Legacy of subprime mortgage woes evident in South Gate

The pace of foreclosures in California is the lowest in five years, and lenders are doing more to modify troubled home loans than ever before.

But in South Gate, where Ana Casas Wilson lives with her husband, James, and her mother, Rebecca, the complex legacy of the subprime lending boom lingers and the harsh lessons for lenders and borrowers remain fresh.

Casas Wilson, 50, now nearly bedridden with terminal breast cancer and cerebral palsy, has lived in the 86-year-old house for 40 years, but the Wilsons haven’t made a mortgage payment since July 2008.

Wells Fargo & Co. won’t grant any more extensions for them and a handful of others who have avoided being evicted for several years. Protesters, who plan to head to the Wilson home Tuesday to try to block that eviction, asked Los Angeles County Sheriff Lee Baca in a letter to refuse to remove the family.

“We understand the empathy that people will feel for Ms. Casas Wilson,” said Vickee J. Adams, a Wells spokeswoman. “But it’s time to move forward. There is no viable option for retention.”

The Wilsons’ eviction illustrates how subprime loans — those made to people with poor or no credit — sent the residential real estate market soaring in the mid-2000s and crashing only a few years later, helping push the nation into the Great Recession.

The easy-lending policies of the housing boom enabled subprime lenders to make billions of dollars by repeatedly refinancing borrowers, pocketing origination fees as well as profits from selling the loans to back mortgage bonds.

Property records show a classic pattern of ever-higher subprime refinance loans at the South Gate home — eight in all in the name of Casas Wilson or her husband since Rebecca Casas took out a $67,000 mortgage on the property 20 years ago.

The debt now totals more than $560,000, including fees, interest and $175,000 in missed payments, on a home assessed at less than $200,000.

The Wilsons’ loans were put into pools with many other subprime loans, and securities issued on those pools of mortgages were sold to Wall Street banks and investors savoring the income from the high-interest rates the loans generated.

Trouble was, too few people were paying attention to how bad the loans were behind those mortgage-backed securities.

Three of the refis were variable-rate loans from companies controlled by the late Holmby Hills billionaire Roland Arnall. Arnall was the founder of Ameriquest Mortgage, which paid $325 million to state attorneys general in 2006 to settle claims it deceived borrowers, falsified loan documents and pressured appraisers to overstate home values.

Among the Wilsons’ other subprime refinancings were adjustable-rate loans from subsidiaries of Bear Stearns and Lehman Bros., the Wall Street firms whose subprime-related meltdowns were major triggers for their own collapses as well.

“This is a great example of how these predatory subprime lenders targeted communities like South Gate — working-class communities of color,” said Peter Kuhns, Los Angeles director of the Alliance of Californians for Community Empowerment, one of the protest groups.

The family contends that James’ earnings as a janitor, along with Ana’s Social Security disability payments and government caregiver payments to her mother, would enable Wells Fargo to offer them affordable payments if it modified their loan terms as aggressively as allowed under government guidelines. The family’s income totals about $50,000 a year.

Organizers who stopped last year’s eviction of the Wilsons said they took a lesson from the case of Rose Gudiel in the San Gabriel Valley community of Bassett. She also was far behind on payments but won a last-minute loan modification after a series of protests.

“Wells absolutely could modify the loan to an affordable payment,” Kuhns said. “And they would help the economy by keeping working people in their homes.”

Bank spokeswoman Adams said Wells Fargo had exhausted every effort to save the family.

It considered loan modifications six times in 2007 and extended trial offers twice, she said, but never received the required paperwork. She said that during last year’s protests, the bank promised to provide up to $20,000 in relocation assistance — an offer the family first accepted and then turned down.

“What could get lost in all this is that we’ve done a lot here,” Adams said. “We’ve really tried to work with the Wilsons.”

Casas Wilson could not be reached for comment. Her doctor said in a letter on her behalf Monday that she is mostly bed-bound and undergoing chemotherapy for terminal breast cancer. External stress, such as having to move, could lead to a premature death, the doctor said.

She told The Times in December that the family first went delinquent when James took time off to care for her, then fell way behind when a scam artist took their money and told them they could stop paying the bank.

When she offered to make payments again last year, Wells Fargo wouldn’t accept them, telling her she was hopelessly delinquent.

“Most of the people who come to us are in the same fix,” Kuhns said. “They stopped paying because someone told them they didn’t have to and ripped them off.”

Adams agreed, saying borrowers should know that changing loan terms becomes extremely difficult if the delinquency is extended, especially past a year.

“There is a perception that a foreclosure delay might allow a borrower to find a solution,” Adams said. “But the longer you wait, the harder it is.”

Wells is the loan servicer for the final lender, Lehman’s BNC Mortgage, which put what was then a $365,500 loan into a pool of subprime mortgages in 2006. The Wilson home, sold at a trustee sale in July 2009, has since then been owned by that pool of mortgages, whose trustee is U.S. Bank.

scott.reckard@latimes.com