US judge hits the roof over 'repulsive' bank home loan
Thursday November 26 2009
GREG and Diane Horoski's story may seem familiar. They bought their home before the boom and, when house prices soared, increased their mortgage to finance a small business.
Interest rates rose, health bills poured in, and then the housing market crashed so that they ended up owing thousands of dollars more than their bungalow was worth.
Yesterday, they went to court in New York expecting to be thrown out -- but instead they emerged with their debt of $500,000 (€330,000) written off and a mortgage-free home.
Judge Jeffrey Spinner ruled that their lender's behaviour had been "harsh, repugnant, shocking and repulsive to the extent that it must be appropriately sanctioned so as to deter it from imposing further mortifying abuse".
The decision, which is to be the subject of an appeal, offered possible relief for some of the 7.5 million Americans who are behind with their mortgages and face losing their homes.
One in seven homes in America is now in the process of being repossessed as many families find it impossible to pay off the high-interest mortgages that were handed out in abundance when the property market was at its height. The Horoskis were just one couple caught up in what the judge called the "yawning abyss of a deep mortgage and housing crisis".
Mrs Horoski, an English professor, bought the 3,400sq ft bungalow 15 years ago for less than $200,000. In 2004, after the value of the home soared, she refinanced with a mortgage for $292,500 from Deutsche Bank at an initial interest rate of 10.375pc that rose to 12.5pc.
The couple, both of whom have medical problems and who live with their adult daughter, used the extra money for healthcare and to help finance Mr Horoski's online business selling collectible dolls.
But the value of their home plummeted in the property crash and is now appraised at no more than $275,000 -- less than the mortgage.
The Horoskis thus joined the one in four Americans who are "under water" on their mortgage -- the US term for being in "negative equity". Facing financial difficulties because of Mr Horoski's health problems, the couple began having trouble making the mortgage payments in 2005. IndyMac Bank, a division of the California-based OneWest Bank, which services the loan for Deutsche Bank, sought to evict the couple.
Sub-prime
IndyMac claimed that with interest and penalties they owed more than $527,437.
Because the case involved a high-interest "sub-prime" mortgage, the bank was required by New York state law to attend a court conference to seek a settlement that would keep the owners in their home before completing the foreclosure.
The bank, however, rejected repeated offers by the Horoskis to make reduced monthly payments with help from their adult daughter. It flatly turned down an offer by the daughter to buy the house for its current value with money from another lender to pay off the bulk of the mortgage.
The judge accused the bank's representatives of an "opprobrious demeanour and condescending attitude". He pointed out that the Horoskis had turned up for court on six occasions, despite Mrs Horoski's difficulty in walking and her husband's health problems.
"At each appearance, they have assiduously attempted to resolve this controversy in an amicable fashion, only to be callously and arbitrarily turned away," he wrote.
OneWest said that it "respectfully disagreed" with the judge's decision and would appeal. (© The Times, London)
- James Bone in New York
Irish Independent
