Loan abuse within minority communities: report

For five grueling years, Queens homeowner Rhoda Carter diligently tried to obtain a mortgage modification while Wells Fargo gave her the runaround.

Carter thought she had started a trial modification on her $320,000 home loan in 2009 after getting laid off. She made payments, but Wells sued her in foreclosure in 2010. Years of legal wrangling finally yielded a modification last fall — with $100,000 more in interest payments than if she’d gotten the deal in 2010.

“I’m going to be 105 when I finish paying, and the house has no equity,” Carter, 65, told The Post.

A new report from the American Civil Liberties Union and local nonprofit MFY Legal Services suggests Carter’s ordeal is part of a wider pattern of ongoing abuse by mortgage servicers when dealing with loan modifications.

“Ms. Carter’s experience is not unique for majority-minority neighborhoods in NYC, both in complaints from her ZIP code and in the city at large,” said MFY’s Elizabeth Lynch.

“The numbers [in the study] seem to point to institutional racism but . . . our study reveals an urgent need for the government to review this…Only the government, either federal or state, can investigate the banks and mortgage servicers to find out if a bigger pattern of institutional racism exists,” Lynch said.

The study concludes that the abuses most likely to cause a borrower to lose his or her home fall disproportionately on New York’s minority neighborhoods — while regulators fail to enforce legal safeguards.

“Banks preyed upon communities of color for subprime lending, and it’s really shocking that the federal government still does not examine this from a race-based perspective,” said study co-author Lynch.

After the foreclosure crisis began, unnecessary delays and other abusive practices by mortgage servicers became so widespread that Wells Fargo and four other big banks signed a $25 billion National Mortgage Settlement in 2012 pledging to improve.

But complaints keep pouring in to the Consumer Financial Protection Bureau — including the 3,500 that the study analyzed, filed by New York State borrowers between 2012 and 2014.

Sixty-eight percent of complaints about servicer misconduct putting a borrower at immediate risk of losing his or her home came from minority communities, versus just 57 percent from white neighborhoods.

Residents of minority neighborhoods also filed more complaints about modifications, and made more complaints reflecting immediate home-loss risk related to Nationstar, Wells Fargo and Ocwen.

“We share the ACLU’s concern that many communities…suffer from disproportionately high rates of foreclosure and underwater mortgages,” said a spokesman for Ocwen, which is reviewing the report.

A Wells Fargo spokesman said that since 2009, the bank has modified more than five loans for every one foreclosure sale in New York state.

A Nationstar spokesman said, “Nationstar performs all aspects of mortgage servicing without regard to any prohibited basis, such as race, and in a manner consistent with applicable fair and responsible lending/servicing laws.”

A CFPB spokesman said servicers must follow tougher new rules, and the agency will “take action to ensure all homeowners receive…fair treatment.”