Like a pair of teenage sweethearts, David Parkes and Kathy Sakry live in the moment. As social workers and county caseworkers assigned to help the vulnerable adults gather to talk about the foreclosure of the couple's Hopkins townhouse, Parkes steps from the top of one coffee table to the next, landing cannonball-style on the couch next to Sakry. ¶ She grins, but the talk quickly turns serious and she contorts her face to hold back the tears, her eyeglasses tilting. ¶ Even as stories of people who can no longer afford their homes become depressingly familiar, the experience of Parkes and Sakry illustrates just how far some mortgage brokers and lenders were willing to go to cash in on the good times, and how few safeguards existed to protect consumers.
Parkes, 44, has an IQ of 56 and the math skills of a first-grader. Sakry is 43 and, like Parkes, faces challenges when it comes to planning and maintaining budgets. Despite their limitations, three different lenders persuaded them to keep refinancing their home until they burned up the equity in their house and could no longer afford the payments.
Congress, meanwhile, continued working this weekend on plans for a proposed $700 billion, taxpayer-financed plan that would help prop up the institutions that made those mortgages possible. It remains unclear whether the final package will include any relief for Parkes and Sakry or the estimated 28,000 Minnesotans who will lose their homes to foreclosure this year.
"This is a more egregious example of what's happened to a lot of average folks," said Prentiss Cox, an advocate for mortgage reform and professor of clinical law at the University of Minnesota. "You can draw a straight line from this line of conduct to Henry Paulson asking for a $700 billion check that will be paid for out of your child's future."
Parkes and Sakry owned a home because of the good intentions of others. Parkes was adopted when he was 11 after nearly nine years in foster care. His mother, Katharine Quigley, spent the next decade helping him develop a sense of trust in himself and others.
Parkes met Sakry more than 20 years ago when they were in school. They bought a house together through a nonprofit, Arc of Hennepin County, which partnered with a neighborhood group to help 14 families buy houses.
Though not married, Parkes calls Sakry his wife; Sakry says that Parkes is "the one for me." They were ecstatic when they closed on their two-bedroom townhouse in a quiet Hopkins neighborhood. "This must be a dream, this must be a dream," Parkes told his younger brother, Kevin O'Neil.
Parkes and Sakry relied on their Social Security checks and part-time jobs they've each held for more than 20 years to make their monthly house payment of $627. Their monthly income of about $1,100 each didn't go far. Like many families, they accumulated some credit card debt when the cash ran out at the end of the month.
By 2004 -- the height of the real estate boom -- the telephone calls came from around the country almost every day. The pitch was simple and appealing: Refinance your mortgage, lower your payments and pocket extra cash.
"They said, 'We have a great deal for you,'" said Parkes, who relies on a calculator to help keep track of how much is in his shopping cart. "They talked like it was a sweet deal."
The Legal Aid Society of Minneapolis has reviewed the case and concluded that there is no legal remedy for their situation, although even the company that now services the mortgage agrees the couple were treated shabbily.
"They were preyed upon, and yes, they didn't have the guidance that they needed," said Christine Holevas, spokeswoman for Chase Home Finance, which was not involved in any of the refinancings.
Dialing for dollars
Michael Harmer was one who got through.
He was working as a loan officer for the local office of the Lending Center, an Irvine, Calif., company that is now out of business.
Harmer said he called as many as 150 homeowners a day. He doesn't remember talking with Parkes and Sakry but has a vague recollection of their financial situation. He said that he thought he was doing a good thing by helping them refinance into a fixed-rate mortgage.
It wasn't obvious to him, he said, that Parkes and Sakry were vulnerable adults.
"I don't recall having a sense of that," he said. "It's pretty shocking to hear that."
Then again, Harmer said, his salary and job security depended on selling the mortgages, not explaining the terms. That was someone else's job.
"That happens at the closing table," he said. "The closers walk them through that information."
The closer, in that case according to the title company, was Sonja Pruisner, who does remote closings for title companies all across the country.
Pruisner doesn't remember meeting Parkes and Sakry, but since both rely on public transportation it's likely the mortgage documents were signed at their home, where the walls are lined with fading family photos and Parkes' marker-on-black-velvet drawings of puppies and race cars. A newspaper article that describes their involvement with Arc is taped to the wall just inside the front door.
Pruisner, who said that she's done a late-night closing at the airport and for a borrower who was drunk, rejected any suggestion that she has a responsibility to ensure the borrowers understand what they are signing. Her primary responsibility, she said, is to verify the identity of the borrower and to show them the figures.
"Unless they say they don't understand, I have no way of knowing that they don't," she said.
Dennis Unger, the past president of the Minnesota Land Title Association, said that with Internet lending increasing and more national companies doing business, such remote closings became more common because national lenders can get high-volume discounts by bypassing local companies.
To provide more protection for borrowers, the association proposed legislation aimed at strengthening and clarifying existing laws requiring closing agents to be licensed unless specifically exempted.
Closers do not give legal advice nor should they interpret the terms of a mortgage, which is a contract between the lender and the borrower.
"It is a shame that market forces -- good or bad -- are moving away from the benefits and experience a traditional closer can add to a transaction," he said. "Least of which is the ability to look out for best interests of the consumer."
Parkes says he now regrets that he didn't tell his family what he was doing, but he felt ashamed and was worried that he'd made a bad decision.
He was right, but didn't know it.
Two of those loans were adjustable-rate mortgages with expensive prepayment penalties. One was a highly complex "pick-your-own payment" negative-amortizing loan originally rolled out by the industry for wealthy, self-employed borrowers. It was originated by Diante Carridonna, a south Minneapolis loan officer who just months before had been fined $5,000 by the Commerce Department and banned from managing a mortgage brokerage after falsifying an appraisal.
Carridonna could not be reached and the company he worked for, Carson-Dell Financial, surrendered its state license earlier this year.
"This is unconscionable," Cox said. "This was too complicated a transaction for a mentally challenged adult to comprehend."
'We all feel stupid'
Like other family members, Quigley said she wrongly assumed that there were safeguards to protect her son's finances.
"We should have double-checked on it even though he wasn't under our care," said Quigley, who now lives in Ohio. "I think we all feel stupid that we weren't watching over them."
O'Neil was surprised, too.
"I was totally unaware of how independent Parkes was with his finances," O'Neil said.
Beth Fondell, executive director at Arc, said that while the organization helped Parkes and Sakry buy the house, it wasn't up to them to decide how much financial oversight was needed.
"We're dealing with vulnerable adults," she said. "But I don't think that we directly had the responsibility other than to make sure that people have the information."
Instead, she blames their situation on a lack of funding and coordination for county case management services: "If there was more prevention, up-front support and dollars invested, people like Dave and Kathy would be able to be as safely independent of the system as possible."
David Belmore, one of Parkes' social workers, said that, in hindsight, more oversight over their finances would have been appropriate, but they seemed to be managing just fine.
"There was some secretiveness about this," Belmore said. "He never asked for help."
Chase Home Finance, which now services the mortgage on Sakry and Parkes' house, has already offered two loan modifications, but has yet to fashion an agreement that O'Neil thinks Parkes and Sakry can afford long-term.
Holevas said that while Parkes and Sakry were obviously victimized, the company wasn't involved in the origination of any of the mortgages. It can't change the mortgage terms without approval of the investors who funded the mortgage. She said the company is working with the investor to see if a third modification offer is possible.
The prospect of losing their home and having to give up his dog, Sarge, depressed Parkes so much that he tried to cut his wrists. During another later bout of anxiety, he swallowed a bottle of pills and told his brother that he couldn't be left alone.
After three hospital stays, Parkes now copes with the depression by going to group sessions twice a week. Talking about it helps, and so do therapeutic craft projects like a blue-painted box that says "Sakry+Parkes" on the top and sides.
Sakry, who is now eager to get on with their lives and hopes to rent a nearby apartment if the sheriff's sale happens, uses the box for her medications.
Quigley said that the anxiety and suicide attempts were probably triggered by painful childhood memories of being mistreated by his birth family and later a foster family.
"When he made a mistake, he was abused, and so this was telling him, 'Hurt yourself, you don't deserve to live,'" Quigley said. "We told him, 'You just made a mistake and a lot of people make this mistake.'"
The situation has also robbed Parkes and Sakry of the trust in others they had worked so hard to develop. "That was the hardest to watch," Quigley said.
Unlike many of the thousands of homeowners who traded their equity for boats, cars and second homes, Parkes and Sakry now have little to show for the refinancing and no record of what happened to the money.
Their house is furnished with thrift-store finds. They bought their color TV a few years ago with their tax refund.
Parkes says that they probably spent some of the money on "Spider-man" and "Batman" movies and for movies, or taxi rides to work. His biggest splurge, he said, was a dog food bowl stand for Sarge.
"I spoiled my little boy for Christmas," Parkes said. "But not this year."
The foreclosure sale is scheduled for Oct. 14.
Jim Buchta • 612-673-7376