Elderly Prey

By: By Matt Miller and Marine OlivesiFor years, the loan payments of Easter and Lee Trimble have been steady and manageable. However, ever since the Trimbles refinanced last year, their mortgage payments have been almost unbearably high.

Easter Trimble, an 82-year-old mother of 15, and Lee Trimble, an 89-year-old World War II veteran, have lived on a fixed income since retirement. Last year, in an effort to get cash to pay off bills and make repairs to their roof and chimney, the elderly couple acquired a $310,000 mortgage loan for a house in the South Side’s Woodlawn community area that cost $14,500 when they moved there in 1982.

They spent nearly $275,000 of the loan to pay off their previous mortgage; an additional $12,000 covered fees for paying off the previous mortgage early. The couple also paid for some repairs to the home.

Subtract all that from $310,000 and there’s little money left to supplement the $2,200 a month the couple gets from Social Security and Lee Trimble’s pension from Dial Soap—on which the Trimbles have been scraping by since they refinanced the home last November.

Nevertheless, they have managed to make every $1,700 monthly mortgage payment and thus are not yet threatened with foreclosure. Still, the couple only has a few hundred dollars a month to pay the rest of their bills. And the couple fears they won’t be able to make their next mortgage payment.

The Trimbles did not consult an attorney or finance counselor when taking out their latest mortgage. And Cook County Recorder of Deeds records show that the couple has refinanced their home at least nine times since 1995. The loan amount was just $45,600 in 1995. It was $170,000 when the couple refinanced in 2003. And it was $272,700 when the Trimbles refinanced in August last year, just three months before their latest refinancing.

“Every time we look at the mortgage bill, it’s higher than it was supposed to be,” said Easter Trimble. “We did not understand that when we signed the loan. They didn’t tell us how it was going to work. All they said was ‘sign.’ We should have brought somebody in here who knew what was going on. All we were thinking about was getting that $22,000 to help pay the bills.”

Worse, starting next year, their payments will begin to climb. Right now, their adjustable-rate mortgage carries a 6.9 percent rate. But after two years, that rate will begin to increase—to as high as 12.9 percent. And for the first five years, none of these payments are applied to the $310,000 principal—only towards the interest.

The Trimbles’ case exemplifies how vulnerable some seniors can be on account of poor understanding of loan terms and implications.

According to some, predatory mortgage lending increasingly plagues the elderly throughout the country. Seniors often hold a lot of equity in their homes but need cash to supplement fixed incomes, according to Daniel Lindsey, a supervisory attorney with the Homeownership Preservation Project of the Legal Assistance Foundation of Metropolitan Chicago. Lenders can take advantage of seniors’ trustfulness, isolation and lack of knowledge about refinancing.

Senior citizens are typically targets for high-cost refinance loans, said Regan Brewer, homeowner services coordinator for ACORN Housing, a division of Association of Community Organizations for Reform Now. “Seniors end up taking loans that may look very attractive but that they can’t afford.”
“It’s a problem everywhere, but the elderly may often be disproportionately targeted by brokers,” Brewer added. “They don’t really know what they are signing for.”

One of the most troubling elements of the Trimbles’ case has to do with the type of mortgage they acquired: a “stated-income loan,” which is a loan where an income is simply declared on the borrower’s paperwork rather than being verified through documentation such as tax returns. According to Brenda Grauer, senior policy advisor of the Illinois Attorney General’s office, the use stated-income loans—which include products known as stated-retired loans due to their frequent association with retired seniors—can be used fraudulently in cases like the Trimbles.

Grauer said that while stated-income loans may be used legitimately in some circumstances—for example, with a business owner whose income is not accurately reflected in tax returns—it can be manipulated by loan originators to inflate borrowers’ income.

The Trimbles’ income was recorded as including $18,000 per month in rent from tenants … tenants who don’t exist. Besides a 17-year-old granddaughter, only one of the Trimbles’ daughters lives with them; she contributes about $500 each month.

In addition, property values are sometimes inflated in order to grant higher loans. In the Trimbles’ case, their home was valued on the loan application at $340,000—at least a $100,000 overstatement, according to Grauer.

Michael Otte, formerly a Neighborhood Housing Services of Chicago counselor who worked with the American Association of Retired Persons, works exclusively with seniors as a reverse mortgage specialist with Residential Loan Centers of America. He said that some stated-income loans effectively target the elderly because they are geared towards those living on fixed incomes like pensions and Social Security.

“This is a product supposedly developed to ease the documentation burden on clients,” Otte said, explaining the rationale behind stated-income loans. “Brokers say, ‘Look, we’re providing a service to people so that they don’t have to go through digging up documents, they can just tell us how much income they’re making and we’ll base our loan on that.’”

Otte also noted that lenders, somewhat ironically, justify stated-income loans to those lacking substantial pension and Social Security income by claiming that they are simply observing anti-discrimination laws that require lenders to offer packages without regard to borrowers’ age.

Inflating borrowers’ income figures constitutes fraud for lenders if it is proven intentional, but it can be difficult to prosecute lenders in cases where lending arrangements were, for the most part, worked out orally—a common occurrence with elderly borrowers who are unfamiliar with legal and financial terms and have a tendency to trust contractors on their word without consulting a third party.

“The difficulty in bringing some of these cases is that the problem is oral misrepresentation,” explained Grauer, whose office brings cases against loan originators who engage in this type of fraud. “The Trimbles didn’t have a lawyer there and they were simply told things and asked to sign. Companies can then say, ‘Hey, you signed the papers, you must have known.’ This kind of thing is more and more common amongst senior homeowners.”

Otte echoed Grauer’s sentiment, acknowledging that while such lending arrangements are technically legal, the process by which they are implemented can be unethical. “Is that predatory lending?” he asks rhetorically. “I would say developing a product that requires no documentation, that there’s no paper trail for, is at least an awful practice.”

Grauer is helping to work out new loan repayment terms for the Trimbles with their mortgage servicer, Wilshire Credit Corporation. The Illinois Attorney General mediates many of these kinds of cases, and demand for its help is on the rise in Chicago. Grauer said that just in the last few weeks, calls about loan mediation to the Chicago office have doubled to around 50 per week, with more than half of those calls coming from seniors.

The Office of the Illinois Attorney General only mediates cases to try to avoid foreclosure; the office does not bring suits on behalf of borrowers. Grauer said that troubled borrowers should call early in the loan process. She advises them to seek legal representation—through free legal service organizations, in cases of tight budgets—if foreclosure is imminent. Complications in mediation with a loan servicer can arise when the loan originator goes out of business, which Grauer says is not uncommon. Such is the case with the Trimbles, whose originator, Mortgage Lenders Network, has filed for bankruptcy.

In an attempt to combat predatory lending that targets the elderly, the city as well as some neighborhood and legal associations offer workshops and counseling services to educate seniors about responsible refinancing and the pitfalls of high-cost loans.

Barbara Hyshaw, director of housing at the Community and Economic Development Association of Chicago, does a lot of work in the Evanston area to expose predatory lending practices. “We do get a lot of turnout of senior citizens just interested in knowing about what it is because they hear so much about people being victimized,” Hyshaw said. “Often what we do is refer them to legal assistance, link them out with a lawyer.”

Hyshaw believes that part of the problem with the efforts against predatory lending for the elderly is the fact that attractive TV commercials and mailings promising cash and low rates often outshine the advertisements that warn against high-cost lenders. “There’s not enough money for campaigns that says ‘watch out’ for these,” she said.

Sherry Smith, a Neighborhood Housing Services of Chicago homeownership consultant in North Lawndale, said she sees a lot of seniors in trouble on the West Side who are preyed upon by subprime lenders. The NHS post-purchase classes have about 40 attendees, around one-third of them seniors, Smith said.

Oftentimes the elderly do not get the guidance they need with refinancing. “Seniors are not always apt to seek out resources … if they are approached through phone or by mail,” Smith said. “They can be very trusting.”

Another important factor, according to Lindsey, is seniors’ sense of physical and mental isolation. “It’s harder for [the elderly] to reach out and find the resources,” he said. “These days, if you’re younger, you’re used to using the Internet, going on a computer and doing things. … Older people are not necessarily going to think to do that. I think sometimes they can be more embarrassed, ashamed, and they just sort of close up and not reach out for help. They can be in denial.”

The story of George Tooley illustrates another predatory practice targeting the elderly known as “rescue fraud.” The 90-year-old man owned four properties in Greater Grand Crossing and Chicago Lawn on the South Side: his own residence plus and three rental units.

Some of Tooley’s tenants started missing their monthly payments when he underwent cataract surgery and lost his eyesight last spring, Tooley recalled. “I was doing pretty good [until the eye surgery]. I went to the hospital. They just took the weakness of me being out of circulation. Money went down. I went into foreclosure so fast.”

Within a few months, Tooley was behind in the mortgages he had on each of the four properties. Several people had been to his home with offers to help stop the foreclosures. Tooley first paid $1,200 to Grant Phil, who worked for National Finance. According to Tooley, Phil said he would give him a copy of what he just signed, but Phil never came back. Many others were knocking on his door each day, but because of his lack of vision, Tooley could not identify who was who.

On August 15, Yolanda King and Warren Jackson from a company named “W2X” had Tooley sign papers to set up an escrow account to stop the foreclosures, Tooley said. He later contacted Neighborhood Housing Services of Chicago. Carole Grant-Hall, manager of the agency’s West Englewood branch, reviewed the only document that Tooley said he was given and identified it as a “deed in trust” that made King the property’s owner. Grant-Hall then ran an Internet search and found that King was also the new owner of Tooley’s three other properties. An investigation for fraud is ongoing at the Cook County Circuit Court’s Chancery Division, said Grant-Hall. The Office of the Cook County Public Guardian and the Chicago Department of Aging are also conducting investigations, she said.

Similar to Tooley, the Trimbles’ were also contacted and visited by people offering to help.
“Our age and our health won’t allow us to get around,” Easter Trimble said. “We appreciate when people can come to us.”

And that’s just what Mortgage Lenders Network did.

Easter Trimble said that after getting their home phone number somehow and calling, their lender sent two or three men at a time to her home to set up the loan. “They told us, ‘Don’t worry about it Mrs. Trimble and Mr. Trimble—we’ll come to you.’” Easter Trimble recalled. The representatives were accommodating yet unforthcoming about the details and implications of the loan, she said. “We didn’t do too good when we signed these papers. That was the big mistake that we made, and that we’re still dealing with.”