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<h1>Ex-loan officer claims Wells Fargo targeted black communities for shoddy loans</h1>
<h3>
By <a href="http://www.washingtonpost.com/ylan-q-mui/2011/03/09/ABTPHIQ_page.html" rel="author">Ylan Q. Mui</a>, <span class="timestamp updated processed">Published: June 12</span>
</h3>
<p>For nearly a decade, <a href="http://www.washingtonpost.com/business/economy/helping-homeowners-facing-foreclosures/2012/06/05/gJQAk2Q0EV_gallery.html">Beth Jacobson</a> lived inside the vast machinery of subprime mortgages that shook the nation’s economy.</p>
<p>In sworn court testimony, she described <a href="http://www.washingtonpost.com/wp-dyn/content/article/2009/09/26/AR2009092602706.html">watching loan officers comb through heavily African American areas</a>
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.</p><p>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.</p><p>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 <a href="http://washpost.bloomberg.com/marketnews/stockdetail/?symbol=WFC">Wells Fargo</a>
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.</p><p>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. </p><p>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.</p><p>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. </p><p>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 <a href="http://washpost.bloomberg.com/marketnews/stockdetail/?symbol=FB">Facebook</a> to tell them to fight their banks.</p><p>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.</p><p>“The whole system’s crazy,” she said. </p><p>
<strong>Get people approved</strong>
</p><p>Jacobson had never heard of a subprime loan when she joined Wells Fargo in 1998.</p><p>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. </p><p>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.</p><p>Jacobson said her job in Wells Fargo’s subprime unit was straightforward: Get people approved.</p><p>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.</p><p>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.</p><p>“There was always a big financial incentive to make a subprime loan wherever one could,” Jacobson wrote in her affidavit. </p><p>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. </p><p>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.</p><p>“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.</p><p>There is one thing, however, that Wells Fargo does not dispute: Jacobson was extraordinarily successful at what she did.</p><p>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. </p><p>As a reward, she got all-<br align="block">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. </p><p>This was the good life. She didn’t ask a lot of questions. </p><p>But some things poked at her conscience, she said. </p><p>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.”</p><p>“The
point was clear to me: Wells Fargo wanted black potential borrowers
talking to black loan officers,” she wrote in the affidavit. </p><p>Wells Fargo said she was asked not to speak because she lived far from the region being discussed. </p><p>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.</p><p>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. </p><p>“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.</p><p>
<strong>Connecting the dots</strong>
</p><p>Jacobson can’t shake the shadow of Wells Fargo.</p><p>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. </p><p>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?</p><p>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. </p><p>She recalled thinking, “Wait a minute — we’re setting people up for failure.” </p><p>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. </p><p>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. </p><p>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.</p><p>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? </p><p>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. </p><p>“You could see this wave of movement from homeowners,” Jacobson said. “There was this kind of quiet uprising.”</p><p>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 <a href="http://www.washingtonpost.com/business/economy/settlement-launches-foreclosure-reckoning/2012/02/09/gIQAxGoE3Q_story.html">$25 billion settlement</a>
with the federal government over the “robo-signing” scandal — the
largest industry payout since the tobacco settlement in the late 1990s.</p><p>By then, Jacobson had found her new calling.</p><p>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.</p><p>“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.” </p><p>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.</p><p>“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.” </p><p>
<strong>‘Like two pit bulls’</strong>
</p><p>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.</p><p>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.</p><p>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. </p><p>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.</p><p>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. </p><p>Today, Jacobson has even better news to deliver. The bank doesn’t even own his loan. </p><p>“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. </p><p>“They’re like two pit bulls,” Dierker said of Jacobson and Rian. “When these guys get going, there’s nothing stopping them.” </p><p>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. </p><p>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.</p><p>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. </p><p>Another said it was Wells Fargo. Her former employer began moving to foreclose this month.</p><p>
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