Lenders with most now-blighted Detroit homes
Correction: Bank of America purchased Countrywide in 2008. An earlier version of this story mischaracterized the relationship.
Across Detroit, 56 percent of all mortgage-foreclosed homes from 2005-14 are now blighted, need to be demolished or were foreclosed for nonpayment of taxes. Here's a look at the number of troubled foreclosed properties tied to the companies that foreclosed and the lenders that sold the loans. Defunct subprime lenders Argent, Ameriquest and New Century Financial Corp. had some of the highest rates of foreclosures that became problems for the city.
The raw numbers likely are underestimates because the foreclosing company and lender was not always listed in the RealtyTrac foreclosure data The News used. A foreclosing entity was listed in nearly 48,000 foreclosures and the loan originator in about 35,000.
Fannie Mae: 5,540 foreclosures, 46 percent are blighted or abandoned
Freddie Mac: 2,197 foreclosures, 56 percent
Details: The federal government bailed out and took over Fannie Mae and Freddie Mac in 2008, after the mortgage meltdown left the mortgage giants near collapse. The companies don't originate loans but bought them from others. Fannie is the larger of the two in Detroit. At its peak in 2010, it had about 2,100 properties in its inventory, which were sold on average for $9,300 each. Both companies say they currently have little inventory left in the city: Freddie had about 100 homes in foreclosure as of early this year and Fannie had less than 550. This month the National Fair Housing Alliance filed a federal discrimination complaint, alleging it markets and maintains homes in white neighborhoods better than minority ones.
Response: Freddie Mac spokesman Brad German said the company can't be held responsible for the condition of foreclosed homes after they've been sold to new buyers. He said when Freddie foreclosed, they "try and protect local home values and minimize the risk of blight" and sell "for the best possible price."
Fannie Mae spokesman Andrew Wilson said the agency works to preserve its foreclosures and sell them to people who will live in them. "Our goal is to do everything we can to help the community stabilize and if possible recover," he said. Both mortgage giants launched a recent effort to prevent more foreclosures with loan remodifications called MyCity Modification and donate properties to nonprofits for rehabilitation through the National Community Stabilization Trust.
Wells Fargo: 3,100 foreclosures, 46 percent
Details: The San Francisco-based bank was a significant subprime lender nationally prior to the housing bubble, ranking No. 8 on the Center for Public Integrity's list of the top 25 subprime players. Nearly 62 percent of Wells Fargo's 2,085 loans in Detroit from 2004 to 2006 were considered subprime. That includes loans from Wachovia, which Wells Fargo purchased in 2008. In 2012, the bank settled charges from the U.S. Department of Justice that it discriminated against black and Hispanic borrowers, agreeing to pay nearly $184.3 million. A year later, it agreed to pay $39 million to 45 communities across the country, including Grand Rapids, after activists alleged it didn't maintain and market homes as well in black and Hispanic neighborhoods.
Response: "Wells Fargo's delinquency and foreclosure rates have been consistently less than the industry average," wrote spokesman Tom Goyda in an email. "We make every attempt to avoid foreclosure and when that is not possible, we work diligently to manage foreclosed properties in a manner that benefits the community until the home is sold to a new owner."
Deutsche Bank: 2,392 foreclosures, 53 percent
Details: The investment bank, based in Frankfurt, Germany, was a significant backer of the U.S. subprime industry, according to a 2011 report from the Senate's Permanent Subcommittee on Investigations under then-chairman U.S. Sen. Carl Levin. The bank "underwrote securities using loans from subprime lenders known for issuing high risk, poor quality mortgages and sold risky securities to investors across the United States and around the world," the report found. The bank maintains it only acted as a trustee for groups of investors who owned Detroit properties and that typically separate servicers handled the foreclosures.
Response: "As trustee, Deutsche Bank has no financial stake in these properties nor is it responsible for the maintenance of foreclosed properties. Rather, loan servicing companies are responsible for property maintenance and property tax payments, as well as responding to legal proceedings, such as city code citations or fines arising from property maintenance issues," according to written statement by spokesman Ari Cohen.
U.S. Department of Housing and Urban Development: 2,453 foreclosures, 50 percent
Details: The Federal Housing Administration (FHA) insures mortgages and operates under HUD. Typically, a servicer or the lender forecloses. But HUD was listed as the foreclosing entity in about 1,200 foreclosures that The News examined in the RealtyTrac data. The actual numbers of foreclosed properties it has sold are much higher, nearly 11,900 between 2005 and 2014.
Response: HUD officials said they work with lenders to help owners avoid foreclosure but when it is unavoidable, they maintain properties and work to sell first to potential owner-occupants, said spokeswoman Gina Rodriguez in an email.
Bank of America: 2,183 foreclosures, 47 percent
Details: Bank of America, based in North Carolina, agreed to pay $16.65 billion as part of a settlement with the U.S. Department of Justice in 2014, to resolve claims it and Countrywide Financial had misrepresented risky loans to investors and violated lending guidelines. Bank of America purchased Countrywide in 2008. Countrywide was one of the largest subprime lenders in Detroit through 2004 and 2006, with had more than 2,300 subprime loans.
Response: Officials noted the bank has donated 370 properties to the city or local nonprofits and recently announced a program to offer zero down, low-interest fixed-rate mortgage with rehabilitation money to homeowners. "Bank of America is proud of our community stabilization initiatives aimed at mitigating impacts of vacant and abandoned properties, revitalizing neighborhoods, creating good affordable housing for lower-income households, and providing homeownership opportunities to those who served our country and communities," Richard Simon, a Bank of America spokesman, wrote in an email. "We have worked especially hard to address neighborhoods that have been most severely impacted by the economic crisis."
US Bank: 2,027 foreclosures, 48 percent
Details: In 2011, the Minnesota-based bank was one of 13 loan servicers to agree to pay $3.6 billion to borrowers, settling charges levied by federal regulators of bad foreclosure practices. Last year, it agreed to pay $200 million to resolve allegations it violated Federal Housing Administration lending rules, resulting in "substantial losses" when the government agency later paid insurance claims on the foreclosed loans
Response: In most cases in Detroit, U.S. Bank said it only acted as a trustee on foreclosed properties, essentially acting as a representative for pools of investors who own the loan. "In this capacity, we (have) no legal right or ability to initiate foreclose proceedings or maintain the properties," spokesman Patrick Swanson wrote in an email earlier this year. "That's the responsibility of the servicer. ... Beyond that, we only own or service 170 properties in Detroit — not the 2,000+ noted in the survey. When we do own a property, we have a strong and comprehensive process in place to regularly inspect and maintain properties."
JP Morgan Chase: 2,017 foreclosures, 54 percent
Details: The largest bank in the United States agreed in 2013 to pay $13 billion to settle charges by the U.S. Department of Justice that it mislead investors about its risky loans. "Without a doubt, the conduct uncovered in this investigation helped sow the seeds of the mortgage meltdown," said U.S. Attorney General Eric Holder in a press release announcing the settlement. In Detroit, Chase announced last year it was investing $100 million in the city over five years to help redevelopment, including boosting small businesses.
Response: "Foreclosure is always the last option," wrote spokeswoman Christine Holevas in an email. "If a property does go to foreclosure, we immediately begin maintaining it and looking for a new family to occupy it. We've prevented more than 20,000 foreclosures and modified another 11,000 loans in Greater Detroit over the past five years."
Ocwen Financial Corp.: 1,800 foreclosures, 64 percent
Details: The Atlanta-based firm was the largest subprime mortgage servicer in the United States as of last year, but is trying to sell its serving rights amid scrutiny from regulators. Late last year, the company agreed to pay a $150 million fine to settle charges from New York officials who accused it of improper practices. That included pushing foreclosure even when modification applications were pending. The money will go to affected New York homeowners and for foreclosure relief. It's facing another investigation from officials in California.
Response: Spokeswoman Margaret Popper didn't respond to The News' questions.
Argent and Ameriquest: 2,502 foreclosures, 70 percent are blighted or abandoned
Details: Combined, Argent and Ameriquest were the No. 1 subprime mortgage lender in the world in 2005. Ameriquest's slogan was "Proud sponsor of the American dream." They were founded by Roland Arnall, a billionare who was President George W. Bush's ambassador to the Netherlands from 2006 until shortly before his death in 2008. The companies stopped making loans in 2007 and some assets were sold to Citigoup that year. Among other penalties, it agreed to a $325 million settlement in 2006 on allegations of deceptive lending practices, including falsified records and pressuring appraisers to inflate home values.
Response: Companies no longer exist
Washington Mutual: 1,322 foreclosures, 70 percent
Details:The Seattle-base bank was the largest bank failure in U.S. history, seized by federal regulators in 2008. It was sold to JPMorgan Chase & Co. Long Beach was its subprime loan subsidiary, originally founded by Arnall, who also established Argent and Ameriquest. Washington Mutual and Long Beach "engaged in a host of shoddy lending practices that produced billions of dollars in high risk, poor quality mortgages and mortgage backed securities," found the 2011 report from the Senate's Permanent Subcommittee on Investigations under then-chairman U.S. Sen. Carl Levin.
Response: Companies no longer exists
New Century Financial Corp.: 1,255 foreclosures, 67 percent
Details: The California-based company was one of the largest subprime lenders in the nation and one of first to implode, filing bankruptcy in 2007. Its partnership with Morgan Stanley is at the center of a lawsuit filed by the American Civil Liberties Union and several Detroit homeowners that alleges racial discrimination in the subprime loans it sold here. Former directors and officials have paid more than $90 million from federal and private suits, the Los Angeles Times reported in 2010.
Response: Company no longer exists
Countrywide: 1,218 foreclosures, 52 percent
Details: See Bank of America above
Response: Company no longer exists
Quicken Loans: 1,058 foreclosures, 52 percent
Details: A Detroit-based company that has become the nation's largest online mortgage retailer. The federal government sued last month on allegations the company "elevated profits over compliance" and committed fraud in Federal Housing Administration loans from 2007 to 2011. The company is counter-suing the government over its investigation.
Response: Quicken officials said they never sold subprime loans and that their loans aren't the cause of blighted foreclosures. The company resold mortgages soon after writing them. Founder Dan Gilbert argues Detroit's blight is largely caused by high tax rates and over-assessed properties that led to tax foreclosure. He said Quicken made good loans that saved qualified borrowers money.
JP Morgan Chase: 802 foreclosures, 59 percent
Details: See above
First Franklin Financial Corp.: 767 foreclosures, 58 percent
Details: Merrill Lynch & Co. closed the subprime mortgage company in 2008, two years after purchasing the lender from Cleveland-based bank National City Corp.
Response: Company no longer exists
Wells Fargo: 756 foreclosures, 60 percent
Details: See above
ABN Amro Mortgage: 731 foreclosures, 50 percent
Details: The mortgage company was a subsidiary of LaSalle Bank Corp. and ABN AMRO Bank. It was purchased by Citigroup in 2007.
Response: Company no longer exists
Flagstar Bank: 563 foreclosures, 51 percent
Details: A Troy-based bank that is also a leading mortgage lender and national leader in the wholesale mortgage business. It agreed to pay $37.5 million in damages to mortgage customers and in fines last year to settle accusations it mishandled requests for loan modifications and, in some cases, illegally foreclosing on homes. Flagstar settled with the Consumer Financial Protection Bureau without admitting guilt.
Response: Gregg Christenson, senior vice president of specialized servicing at Flagstar, said the bank isn't responsible for blight on properties it made loans on. The banks sold most of its loans to government agencies, including Fannie Mae, and serviced the loans according to the agency guidelines. "Flagstar doesn't participate in he ultimate disposition of the property," he said. "(The blight) happened subsequent to our involvement in the property," he said.
Sources: The Securities and Exchange Commission, the U.S. Department of Justice, The Center for Public Integrity "The Subprime 25" and Detroit News reporting.
Detroit was hit hard by subprime lending, mortgages with higher interest rates that were designed for borrowers with damaged credit. Before they failed, the loans were lucrative because they increased monthly payments but were far more likely to default.
They helped lead to the real estate meltdown that triggered a global recession in 2008.
Although there is no consensus on the definition of "subprime," The News defined it as loans with annual rates of 3 percentage points or more higher than Treasury securities of comparable maturity. That is a benchmark used by the federal government.
Here's a look at one year of subprime loans issued in 2005:
- 68% of Detroit's mortgages were subprime
- 27% of Michigan's mortgages were subprime
- 24% of the nation's mortgages were subprime
- $1.4 billion of $2.1 billion loaned in Detroit was subprime
Top five subprime lenders in Detroit
1. ACC Capital Holding Corp. (Ameriquest, Argent and AMC Mortgage)
Combined, Argent and Ameriquest were the No. 1 sub-prime mortgage lender in the world in 2005. Ameriquest's slogan was "Proud sponsor of the American dream." They were founded by billionaire Roland Arnall, who was President George W. Bush's ambassador to the Netherlands from 2006 until shortly before his death in 2008. The companies stopped making loans in 2007, and some assets were sold to Citigroup that year. Among other penalties, it agreed to a $325 million settlement in 2006 on allegations of deceptive lending practices, including falsified records and pressuring appraisers to inflate home values.
Subprime loans: 2,461
Percent subprime: 95
Amount: $217.7 million
2. New Century Financial Corp.
The California-based company was one of the largest subprime lenders in the nation and one of first to implode, filing bankruptcy in 2007. Its partnership with Morgan Stanley is at the center of a lawsuit filed by the American Civil Liberties Union and several Detroit homeowners that alleges racial discrimination in the subprime loans it sold here. Former directors and officials have paid more than $90 million from federal and private suits, the Los Angeles Times reported in 2010.
Subprime loans: 964
Percent subprime: 96
Amount: $96.1 million
3. National City Corp. (National City Bank of Indiana)
The Cleveland-based bank tried to become a major national mortgage lender by boosting its subprime lending. Amid the 2008 mortgage meltdown, it was sold to PNC Financial Services Group. An investigation by the U.S. Department of Justice found that National City charged black and Hispanic borrowers higher loan rates based on their race. PNC settled the case in 2013 by paying victims $35 million.
Subprime loans: 851
Percent subprime: 79
Amount: $77.9 million
4. Fremont Investment & Loan
Federal regulators ordered the California-based lender to stop making loans in 2007, saying it "substantially increased the likelihood of borrower default or other loss to the bank." About a year later, it filed for bankruptcy. Its branches and deposits were sold to CapitalSource Inc.
Subprime loans: 728
Percent subprime: 99.7
Amount: $67.9 million
5. Countrywide Financial Corp.
The California-based company was the nation's largest mortgage lender until it was acquired by Bank of America in 2008. In 2014, Bank of America agreed to pay a record $16.65 billion settlement in part to resolve government allegations Countrywide misled investors about the company's risky loans. Countrywide CEO Angelo Mozilo agreed to a $67.5 million federal settlement, but in an interview last year with Bloomberg he said he did nothing wrong.
Subprime loans: 617
Percent subprime: 51
Amount: $58.3 million
Source: Federal Financial Institutions Examination Council's Home Mortgage Disclosure Act data, The Securities and Exchange Commission, The Center for Public Integrity's "The Subprime 25," the Los Angeles Times and Detroit News reporting