Finally, our legal action is very focused and was brought to stop Countrywide from initiating or advancing any foreclosure on any residential mortgage involving properties that are owner-occupied in the City of San Diego when the residential mortgage contains the following characteristics: 1) the loan is an adjustable-rate mortgage (ARM) with an introductory rate period of three years or less; 2) the loan has an introductory or teaser rate for the initial period that is at least 3 percent lower than the fully indexed rate; 3) the borrower had a debt-to-income ratio that would have exceeded 50 percent if the lender's underwriters would have measured the debt, not by the debt due under the teaser rate, but by the debt due under the fully-indexed rate; and 4) the loan-to-value ratio is 100 percent or the loan carries a substantial prepayment penalty or a prepayment penalty that extends beyond the introductory period.

Once it is determined that a loan meets these criteria, we are asking that before any further foreclosure action is taken, the legality of the underlying loan origination practices be reviewed by an independent auditor. The audit findings can then assist the borrower and the lender in establishing an equitable workout plan for the loan which may include seeking funds from recently enacted federal legislation designed to help distressed borrowers.

Unlike the Attorney General's lawsuit, our legal action was brought to stop Countrywide from foreclosing on borrowers who were victimized by Countrywide's predatory lending practices. And judging from the calls and e-mails my office has received, that number is very high.

Mike Aguirre is the city attorney for San Diego. You can reach him at cityattorney@sandiego.gov. Or send a letter to the editor.

Countrywide continues its predatory lending practices as the most aggressive lender at these massive auctions of foreclosed properties, the next of which will be held on Saturday Aug. 16, 2008 at the San Diego Convention Center- Exhibit Hall A link Countrywide is often the new lender on its own foreclosed properties. It is actually experiencing a boom in new business as a result of its former "failed" lending practices. Foreclosures create turnover, turnover creates new business. Remember, Countrywide is in the business of "originating" loans not holding them for "investment". Investing pension funds take the losses.

Posted by Pat Flannery | reply to this comment
July 30, 2008 6:25 pm

Oh, I thought that the fraud was conducted by the borrowers who lied on their applications. How about the fraud conducted by the appraisers, brokers, and real estate agents who were in on the gravy train. How about housing them all in the poky? I can't see how lending money to poor people constitutes fraud when foreclosure is the remedy. Would they have given Countrywide a cut of the profits if home values went up?

Posted by Master of Obvious | reply to this comment
July 30, 2008 7:34 pm

Tell me Mike...what happened to personal responsibility? These people made poor decisions and if they can't afford their loans that is their fault. No one forced them to sign the contract. Poor choices means loss of home. Very simple. I'm sick and tired of the government bailing everyone out. Find something more productive to do like processing the backlog of criminal cases sitting in your office. Most SDPD detectives don't even take misdemeanor cases to the CA anymore. Its just a waste of our time.

Posted by Jim | reply to this comment
July 30, 2008 7:38 pm

I'm just wondering why our City Attorney believes it his responsibility to "...create a forum in which both the lender and borrower will be given the opportunity to negotiate a mutually agreeable loan workout program..." Isn't this the responsibility of adults who enter into contracts? Only those who were greedy, reckless or immature executed these contracts. Now its time to grow up and be responsible. Mr. Aguirre professes he's not "... seeking to create a foreclosure sanctuary...". Okay, I’ll take him at his word. But why should I and other San Diego taxpayers, a vast majority who pay their mortgages on time, subsidize the cost of litigation? This is another HUGE step towards a NANNY government where "they" know better than you and "they" will tell you what to do! The ongoing collapse of our freedom to choose or think for ourselves is just around the corner.

Posted by JustWonding | reply to this comment
July 31, 2008 4:53 am

Ethical business practices should always include a clearly demonstrated understanding by the client, of any documents they may be required to sign. In the hast to make money, businesses don't always put the best interests of their clients ahead of their own. It is in our society's best interests to be sure that businesses treat all people with the respect and care they deserve. I believe that this morg=tage forclosure crisis affects every one of us. The result has been a huge decrease in the property values all ar=cross our country! It isn't just the ignorant who are losing money!

Posted by Elly | reply to this comment
July 31, 2008 6:31 am

Bad business, illegal business, is that bad & illegal! I believe a lot of these homebuyers didn't get a chance to read through the documents, didn't understand what the broker/lender was doing was illegal, and got taken to the bank in the process (hard-sell tactics). Because you can manipulate (con) someone doesn't mean you should. And if you do you should go to jail, pay back for your abuses, and be made to stop the abuse. Laisetfair(sp) principle works on business being legitimate, that the gov't isn't majorly benefitting (higher property taxes) from the sale, and that the consumer has the funds. Other wise will, even those not involved, pay the price (aka down economy, lack of lending, budget deficits, etc).

Posted by FreedomPleaseOrg | reply to this comment
July 31, 2008 8:08 am

Fraud is saying a home is worth more and more every year - while average incomes are dropping like a rock. Fraud is saying a home is worth more so people will attempt to make-up for shortfalls in earned wage incomes by taking every greater loans out against their Family Homes. Fraud is attempting to deflect responsibility away from those who totally control the lending process, and forcing a false attachment of those responsibilities to the people who have the least control over the lending process. Kind-of like the Oil companies who claim, they cannot help that Gas Prices are so high - while their profit margins continue to go up exponentially to the price increases we pay at the pump. If I were one of that 3% of Americans who are better off today than they were in the year 2000 - I would be ashamed.

Posted by Gregory | reply to this comment
July 31, 2008 8:11 am

It's important to remember what was going on when the loans were being written. The media was telling people house prices would only go up and this was their last chance to buy. More than a dozen offers on a home in its first market week. And brokers got big bonuses for writing ARMs. I know three people who showed up for closing expecting a 30-year fix and found themselves looking at a loan or loan terms they didn't want. It's easy to look back now and say they should have walked. But they'd given notice and packed up, their realtors told them they could easily refinance out in a year or two when the house had more equity, they'd committed thousands of $ already and they knew they'd lose the house if they walked. So they signed. Now they can't sell or refi.

Posted by lucy barker | reply to this comment
July 31, 2008 10:23 am

No matter how they squeal, the lenders won't pull out over sanctuary. Not when there's money to be made. And our city does not benefit in any way from having a bunch of empty, unsellable properties standing around. That hurts public safety, drags down ALL market housing prices, crushes tax revenue and most of the buyers who are FLIPPERS who aren't invested in our community. 8,500 homes went into foreclosure - do you think there are that many buyers out there? Not even in a great year! Makes sense to keep people who can afford it in their homes and the lenders aren't doing that yet. Mortgage sanctuary is a fine bluff in a bad poker game.

Posted by cabrillo street | reply to this comment
July 31, 2008 10:31 am

As the head of the Criminal Division of the City Attorney's Office I am responding for the sole purpose of correcting the misrepresentations made by "Jim" who presents himself as an SDPD detective. "Jim's" allegations are false and untrue. The number of misdemeanor cases my office receives from SDPD has remained consistent over the last five years.

Posted by Chris Morris | reply to this comment
July 31, 2008 10:53 am

Mortgage BROKERS are required to hold a license.a loan. "DIRECT" lenders such as Countrywide, are not. Theoretically they lend their own money. They write the check and immediately sell the loan onwards. They are not required to employ licensed sales people. Mortgage Brokers are. "Senior Sales Consultants" with Countrywide often sold vacuum cleaners just a few weeks previously. They had none of the constraints of licensed real estate professionals. It still goes on. Check it out. Ask the Countrywide "Senior Sales Consultant" offering to finance your purchase at the next jumbo foreclosure sale. Real estate license? No!

Posted by Pat Flannery | reply to this comment
July 31, 2008 11:20 am

Mike Aguirre, his Officers and staff, compile the best City Attorney representatives we have had in San Diego in my 40+ years here. The Aguirre, complainer's and hater's, are mostly troglodytes and self-seekers ignorant, or a part of the power structure that HAD been running this City. This power structure, formerly impervious to any exposure, or challenges to their own self-enrichment. Self enrichment which came at the expense of the citizens of San Diego. For the last three years, led by the SD Union's Kittle, and his illiterate "America's Finest Blog" boy, the power structure has attempted to destroy Mike Aguirre because his office has threatened and exposed their moral, at a minimum, corruption. The negative statements concerning the City Attorney's suit against Country-wide is just part of their long running plan to destroy him by always reporting the work of the City Attorney in the most negative way possible.

Posted by JIMMIE | reply to this comment
July 31, 2008 11:22 am

The average age of people living on the street has increased by some 7 years - over the last seven years. Rip-off of the General Public, such as Enron and other hits to the retirement savings of our elderly, have placed them in the group most likely to lose their homes. Then you have cost of housing and rental in San Diego and the destruction of those entire truly affordable apartment Down Town to make room for ‘REDEVELOPMENT.” Then here come the loan-sharks, swimming around the poorer neighborhoods, where these predators told our elderly that they deserve to enjoy the equity they have worked so hard to build-up in their homes. They suckered the elder folk, who had low levels of access or acceptance during segregation to gain a higher education – that is just wrong. They represented Second Mortgages and Third Mortgages as Equity Lines of Credit’ and ‘Home Equity Loans.’

Posted by Gregory | reply to this comment
July 31, 2008 3:00 pm

Seems to me they are still running the show, or was there some other reason for Jerry to run to District 4 to 'kiss the baby' of the power elite in that area?

Posted by Gregory | reply to this comment
July 31, 2008 4:31 pm

Maybe, Chris Morris...but you're prosecuting fewer than ever before. Why is that? Can you respond to allegations that misdemeanor cites sit stacked in a room somewhere...and it can take hours, if not days, to locate one for prosecution?

Posted by Cobracat | reply to this comment
July 31, 2008 4:45 pm

Mr. Cobracat...you certainly sound like a disgruntled individual with some sort of ax to grind. I can tell you that many members within the criminal division of the City Attorney's office work tirelessly to ensure that the best possible job is being performed.. I am willing to bet that you are a dissatisfied police officer who probably failed to submit a complete and thorough report, therefore allowing an individual to escape charges. Lastly, I would like to say that I am not a City employee, am therefore not employed by the City Attorney's office, but AM sick of looking at your allegations when you obviously do not have correct information regarding the effort that is being done by memebers of the criminal division of the City Attorney.

Posted by Joe B | reply to this comment
August 1, 2008 9:46 pm

Goord luck in your future endeavors Mike! Come November you can go back to earning a living sueing the city and accepting small settlements to go away just like before.

Posted by Caitlin | reply to this comment
August 7, 2008 8:14 pm

What does Goldsmith stands for? Will he insure transparency and openness in our city government? Will he enforce contract compliance? Will he work to return ethnic, morals,and integrity to our local city's redevelopment corporations. What we see here are people launching personal attacks upon Mike A., unsubstantiated accusations and opinions. Assertions that Mike is costing the taxpayers money. Take the amount of monies spent and the amounts of monies saved/reclaimed, I see no expense, I find a net savings. Let us try to return real Conservative economic/budget policies to our city government. 'Borrow and spend' is less Conservative than 'Tax and Spend.' We have got to stop the 'bleeding of wealth' out of San Diego.

Posted by Gregory | reply to this comment
August 11, 2008 11:36 am

Does the SEDC board have the power, right, and authority to give Ms. Smith a get 'out of jail free card' (immunity from any/all acts/actions)? I mean, as Chip was still the chairperson (or whatever) and seems to be, himself, in some ways linked to the ‘acts/actions’ - I do not understand how such a thing could have taken place. Acta exteriora iudicant interiora secreta? I know you are busy, but when you have the time.... Thanks

Posted by Mr. Mike | reply to this comment
August 12, 2008 7:46 pm

Mike's Turn

By Mike Aguirre