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   Ex-loan officer claims Wells Fargo targeted black communities for shoddy
loans By Ylan Q.
Mui<http://www.washingtonpost.com/ylan-q-mui/2011/03/09/ABTPHIQ_page.html>,
Published: June 12

For nearly a decade, Beth
Jacobson<http://www.washingtonpost.com/business/economy/helping-homeowners-facing-foreclosures/2012/06/05/gJQAk2Q0EV_gallery.html>lived
inside the vast machinery of subprime mortgages that shook the
nation’s economy.

In sworn court testimony, she described watching loan officers comb through
heavily African American
areas<http://www.washingtonpost.com/wp-dyn/content/article/2009/09/26/AR2009092602706.html>such
as Baltimore and Prince George’s County, forging relationships with
churches and community groups to sell their members shoddy mortgages. She
says she processed loans for homeowners with sterling credit ratings with
higher interest rates than they needed to pay. And she says she pumped out
millions of dollars in mortgages to people with no paperwork and low
incomes, becoming Wells Fargo’s top-producing loan officer.

The machine made her rich — the questions came later. Now, she has recast
herself as a crusader for consumers in a battle that has pitted her against
the system she once pushed.

The 51-year-old Maryland resident has emerged as a defining character in
the ongoing saga of the country’s housing crisis, from the headiest days of
the bubble to the current flood of foreclosures. Her scathing affidavit
detailing “the stagecoach to hell” at Wells
Fargo<http://washpost.bloomberg.com/marketnews/stockdetail/?symbol=WFC>is
a key part of the groundbreaking lawsuit filed by the city of
Baltimore
against her former employer. The case spawned copycats across the nation,
and federal regulators launched investigations mirroring its allegations.

The company flatly denies any wrongdoing, especially when it comes to
Jacobson’s claims. It calls her testimony misleading at best and, at worst,
outright lies.

The consequences are still unraveling. Wells Fargo is under investigation
by the Justice Department over alleged fair-lending violations, and it has
spent millions of dollars to put similar charges to rest.

Jacobson has faced her own fallout. Her income plummeted after she left
Wells Fargo five years ago, and creditors are knocking. A vacation home and
an investment property she bought at the height of the market were both
foreclosed on. She and her husband divorced last year.

Yet she has placed herself back inside the machine. Her new business
focuses on homeowners navigating complicated loan modifications and
examines mortgage documents for fraud. She has used an obscure clause in
the federal financial regulatory overhaul to help her clients win thousands
of dollars from their mortgage companies. She tracks auction notices and
pursues strangers on
Facebook<http://washpost.bloomberg.com/marketnews/stockdetail/?symbol=FB>to
tell them to fight their banks.

Jacobson’s journey through the housing boom and bust mirrors the country’s
own struggle for recovery — a messy, complicated affair in which blame is
plentiful but redemption is hard to find.

“The whole system’s crazy,” she said.

*Get people approved*

Jacobson had never heard of a subprime loan when she joined Wells Fargo in
1998.

Wall Street had just figured out how to generate enormous pools of money
that could be used to extend these mortgages to people with low incomes or
poor credit. Many of them were minorities who traditionally had been unable
to qualify for a loan. The trade-off was that they paid higher interest
rates and often accepted adjustable terms.

The mortgages were so popular that they spawned a boom in lending that in
turn fueled the country’s economic growth. Home­ownership soared among
blacks and Latinos, a fact celebrated at the time by banks and consumer
advocates.

Jacobson said her job in Wells Fargo’s subprime unit was straightforward:
Get people approved.

She had never worked in lending but quickly learned the ropes. In her
affidavit, she said the quickest and most profitable way to make loans was
to steer borrowers into the new breed of subprime mortgages. It didn’t
matter if they couldn’t afford the mortgage in the long run. All loan
officers were paid by the number of loans they approved, not whether they
succeeded, she said.

Subprime loans were so lucrative, she testified, that many of her
counterparts selling traditional mortgages realized they could make more
money by referring borrowers to her than by making their own loans. That
meant customers were offered subprime mortgages even if they qualified for
better interest rates, she said. Other times, brokers encouraged buyers not
to provide a down payment or income documents, automatically funneling them
into the more profitable subprime division, she said.

“There was always a big financial incentive to make a subprime loan
wherever one could,” Jacobson wrote in her affidavit.

Company spokesman Oscar Suris flatly denied Jacobson’s testimony. He said
the bank never made “no doc” mortgages or predatory loans that kept
homeowners from paying down principal. An internal review of a sample of
the subprime mortgages Jacobson approved found that almost all of the
borrowers would not have qualified for traditional loans. And, he said,
prime-loan officers had quotas to meet as well — only a few could have made
more money referring clients to Jacobson.

Her declaration proves that she violated several company policies, Suris
said. According to Wells Fargo, Jacobson was more like a technical glitch
than a cog in a well-oiled machine. Back then, only 10 percent of the
company’s mortgage business was subprime, he said.

“Ms. Jacobson is making unfounded and opportunistic accusations that are
offensive, inaccurate, and contrary to Wells Fargo’s commitment to fair,
responsible and unbiased lending practices,” Suris said.

There is one thing, however, that Wells Fargo does not dispute: Jacobson
was extraordinarily successful at what she did.

She churned out roughly $50 million in loans annually for Wells Fargo,
making her the top-producing subprime officer in the country. She earned as
much as $700,000 one year, more than seven times the company’s stated
average for subprime-loan officers in her area.

As a reward, she got all-
expenses-paid trips to Cancun and the Bahamas, where the likes of Aerosmith
and Jimmy Buffett performed for employees, according to her testimony. She
bought a home in Federalsburg, Md., with her husband, an investment
property down the street and a vacation house in Virginia.

This was the good life. She didn’t ask a lot of questions.

But some things poked at her conscience, she said.

She said she grew uncomfortable after being excluded from meetings about
marketing to black churches. She said that she later learned how sales
pitches purposefully shunned the word “subprime” and that she was taken off
the roster to speak at a “wealth-building” seminar in predominantly black
Prince George’s County because she was “too white.”

“The point was clear to me: Wells Fargo wanted black potential borrowers
talking to black loan officers,” she wrote in the affidavit.

Wells Fargo said she was asked not to speak because she lived far from the
region being discussed.

Jacobson’s testimony is one of the most salacious and incendiary pieces of
the Baltimore lawsuit. The city’s attorney, John Relman, said her
statements are crucial to proving that Wells Fargo intentionally made bad
loans to black homeowners — and that it is the bank’s fault many of them
have gone bad. The company argued that the scope of the case has become so
narrow that Jacobson’s affidavit is no longer relevant.

But in an opinion allowing the suit to move forward last year, U.S.
District Judge Frederick Motz cited Jacobson’s testimony as essential to
bolstering the city’s claims.

“This proffered evidence also undermines Wells Fargo’s claim that the
city’s allegations identify nothing more than ‘industry-wide wrongful
practices’ common to all lenders,” he wrote.

*Connecting the dots*

Jacobson can’t shake the shadow of Wells Fargo.

She said she left the company in 2007 when she moved to Easton, Md., and
was unable to open an office closer to her new home. Disillusionment also
set in after she heard a company executive deny dealing in subprime loans,
she said.

Jacobson said the statement blew her mind. She had recently received an
internal e-mail congratulating her division for meeting its quarterly
targets. How could anyone say that she didn’t exist?

That’s when she began to connect the dots. The loans she was originating
were not just un­affordable for homeowners — she believed they were
intentionally designed that way.

She recalled thinking, “Wait a minute — we’re setting people up for
failure.”

Wells Fargo has scoffed at the characterization — 2007 was the year the
bank stopped making subprime loans, leaving Jacobson out of a job, a
spokesman said.

That year, the volume of subprime loans fell by $40 billion across the
country, according to Moody’s Analytics. Meanwhile, foreclosures doubled.
Soon, the mortgage crisis landed on her doorstep.

Not only did Jacobson lose homes she owned in Virginia and Federalsburg,
but several of her friends were also underwater, owing more than their
homes were worth. In 2009, one friend told her his bank could not even find
proof that it owned his loan.

That didn’t make any sense to Jacobson. If the bank couldn’t prove it owned
the loan, then it should not be able to foreclose on the home. How did the
bank even know the property belonged to it?

Soon she was trolling the Web site of the Securities and Exchange
Commission in hopes of unraveling how loans were sold and resold, in many
cases without proper papers. She read 1,200-page pooling and securitization
agreements and began trolling Internet forums where people shared their
experiences about fighting foreclosures.

“You could see this wave of movement from homeowners,” Jacobson said.
“There was this kind of quiet uprising.”

It would be another year before fraudulent and shoddy foreclosure paperwork
made national headlines in fall 2010. Earlier this year, some of the
nation’s largest banks, including Wells Fargo, agreed to a $25 billion
settlement<http://www.washingtonpost.com/business/economy/settlement-launches-foreclosure-reckoning/2012/02/09/gIQAxGoE3Q_story.html>with
the federal government over the “robo-signing” scandal — the largest
industry payout since the tobacco settlement in the late 1990s.

By then, Jacobson had found her new calling.

Her new business is called Professional Compliance Examiners. She and her
partner, Doug Rian, have roughly 60 open cases and work round the clock,
waiting for hours on the phone to speak with a client’s lender, traveling
with them to the foreclosure offices the banks have set up, testifying on
their behalf in court as expert witnesses.

“This is not a world that the lay person can navigate,” said Lynn Anstatt,
who worked with them to secure a modification for her loan after years of
battling on her own. “You just feel amazingly alone, and you don’t know
where to turn.”

Jacobson and Rian work out of a picturesque home on the water on Maryland’s
Eastern Shore that they say they saved from foreclosure. Only a small sign
above the mailbox indicates that this is anything but another neighborhood
home. Inside, two massive desks stacked high with files sit by the front
window.

“The true revolution of which we’re a part is that of homeowners, one at a
time, insisting that ours is a nation of laws,” Rian said in an e-mail.
“They’re not getting the attention that the Occupy Wall Street people are,
but these homeowners are quietly saving their home using the information
from our audits, and each time we testify another of society’s foundations
— that of secure wealth — that has been roughly shaken, is preserved and
thereby strengthened.”

*‘Like two pit bulls’*

For their services, Jacobson and Rian charge between $300 and $2,000.
For-profit mortgage-relief companies have come under scrutiny by federal
regulators, who say many have scammed customers for services never
produced. The Federal Trade Commission has warned that there is no evidence
that audits speed up loan modifications or foreclosure relief.

Jacobson said she and her partner have gotten 30 foreclosures dismissed
over the past two years and helped in dozens of other successful
loan-modification and foreclosure cases. They have sent tips to the
Maryland attorney general’s office and helped homeowners fight
foreclosure-relief scams.

Jacobson said she is not in the business for the money — especially since
she is barely making any. Court documents show one of the most recent
creditor filings against her was by her dentist for $905.

On a recent rainy morning, Jacobson sat on a couch in the living room of
her Easton office with John Dierker, a mammoth man clutching a super-size
soda in one hand and his Shih Tzu, Haley, in the other. Despite a string of
layoffs during the recession, Dierker stayed current on his mortgage until
two years ago. That’s when his lender began moving to foreclose on his home
— and when Dierker began fighting back.

In their 21-page audit of his loan, Jacobson and Rian say Dierker’s lender
stopped accepting his payments in August 2010. The notice of intent to
foreclose listed the day he defaulted as May 2, even though Dierker’s bank
statements show that the company cashed two checks he sent after that date.
In other words, they say the bank tried to foreclose while Dierker was
still sending in payments.

Today, Jacobson has even better news to deliver. The bank doesn’t even own
his loan.

“They had no legal standing to even sue you,” she told Dierker, handing
over a letter verifying her statement. Freddie Mac actually holds the note.

“They’re like two pit bulls,” Dierker said of Jacobson and Rian. “When
these guys get going, there’s nothing stopping them.”

Critics have compared them less charitably to “junkyard dogs,” Jacobson
said with a mix of disdain and pride. But if she knew five years ago what
she knows now, she said, she might have been able to save her properties
from foreclosure.

She is still working through a loan modification for the house she bought
in Easton at the height of the market for more than $500,000. Jacobson said
the bank wrongfully returned payments she made during her trial
modification. The bank said it is still waiting for her to submit missing
documents.

For Jacobson, this has become as much about the process as a symbol of her
fight. She said she isn’t even sure who owns her loan anymore. One letter
she received said Freddie Mac held the note.

Another said it was Wells Fargo. Her former employer began moving to
foreclose this month.

* *


-- 
Art Deco (Wayne A. Fox)
art.deco.studios at gmail.com
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