By James O’Shea and Bridget O’Shea
October 3, 2011
In November 2004, Wanda Carter bought a home at 6548 South Morgan Street on the South Side and thought she got a good deal.
A bank lent her $142,000, which covered the sale price and loan fees, and provided $20,000 to fix up the place. To Carter, it seemed as if the bank was paying her $20,000 to take the loan. She did not even have to come up with a down payment.
After the deal closed, Carter discovered the house needed structural work that would cost far more than $20,000. Then the man she married about a year after moving in received a diagnosis of late-stage cancer.
Carter soon fell behind on her mortgage. After a bank advised her that the best way to settle her mortgage debt was to evacuate and let a lender sell the house, the couple moved out. Instead, banks let the house deteriorate, and now it is an eyesore in its Englewood neighborhood — the kind of house that devastates nearby property values.
“This place is a disaster,” said a neighbor, Ernest Hearny, surveying the trash-strewn yard of the boarded-up home. “There’s nothing inside. Gangbangers got in there and got high, had sex. The odor is so bad. They took the pipes, the plumbing, everything. It started going downhill when the people moved out. ”
Carter’s story is more than an all-too-familiar tale about the ravages of predatory lending. It is also an example of why the Woodstock Institute, a nonprofit research group specializing in housing issues, just reported that Chicago’s inventory of foreclosed homes continues to be at record levels. Red tape, clogged courts, victimized borrowers and overwhelmed banks have created a glut of abandoned homes mired in a foreclosure nightmare.
The federal government and big banks have offered programs to mitigate the damage for overwhelmed borrowers. But as Carter and her husband struggled to stay in their home they tried to tap into the tools, only to be driven to the brink of bankruptcy as their home descended into blight.
“It was my first time buying a house by myself,” said Carter, 60. “I did a poor job. I’m telling everyone I know not to do this. I wanted a place of my own so bad that I didn’t follow the proper steps.”
Carter’s financial quagmire began when a friend in the mortgage business told her about a distressed two-flat on South Morgan. A bank had foreclosed on the property and was looking for a buyer.
“We thought it was a good deal even though it needed repair,” said Carter, who did not hire a home inspector. She and her husband-to-be Morgan Carter, a former WVON-AM radio host and newspaper publisher, planned to live on the first floor and convert the second into rental property.
At the suggestion of a mortgage service company that is now defunct, Carter obtained the $142,000 loan from Washington Mutual Bank. (Years later, WaMu was accused by a United States Senate investigative committee of igniting a “mortgage time bomb” by making thousands of subprime loans that were destined to go bad.)
After she agreed on the price, John Ptak of the Westland Group in Crystal Lake issued an appraisal that valued the property at $142,000, a perfect match to her WaMu loan. The Westland Group’s telephone has been disconnected, and Ptak did not respond to an e-mail.
In December 2004, the couple moved in, confident that the $20,000 would cover the repair work.
“I called heating, plumbing contractors, an electrician, to come in and tell me what I had to do,” she said, “and they started telling me they didn’t know how anyone could have sold the house to me because it wasn’t up to code.” The contractors’ estimates totaled $50,000.
The couple married. Then in late 2005, Morgan Carter became ill. “He was going in and out of the hospital, and our income fell,” Carter said. She was soon missing mortgage payments.
“I tried to do one of those things when you ask for your payment to be reconsidered so you can make it lower — a modification,” Carter said. She wanted Washington Mutual to lower her payments so she could afford them, catch up and remain in her house. Instead, the bank increased her payments.
By late 2007, Carter had the property appraised again, but its value came in at just $95,000. Two investors offered her $80,000 because the house needed so much work.
Carter soon learned Washington Mutual had sold her mortgage to a lender that employed Greentree Mortgage to service the loan. Such sales are a common practice among predatory lenders to get bad loans off their books and let the mortgage industry’s scavengers worry about the payments.
She started dealing with Greentree, which said it would release her of all obligations under the mortgage if she would move out. So, she said, she moved out and rented an apartment.
In early 2008, two pieces of bad news hit. Her husband, whose cancer was compounded by coronary disease, died. Then Greentree said Washington Mutual still held a second mortgage and would not agree to Greentree’s plan to unload the house.
“When I first bought the property, I didn’t understand that I was getting a first and second mortgage. It wasn’t explained to me like that,” Carter said.
“I was like, well, why didn’t you tell me that before I moved out?” she said. Greentree declined to comment.
Today the house, like thousands of foreclosed properties in Chicago, sits vacant. Woodstock Institute data show that the number of foreclosed homes sold in the first half of this year was at its lowest level since the housing crisis began. The typical sale in Cook County this summer occurred after the house had been on the market 363 days — nearly a year. That was up 25 percent from the previous summer.
For Carter’s home, a potential buyer would need a lawyer to sort through extensive paperwork and missing information. Court records indicate that a judge had ordered a sheriff’s sale but then dismissed the case before an auction could occur, without explaining why.
The primary mortgage was eventually passed on to REO Properties. And a sign on the building indicates that information about it is available from Chase Home Finance. The home-lending unit of banking giant JPMorgan Chase had picked up the second mortgage in September 2008 after the federal government ordered WaMu closed for its predatory lending practices.
Tom Kelly, a spokesman for JPMorgan Chase in Chicago, said that the bank’s interest in the property involved a second mortgage and that responsibility for the property’s upkeep rested with the primary mortgage holder. He said it was unclear at this point who was responsible for maintaining the home. Representatives of REO could not be reached for comment. Carter is still responsible for $141,836 in loans, court costs and legal fees. She said she would file for personal bankruptcy.
“I’m sure the house is worth even less now,” she said. “It was a shell to begin with, and now it’s even more of a shell.”
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