New York Times Neediest Cases Fund Provides Additional Help for Two LSNYC Clients

Two Legal Services NYC clients recently received crucial support from the New York Times Neediest Cases Fund. Their stories appeared in the November 26th edition of the Times.

Legal Services NYC client Theodora Roach’s problems began when she took out a $10,000 loan from Fidelity Group, an agent of World Savings:

What Ms. Roach did not know was that she had entered into a balloon loan, and the minimum payments she was making did not cover the interest due. The remaining interest owed was added to the outstanding balance, making it larger than the original loan. In six months the $10,000 she borrowed became $32,000 — and kept growing.

At first, her phone calls to Fidelity went unreturned, but finally, she said, her broker offered to convert her mortgage to a fixed-rate loan at 5 percent interest. But in fact, her mortgage was interest-only, at 6 percent. Her payments were now $2,100.

“They told me they were taking me from a subprime loan to a good loan,” she said. “What I should have realized is, the broker was not in the room with me. I didn’t have anybody.”

Fidelity sold her mortgage to a series of lenders until it reached the now-defunct IndyMac, which added property taxes to her monthly bill, something she said she never agreed to. Ms. Roach, an executive secretary at the Lincoln Center campus of Fordham University, could not cover monthly mortgage payments of $2,400 with her $2,800-per-month income and her mother’s $666 in monthly Social Security.

A financial adviser at IndyMac told her to sell. When she balked — “I don’t want to see my mother in her last days out in the street or in a home,” she said — she was told, “You should not have bought a house if you could not afford it.”

“But I didn’t get into this because I was greedy or did something illegal,” she said. “They bought a loan from someone else and they should have seen it was bad when they bought it.”

In February, she was referred to Legal Services NYC. She qualified for the Home Affordable Modification Program, which is run by the Treasury Department. If she can pay $1,419 a month for three months, her monthly payments on the mortgage, which is now $412,000, will be permanently modified to reflect that amount at a 30-year fixed interest rate.

But because she has $14,000 in credit card debt, she could not afford the three months of trial payments. In November, The New York Times Subprime Neediest Cases Fund gave her enough to cover those payments. She is using the cushion of time to catch up on her credit card debt.

Read more about Ms. Roach’s story here. 

South Brooklyn Legal Services (a program of Legal Services NYC) client Carol Sclossman was paying $1,400 a month toward her $312,000 mortgage before she refinanced Empire Mortgage, also an agent of World Savings:

Nestled in the stack of paperwork a lawyer brought to her house and zipped through one afternoon was an agreement to pay $1,145 each month as part of a “pick a payment” loan, which allowed her a choice: pay the minimum, or a higher amount. She chose the minimum.

So it was a surprise when, in January 2009, her first statement said she owed $1,530. Apparently the $1,145 did not include insurance or real estate taxes. But worse, the payments were so low that the interest, unbeknownst to her, she said, was deferred and tacked onto the principal — and it kept accruing. What had been a $312,000 loan grew to $331,682 in nine months. She let her other bills fall by the wayside as she focused all her resources on her mortgage because “this was number one,” she said. “I didn’t want to lose my house.”

She called her mortgage broker, only to learn that he did not work there anymore. She spoke instead to a manager, who told her: “You signed it. There’s nothing we can do.”

“I take the blame for taking out a mortgage,” she said, but she feels she should not be responsible for the deferred interest, because she says the consequences of paying the minimum each month were not adequately explained to her. Attempts to reach closing agents at World Savings who were involved in the deal were unsuccessful.

After the loan was taken out, she said, she discovered a big inaccuracy: the paperwork reflected income of $6,015 a month in pension and disability payments. In fact, Ms. Schlossman said, her monthly Social Security payment is $785, and she receives $1,375 a month from an upstairs tenant.

“Can I take them to court for lying?” she said she wondered.

By summer, her monthly payments had risen to $1,697, and she had had enough. With the help of South Brooklyn Legal Services, she obtained a reverse mortgage from Freedom Financial, a lender approved by the Federal Housing Administration. The entire mortgage debt was paid off.

But first she needed to pay $10,000 in arrears on her mortgage, an amount secured for her by the Children’s Aid Society, one of the seven beneficiary agencies of The New York Times Neediest Cases Fund.

Read the rest of Ms. Schlossman’s story here.

Click here to find out more about the New York Times Neediest Cases Fund, including how you can help. 

Below: New York Times Company Foundation President Jack Rosenthal accepts a Visionary Leadership Award on behalf of the Neediest Cases Fund. The award (bottom, center) was presented at Legal Services NYC’s Annual Jazz for Justice Fundraiser in June 2009.