The news about the voluntary temporary foreclosure moratoriums announced by Wells Fargo, JPMorgan Chase, Bank of America and Citigroup will not change the looming foreclosure that Mr. McAlpin is facing on March 3, 2009. His loan is held by another lender not on this list. Consumers Union wants other lenders will follow the lead of the large banks so that all consumers facing foreclosure, regardless of their lender, will have a chance to benefit from what we hope will be some important and effective protections coming from the Obama Administration very soon.

Mr. McAlpin’s loan is an example of what happens when an adjustable rate mortgage with steadily escalating payments is sold to someone on a limited, fixed income that cannot support the loan payments. His case also illustrates how innocent borrowers have no recourse against the current holder of their loan once their loan is sold, even if there were problems with how the loan was originated, and the company that originated the loan.

Some of these abuses can be prevented by requiring all lenders to make sure the loans they are selling are suitable for the borrower and by requiring lenders to act in the best interest of the borrower. Also, by making sure that any liability for problems in the origination of the loan follow the loan when it is sold (assignee liability), subsequent purchasers of loans put pressure on originators to originate good loans and borrowers will have recourse when they are wronged.

Perhaps you have some lingering questions about how he got into this situation. There are many important details that simply cannot be incorporated in a short video so I’ve included them in this blog post so you can get a better sense of what happened to him and how. Please read on!

Mr. Langdon McAlpin is 67 years old and lives in Loganville, Georgia with his wife Gloria. They have lived in their house for 19 years. Mr. McAlpin had been a city of Decatur police officer for 23 years when he was struck by a vehicle while directing traffic in 1989. He suffered severe physical injuries including a significant head injury and is permanently disabled from work as a result. In 2004, the McAlpins refinanced and were sold an adjustable rate mortgage (ARM) that they could not afford.

Mr. McAlpin said the lender told them they were qualified for the loan, but in fact that was not true. The ARM they received had a fixed initial interest rate for the first two years that continued to change every six months thereafter. His income, on the other hand, was limited and fixed and Mrs. McAlpin was unemployed. The only household income came from Mr. McAlpin's pension disability check in the amount of $2,039.62. After a deduction of $250 for Mr. McAlpin's medical insurance, the McAlpins had $1,789.62 net monthly income available to pay the new mortgage payments and their other household expenses.

After the loan was made, the McAlpin's initial monthly principal and interest payments on the new mortgage were $888.71. After the city and county property taxes and homeowners insurance were escrowed into the payment ($221.91 per month), the total monthly housing payments for the McAlpins were $1,110.62. The initial mortgage payment consumed a staggering 62.06% of the McAlpin's net monthly income and the McAlpins struggled to make the payments. Two years later, the interest rate adjusted and the escrow payments increased inflating their monthly mortgage payments to $1,378.52. Six months, later their monthly mortgage payments rose again to $1,487.92. Six months later, on July 1, 2007 the total mortgage payment effective on August 1, 2007 was $1,576.46, or over 88% of the McAlpin's net monthly income.

On October 26, 2007, the Georgia Department of Banking and Finance revoked the mortgage lending license of the original lender involved in the McAlpin mortgage loan and entered into a consent order with its owners to resolve allegations pertaining to violations of the Georgia Residential Mortgage Act and agency rules. However, the McAlpin loan has been transferred and assigned to another lender who is not subject to the Georgia Department of Banking and Finance action against the original lender. Through his lawyer, Mr. McAlpin is alleging that the purchaser of the loan knew or should have known of the legal claims against the original lender and should have more closely inspected the documents in the loan files it purchased. Had it done so, the McAlpin's allege, it would have discovered that that this was a clearly unaffordable loan.

Complicated, right? You bet. But it’s hard to convey exactly what happened to Mr. McAlpin and his wife without sharing these details with you. Imagine navigating these landmines that even the most financially sophisticated borrower can miss. Multiply this problem times a few million people and you have the perfect recipe for today’s mortgage crisis.

Surely something must be done to provide relief for homeowners against rampant foreclosures. But there is more. We need to make sure this never happens again. Consumers Union has a plan for how to accomplish this. Read our Mortgage Reform Platform for No More Mortgage Meltdowns.

Now we just need our lawmakers and regulators to bring much needed consumer protections back to the mortgage lending marketplace. Let them know you want them to say “NO” to mortgage lending abuses and to call for an immediate moratorium on foreclosures until a workable plan to prevent unnecessary foreclosures can be put in place.