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Copyright 1995 - 2005
admits $15,096.90 "Error",
Kathy (we changed her name to protect her privacy) was a homeowner on the San Francisco Peninsula in foreclosure and bankruptcy.
In 1991, her husband passed away. At the time, they were doing quite well and owned the rental property next door. Her husband had been taking care of the finance and business matters, and all of a sudden Kathy had to make many decisions she was not prepared for.
Having received numerous mailings advertising their loans, Kathy called Transamerica Financial Services.
It was so easy. She remembers how their loan representative, Peter Hurley, came to her house twice and arranged the loan. She didn't even have to go to an escrow company to sign loan docs.
According to the only document provided to us by Transamerica, the Disclosure Statement, Kathy took out her loan with Transamerica on March 1, 1993 for $249,786, encumbering both her residence and the rental. She paid off the existing loans with Long Beach Bank and the IRS received $14,691. Her monthly payments were 2,836 at 13.1% interest. The prepaid finance charges were $16,216 (6.5 points). The disclosure called for a balloon payment of $248,467.55, due on 11/1/95. The APR was quoted as being 16.5%.
Kathy could not make those payments as they exceeded her income.
She says Peter Hurley advised her to sell the rental and he recommended C-21 Community Realty. Kathy listed with them in June 93. According to the Closing Cost Estimate provided by C-21 Community, Kathy was going to receive $43,000 from the sale with an estimated 45 day closing.
By the time the rental closed 6 months later, she received nothing -- $130,548 went to Transamerica according to the HUD Settlement Statement dated 12/1/93. Her monthly mortgage payment was reduced to $1,465.
Kathy responded to my mailing when I offered free consultations to home owners in foreclosure in 1994. She had filed for Chapter 13 bankruptcy after Transamerica had begun to foreclose on her home.
On Dec. 21, 1994 we first requested an accounting statement and copies of the loan documents from Cynthia Long, attorney for Transamerica.
Kathy had previously requested accounting statements, but never received one.
By 1/12/95 we hadn't received a reply either. So we mailed a copy of our letter, by certified mail this time, along with Kathy's request that copies of all loan documents signed by her be mailed to us.
On 1/23 we got what appeared to be copies of microfiche statements. What Ms. Long calls an accounting statement is not quite readable.
What we are able to decipher makes little sense. We scanned the accounting records (page opens in new window.)
There are lots of numbers, but I can't read the dates and have no clue what's interest, penalties or what else the charges are for. We did not receive copies of loan documents, instead Ms. Long mailed a copy of the Transamerica Disclosure.
On 1/24 we again requested an accounting statement, READABLE and with all CREDITS AND CHARGES explained. We also requested the HUD Settlement Statement, itemizing all fees and charges. We asked why the HUD Statement from the sale of the rental shows $130,548 going to Transamerica, but from what we can tell only $106,653 were credited to Kathy's loan.
Ms. Long replied that no HUD statement was prepared for the account.
Why was this transaction exempt from RESPA?
"As for your concern regarding the legibility of the accounting statement, you were provided with a copy of the accounting record maintained in the ordinary course of business by Transamerica Financial Services."
Kathy was working with the third bankruptcy
We had been trying to get an appointment with the attorney because a $400 monthly payment seemed too high.
Her bankruptcy budget was based on her maximum monthly GROSS income of $2,800.
Apparently nobody wondered why she hadn't made the mortgage payments.
Nobody realized that she would lose her child care business, her only source of income, if Transamerica foreclosed.
Where will she live, what will her income be, what will her budget look like after foreclosure?
The confirmation of the Chapter 13 was postponed after we raised these questions. Kathy was extremely concerned that she would not qualify and the bankruptcy would be dismissed. She would then lose her van. Her attorney has not provided any information on the foreclosure proceedings.
Where can she find out what her legal rights are?
In the Relief From Stay Cover Sheet dated 12/13/1994 Cynthia Long states that the approximate balance is $149,535.
In the Declaration by Cynthia K. Long in Support of Motion for Relief from Automatic Stay she states:
"...and the total amount due as of August 12, 1994, was $128,983, plus approximately $10,297 in accrued interest, late charges, attorneys fees and costs. The monthly payment is currently $1,465. Debtor has failed to make the payment due for June 1, 1994 and all subsequent payments. Consequently, the DEBTOR is past due for 4 pre-petition monthly payments and 3 post-petition payments. Total arrearages equal approximately $10,255, plus interest, late charges, attorneys fees and costs."
If the outstanding balance with Transamerica was in fact 150K and Kathy wanted to sell, she would need a short sale (the lender agreeing to accept less monies than owed.) The amount of principal forgiven is taxable income to the homeowner.
Katherine Leary, branch manager at the North American Title office in San Mateo and the escrow officer in the transaction, gave me the number for Randy, Branch Manager in the Mountain View Transamerica office.
For some reason she had decided to call him prior to releasing the documents to us.
It took over a month and many faxes and phone calls to North American Title before they released the file to Kathy, the principal in the transaction.
Is that reasonable?
I don't think so. This is a fine example of a working relationship between a title/escrow company and their Client. The Client is the lender, Real Estate Agent or Mortgage Broker or whoever else brings the business.
I finally received the docs from the sale of the rental.
Transamerica had made a loan for $23,894.42 to the Buyers.
That amount was deducted from the check to Transamerica and explains the credit on 12/5/93 for $106,653.58. I am assuming the $5,872 listed above as paid and charged was a prepayment penalty.
Ms. Leary had stated that Randy would be happy to explain all charges. When I called him he wanted us to go to his office! The nerve these people have! This is what Kathy had been doing the last two years, going to his office and then they showed her these little cards (I assume they are the originals of the unreadable copies they sent us.)
Randy was very upset because we bypassed him and had written directly to their legal representative, Cynthia Long. I asked him to contact her for copies of our correspondence so that he could clarify the accounting in writing, as I was really busy finishing up our newsletter.
He advised "If you print as much as my name or that of Transamerica Financial Services, we will sue you for slander!"
I asked if he would repeat that statement on tape. He refused and terminated the conversation. I called back right away requesting his last name, but he hung up on me.
DOC -- does not fax
I spoke to Ms. Rosalinda Gomez, DOC (Department of Corporations) on March 31, 1995.
The DOC is the licensing agency for consumer finance lenders such as Transamerica.
I explained the urgency of our request to her and asked that the accounting statement be faxed. However, she insisted to request the accounting statement from Transamerica via snail mail. Their policy is not to fax, as faxes cannot be used in Court, because they have no live signatures.
According to Ms. Gomez this policy was established by her supervisor, Warren Adams.
I also requested she review the case for any violations of their regulations with respect to the entire transaction.
We briefly discussed their brochure on filing complaints.
I was especially irritated by their statement that "creditors are concerned with the consumer." She thought it was a valid statement, as creditors cooperate with them.
The DOC is misleading the public as creditors are concerned ONLY with their profits.
They have to be, they have obligations to their shareholders.
The DOC SHOULD be concerned with the consumer and preserve the consumers' rights, but they are not.
If anybody had any concern for the consumer, they would have faxed that accounting statement. One can always follow up with a hard copy.
On April 24, 1995 we received a request from Gerald Lax, Senior Counsel for Transamerica, for Kathy to sign an authorization so Transamerica could obtain the closing statement for the sale of the rental from North American Title.
On May 1 Gerald Lax admitted a $15,096.90 error.
"The branch made an error and did not give you full credit for this principal reduction upon the close of the sale."
He included a Procedures Department - Recasting Worksheet.
We never received an accounting statement for the entire loan. The worksheet he included started with $9,415.93 accrued on 9/22/93. That number jumps to $15,709.11 on 12/1/93. On 3/17/94 we have 2 transactions, and mysteriously the accrued figure changes from $20,272.23 to $11,763.25.
I have no clue what they are doing. I believe, they also have no clue.
" If the past due payments set forth above are paid on or about May 1, 1995, they will be applied first to unpaid and accrued interest, which would leave a total of approximately $11,500.00 in unpaid and accrued interest provided these payments are paid within the next several days."
AFTER the past due payments are made Kathy STILL owes an additional $11,500?
HUD -- out to lunch!
I called the San Francisco HUD office hoping I could file a complaint as RESPA, TIL and other federal laws might have been violated by Transamerica.
The first time I called around 1 PM. I was asked to call back later in the afternoon as the person handling complaints was out to lunch. When I called back in the afternoon, I was transferred around various departments.
I spoke to supervisors, but nobody had ever heard of RESPA.
Eventually I was informed that HUD only regulates FHA mortgages (which I believe is incorrect) and that I should call my local city to file a complaint.
So much for HUD!
Tax Preparer unlicensed -- CPA incompetent
Looking for professional help, Kathy saw lawyers and tax preparers, but apparently got bad advice everywhere.
Kathy had joined one of those financial/legal services plans with annual dues of $300 to $500. Yes, they do have impressive brochures, but that's all there is to it. They claim to provide legal/financial/insurance/tax/etc. etc. services. They prepared her taxes for 1993. Of course they charged an additional $100 tax preparation fee and $100 for tax consultation.
While they had the original sales agreement and closing statements from the sale of the rental for 6 months, they did NOT declare the sale of the rental.
When Kathy first came to us in December, she had no documents. They were finally returned to her at the end of December, after we sent a letter.
We have filed a complained with the Department of Consumer Affairs and apparently they don't even have a tax preparer license.
So now Kathy's 1993 taxes had to be amended. It looked like she wouldn't owe any additional taxes from the sale of the rental.
However, if Kathy sold her residence, purchased many years ago, there could be a substantial amount in taxes due. (prior to the 1997 tax reform)
She and her husband held title as joint tenants, now only 1/2 of her basis will be stepped up. Do you know how YOU hold title?
In January 95, Kathy had gone to see Robert Griffin, CPA.
Two months later he presented her with a $40,000 tax bill.
He didn't adjust the basis of the rental upon the death of her husband.
My complaint letter to the State Board of Accountancy was acknowledged on April 11, 1995. They will research the problem and reply when additional information is available. We're still waiting for the reply.
CCCS -- another disappointment
We also had an appointment with the CCCS (Consumer Credit Counseling Services.) I must say, I was rather disappointed.
Their office appeared to be designed for single people only, as there was only room for one chair and I had to stand there for an hour. Had it been up to Liz Barger, Counselor, we wouldn't have been there very long. She kept asking Kathy to come back after the foreclosure, after the BK.
I thought it was important that Kathy established a budget BEFORE renting a house.
How could it ever be to soon to get in control of your finances?
I insisted on the preparation of a budget, based on realistic numbers. Ms. Barger did divide and multiply for a while, but really did not seem to care AT ALL. She failed to account for health insurance and income tax and social security tax.
We left with nothing except another interesting experience, as Ms. Barger kept the calculations (just like the accountants and lawyers.)
I asked about assistance with setting up Quicken for Kathy. Maybe there is a library somewhere with computers to use or classes?
Ms. Barger did not like that idea and stated that every expense had to be written down on paper first anyway. Is Ms Barger really THAT stupid?
And no, I don't own Intuit or Microsoft shares, but Quicken and MS Money are the greatest development since the invention of the calculator. The ease of reconciling bank statements, budgeting, categorizing, forecasting, investing, preparing taxes and PLANNING is just unbelievable.
Why would the CCCS NOT recommend Quicken or MS Money?
The answer is obvious:
The CCCS is funded by the creditors. Their only goal is to talk consumers out of discharging their debts trough bankruptcy.
Where do we go from here?
I don't believe Kathy will be able to keep her house.
It looks like her housing expense is exceeding her income and the Transamerica loan is due in a few months anyway. While they would probably rewrite the loan (for another $16,000 loan fee?), it just doesn't make sense to me to pay a $1,600+ housing expense on a property with no equity and a rental value of about $1,000.
Kathy has a few more months to consider her options. Transamerica is going to start over with the foreclosure proceedings because of their error. Kathy is inundated by mailings from scrupulous loan brokers, real estate agents and investors.
Everybody has some free honest advice for her.
In spring I had sent some of the docs to The Alexander Law Firm. RESPA violations have a one year statute of limitations from the date of occurrence. The loan was originated over 2 years ago. They hadn't found anything wrong with the accounting.
We still don't have an accounting statement. Somewhere in the Civil Code it says that lenders have to provide one within 30 days. And who pays for my time and resources spent on trying to find out how much she owes? I think Transamerica should pay for every hour I have spent on this case (several hundred.) Can Transamerica get away with this?
Some Readers wondered why it makes any difference how much Transamerica is owed.
In Kathy's case $15,000 make a big difference. Should she sell, refinance or just let the lender foreclose and/or file for bankruptcy?
I look at all aspects in my Client's life. I explain the consequences of foreclosure or bankruptcy on their credit. I look at tax and legal issues as they pertain to their personal lives. As I am neither a lawyer nor a CPA, I only point out potential problems. I run the numbers and look for the solution that most benefits the home owner -- not the lender, real estate agent, loan broker or lawyer. $15,000 are over 10% of the value of the home.
Are we at 90% LTV or at 100% LTV?
Wrong numbers = real bad advice.
It's as simple as that.
July 7, 1995
Over two months went by since TFS admitted to their "error". The DOC (Dept. of Corporations) had closed the file and refused to comply with Kathy's written request to address correspondence to my office.
Isn't it obvious that people in foreclosure and bankruptcy are overwhelmed with mail and just don't read it?
Many times they even vacate the property. Kathy had told us that she had problems receiving her mail.
Why can the DOC refuse to comply with the home owner's written request?
So she didn't receive their notice until I called and wrote another letter.
The DOC has no problem with the TFS accounting system and closed the investigation.
By mid June Kathy had decided to sell her home and on June 21 TFS filed another NOD.
Subsequently Kathy got a mailing from a lawyer in Oakland who promised he could help and we delayed the sale. On July 5 we met at the law office. Another bankruptcy delay tactic was suggested and a $2,000 retainer was required to sue TFS.
Today I sent a copy of the DOC complaint and correspondence to the ACLU.
And I wrote this letter to TFS:
Gerald B. Lax
RE: Request for Rescission
Unfortunately neither Ms. --- nor I can figure out how much is owed to TFS based on your letter dated April 27, 1995. I am quoting:
"The following changes have been made to your account. The new principal balance will be changed to $119,943.35. This amount is reached after your account will receive a direct principal reduction of $9,777.53. Additionally, unpaid accrued interest will be reduced because of the recast. The amount of the reduction will be $5,319.37. This will leave your account with an unpaid accrued interest due of $14,144.36 as opposed to $19,463.73 as of March 13, 1995. TFS will also unilaterally waive $738.16 it had added to your account for "trustees and legal fees" as a result of the filing of the Notice of Default.
Furthermore, the aforesaid Notice of Default will be rescinded as soon as possible.
On behalf of TFS, I apologize for the misapplication of the proceeds following your sale to Mr. ---. However, Ms. ---, please be advised that even with the changes to your account as set forth above, your account is still seriously delinquent. You are due for the following sums on your loan."
You are listing the payments due: 8/1/94 at $765 and 9 payments at $1,465 including 5/1/95.
"If the past due payments set forth above are paid on or about May 1, 1995, they will be applied first to unpaid and accrued interest, which would leave a total of approximately $11,500 in unpaid and accrued interest provided these payments are paid within the next several days."
1) I don't understand why Ms. ---- would still owe an additional $11,500, if she had paid the above payments by May 1, 1995. Please explain.
2) Adding up the payments past due as of the date of your letter, April 27, 1995, I get a total of $12,485, including the April 1 payment. How does that relate to the $14,144.36 you claim are owed as of March 13, 1995?
3) Calculating the monthly interest based on a $119,943.35 principal balance I get monthly interest of $1,309.38. How does that figure relate to your payment of $1,465? How was that payment established?
4) Why can't we get copies of all documents signed by Ms. ---- as we have requested numerous times? We don't know what the terms of the loan are and I would really like to see a copy of the loan application. How did TFS approve this loan knowing that Ms. ---- did not have the income to make the payments?
5) I am including a printout with a calculated APR of over 18%. Your disclosure states an APR of 16.5%. It is my understanding that Ms. ---- is entitled to rescind the loan and all interest is to be refunded to her if in fact you misstated the APR. Please consider this letter the request for rescission. If you disagree, please explain how you calculated the APR or why you are exempt from TIL.
6) Do you think that Bay Area Housing & Finance Center should be compensated by TFS for the hundreds of hours we spent on this case corresponding with TFS, filing complaints, and consulting with Ms. ---- ?
Your prompt reply will be appreciated.
We received a reply stating that the APR was quoted correctly and that TFS does not feel that I should get paid.
We never received an accounting statement.
Ms. Jamie Santos, Legal Assistant with the ACLU finally replied on October 18, 1995.
She apologized for the delay.
".... we must confine our involvement to a limited number of cases which raise new constitutional issues or which affect large numbers of people, and these are usually at the appellate level. .... Furthermore, the matters that you raise in your letter and the attached materials fall outside the expertise of anyone on our staff, and are not within the focused areas of priority concern that our Board has established. I have tried thinking of some consumer organization that might be of assistance, but frankly I do not have that kind of information. I am sorry that we cannot be of more assistance, but I applaud your conviction to your client."
As several readers had suggested requesting help from the ACLU, I had thought I'd give them a try.
Are they, like all the other lawyers who reviewed the accounting, too stupid to add?
Or do they really not care that minorities and low income consumers are defrauded out of their homes?
It sure looks to me like there is NOBODY who cares that lenders are above the law and that the DOC refuses to cooperate.
If you are ignorant, you are fair game. There is no help anywhere.
Even if you write letters and file complaints, you can't get these corporations to comply with the law. That's life in the civilized world.
Friends have told me not to waste my time and money on this case.
"You don't take on a big company like Transamerica, because they always prevail."
I did expect to eventually get an accounting statement and I didn't.
Things are worse than I thought. Much worse. I am so tired of hearing that there is too much consumer protection.
There is too much consumer protection legislation NOT ENFORCED.
Originally I started to work with Kathy to help her keep her home or to at least maximize her proceeds if she had to sell.
Then it really bothered me that so many people told me all I needed to do was "write a letter," "file a complaint, that will scare Transamerica" or "send it to the ACLU."
Nothing worked. Does anyone believe that this is an isolated incidence?
Transamerica has several other foreclosures pending in the same neighborhood of minority low income home owners.
The Board of Accountancy never got back to me with the results of the complaint about the incompetent CPA.
One more complaint -- this time with HUD
February 8, 1996
Program Compliance Division
Re: Complaint against Transamerica Financial Services (TFS) and CA Department of Corporations (DOC)
Please note that I am NOT writing on behalf of the TFS borrower, but to file a complaint against TFS and the CA DOC, and to request the HUD RESPA enforcement history.
enclosures: DOC complaint and correspondence
Three certified mailings to HUD with copies of my entire Transamerica file were lost by the US Postal Service and are untraceable.
The Washington DC Postmaster didn't respond to two written inquiries.
Is this odd or what?
Does Transamerica control not only the California DOC, but also HUD and/or the US Postal Service?
What the hell is going on?
I know one thing for sure:
Congress and State legislators enact laws to make consumers *think* they have protection.
It's much easier for business to take advantage of a population believing that they are protected from corporate fraud.
It makes sense: Government IS big business, that's where their campaign contributions as well as most politicians come from.
Working with young families buying their first home, I found that few college graduates understand interest, loans, credit, taxes and contracts.
It's not that they are too stupid to understand, as they pick up on these things very quickly. But it's not on the curriculum to teach students about real life.
It wouldn't be good for business and government if the general population knew how to do business, how to read and understand contracts, how to negotiate, how to represent themselves in Court, how to avoid paying taxes.
Reading this page makes me understand why so many people prefer to be addicted to stupid TV shows, AOL chat rooms, drugs and alcohol.
Even when you spend several hundred hours trying to get a simple accounting statement from a huge corporation like Transamerica, you just can't get results. Real life sucks!
I had a very similar experience with FNMA and Nationsbank in 1997. Again, the lawyers and judge involved just couldn't (or didn't want to?) add.
The case ended up being publicly discussed in ba,internet, after FNMA lawyers threatened my web host with legal action for hosting the pages on the FNMA fraud. My web host, then wco.com, now Verio, closed my account.
The majority of posters in ba.internet felt that the home owner deserved the foreclosure and eviction from her house. "She had two years to get her shit together."
Her dimwitted lawyer got $5k borrowed from her parents, another $5K were owed. When I talked to him it became clear that he didn't have the IQ to verify the payments. All he ever did was file motions to delay the eviction. Because he's too stupid to add.
It took me several hours to review EVERY single ORIGINAL money order receipt and compare it with her spread sheet and the Ch. 13 paper work. I just don't understand why the FNMA attorneys, her attorney and Judge Wade couldn't do that.
I concluded that Judge Wade personally knew the FNMA attorneys and he took their word for it.
Why waste your time on a single mother and her 10 year old daughter?
You can read in the Finance Forum how Mellon Bank fleeces their customers.
And who gives a damn? Apparently NOT the BBB or any government agency.