WBUR

A Family Loses A Dream While Investors Cash In

BOSTON — Although the number of foreclosures in Massachusetts is expected to drop next year, for now, the number continues to rise. This year, lenders in the state have filed more than 22,000 petitions to take homes, and more than 11,000 properties have already been seized — including the former home of Pierre Solon and Katty Famila. Their case illustrates a crisis that continues to hit low-income families the hardest.

After their Hyde Park home was taken, Pierre Solon and Katty Famila now live in an apartment in Mattapan. (Anthony Brooks for WBUR)

In one sense, this story has played out millions of times across the United States. However, what is striking about this case is what happened to the house after the family lost it.

Losing A Dream

Solon and Familia own the Little Wonders Daycare Center in Boston. On a recent afternoon, about a dozen kids were sleeping on cots underneath brightly colored blankets. Solon, who comes from Haiti, and Familia, who comes from the Dominican Republic, have been running their business for the past two years while fighting to get their home back.

In 2006, Solon and Familia bought a green clapboard house in Boston’s Hyde Park neighborhood. Familia, a small woman whose eyes flash with determination, says they both took on extra work to pay for it.

“We made a lot of sacrifices,” she says. “Sometimes we (didn’t) even have food. I got two jobs, he got two jobs. I lost one, he lost one.”

And that is when they started falling behind on their payments.

The couple paid $584,000 for the house, borrowing the entire amount. After they fell behind on the payments, Wells Fargo, the loan servicer, foreclosed on the property, and in 2009, the couple moved out.

They sought help from Nadine Cohen, an attorney with Greater Boston Legal Services, who found out earlier this month that the bank auctioned off the house to a private investor for $115,000. That is a fraction of the original price.

“The broker made money, the investor made money, the servicer made money, and the homeowners lose out.”
– Nadine Cohen,
Greater Boston Legal Services

“The bank could have offered a modification of their loan for twice that amount,” Cohen says. “But the bank would rather see the homeowner displaced from their home with their children, and then sell it to an investor for $115,000.”

Investors Cash In

Two weeks after that sale, the investor who bought the home flipped the property to another investor for $270,000, making a profit of $155,000.

“Everybody has made money off the backs of low-income homeowners,” Cohen says. “The broker made money, the investor made money, the servicer made money, and the homeowners lose out.”

Familia calls the loss of her home “unfair and ridiculous.” “I think the banks … play with the people, like we are little toys,” she says.

This story is complicated, and assigning blame is not straightforward. Familia and Solon took on more debt than they could afford. Attorney Cohen says they were encouraged by a California-based sub-prime mortgage lender called Fremont Investment & Loan.

“They were given two mortgages, and those mortgage payments were almost $5,000 a month, (which was) more than their income,” Cohen says.

Fremont Investment & Loan was later sued by the Massachusetts attorney general for deceptive loan practices, and the company went bankrupt and shut down. By then its loans had been securitized and sold to investors. Wells Fargo has been servicing some of those loans, including the one made to Solon and Familia.

Wells Fargo’s Argument

Michael DeVito, a vice president for Wells Fargo home mortgage, would not comment about this particular case. He did say that less than 2 percent of Wells Fargo customers have gone into foreclosure, and that the bank does all it can to help borrowers keep their homes.

Solon and Familia had a $584,000 mortgage on this Hyde Park home. After it went into foreclosure, the bank auctioned it for $115,000. (Anthony Brooks for WBUR)

“Wells Fargo has been successful helping over half a million customers reach an affordable payment plan through a loan modification program,” DeVito says. “It’s always preferable, from Wells Fargo’s point of view, to keep a customer in the home.”

Another Wells Fargo official said the couple had fallen more than $150,000 behind in their payments, which the borrowers do not dispute. The bank offered Solon and Familia a chance to modify their loan through a federal loan modification program known as HAMP. That could have lowered their monthly payments, but because they had fallen so far behind on their payments, it would have increased their mortgage to more than $600,000, so the couple did not go ahead with the modification.

Paul Collier, another attorney who works with families facing foreclosure, says rather than auctioning the home at a fire-sale discount, Wells Fargo could have worked out a deal that benefited the bank and the family.

“What the bank did instead,” Collier says, “is to take the home from a family that could afford a fair-market price for that home in order to punish them for being victims of a predatory mortgage.”

A Foreclosure Mediation Proposal

Collier supports a proposal by Boston Mayor Thomas Menino that would require mortgage lenders to participate in mediation with homeowners before they foreclose on them. If approved by the state Legislature, it might help others, but Cohen says it would come too late to help Solon and Familia get their home back.

“I don’t think that’s going to be possible in this case,” Cohen says. “I think they lost their dream.”

Familia says she has worked for the past 20 years to afford a home for her family. Now, she, her husband and three children are living in a rented apartment in Mattapan. “I prefer to go back (to) my country,” she says. “At least there your house is yours.”

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  • Michael Rains

    Bob forbid we actually have affordable housing , zoning regulations wont allow mobile homes or similar type of houses the neighbors cry about property values or complain about cracker boxes that look identical even though the Mcmansions and condos all look the same ! .
    It is all about greed and status at the expense of the working poor .

  • Barbara Petrocelli

    Borrowers are responsible to pay back to money they borrow, just as they are responsible to collect information and ask questions to ensure they can afford to pay back the loan. It is sad when families lose their homes, even more so when they saved for years to buy that home, but that doesn’t absolve their responsibility. Maybe the bank observed that this family did not have a track record of repaying debts, and that foreclosing and finding a new borrower – even at a lower price for the home – was a better strategy for recovering money from the home.

  • Larry Boston

    “Pierre Solon and Katty Famila’s Hyde Park live in an apartment in Mattapan after they foreclosed on their Hyde Park home.” Huh?!

  • Marty Schneider

    I hear people say we should not feel for these people, that should should pay their bills and carry their fair share to society. We I feel the rich people should carry their fair share for society and not get the massive tax cut that could have been used to save our economy by helping people from getting foreclosed on

  • geffe

    While I’m sorry for the trouble this couple went through it seems to me they bought way to much house for their income level. To afford a $584,000 they should have made a combined income of at least 120K a year. Hardly low income. They should have put down at least 15% or more. They should not have been able to get mortgage for this house unless they three times the income.

    There were plenty if houses for sale in Hyde Park for under 500K in this period and they should have bought within their income level. That they did not have the finical education to figure out that they were borrowing more than they should have is their fault but I also blame the banks for and the government (lack of good tough regulations and oversight) for this mess. By the way this kind of housing bubble did not happen in countries that had good regulations. Such as Canada and France.

    I do feel what happened after this family lost their home is repulsive and shows me that our country is all about dog eat dog. It’s not about building good solid communities with good people of whom this couple seem to be.

    And, guess what not one thing has been done by the Obama administration or Congress to stop this kind of crap from going on in the future. Not one. It’s amazing simply amazing that the banks and Wall street do really control this country.

  • Danial

    This is the essence of “free markets” … the rich get richer; the poor get to bury themselves in the ground. I’ve been burned by the housing bubble (I overpaid for my house), but I’ve had the good fortune to hold to my job. I see nothing wrong with my tax dollars going to help out this family–after all, my tax dollars went to bail out banks and drop bombs on families. We live in “scary” times. I hope the investor who made a profit on this house by flipping it is visited by a ghost soon. Of course, Mr. Friedman is on today arguing there is nothing wrong with a system that rewards the rich. Great (for me)!

  • Brenda

    I grew up in this house – it’s a two-family, perhaps they had planned for the rental income from the apartment to assist with paying the mortgage. My parents sold to the family prior to the folks in the story. They are the ones who profited the most. My parents sold it for under $400K. If my parents were still alive – they would be very sad to hear what has transpired with their dream house.

  • Russell

    At some point it is time to stop blaming the banks. These people still bought a home that they had no way of affording and should have had the common sense to know that. Did they also buy Ferrari’s to drive around in because that would be about as dumb of a decision. I have no sympathy for homeowners getting the boot when they buy houses they have no money to pay for. I just get so sick of hearing families like this complain then you find out that the home they bought was over $500,000. Are your freakin kidding me. Blame the banks all you want but it is still your own personal responsibility to not be an idiot. Just like the guy working at taco bell shouldn’t go buy a BMW this family should never have bought that house to begin with, if you can’t afford it then don’t buy it.

  • mike

    Low income???
    They bought a half million dollar house and they are low income????

    Who the hell wrote this pathetic article and how could they be so cluless as to what the real story is!?!

    The headlind shoul’ve read-

    “Over-extended couple loses half million dollar house”

    or

    “Hispanic couple lies on credit app to secure half million dollar house- AND LOSES IT!)

    I make 100k year and live in a $300k castle in the worcester suburbs!

    No sympathy from me!!!

  • Padraic McCormick

    @ Russell – I have sympathy for them because unfortunately not everyone takes or receives good advice. They admit they made a mistake BUT THE FACTS are the bank sold it to the 1st investor for $115,000 when they could have sold it to these people for the same amount. So please tell me WHY you support the bank selling this for $115,000 to an investor when they could have kept that family there for the same amount or more? PLEASE answer that simple question?

  • Sean

    Read the comments and the one that said “It’s amazing simply amazing that the banks and Wall Street do really control this country.” is so very correct!! I’d add that the media does a form of propaganda, and WBUR is in the thick of that! The pledge drive is absurd, and since they mention in advertising fashion those that pledge, they are essentially being PAID to do that! That is NOT non-commercial radio! And since apparently John Lennon’s death day (12/8) was more important to make mention of on 12/7 (Pearl Harbor Day)…, I’d like to see Federal Funding removed from WBUR, and I recommend to others to “make a lot of noise” about this, and see that this duplicitous radio station gets what it deserves!

  • Mare

    My heart breaks for families in this kind of situation, especially with what I am experiencing.

    I own a condo in a 2-unit association. The owner of the other unit lost his sources of income as the economy started to sour. He had not paid his mortgage for a year, then he died. He has deceased now for 2+ years, so more than 3 years have passed with no payments being made on that mortgage. His family is not probating and have walked because the estate is so far under water. This is condo with amazing potential sitting empty, owned by a dead man because the bank won’t foreclose. They’d prefer to boot families, make them live on the streets, and pay the condo fees (the mortgage company is legally required to do so) for a condo that is vacant, and leave some schmuck (me) to manage an additional unit to protect the other unit’s (my unit’s) value.

  • Detra

    My husband and I bought our townhouse in Lowell for $157K in 2004. We did our research and bought in what we thought was a solid market. Property values were reasonable and there was a slow steady increase in the property values. There was none of the 100% increase in value as you saw in Boston and surrounding neighborhoods. We both had good paying jobs, I’m a lawyer he’s a paralegal, in the city. After a year and about $15k in upgrades we refinanced and paid down revolving debt. We didn’t take vacations or buy new cars. Since then we had a baby and my husband was laid off twice. Each time he was laid off he had to take a pay cut. Our income decreased by $40k per year. This last time, we called the banks immediately to get help. They sent back a letter saying that unless one of us had died, been permanently disabled or we were divorced, they couldn’t help us. They also told us we had to be at least 3 months behind before we could get a modification.

    We did everything right. Yet the banks that got taxpayer assistance are unable or unwilling to help unless we ruin our credit or step in front of a bus. We all have to take responsibility here. The banks chose to lend to people they knew were not qualified and were destined to fail. Those decisions directly affected my family by tanking the economy and causing property values to plummet when the bubble burst. I am doing my part, I pay the mortgage every month because we need a roof over our heads. I can’t do much else. It’s time the banks stepped up and took some of the hit for what they helped create.

  • geffe

    Sean I must say that your comments are off base.
    NPR and BUR do not get much in the way of public funds.
    I support it myself. I’m not bothered by the fact that John Lennon was given more air time than December 7th. By the way he was given more air time than 9/11 as well. So what? Why does this matter? They did mention it. I would have liked to have seen a show on the internment of American citizens, the Japanese Americans who were put into concentration camps. Even while their sons went off to war. The 442nd Infantry unit became the most highly decorated regiment in the history of the United States armed forces, including 21 Medal of Honor recipients.

    However I see that this was a two family and it’s possible that they did depend on the rental. That said they bought more than could afford, period.

  • Russell

    @Padraic
    I don’t support the banks actions but I’m guessing they were looking to just cut there losses and take money on the spot. So lets say they do resell to the family, who still owes over 150,000 in back payments then you add on the cost of the home and your probably around $275,000. Can they afford that? probably not. I recently purchased a townhouse with good credit, solid income between me and my wife and I wasn’t even looking at above $200,000 because if one of us was to lose out job then I would want to be able to pay my mortgage. Why would the bank resell to the same people who already proved that they can not back up there end of the bargain regardless of what advice they got. It’s time people took responsibility for there own actions. This family in the story only has themselves to blame for the mess they are in for assuming they could afford a $5000 a month mortgage that would require them to both work 2 jobs in a bad economy and have nothing go wrong, are your kidding me???? stupid, stupid, stupid. At the end of the day regardless of what the bank or mortgage broker tells you, it is still YOU that is signing the papers and getting into the mortgage. If your unemployed and walk into a best buy for headphones and walk out with a 57″ plasma that the salesmen told you that you can afford and then you can’t pay rent is it the salesmens fault?

  • Mary

    Wells Fargo offered the working poor a chance to modify the loan they have been paying into for several years through a federal program with a mortgage of more than $600,000, and then sell it to an investor for $115,000. This preferential treatment by banks of the investor class has got to stop.

    The investor sells it to another investor for $270,000, thereby inflating the price of a house by $155,000 in only 2 weeks. The first investor only pays 17% capital gains tax on the 2 week income of $155,000. Housing is a basic human need. Rewarding asset bubbles – especially assets like food, shelter, energy – by the investor class has got to stop.

    Money paid to Fremont Investment & Loan should be clawed back from the executives who profited from predatory lending.
    Money paid to the bank that securitized the mortgages should be clawed back.
    The government has the power to protect the poor from being preyed on by the rich, rather than enabling the predation.

  • Padraic McCormick

    @Russell – I like much of your last statement as it seems the owners “common sense” was not on display.

    I know from experience that some people get “caught up” in the emotional moment of purchasing a home and make poor decisions. There have been other purchasers who bought over their heads because they “knew” the market was going to appreciate and were gambling with what they could not afford to lose.

    I lost buyers because I suggested they do a budget. I would also ask them to sign a document stating I thought the purchasing decision was not in their best interest.

    Other purchasers appreciated my candor and the fact I put their interest before my own – which simply is my legal fiduciary duty in the State on NJ.

    I even had a case where a disabled vet and his young wife were assured they could afford to finance a home somewhere about the $175,000 range. I had them pre-approved by two lenders who came up with $105,000 and $104,000. These people were shocked! They came to the correct conclusion it would be better to rent.

    What disturbs me as a real estate professional is why could a bank not make a deal with the owners in this story as there was significant documentation this family could afford the home at the reduced price. Sometimes we think the banks are immoral but many times they are simply not very smart. Case in point – house owned by bank offered for about $115,000. CASH purchaser for $110,000. They refuse offer because the person who could make the decision on behalf of the bank in unable. Later that home sold for under $100,000 if my memory serves me correctly. We – as taxpayers – have to pick up the bill.

    We simply are not treated equally by banks nor have the financial opportunities that wealth provides. Wealth – “real” wealth – as well as the corporations and their lobbyist have unparalleled access to lawmakers. They also enjoy the unique and coveted position of being able to influence politics disproportionately. They also provide significant input to the very process of writing laws so their interest receive priority and precedence over that of the general public.

    The % of wealth controlled by the top 2% of our country has grown at a grotesque rate. Wealth has not trickled down – it has gushed upwards.

    Our country should be better then this.

  • Skeptical

    I feel sorry for the couple, but the one thing I can’t get past is this:
    “They were given two mortgages, and those mortgage payments were almost $5,000 a month, (which was) more than their income,” Cohen says

    They borrowed so much money, that the monthly payment was more that their combined income. Did they make any payments? They borrowed 100% of the price – so as far as we know from the details in the story – they didn’t lose their life savings – they lived there from 2006 to 2009 – and now that they have been foreclosed upon, they’ve learned the hard lesson that you need a substantial income to afford a $584,000 mortgage.

    The reporters on this story could have done a better job asking some additional questions.

  • http://newsblaze.com/writer/lawg.html Barbara Ann Jackson

    On the other hand, whether or not homeowners oppose foreclosures, LAWYERS WHO FILE FORECLOSURES SHOULD BE INVESTIGATED http://chn.ge/eU2zAm

    It does appear that this was mortgage loan that should have never been granted. But it is equally necessary to raise awareness about even more insidious activities that occur with in the foreclosure mess.

    In fact, some mortgage loans are made for the very purpose of default so that properties can be flipped! In fact, IT IS POSSIBLE THAT THE LAWFUL LENDER DID NOT FORECLOSE, AT ALL.

    Foreclosure fraud entails foreclosure mill attorneys intentionally filing foreclosure cases naming defunct mortgage companies, and companies having no ownership of promissory notes; or charges unfair fees beyond “Acceleration Clauses,” which impairs borrowers’ ability to repay arrears! When homeowners sue for “Unfair Debt Collection Practices,” the foreclosure lawyers make even more $$$$ through protracted litigations. Additionally, foreclosure fraud entails filing in Bankruptcy Court falsified motions to “Lift Stay” pleadings for purposes of accomplishing”simulated” foreclosure auctions abetted by “straw buyers.”

    Inadequate or questionable foreclosure can lead to useless property deeds that impede real estate sales. Increasing numbers of title insurance companies are refusing to cover foreclosed properties; and certain mortgage default claims, are being denied because of defective foreclosure proceedings.

    Foreclosure lawyers are officers of the court knowledge of applicable laws and civil procedure is not required from mortgage lenders, nor loan servicers. In states that require judicial foreclosures, FORECLOSURE LAWYERS are the ones who file lawsuits to seize and sell property; and lawyers are responsible for filing and recording foreclosure property deeds.

    Also, scores of homeowners do not contest foreclosures because of: not having knowledge of the law in order to recognize legally challengeable foreclosures or fraud; lack funds to pay for attorneys to represent them; homeowners are told to come to foreclosure auctions with money that they do not have, so they stay away from foreclosure auctions.

    * Request for Congressional Foreclosure Panel to Examine Foreclosure Lawyers @ http://www.change.org/petitions/view/request_for_congressional_foreclosure_panel_to_examine_foreclosure_lawyers#

  • Sonia Martinez Romaih

    These people have no defense, no excuse. What part of the mortgage payment is more than we earn did they not get? You can’t even claim anything getting lost in translation as numbers are the same in every language. If you make $3,000 a month you can’t buy a house for which the payment is $5,000. End of story, I have no sympathy for these people at all.

  • mo

    This article is a joke right?!
    They bought a half million dollar house with no money down and borrowed the whole amount!
    That isn’t even the worse part – they make less than what they have to pay on their mortgage!
    The article title should have been –
    “Greedy morons kicked out of house for being idiots”

  • geffe

    Familia says she has worked for the past 20 years to afford a home for her family. Now, she, her husband and three children are living in a rented apartment in Mattapan. “I prefer to go back (to) my country,” she says. “At least there your house is yours.”

    I’m perplexed by this last statement about if Familia buys a house in the Dominican Republic she claims the house is theirs. I’m assuming by this comment that in her country people do not have mortgages. Which would mean they have to buy them outright. I doubt this is the case, but there seems to be some confusion on her part on how the system works.

    She seems to misunderstand the idea of a mortgage and that she did not own the house Hyde Park. She took out a loan which means that the bank owns the house until you pay it off. The house is the collateral for the loan. I’m sorry but this woman was misinformed by a lot of people or she was willfully ignorant. Either way her statement sums up how this couple made some huge mistakes here. Does Anthony Brooks realize that he has done this couple a huge disservice by posting this story.

  • Pcloa3

    Wellsfargo has been forced out so of course they talk about the help they are now giving. What about those they unfairly  put out before this help? Oh but won’t comment. Huh keep families in there homes? I would love to sit down with Mr. DeVito. Huh.. 

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