Investigation reveals exploitation of vulnerable

Today's story, "The Fleecing of Frances Taylor," should move you to wonder about the exploitation of people when they are most vulnerable. How can a 96-year-old woman lose not just her home, but everything — $2 million and nearly all of her possessions?

Reporter Susan Kelleher got a tip about Taylor after The Seattle Times published a story about a mentally ill man who had been bilked by a car salesman. The caller said that was nothing compared to what happened to Taylor. At the heart of today's story are allegations that one man took advantage of an old woman losing herself to Alzheimer's. But, as the story says, that man had a lot of help.

"The companies that fed off her decline are part of a financial-services industry that targets people, looking for potential borrowers with high debt and assets that can be tapped to pay off that debt," today's story asserts.

Tomorrow in The Times, Kelleher and Justin Mayo report the details behind that assertion. If you are moved by what happened to Frances Taylor, you shouldn't miss this broader story of how the system has targeted many more older borrowers.

As she worked on the Taylor story, Kelleher was troubled by what she calls a "dissonant picture." Taylor was one of millions of subprime borrowers, but she didn't fit the stereotype of young, first-time home buyers with bad credit. Was she an anomaly?

Then Kelleher noticed that many of the people testifying before Congress about subprime mortgages didn't fit that picture, either. They were older, more established, but they were losing their homes because of high-cost, high-interest mortgages. They weren't first-time buyers seeking the American dream; they had refinanced their way out of it.

What was going on here? Kelleher wondered. Unfortunately, there was no ready way to find out. The federal government tracks mortgage data by categories such as race but doesn't track by age.

Enter Justin Mayo, whose specialty is databases and computer-assisted reporting. A decision was made to focus on Ameriquest, one of the lenders in Taylor's story and a major player in the subprime market. "The starting point was the King County Recorder's Office," Mayo said.

"We queried their online database and downloaded all deeds of trust involving Ameriquest over a five-year period (2002-2006). This produced more than 4,000 loans. At this point all we knew was: borrower name, filing date, recording number and legal description of the property, including (in most cases) the parcel number.

"We linked the parcel number to the county property database, which allowed us to find addresses for the borrowers. Finally, with name and address, we then searched voter registration and driver's license databases to find birth dates to calculate ages."

The investigation got even more complicated after that, but I want to emphasis a critical element. Cheryl Phillips, the editor who oversaw the data analysis, puts it succinctly: "There is no way this story could be told without the dates of birth."

Efforts are under way in the courts and Legislature to exempt birth dates from public disclosure. Proponents of exemption argue they are trying to prevent identity theft, but they haven't made their case. Information from public records hasn't been identified as a source of identity theft.

To the contrary, the harm done by predatory-lending practices is real. Tomorrow's story includes this quote from Melissa Huelsman, a Seattle attorney who represents homeowners in predatory-lending suits:

"You can't take away a house with a gun, but you can take it away with a piece of paper. We as a society should treat that as a serious crime."

In a society that is aging, the elderly become an easy target. In Frances Taylor's case, one lending agency disregarded its own rules with seemingly no fear of consequences.

When lending is based on the assets the borrower has, the lender has little to lose, no matter how risky the loan or how onerous its terms. The lender has no reason to look out for the borrower and may have a financial stake in guiding the borrower to loans with higher fees, higher interest rates and prepayment penalties.

"Debt begets more debt, and more costly debt. It becomes a debt death spiral," Kelleher said. If lenders target borrowers at their most vulnerable, there is "an irrational imbalance of power" in the relationship, she added.

"There are so many good and decent people in the lending industry, but this is happening all over America," Kelleher said. "It's mind boggling."

Inside The Times appears in the Sunday Seattle Times. If you have a comment on news coverage, write to Michael R. Fancher, P.O. Box 70, Seattle, WA 98111, call 206-464-3310 or send e-mail to mfancher@seattletimes.com. More columns at www.seattletimes.com/columnists