foreclosure: Bill and Georgianne Crabill say they were
victims of predatory lending.
Photo: Alicia Soslman
foreclosures in the subprime market increase, many rally for
fixes to what they say is a broken system
and Georgianne Crabill were at work on April 27, 2004, the
day they say a subsidiary of the largest financial group the
world began formal proceedings to steal their home. So the
papers to foreclose on the couple’s property—a two-story Cape
Cod that they built in Voorheesville shortly before their
marriage in 1976—were served to their son, Bill Crabill Jr.,
who was shooting hoops in the driveway outside the place he
had called home for his entire 24 years.
By the time the foreclosure papers were served, the Crabills,
per the advice of their attorney, hadn’t opened their checkbook
to CitiFinancial Mortgage Company for nearly one year. Despite
repeated phone calls and letters threatening foreclosure,
they refused to pay one cent of the more than $20,000 of outstanding
balance CFMC reported they still owed on their home-equity
loan, contending that the figures were falsifications, the
product of an unusual series of problems caused, at least
in part, by misleading lending terms and corporate maneuvering.
got this bank with a trillion dollars in assets and then you
have two people who have trouble finding 50 bucks,” says Warren
Redlich, the Crabills’ attorney. “The largest banking group
in the world tried to steal their house. It’s kind of one
of those things where they [CFMC] have 1,000 little machines
walking along, and there’s one guy watching them. One of the
machines kind of bubbles a little, and that guy’s too busy.
He doesn’t notice. It’s like they’ve created this monster
that they can’t even control that eats people like the Crabills.”
By most definitions, the Crabills’ loan with CFMC falls into
a category known as subprime—a type of loan that’s characterized
by higher-than-average interest rates and typically is offered
to applicants who may not otherwise qualify for a standard
loan. According to Redlich, the Crabills’ loan also falls
into a subset of the subprime market known as predatory lending—generally
defined as loans that involve deceptive practices or contain
unfair terms and conditions.
The terms incorporated into the Crabills loan are so complex
that when Georgianne and Bill began seeking legal counsel
to help them resolve the disputed loan balance, several attorneys
turned them away, calling the case too complex or time-consuming
for their office to handle. Another suggested that the Crabills
file for bankruptcy.
said, ‘No, no, no,’ ” Georgianne says. “We don’t do bankruptcies.
We’re honest people. We pay our bills. We don’t try to get
out of things by doing something like that.”
When the Crabills approached Redlich, he agreed to take the
case, in part because his practice was young and he needed
work. He quickly realized, however, that the complexities
of the loan were above his head as well, and he hired Calvin
Bradford, an expert in issues of housing, insurance and credit,
to make sense of the matter.
don’t recall seeing more complicated or misleading loan conditions
in my 30 years of work in this field,” Bradford writes. His
testimony cites several ways in which the Crabills’ loan violates
federal lending laws or at least engages in what at one point
he calls “legal gymnastics.”
Within the financial industry and as a matter of public opinion,
there is broad-based consensus that predatory lending is a
deceptive and harmful practice that should be curtailed. The
problem is that there’s simply little agreement about where
to draw the line between subprime and predatory, and financial
institutions aren’t about to voluntarily point out which of
their loan agreements fall into the inferior category.
more of an interpretation than truth in fact,” says Jonathan
Pinard, president of the Empire State Mortgage Bankers Association.
“If it was truth and fact, then it’d be really easy for people
to go to court and get the loan null and void because it was
Even in cases where the line is less hazy, the demographics
of borrowers who are most susceptible to subprime and predatory
loans means borrowers have limited options when seeking recourse.
thing about predatory lenders is that the people they deal
with do not generally have the resources, the education, the
background, the money to hire lawyers to deal with it when
they get screwed,” Redlich says. “So [the lenders] consistently
find ways to steal money from the people that are their customers.”
If not for the dispute about the outstanding balance on their
CFMC loan, the Crabills likely never would have realized there
was anything questionable about the terms of their loan. While
they were aware that they were paying more in interest and
fees than borrowers with better credit, that was expected,
says Georgianne. The possibility that CFMC may be cheating
them out of money by finagling complex loan terms was not.
During the late 1990s and early 2000s, there were many borrowers
like the Crabills. A national environment of low interest
rates helped fuel a housing boom, and consumer demand for
home loans soared. In response, lenders began relaxing their
guidelines in order to accommodate borrowers who, because
of their credit ratings, otherwise wouldn’t qualify. The subprime
market emerged, and began gaining national attention.
In addition to the surge of new mortgages, low interest rates
encouraged many homeowners to refinance. Some borrowers with
prime loans were even enticed to refinance into the subprime
category, lured by cash-out options—loans created for more
than the old loan so that borrowers receive the difference
The boom in refinancing lasted through the early 2000s, with
large percentages of mortgage and home-equity borrowers, including
the Crabills, weighing refinancing options.
During May 2003, Georgianne was at work when she re - ceived
a cold call from Paula Stitt, a representative of CitiFinancial.
“She said, ‘We’re doing a customer-appreciation campaign.
We decided to start doing that because the only time we ever
contact our customers is if they’re not paying their bills,
and we never reward the people who do have a good payment
record,’ ” Georgianne recalls.
Stitt offered the Crabills an option through CitiFinancial—also
a subsidiary of Citigroup but separate from CFMC—that would
allow the couple to refinance their current home-equity loan
at a lower interest rate. Even more attractive was the fact
that the Crabills could refinance for more than the CFMC loan
amount and use the excess to pay off other bills.
A closing was scheduled for July 8, 2003. Georgianne says
Stitt asked them to come with the balance-due amounts for
any private bills while Stitt would obtain the payoff figure
from the CFMC loan because it was a sister company. After
three days—a right-of-rescission waiting period required by
the federal Truth in Lending Act—the Crabills returned to
sign the checks.
told us that she got our mortgage payoff as $121,000, but
she made the check out for $122,500 to cover any per diems
or interest that was being added on in the meantime after
she got the payoff amount,” Georgianne says. “She said you’ll
probably get $1,000 or more back after they receive this check.”
Two weeks later, July 21, Georgianne was taking a two-day
vacation from work and was home when Stitt delivered unexpected
news. “She called me at home and said, ‘Georgianne, I have
to talk to you. I haven’t been able to mail this mortgage-payment
check.’ I said, ‘Why?’ and she said, ‘Because they’re telling
me that you still owe $2,600.’ I said, ‘What? Wait a minute,
Paula, we did this closing on July 8. This is a done deal.
How can you come back and say that we still owe?’ ”
During the following weeks, Georgianne says that she and Stitt
both placed multiple calls to CFMC representatives to inquire
about the final payoff amount, but they were regularly cited
conflicting amounts that ranged from $113,000 to more than
when [Stitt] started saying, ‘I don’t know what they’re doing,’
” Georgianne says. “ ‘Georgianne, let me tell you,’ she said,
‘they’re screwing you. Get an attorney.’ That’s what she said
101: Minnie Rahman leads homeownership workshops at
the Affordable Housing Partnership.
Photo: Alicia Soslman
weeks of confusion, Stitt finally mailed a payoff check for
a little more than $114,000. Later that month, the Crabills
received an August statement from CFMC that showed a $0 balance.
They didn’t receive a statement the following month.
Then, in October, another statement arrived in their mailbox,
displaying a balance of $20,526.65.
Based on her private calculations, Georgianne says the lower
payoff figures she was quoted by CFMC representatives seemed
more accurate than those on the higher end. For this reason,
and because they’d already made a closing in good faith, Georgianne
says she wasn’t about to give CFMC any more money unless they
could provide a breakdown of what the Crabills still owed
and why. Despite her requests for full documentation, Georgianne
and Stitt continued to receive documents insisting that the
higher amount was correct, but without a complete breakdown.
had no intentions of dragging it this far,” Georgianne says
as she thinks back about the events of the past few years.
“All we wanted them to do was look at [the situation] and
see what happened and fix it. I said that if we owed them
money, we would pay it, but I’m not paying them something
that they can’t prove to us that we owe them.”
As the housing market cooled and interest rates rose, the
potential long-term ramifications of the new subprime market
began to emerge, especially since the beginning of this year.
Some borrowers are finding they can no longer afford the loan—typically
sold as an adjustable-rate mortgage—that seemed so promising
a few years earlier.
Tracy Petersen is a program coordinator at the Affordable
Housing Partnership in Albany, which provides free homeowner
counseling to Capital Region residents, including prepurchase
services and assistance for those who fall behind with mortgage
payments. “I’m getting more calls for mortgage-default counseling
than we’ve ever gotten in the last seven years I’ve been at
this agency,” she says.
At a conference last fall, Petersen says that she was told
to expect an increase in mortgage foreclosures—and therefore
in her workload—as borrowers, faced with the possibility of
losing their home, seek out assistance. “They were so right,”
she says. “I’m not sure where in the country it started, but
it hit here.”
Nationally, the percentage of homeowners with subprime loans
who are behind in their payments or in foreclosure has jumped
by full percentage points within a matter of months, causing
some lawmakers and civil-rights groups to sound the alarm.
Several organizations are calling for an immediate six-month
moratorium on foreclosures on subprime loans, while state
and federal lawmakers float ideas of their own. Both New York
senators have released statements in recent months that note
problems with the subprime market and call for urgent action.
During March, Sen. Hillary Clinton (D-N.Y.) reintroduced the
21st Century Housing Act, designed to modernize the Federal
Housing Administration and enable the agency to provide more
homeowners with alternatives to the subprime market. She joined
other federal lawmakers in supporting initiatives to expand
access to prepurchase counseling and to strengthen the Truth
in Lending Act.
subprime problems are now creating massive issues on Wall
Street,” Clinton says. “It is a serious problem affecting
our housing market and millions of hard-working families buying
a home, many of them for the first time. The market is clearly
broken, and if we don’t fix it, it could threaten our entire
If the upward trend in foreclosures continues, the trickle-down
effect will have broad implications for communities across
the country and in the Capital Region, agrees Petersen. If
area residents begin losing their homes in foreclosure, she
worries that homes could stay empty for long periods of time
due to sluggish growth in the region’s real-estate market.
needs to be done in the system fast, because if you get homes
defaulting, it results in a change in the value of the remaining
homes in the neighborhood,” Petersen says. “The truth is if
you’ve got three homes in the neighborhood that nobody is
living in because the homeowners couldn’t afford it and it
hasn’t been sold, those homes are usually boarded up. If you
think that’s not going to affect the value of your home, you’re
Before the emergence of the subprime market, it was nearly
impossible for applicants with low credit scores—generally
considered to be less than 620—to obtain home loans. Today,
as talk of late payments and foreclosures dominate media attention,
the new type of lending known as the subprime market has taken
a beating in news reports and the court of public opinion.
think that there’s been a lot of negative [press] because
it’s easy to say things negative, but there are a lot of positives
that are being ignored,” Pinard says. Among borrowers with
subprime loans, only about 10 percent currently are delinquent
with their payments. “If 90 percent of them are paying on
time at any given month, it’s really hard to say the whole
system is flawed.”
He says he knows that there are people who are taken advantage
of in the subprime market through loans that may be considered
predatory or otherwise contain suspect terms and conditions.
Acting too quickly, or implementing policies that are too
broad, however, could do more damage than good by undercutting
the possibility of homeownership for many Americans with low
we never gave them a mortgage, they wouldn’t be in foreclosure,”
Pinard says, “and we forget the fact that the same individual
never would have had the opportunity to own a home.”
is a loan out there for anybody,” Petersen adds.
She tells of clients with poor credit with whom she has met
for prepurchase counseling. “We talk about credit and what
they need to do to fix it, but instead of taking the time
to fix the credit issues, they decide, ‘I gotta have a house
now. I just gotta.’ There is a lender that will meet that
need. They don’t care if you’ve never met a bill. They’ll
just charge you 11 percent interest and make that rate adjustable
because you’re very, very risky.”
It has been exactly three years since the younger Bill Crabill
was served with papers to foreclose on his family’s home.
Bill and Georgianne say that they’re still waiting for an
explanation and some form of resolution.
of the things that bothers me about this process is that CitiFinancial
Mortgage Company has never explained what they did,” Redlich
After CFMC filed the foreclosure action, Redlich responded
with a counterclaim against the company for intentional infliction
of emotional distress. “It’s not a very common claim,” Redlich
says. “It’s a very hard claim to make because you have to
show extreme and outrageous conduct, but most of the people
I talk to consider filing a frivolous foreclosure action to
be extreme and outrageous conduct.”
If a jury agrees that CFMC’s actions were so bad as to warrant
a finding of intentional infliction of emotional distress,
the jury also can choose to award damages to the Crabills
for their pain and suffering.
never would have taken them to court if they had only tried
to fix this,” Georgianne says. “We didn’t want to have three
years of our life disrupted.” She describes how, for two years,
she suffered from anxiety attacks caused by the stress of
the threatening phone calls, letters and, ultimately, the
couple of times I almost had him take me to the hospital because
I thought I was having a heart attack, and it turned out to
be anxiety attacks,” she says. “I’d wake up. I’d have to sit
on the edge of the bed, and I couldn’t get my breath, and
my heart’s racing. It felt like my heart was going to pound
right out of my chest. And then I couldn’t sleep because I
was afraid I wasn’t going to wake up in the morning.”
Georgianne began taking anxiety medication, and her prescription
for high blood pressure also was adjusted.
Even though CFMC later withdrew the foreclosure action, the
case still is pending in Albany County Supreme Court because
of the Crabills’ countersuit. Assuming the case makes it to
trial, in addition to the possibility for damage payments
for the Crabills, the jury could decide to charge the company
in punitive damages as well.
called predatory lenders because they’re preying on their
customers and they steal money from them, and the vast majority
of people who they do it to have no way of fighting back,”
Redlich says. “Usually when a lawyer steps up and says, ‘Hey,
you guys screwed up. Now fix it,’ usually predatory lenders
back down and pay off and try to quiet everything down because
they don’t want everything to blow up in their face. And for
some reason we don’t understand, they’re idiots and they didn’t
recognize, ‘Wow, we screwed this thing up, we had better step