Klobuchar and Franken to Shape Financial Overhaul on Foreclosures

Thursday, May 20, 2010
In Washington, Senators Amy Klobuchar and Al Franken are pushing for a financial overhaul bill that will serve as bookends to the vicious cycle that trapped unwitting mortgage borrowers. Many people have a similar story to Tecora Parks, a retired hospital worker and South Minneapolis resident, who was duped into refinancing her home in 2005 near the height of the housing bubble.

Tecora, like many homeowners, admits she understood little of what she signed. She bought a house with an option ARM mortgage, and the mortgage payments increased dramatically over the years. Someone should have helped her understand that the “teaser rate” her lender offered her would not necessarily mean she would be able to afford her mortgage payments in the future – but no one ever did.

\When Tecora's payments increased, she fell behind on her mortgage. She entered the Home Affordable Modification Program (HAMP) hoping to save her house, but seven months later she was told by her mortgage servicer that her file was closed, because she had declined a final modification of her mortgage.

Here’s the only problem – she didn’t, and her mortgage servicer has no record of a conversation or correspondence with her. They simply marked the file as closed.

Tecora is now working with Twin Cities Habitat for Humanity's Mortgage Foreclosure Prevention Program (MFPP), and we are helping her to fight this mistake. In the meantime, Tecora is constantly worried that she may lose her home, because her mortgage servicer made a mistake.

Another homeowner in danger of losing her home is Barbara, who is from Minneapolis and fell behind on her mortgage payments when her husband was laid off and her son was diagnosed with cancer, which racked up huge medical bills. Talk about someone who might lose her home through no fault of her own!

Her mortgage servicer claimed she wasn’t eligible for a final mortgage modification, using incorrect information about her financial situation. When she pointed out that there was a problem, her servicer told her there was nothing they could do, because, “once you have been denied for HAMP, you cannot be eligible again.” Barbara is fighting this with the help of our Minnesota Senators.

Senator Klobuchar's proposal, which has already been adopted as an amendment, would protect consumers from the predatory lending practices that jeopardize Tecora's house. It is based on the 2007 law that ensures lenders obtain essential financial information and provide responsible advice to borrowers.

Franken, who has cited both cases on the Senate floor, wants to block banks and other financial institutions from shopping around for the highest credit rating they can find for their securities. "Wall Street's current system just isn't honest and it's time we clean it up," said Franken, whose measure was incorporated into the Senate bill with bipartisan support.

Trista Matascastilllo, Community Relations Sr. Associate