Minneapolis woman's battle to keep home spills into Senate

WASHINGTON - Minnesota lawmakers trying to counter the causes of the epic Wall Street meltdown see one piece of the puzzle in a south Minneapolis duplex where 66-year-old Tecora Parks is fighting to keep her home out of foreclosure.

A retired hospital worker, Parks says she was duped into refinancing her home in 2005 near the height of the housing bubble, with an adjustable-rate mortgage that put her deeper in debt.

Now Parks is one of more than 1.5 million borrowers nationwide trying to get help under the Obama administration's housing rescue plan. Nearly 20,000 of them are in Minnesota.

"It's raining outside, but it will dry up someday," Parks said hopefully.

In Washington, Sens. Amy Klobuchar and Al Franken, both Minnesota Democrats, are pushing measures in a financial overhaul bill that serve as bookends to the vicious cycle that trapped unwitting borrowers such as Parks, who admits she understood little of what she signed.

Both measures attempt to get at the heart of the financial crisis -- the over-abundance of shaky mortgage-backed securities -- that brought Wall Street and Parks' bank to its knees nearly two years ago.

Klobuchar's proposal, which the Senate adopted as an amendment on Wednesday, would protect consumers from the predatory lending practices that jeopardize Parks' house. It is based on a 2007 Minnesota law that ensures lenders obtain essential financial information and provide responsible advice to borrowers.

With the support of Republicans such as Sen. Chuck Grassley of Iowa, Franken would set up a legal firewall between issuers of mortgage-backed securities and other financial products and the agencies that rate them for investors.

"Wall Street's current system just isn't honest and it's time we clean it up," said Franken, whose measure was incorporated into the Senate bill on Thursday with bipartisan support.

Both senators say their proposals connect the dots between the excesses of Wall Street and the woes wrought on ordinary people in Main Street America.

"Complex and deceitful lending practices were at the heart of the financial crisis," said Klobuchar, taking aim at brokers who steer borrowers into higher-rate mortgages that they can't afford.

Parks now owes $317,000 on a $288,000 loan, thanks to a controversial negative-amortization mortgage in which initial minimum payments are less than the interest charged over the same period.

"All of a sudden, it was boom," she said.

'Let me know'

Negative amortization deals were banned in Minnesota in 2007.

But that doesn't help Parks, who is still trying to figure out what happened to her. "If you can figure out how the mortgage changed," she said, "let me know."

Parks said she asked for a conventional mortgage with fixed payments. But offered a menu of payment options, she apparently selected the cheapest one. That put her in an adjustable-rate mortgage.

Cheryl Peterson, a program manager at Twin Cities Habitat for Humanity, which is trying to help Parks untangle the mess, said "she had one of the worst of the worst loans that existed. You talk about an exotic mortgage product, she had the epitome of what the worst ones look like."

Peterson said the loan originator was a "little broker's office" that she had never heard of before. The loan subsequently passed to Countrywide Financial Corp., which once financed about a fifth of all U.S. mortgages, and then to Bank of America, which took over Countrywide in 2008. Last week, Countrywide agreed to a $624 million settlement of lawsuit in which it was accused of misleading investors about its lending practices in the risky subprime mortgage market.

"My guess is this is one of those securitized loans that was cut up into pieces and sliced and diced," Peterson said. "There's a bunch of different investors."

Even if Parks had struggled with her payments, everything might have been fine if the housing market hadn't crashed. In a rising market, she could always refinance again, the conventional thinking went. But instead, the boom went bust in 2007.

Error made

Bank of America spokeswoman Jumana Bauwens said Parks was found to be ineligible "based on the information we had on hand."

Either way, the problem led to Parks' case being closed under Obama's Home Affordable Modification Program (HAMP), which is supposed to work with private lenders to lower payments and ward off foreclosures.

Parks' bureaucratic limbo prompted Franken to call for a homeowner advocate within the HAMP program. The move comes six months after housing advocates in Minnesota lost a lawsuit alleging a failure of procedural safeguards within the program.

Bauwens said the bank will "re-review" Parks' loan, adding "if we can't place her in a HAMP modification, we will work quickly to identify another home retention solution based on her financial circumstances."

Parks, once looking forward to the tranquility of retirement, now says she's a "nervous wreck." She has not missed a payment. But unless she gets some kind of a break on her mortgage, she knows she likely will lose her home. Since the property is now worth less than the loan, Bank of America, which was stabilized last year with the help of $45 billion from the government's Troubled Asset Relief Program (TARP), also would stand to lose more money.

Parks, fighting a case of nerves, said, "I'm squeaking by, by the plaque on my teeth."