May 1, 2008 9:43 pm US/Eastern
Many Local Mortgages Owned By International Banks
PITTSBURGH (KDKA) ―
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An Allegheny County sheriff's deputy enters a home in Bethel Park that is in foreclosure.
KDKA
It used to be that if you had a problem with your home loan or had trouble making your payments, you could walk down the street and discuss it with your lender.
Today you may not even know who that lender is.
Deutsche Bank - not PNC, National City or any other local bank - is the largest title holder of houses in foreclosure in Allegheny County, followed by other financial giants like Wells Fargo and JP Morgan Chase.
Even though people may have originally secured their mortgages from local brokers or lenders, most of those loans were sold years ago to fuel an investment craze on Wall Street.
Investment banks used risky mortgages to back securities or bonds and the appetite for these investments got so great Wall Street took little notice of people's ability to pay.
"They cut them up, they repackaged them, they sold them to pension funds, hedge funds all the way down the line, all anticipating a certain return of income on this that they're now not getting," Randi Lowe, of the Pittsburgh Community Reinvestment Group, said.
And with foreclosures sweeping the region, those on the brink of losing their homes say the big banks are proving difficult to deal with. A man, who did not want to be identified, got his mortgage from Mellon which sold the loan to a bigger national bank.
"And I felt that whenever we had any questions with Mellon we got straight answers but once Mellon got out of the business in this area it was a whole different story," he said.
"It used to be you could go down to your local bank and tell your problems to somebody who was actually face to face with you to see if you could get some kind of work-out," Lowe said.
She says mortgage holders now speak to middle men called servicers.
"And you're talking to a customer service reps whose job is to do nothing but to read off the script," Lowe said.
In Cleveland where foreclosure has hit even harder than here, the city is suing big banks like Deutsche Bank, claiming that they purposefully targeted low-income areas with risky mortgages.
A spokesman for Deutsche Bank in New York tells KDKA's Andy Sheehan that although Deutsche Bank is titleholder of many mortgagees in our area, it serves as a trustee for the loans and does not initiate foreclosures.
Either way, foreclosures are increasing and Lowe for one doesn't know how banks will recoup their losses by kicking people out of their homes.
"I could be wrong I'm not a financial analyst but I don't understand how you're going to make money off of this short or long term if everything falls apart," Lowe said.
And this batching, buying and selling of high-risk mortgages had had a ripple effect throughout our entire economy.
Some would call it an earthquake and one of the main culprits for the recession we're now facing.
Advocates for homeowners on the bubble wish the big banks would try a little harder to work with those facing foreclosure.
(© MMIX, CBS Broadcasting Inc. All Rights Reserved.)
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