It's time to come clean on overburdening mortgages

Wonder why the tubload of dirty home loans has shredded the inner workings of our financial system?

Behold the mortgage officer as shrill pitchman: Don't worry about the stretch marks on your home loan application, everything will come out in the next cycle.

Hillsborough County school teacher Kelly Clem fell for the pitch, and promptly fell on her face financially. Let's etch her 2006 mortgage experience in our minds lest we repeat her blunders in 2016.

Clem stumbled into home ownership with high expectations in 2006, agreeing to pay $265,000 for a 2,000-square-foot Lennar townhome in Brandon.

Clem's house payment would total 70 percent of her monthly income, a lopsided debt-to-income ratio that would have raised a bloody banner in a banking system that hadn't lost its bearings. The deal would eventually land Clem in foreclosure court in late 2008.

But with a brashness that would have shamed late TV pitchman Billy Mays, a loan officer at Universal American Mortgage Co., Lennar's in-house loan originator, hoisted sail for full speed ahead.

At a Hillsborough County court hearing this week to contest her foreclosure, Clem accused a UAMC loan officer of "fraud and gross negligence" for handing her nearly a quarter-million dollars she couldn't afford to repay.

Twice she pulled out of home closings, and twice the loan officer cajoled her back to the sales table. Why worry about the debt? Real estate values were astronomical. You could always sell the town home for a profit. You wouldn't want to lose your $5,000 deposit, would you?

Let's clear the air of the obvious comeback. I admit Clem's line of reasoning smacks of the-devil-made-me-do-it defense. Please, Mr. Banker, don't give little ol' me all those crisp new bills.

Then I learned about three other neighbors in Clem's town home community, the Lakes of Brandon, who came forward with nearly identical stories.

All were young women of low to moderate means: a teacher, a postal worker, a soldier. All got 100-percent financing from Lennar's lender.

All had to shell out three quarters of their incomes to make monthly house payments that in some cases surpassed $2,500. All have struggled to fend off foreclosure on homes that have plunged in value. All feel abused for their lack of sophistication.

As Clem put it this week: "I let myself get bullied."

Clem has done what few distressed homeowners around Tampa Bay have dared to do. She countersued her lender, demanding relief from a foreclosure she insists wasn't her fault. That lender is no longer UAMC. The company had unloaded the loans in 2006 before the ink was dry.

Clem's mortgage eventually landed with GMAC, a notorious multibillion-dollar government bailout recipient. As its name suggests, GMAC once focused on General Motors auto loans until it caught whiff of money to be made in subprime mortgages.

GMAC alleged, and the judge concurred, that the lender wasn't liable for loans it didn't initiate back in 2006.

But, win or lose in court, Clem makes a damning point. If a silky-tongued salesman insists you can afford a home loan equal to 75 percent of your income, wash his mouth out with OxiClean.

Then repeat.

After 21/2 years of writing this column, James Thorner has accepted another job in journalism. This is his last column for the St. Petersburg Times.