September 22, 2023

For Fighting Foreclosures, a $100,000 Award

After 30 years of that, he retired and in 2008, during the Great Recession, he experienced a crisis of conscience and switched sides to work pro bono for people whose homes were being foreclosed on by banks.

In this case it took a banker to catch a banker. Mr. Cox very quickly realized that GMAC, the mortgage company he was suing in court to save Nicolle Bradbury’s $75,000 house, was mass-producing flawed paperwork to seize people’s homes illegally. This set off what would become known as the robo-mortgage scandal, leading to a $25 billion settlement that forced the nation’s largest banks to halt foreclosures.

For his work, Mr. Cox is one of five people to be awarded a $100,000 Purpose Prize, given to those 60 and over who have created fresh solutions to old problems. The prize, now in its seventh year, has become a sort of MacArthur genius award for people who develop a second career as social service entrepreneurs.

This year’s other $100,000 winners include:

Judy Cockerton, 61, of Easthampton, Mass., a former toy store owner, for creating innovative programs to support foster children.

Lorraine Decker, 64, of Houston, who had a lengthy career as a consultant to Fortune 500 companies, for developing financial education programs aimed at low-income teenagers and adults.

Susan Burton, 61, of Los Angeles, an ex-con and former drug addict, for opening five transitional homes to support women who have been newly released from jail.

Bhagwati Agrawal, 68, of Fairfax, Va., an engineer, for his work in rural India developing systems that produce safe, low-cost drinking water.

The prizes are awarded by, a nonprofit organization that develops programs aimed at encouraging retired and older workers to take on second careers in community service. Financing is provided by the John Templeton Foundation and the Atlantic Philanthropies.

This year’s 23 judges included Sherry Lansing, former chairman of Paramount Pictures, David Gergen, Jane Pauley and Sidney Poitier.

While the winners are free to use the $100,000 as they wish, several interviewed said they would use the money to expand their programs.

Mr. Cox, 68, said he plans to use most of his winnings to develop seminars that will train lawyers in Maine to perform consumer protection work.

“Maine is a state with a large rural population where a lot of the attorneys work solo or in two or three person practices,” he said. “Many are unfamiliar with the protections provided under the laws.”

Among other things, he wants to teach lawyers methods for having their legal fees paid by companies that they successfully sue. “A lot of these clients can’t pay much, but their lawyers can recover legal fees from the other side,” Mr. Cox said.

He hopes to bring national experts to Maine to educate the state’s lawyers in consumer protection law.

He also plans to set up a corps of retired lawyers from around the state who will mentor new lawyers and work with them in court.

“The prize money won’t cover the new programs,” he said, “but I’ll use it as seed money, hopefully to raise the $200,000 to $300,000 we’ll need.”

For the last four years he has paid for virtually all the foreclosure work out of his own pocket, he said. “The most I have received was $23,000 in counsel fees for the GMAC case,” he said.

Asked if he intended to use any of the prize money for himself, Mr. Cox said, he might set a little of it aside for a fishing trip.

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Mortgage Company Settles U.S. Discrimination Case Involving Maternity Leave

The complaint, brought by the Department of Housing and Urban Development, says Cornerstone Mortgage, a Houston-based lender that has offices in 14 states, may have violated the Fair Housing Act, which prohibits discriminatory lending based on sex, disability and family status, including pregnancy or simply having children, among other things.

The department said it was investigating similar complaints from prospective borrowers involving other lenders.

Cornerstone Mortgage initially approved a mortgage for Elizabeth Budde, a 34-year-old oncologist in Kenmore, Wash., while she was pregnant. But soon after she had the baby and the lender learned she was on maternity leave, Dr. Budde said, it rescinded the approval via e-mail.

Since “maternity leave is classified as paid via short-term or temporary disability income,” the e-mail said, that income could not be considered. With the help of her real estate firm, she eventually requalified after proving that she was receiving her full salary during her time off.

While Cornerstone has agreed to pay Dr. Budde $15,000 in damages and set aside $750,000 for other female borrowers treated similarly, it denied the accusations and maintains that all its actions have been “legally and prudentially sound.” If no other women file claims, the money will be returned to Cornerstone.

The department said it would investigate after learning about Dr. Budde’s situation last July in an article in The New York Times, which reported that lenders were taking a harder look at prospective borrowers, like parents of new babies, whose income had temporarily fallen.

John D. Trasviña, the department’s assistant secretary for Fair Housing and Equal Opportunity, said that 25 to 30 women had come forward since then, and that the department was investigating nearly a dozen of those cases from other lenders.

“While lenders must determine their customers’ income and other resources, some may go overboard in order to make it a safe loan or to make sure they meet all government requirements,” he said. “Here, pregnant women were singled out and going overboard may violate the Fair Housing Act.”

The Fair Housing Act protects borrowers from being discriminated against based on maternity leave if the borrower can demonstrate that she intends to return to work and can otherwise continue to meet the income requirements to qualify for a loan.

But the problems have arisen because of lenders’ skittishness after the housing crisis that can be traced, at least in part, to new quality-control measures that went into effect last year. Fannie Mae and Freddie Mac, the two government-sponsored agencies that buy the bulk of conventional loans from lenders, have tightened their system of checks and balances. Both agencies require lenders to recheck a borrower’s financial situation right before a loan closes if that borrower’s situation has changed.

And while both Fannie and Freddie have always required that borrowers have enough income to pay for the loan on closing day, some lenders had begun to interpret the rules in a way that disqualified new mothers on maternity leave. Lenders have become increasingly conservative in their interpretation of the rules, in part because they could be required to repurchase loans that do not meet Fannie and Freddie’s underwriting requirements. And the number of those repurchase requests has risen sharply in recent years.

Mr. Trasviña said the agency was providing additional information through Fannie and Freddie to help clarify for lenders when those interpretations become discriminatory. Both Freddie and Fannie said if the mother was planning to return to work and her regular income qualified for the loan, a short leave should not be an issue.

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Bucks: When Banks Impose Homeowner’s Insurance

Paul Sullivan writes this week in his Wealth Matters column about something called “force-placed insurance.” It is the insurance that a mortgage company buys when it believes the owners of a house no longer have insurance on the property.

But as Mr. Sullivan found out, mortgage companies are often imposing the insurance on homeowners already having trouble making their mortgage payments. Because the insurance is more expensive than homeowners’ insurance available on the open market, the additional costs have been sending some homeowners into foreclosure.

In other cases, particularly in areas prone to natural disasters, Mr. Sullivan reports, homeowners have been getting notification that they lack flood or hazard insurance even if they already have the coverage or don’t need it.

His main advice for anyone who has received these notices is to act quickly to prove to the mortgage company that the insurance is not needed.

Have you received one of these letters from your mortgage company? What was your experience? Mr. Sullivan reported that he got a letter in November from his lender and it took him four months to resolve the issue. Were you able to resolve your dispute more quickly? If so, how?

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