After NASCAR debt write-off, some homeowners cry foul

Published: Jan. 7, 2015 at 4:00 AM EST|Updated: Feb. 6, 2015 at 4:00 AM EST
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CHARLOTTE, NC (Steve Harrison and Rick Rothacker/The Charlotte Observer) - The city of Charlotte's tentative deal with Bank of America and Wells Fargo to erase $17.6 million in NASCAR Hall of Fame debt has left some homeowners angry after they said they struggled to restructure their loans and fight foreclosure.

The city was supposed to pay the $19.1 million loan with proceeds from NASCAR hall commemorative brick sales and corporate sponsorships, but revenue fell far short of expectations.

The hall opened in May 2010, and the city never made a single payment on that debt.

The proposal calls for the city to pay the banks $5 million from Charlotte Regional Visitors Authority funds. In exchange, the banks will erase $3.5 million in accumulated interest and $14.1 million in principal.

Jill Fletcher of West Palm Beach, Fla., said she has been trying to keep Bank of America from foreclosing on an investment home she and her husband bought in the Ballantyne area in 2006.

She said she would be happy with a deal similar to what was given to the NASCAR Hall of Fame.

"If they would just take off the interest, that would help," Fletcher said. "They are still trying to foreclose on us, and we are still trying to fight them."

Charlotte City Council member John Autry, who represents east Charlotte, said some neighborhoods have been hurt by foreclosures, stemming from the housing crisis and the recession that hit in 2008.

He said Tuesday that he wishes the two banks would be as "humane" toward homeowners as they were to the NASCAR hall. The City Council will vote on the deal Monday.

The two banks defended the loan agreement Tuesday and said they have worked to keep people in their homes.

Wells Fargo said it worked with the city to "reach a solution that supports the long-term viability of this city-owned landmark and benefits our community." Bank of America said it has "made unprecedented investments to provide relief to mortgage customers in need of assistance … helped more than 2 million customers avoid foreclosure."

Big banks, including Bank of America and Wells Fargo, have faced sharp criticism for their handling of borrowers struggling to make their payments during the financial crisis and the resulting surge in foreclosures.

Homeowners complained lenders were unwilling to help them or only provided loan modifications after putting them through a frustrating application process. Investigators later found banks were mishandling foreclosure documents in a process that became known as "robo-signing."

To help combat these abusive practices, federal agencies and state attorneys general in 2012 reached a $25 billion settlement with five major lenders, including Bank of America and Wells Fargo. The pact included $17 billion in loan modifications and new standards for treating borrowers.

Generous loans

The loans made to help finance the hall date back to before the recession, at a time when Bank of America and the former Wachovia were making record profits. The two banks were adversaries, but they teamed up to create a financing package that would help Charlotte land the hall over cities such as Atlanta.

One $20 million loan used to build the hall is backed by the future sale of several city-owned parcels of land near Interstate 277. The sale of that property has been slower than expected, but both the city and the banks believe the land will be sold and developed.

The other loan – for $19.1 million – was backed by the sale of commemorative bricks and corporate sponsorships. The city would funnel proceeds from those two sources of money to pay off the loan.

But when the city voted to expand the hall's construction budget in 2008, the deal called for $5 million of that money to be paid back to the city for five years.

With the initial sponsorship revenue diverted, the city wasn't able to make a single payment toward that loan. Meanwhile, the amount of revenue from sponsorships dwindled, from more than $1 million in the first year to about $500,000 in 2014.

Two parts of the loan were particularly generous: The city received an interest rate of 4 percent, which was below the prime rate of about 7.5 percent at the time of the deal in 2006. In addition, the $19.1 million was a "no-recourse loan," meaning the banks couldn't seize any hall assets.

The banks could have insisted on receiving all sponsorship revenue. At $500,000 a year, it would have taken the banks 10 years to collect $5 million, 20 years to collect $10 million and 40 years to collect $40 million.

That doesn't count accruing interest.

Banks say they've helped

Both banks have said they committed thousands of employees to help homeowners behind on their payments. Since 2008, Bank of America has modified more than 1.3 million loans, while Wells Fargo has provided customers more than 900,000 mortgage modifications since 2009, according to the banks' most recent annual reports.

Wells Fargo said it has a NeighborhoodLIFT program in Charlotte, in which it has contributed $6.6 million that includes $15,000 down-payment grants for local homebuyers.

But Peter Skillern, whose Durham-based Reinvestment Partners advocates for homeowners facing foreclosure, said there has "not been an appearance of fairness to the public on who has been and who has not been hurt" in the financial crisis.

"We've seen bank executives receive tens of millions of dollars in bonuses while they lay off thousands of employees," Skillern said. "Some homes have been saved, and others have not. It's reflected by the NASCAR Hall of Fame getting a loan forgiven."

Bank of America continues to face issues over its treatment of mortgage borrowers.

Last month, the national mortgage settlement's watchdog said Bank of America failed tests on two metrics out of 31 it was tested on during the first half of last year. The tests are designed to see whether it is complying with the settlement's rules.

Vickie Fewell bought her house in east Charlotte's Shannon Park in 1994. She was laid off from her job at AT&T in 2009. She fell behind on her payments and has been fighting foreclosure.

When asked whether she would like a similar restructuring to what the city received from the banks, Fewell said: "Big time."

"I mean, how many millions is this? My house, when I first bought it was less than $100,000. And the NASCAR Hall of Fame is how many millions?"

After several years, Fewell said her mortgage servicer, Bank of America, offered to write down about $20,000 of her loan.

Bank of America said Tuesday that it is trying to work with Fewell and no date for foreclosure has been set. In the case of Fletcher's Ballantyne house, the bank said "foreclosure remains on hold" and that it is actively working with Fletcher's attorney. Because the house is a second home, the bank said it doesn't qualify for most governmental assistance.

Should city pay debt?

While some have questioned the bank's willingness to write off the NASCAR hall debt, council member Kenny Smith said he's uncomfortable with the city's decision to walk away from the loan.

"My personal viewpoint is, the way I was raised is you pay your debt," Smith said. "I think it's immoral not to pay your debt."

The city is only obligated to pay back the loan from sponsorship revenue. But the CRVA – which is partially funded from hospitality taxes – has the money to repay the loan.

Tom Murray, CRVA chief executive, said the tourism authority has done its part by paying for annual operating losses at the hall, which have been as much as $1.8 million a year.

Most of the hall's construction debt is paid by a special 2 percent hotel/motel tax levied in 2006. The city said that fund has more money than expected because of surging hotel/motel occupancy.

The city has declined to use that money to pay off the loan.