Zalee Harris, 63, lost her Temple Hills home after fighting her predatory loan foreclosures for almost a decade.
Some homeowners in Prince George's County are grappling with the current recession while still mired in debt from predatory home loans from the last recession.
The 2008-2009 subprime mortgage crisis left thousands of homeowners in Maryland — which was third in the country for foreclosures — strapped with loans that were initially low before ballooning dramatically. Black homeowners — particularly in Prince George's County which was hardest hit in the state for foreclosures — were often targeted for these loans. Many didn't find out about the high cost of the loans until receiving a notice for intent to foreclose, years after the housing crisis had supposedly ended.
And when they try to seek help to avoid foreclosure, they're mostly told to get a hard-to-obtain modification or declare bankruptcy.
The county couldn't provide an estimate on how many of the foreclosures were due to subprime loans, but experts with the county's NAACP says that a large majority of the more than 3,000 foreclosure cases in 2019 were due to subprime loans. The county reached its peak in foreclosures in 2010 with more than 12,700. Maryland still remains high on the national list for foreclosure, even though there's a moratorium on evictions for government-backed mortgages.
Zalee Harris, 63, spent almost a decade trying to save her home. She bought her Temple Hills' home with her husband in 1988, when they were newly married and first-time home buyers.
"Four bedroom. Upstairs, downstairs. Twenty four hundred square foot, three bathrooms, unfinished basement," Harris told WAMU/DCist. "We absolutely loved the place."
Zalee Harris sits in front of the house she rents in Charles County after leaving her Prince George's County home.
Later in 2006, they refinanced the house with their lender, HSBC. The couple didn't realize they couldn't afford the ballooning mortgage payments until 2010. That's when Harris had to wait a few weeks for a multimillion-dollar business contract to be signed for a non-profit that she runs.
For the first two years of their loan, their monthly payment was about $2,600. Then the interest rate almost doubled, and, by 2008 they had a balloon payment of more than $8,500 a month.
"We found out then that we was in trouble," Harris said.
According to a 2011 audit of the couple's mortgage, they had been the target of a predatory loan — like many Black homeowners in the county during that time. For three months, they tried to get their lender to approve a three-month delay in repaying the loan. Once Harris' business contract went through, they tried to back pay their mortgage. But the lender never responded.
It wasn't until 2014 that the couple received a notice with intent to foreclose. "The court proceeded with the foreclosure," she said. "The judge rubber-stamped the whole process."
When asked about the case, a representative from Prince George's County Circuit Court responded with a written statement that it followed all local, state and federal mandates.
As the couple was trying to hold a mediation with the bank, Harris was diagnosed with breast cancer and had to get a double mastectomy. Her husband was diagnosed with congestive heart failure. They say they never got a mediation with the bank, but the couple continued to fight the foreclosure in court.
In 2017, they hired Attorney Phillip Robinson to help them with their case pro-bono. A year later, they lost their case in circuit court and got an appeal. By early 2019, they were getting eviction notices. Harris says she already saw many of her friends and neighbors get evicted and didn't want to go through the same process.
"They would junk it. They would throw it. They would just destroy your stuff," Harris said. "And that scared us. That scared us to death. I then started looking for some place to go."
The couple moved to a rental house in Charles County just south of Prince George's. They lost their appeal in August of 2019 even with evidence showing that the bank didn't have the Harris's note or right to foreclose on them, according to Robinson.
Harris has a word of warning to other homeowners who are still fighting their cases.
"The best thing that you can do to preserve you and your family is to go find a nice rental property and start over because you're not going to win," Harris said.
'I Used My Own House As A Guinea Pig'
One person that's been able to help people like Harris is Liz Johnson with the county's NAACP's Strategic Housing Solutions. Johnson has had her own issues with predatory lending which led her to be an advocate for others.
Liz Johnson, Chair of PG Counties NAACP Strategic Housing Solutions, stands in front of her Temple Hills home which she put up as collateral to figure out what the banks were doing with predatory loans.
Johnson started Strategic Housing Solutions in 2017 out of a personal need to figure out what the banks were doing with homeowners loans that originated several years earlier. Johnson was in the process of constructing a new home in St. Mary's County in March 2010 when the bank foreclosed on it before she could move in or make her first payment. Johnson lost the house.
She then decided to put her own home in Temple Hills, that she bought in 1974 and refinanced in 2007, up as collateral for an experiment.
"I'll use my own house as a guinea pig. I figured I don't have any babies at home. If need be, I can drink muddy water, sleep in a hollow log," Johnson said. "I've got to figure out what [the banks] are doing."
She stopped paying her mortgage in 2010. "I wanted to see what would happen," she said.
Johnson gathered her team of experts: Kellee Baker, an attorney dealing in foreclosure in the county, and Beth Jacobsen, a paralegal and expert witness who worked as a lending agent for Wells Fargo Bank until 2008. Jacobsen testified against the bank in court in 2009.
Liz Johnson at her Temple Hills home.
As Johnson received her notice of intent to foreclose in 2018, the team began to dive into the foreclosure process. They gathered clients, tens of homeowners with the same issue: their houses were being foreclosed on because of predatory loans they had received in the 2000s and discovered that "everybody's case is different. Everyone has signed a different note ... They have different servicers."
An Ongoing Dilemma
One of the non-profit's clients was Upper Marlboro Resident Michelle Quarels-Washington. Jacobsen helped Quarels-Washington review her documents and provide her with information about predatory loans. Quarels-Washington is still trying to fight her wrongful foreclosure in court.
Quarels-Washington and her family refinanced their home in 2008. "Unfortunately, that was when they gave us these very bad loans, which is a pick-up payment, interest-only loan," she said.
The family maintained their ability to pay the loan, but in 2016 payments increase by $400. They received a notice with intent to foreclose shortly after.
While the current moratorium on evictions prevents Quarels-Washington and many other homeowners from being kicked out of their home, she says there's still a lot of uncertainty on the status of their foreclosure case in the county's circuit court.
"It's been very tough because, you know, a lot of businesses were shut down. You couldn't get in touch with certain people," she said. "My family is just torn apart because we know that we can afford the house if you just make the loan right."
Dominique Maria Bonessi/WAMU
If these wrongful foreclosures continue, Prince George's Black homeownership rate (44%) will remain well under the white homeownership rate (73.7%).
Dominique Maria Bonessi/WAMU
Johnson says she's worried there's going to be a repeat of the 2008-2009 housing crisis when the moratorium is lifted.
"It's going to be mayhem. They don't have jobs. A lot of them don't have income and can't pay their mortgages. It's going to be 2008 all back over again," Johnson said.
Baker and Jacobsen say the toughest fight is going to be getting the courts on the side of the homeowner. "The uphill battle is getting the judge to understand because they're so ready just to always call the homeowner a deadbeat and rule in favor of the bank," Jacobsen said.
Battle In The Courts
Prince George's County Circuit Court faces its own dilemma in figuring out how to deal with foreclosure cases related to subprime mortgage loans. Baker and other attorneys in the county say the court faced a backlog of foreclosure cases following the 2008-09 housing crisis and will continue after the moratorium is lifted.
In 2010 at the height of the foreclosure crisis, the county saw over 12,789 foreclosures filed, but only 725 hearings were held, according to data WAMU/DCist obtained through a public information request. In that same year, Montgomery County saw 6,744 foreclosures filed, but only held 317 hearings.
The data also showed that for each year between 2007 and 2019, less than a third of the foreclosure cases in the county's circuit court had a hearing. The reason for that, Jacobsen says, many homeowners who are in foreclosure don't realize they have the option to fight it in court. When the notice with intent to foreclose arrives, homeowners see two options: either pay the debt they owe to possibly keep their home or liquidate their assets and leave their home.
Johnson and Baker say they've been pushing the court to hold more hearings for those who wish to fight their foreclosures. "We're not saying the judges are still listening or understanding even, but at least having a hearing gives you your day in court," Baker said.
Johnson adds that the courts need to do a better job to inform homeowners of their rights because the banks "steal away your constitutional rights ... to a fair trial and to be able to face your accuser. None of that's happened for us."
However, even when a hearing is granted most homeowners think they can go before the court on their own to fight the wrongful foreclosure. Jacobsen says homeowners don't understand that if they don't file a motion to delay to dismiss the foreclosure within 15 days "then it's considered untimely. That in itself is enough for the judge to say deny that motion and proceed with the foreclosure."
On top of that Baker says "there's a lot of bias in Prince George's County Circuit Court" because there's only one judge who hears foreclosure cases "as opposed to Montgomery County and other counties [the cases] are evenly spread out on the docket."
Apprill Walden, a spokesperson for the circuit court, responded to allegations of a backlog via email by saying the court "is able to effectively and efficiently manage the foreclosure caseload by having a magistrate, several clerks and paralegals exclusively assigned to process foreclosure cases."
In order to get a fair shake in court, Johnson says, the state legislature needs to change laws to litigate these subprime mortgage loan foreclosures fairly. Johnson and the county's NAACP are pressuring lawmakers to take a look at the policies and procedures of the circuit court foreclosure docket to figure out how they can help homeowners have a fair shake.
Currently, under Maryland law, a lender can file a lost note affidavit stating why it can't produce the property's bank note in court and the efforts it made to get a copy of the bank note. Johnson says she'd like the legislature to introduce a law that would require the lenders to prove that they have the right to foreclose.
A law like that could have helped homeowners like Zalee Harris because the lender in her case never proved they owned the bank note. Harris says while her foreclosure battle has left her skeptical about trying to buy another home, she wants to buy the property she is currently renting in Charles County. However, before she buys and signs another contract she's going to make sure she has an attorney look over the fine print.
"There's no way we're going to go through this again," Harris said. "I don't trust [the banks] at all."
In recent years, the state legislature has made few strides on foreclosure legislation. In 2014, a law passed that put a statute of limitations on a lender to collect on a residential mortgage within three years. The law only applies to foreclosure cases that went into effect after July 1, 2017.
Without legislative oversight in the courts, Prince George's Black homeownership rate (44%) will remain well under the white homeownership rate (73.7%). In the long-term, Johnson says, wrongful foreclosures could adversely affect the county's Black generational wealth.