380: No Map

Ira Glass

A couple years ago I interviewed this cop about something that happened to him when he was still a rookie on the force. He and his partner had gotten called out to this suburban house to do something about this squirrel that was running around the attic of the house. And by the time they were done an hour after that, they had accidentally injured the owner of the house. The squirrel had not only evaded capture, he had run through a fireplace, setting himself on fire and then setting a couch on fire. The house was full of smoke. It was a fiasco.

And just recently, it occurred to me, why have we never had that guy back on the show? Something else interesting must have happened to him in his years on the force.

Ira Glass

After ascertaining that nobody was injured at the scene, the cop, whose name is [? Sean, ?] goes over to the officer who's taken charge of this situation and listens to him interviewing the driver of the van. It seems that the driver of the van has this business where he dress the chimp up and goes out to birthday parties and Bar Mitzvahs and the chimp performs. And they had been coming home from a gig just like that. The man's driving, the chimp's in the passenger seat, wearing a seat belt, just like a passenger.

Ira Glass

So the officer in charge explains to this guy that from the point of view of the law, he was the driver, not the chimp. And he's the one who is going to get charged and the guy's not too happy about that. He leaves the chimp with [? Sean, ?] holding [? Sean's ?] hand, and he walks over to the squad car to sit for a minute inside, just to rest. And the officer in charge notices the guy seems sort of unsteady on his feet.

And he tells the guy he wants to bring him into the station for a breathalyzer test. This all happened 20 years ago. They couldn't do those kinds of things right there on the side of the road. And the guy starts to raise his voice a little. And the officer in charge just a little testy. It starts to get a little personal between them. The officer informs him that no, he is under arrest until they do this alcohol test. And the guy gets even hotter.

Ira Glass

So at this point, the officer in charge asks [? Sean ?] to get emergency services on the radio. They are the ones who have been trained to get an animal under control. And if all else fails, they have a tranquilizer gun.

Ira Glass

He tries again on a land line-- this is before the age of cell phones-- and they hang up again. He has his dispatcher try from the police station's phone. Still no. So now Sean and the other officers on the scene are in this situation where they really have no map at all for what they're supposed to do. It's like a lot of police work, Sean says. You just make it up you go along. You have to. And now the guy's in handcuffs in the back of the squad car.

Ira Glass

So they uncuffred the guy and he calms the chimpanzee down. And they're putting him into a car that's going to take him home.

Ira Glass

The cop is furious but can do nothing. He's un-arrested somebody that he's arrested. That never happens. A chimpanzee got the last word on a cop. That never happens. The world is upside down. But [? Sean ?] says, what are you going to do? Police work is improvisation. You're put in situations. You have to do something.

Ira Glass

Well, today on our show, situations where capable people find themselves with no map, no precedents they can rely on, no idea how to handle what it is that they're supposed to handle. From WBEZ Chicago, it's This American Life distributed by Public Radio International. Our show today in two acts-- one in the work world, one at home. Stay with us.

Ira Glass

Act One, The Mod Squad. We're in the middle of a historic moment where millions of people are losing their homes and the numbers continue to rise. Last month, there were 342,038 foreclosure filings, which is the highest that it's been so far in this recession. And this has left bankers in this situation that they never imagined was going to happen, where they are not entirely clear what to do, and struggling along without any kind of map to handle this situation. They are apparently foreclosing on a lot more people than they need to.

This next number I'm going to tell you is kind of astounding. Some economists, including mainstream academics and Wall Street guys like a chief economist at Moody's, the Wall Street ratings agency, estimate that half-- yes, half-- of all the six million possible foreclosures that we're facing over the next three years don't need to happen. That even the banks would be better off, they would make more money, they would come out richer if they didn't foreclose. Reporter Chris Arnold explains how this could possibly be.

Chris Arnold

To illustrate the paradox of this crisis, here's this couple. I met them at a foreclosure prevention event. The foreclosure mess is now so huge that these events are happening all over the country.

Chris Arnold

Every eight seconds, another house gets foreclosed in the US. So banks and nonprofits hold big events like this. This one was at a hotel in Connecticut. Thousands of people showed up. There's about a hundred housing counselors with laptop computers spread out across this big convention hall at little tables.

Chris Arnold

Alex isn't one of these people who bought a house that he couldn't afford. He says he's had steady work as a truck driver for 15 years, but he refinanced a couple of times, pulled out some money to fix up the house and pay some bills. Then his wife lost her job and now they can't afford their monthly payments. On top of that, their house has lost value. They owe $230,000 on their home loan and their house is only worth 180,000.

Chris Arnold

Alex is underwater. Sometimes it's called upside down. You hear those terms a lot nowadays and, in fact, you'll hear them again before this story's over. Somewhere between 15-20% of all homeowners are in the situation. They owe more than their house is worth. Alex is so stressed out that he's taking medication and having trouble sleeping. He's the first person in his family to own a home and now he's about to lose it.

And here's what's so strange. Alex shouldn't be losing his house. Not out of some doe-eyed feeling of charity, not because hard-working people deserve homes, but for a simple economic reason. The bank doesn't want his house-- or whoever owns his mortgage. If they take his house back, they'd have to sell it for a big loss. It makes much more financial sense to cut him a deal. And this is the thing-- this is the crazy thing about this whole foreclosure mess. In a lot of cases, it would be a win-win to cut people deals, that is, to lower their payments and keep them in their homes. Then the lender would keep getting payments and it would have the added benefit of helping the housing market and possibly saving the economy. But it's not happening. The system isn't working right.

Chris Arnold

That's Mark Pearce. He's North Carolina's deputy banking commissioner. And he says it's a huge problem. Mark Pearce has been meeting with executives at all the major banks and mortgage companies. And he's been getting the industry's own data on foreclosures. And what he's seeing is huge numbers of people in roughly the situation that Alex [? Alicea ?] is in. They're facing foreclosure even though they have jobs and could make some kind of reasonable payments. And it would be in everyone's interest just to rewrite their terms. But so far, that's not happening.

Chris Arnold

Danny Shapone is a manager at a call center run by a company named Ocwen. And I came here to find out, basically, what the hell's going on. Why, when the industry is presented with-- let's be honest-- a rare case of an actual win-win, why is everybody still losing?

Chris Arnold

This is ground zero of the foreclosure crisis-- right here. If you own a house and you send in your mortgage payment, it comes to a company like this one. They're called a loan servicer. You may not know that. Most people have never heard of a loan servicer. You think you're writing a check and it goes to the bank that loaned the money. But these days, there's the person who gave you the mortgage, then often, they sold it to somebody else and then they sold it to somebody else. And so the person who eventually gets your money, you have no idea.

It turns out Ocwen does. They're the middleman between you and the person that you owe. They're are also the people that you call when you can't pay. Or they'll call you. They're a debt collector

Chris Arnold

It's a big room-- lots of cubicles, call center workers with headsets. Ocwen's got 300 people taking calls-- twice as many as two years ago. All day, they talk to people who are about to lose their homes. It's their job to figure out if it makes sense to modify their loans, lower their payments to avoid a foreclosure.

Ocwen agreed to talk to us probably because they're different than a lot of loan servicers in one important way. When you have trouble with your loan and call Ocwen, they might actually help you out. They modify a lot of mortgages. They say when a borrower can't pay, 75% of the time, they work out a deal that keeps them in their homes. In other words, they do loan modifications for three times as many people as they are foreclosing on.

Margery Rotundo is a vice president who's in charge of the call center. She shows us Ocwen's computer system. This is where they crunch the numbers that allow them to be nice to people.

Chris Arnold

Basically, every borrower is in a database. And when they call asking for a modification, it's as simple as plugging in a few numbers. Ocwen finds out what their income is and how much they owe. And then based on those two things, Ocwen figures what the homeowner can afford to pay. Then they try to rework the loan terms to match that number. They can reduce the interest, which is sometimes as high as 11 or 12% to as low as 2%. And just like that, this can cut a person's monthly payment in half. Sometimes-- and this is more rare, just 16% of the time-- Ocwen even reduces the actual amount that the person owes.

Ocwen can do all this because if they did nothing and allowed the foreclosure process to run its course, it would cost even more. Margery points to a computer screen that actually calculates how much money would be lost in a foreclosure for one of their loans. The software knows what the average repair costs are for foreclosed properties in any given neighborhood. It calculates the legal fees.

Chris Arnold

The argument for making a deal with the homeowner looks even better when you consider how much value the house has lost. That's huge. Say I'm the bank and a borrower owes me $400,000 on a mortgage. But it now turns out that the house is only worth half that. If I foreclose, I own a house that I can only sell for $200,000. I've lost at least half my money. So even if I cut the homeowner an incredible deal-- I tell them forget about $50,000 or even $100,000 of that 400 that he owes me-- I still come out ahead. I've lost less money. It's all there in the numbers on Margery's computer screen.

Chris Arnold

When you see Margery's database, it looks very straightforward and mathematical. But out in the call center, it gets very messy and human and complicated pretty fast. My producer Alex Blumberg and I talked to Danny Shapone and another manager, Doug [? Donegan ?] They say they hear all kinds of heartbreaking stories from people-- a lost job or an unexpected medical cost, victims of a mortgage scam. Then there are the non-heartbreaking ones.

Chris Arnold

Ocwen is just one company, just one loan servicer that's gotten [? religion ?] about doing a lot of these workouts. The problem is there are dozens of other loan servicers. The biggest ones are owned by the big banks-- Wells Fargo, Citigroup, Chase-- the same banks that are getting bailed out by the government right now. They all have big servicing divisions. We sat down with the top executives at Ocwen-- president Ron Faris and executive vice president Paul Koches-- in their modest conference room. They said those bigger companies, the big banks, it turns out they were just not set up to deal with this problem.

Chris Arnold

Ocwen, on the other hand, has been doing this for a while. For their entire history, they've specialized in so-called distressed debt, which means that they're the industry's problem loan guys. They were like the messed up loan foreclosure specialists. Before this crisis, that was a tiny part of the market. Now it is the market. Vice president Paul Koches says he was at a meeting in Washington recently. The industry was batting around the notion of a celebrity campaign. This was their big idea, to get celebrities to go on TV and tell people at risk of foreclosure to call up their lenders and ask about loan workouts.

Chris Arnold

That's Rod Alba, the vice president for mortgage finance at the American Bankers Association, which represents banks around the country. I called him up and he basically agrees with all of this, that a lot more loan modifications would make good business sense. But still, two years into this mess, many big loan servicers haven't figured out how to make that happen. And there are a lot of other reasons that the big banks, which are also the biggest loan servicers, aren't modifying more mortgages. Because of the way accounting rules work, if they do a loan modification, they basically rewrite the terms of the loan, which means that then they have to admit that they have a problem on their hands.

Chris Arnold

It's a problem because the bank has to take a short-term loss. If they don't modify the loan and put the house in foreclosure, they still take a loss-- and probably a bigger loss-- but it might be as much as a year under accounting rules before that law shows up on their books. They still lose money, but they don't lose it now. And it's now that the banks are worried about.

And then and there are those conflicts of interest. Some top people in the mortgage business think those are a big problem.

Chris Arnold

This is Scott Simon. He's not the NPR host and he's not a consumer advocate or an anti-bank activist. He's a big time money guy. He's a managing director at Pimco. It's an investment firm that holds more than $500 billion worth of home mortgages in the form of mortgage backed securities. Simon manages all of that. He says often the banks are servicing loans that are owned by investors like him. And the banks are supposed to make sure that the investors get paid. And they're supposed to decide if a loan modification makes good business sense. Simon thinks they should be making more loan modifications but he believes that the banks are wearing too many hats and they can't do that job right.

Chris Arnold

A home equity line of credit is, of course, a second mortgage. You borrow another, say, $25,000 to redo your kitchen, buy a car or just pay off your credit cards with your house as collateral.

Chris Arnold

Simon says legally, it can be tough to modify your mortgage without basically wiping out your home equity loan. And some of the nation's biggest banks are each on the hook for more than $100 billion of those little home equity loans. And so he says the bank is a big incentive to avoid doing a modification. And so it doesn't happen.

Chris Arnold

We talked to several of the biggest banks but none of them would let us come do interviews at their loan servicing operations. In prepared statements, the banks point to all the loan adjustments that they are making right now. And these are on the rise and most loan modifications now do result in lower monthly payments.

But as Mark Pearce, the deputy banking regulator said earlier, only one in 10 of the people who need loan modifications are getting them. And when the banks and big loan servicers do modify loans, regulators say that too often, they're not taking the dramatic steps that actually keep people in their houses-- the things that Ocwen does, slashing interest rates or lowering the overall amount of loans. And because the big banks don't take those steps, 46% of the modified loans have ended up in trouble again.

Of course, the scale of this problem is just by its very nature overwhelming. And you can see that at the call center at Ocwen.

Chris Arnold

Call center worker Tammy White has been going around and around trying to do something that sounds like it should be pretty simple-- get a copy of an old tax return from a homeowner who's looking to get her payments lowered.

Chris Arnold

So this conversation takes half an hour to try to get one homeowner to sign and mail in one document. This is the conversation that has to happen millions of times if we're going to sort all this out. That's not an easy thing. But the people here at Ocwen say it's definitely doable. The Obama administration has a new plan to try to get a lot more loan modifications happening. But for now, we're still in the middle of this giant foreclosure mess. People are losing their houses at a faster rate every month, another one every eight seconds.

Ira Glass

Chris Arnold is a reporter for NPR News. His story is part of Planet Money, which is a co-production that our show is doing with NPR News. You can have the economy explained to you in normal human language. They're even funny on their podcast thrice weekly at www.npr.org/money.

Coming up, parenting stumpers. Match your wits against some very well-intentioned parents. That's in a minute from Chicago Public Radio and Public Radio International when our program continues.

Ira Glass

Well, it's This American Life. I'm Ira Glass. Each week on our show, of course, we choose a theme and bring you different kinds of stories on that theme. Today's show, No Map. Stories of people struggling through situations where there are no guideposts or precedents.

We've arrived Act Two of our show. Act Two, Where's King Solomon When You Need Him? It's not like there's not a map for how to handle being a parent. Our culture's actually awash with how-to parenting guides. It's actually kind of comforting. If any jackass can have a kid, I can have a kid. Anything that comes up, somebody has already dealt with. You'll be able to get advice. Unless you're a guy in this story, Mike Nyberg.

Over the course of four years, he got into a series of situations and faced a series of parenting decisions in adopting a child that were so unusual, so difficult, that it really seems that he was lost at sea in almost uncharted parenting territory. Ted Gesing tells us what happened.

Ted Gesing

Mike and Kari Nyberg already had two sons. They're Mormon, or LDS-- Latter Day Saints. And when they decided to adopt, they begin to look at children from Samoa, a small Pacific island that has a large LDS population. Mike remembers the first picture he saw of the three year old they would eventually name Elleia.

Ted Gesing

Elleia was the youngest of eight kids. The adoption agency Mike and Kari chose in Salt Lake City, called Focus on Children, told them that Elleia had been living for the past nine months in the agency's nanny house where a Samoan couple took care of the children. But when the time came for them to go pick her up, Mike and Kari were told that Samoa and the nanny house were off limits because of a recent hurricane. They would have to meet the girl at the closest major airport in New Zealand. They flew there and waited for Elleia's flight.

Ted Gesing

They took her back to their hotel and did what the adoption agency had instructed them, which was to rub her down with a lotion that would kill off scabies.

Ted Gesing

Within days, they were back in Utah, and Elleia begin to settle into her new life. She was doing well, Mike said, and she picked up English incredibly quickly. It only took her about a month. And that's when things begin to change for the Nybergs.

Ted Gesing

There were other clues that something wasn't right. They dug up a photo the adoption agency had sent, supposedly taken of Elleia at the nanny house, and discovered it didn't match the photos of the nanny house that were on the internet. Mike and Kari were realizing they'd been lied to in little ways, and they wondered if they were being lied to in big ways. So they started digging around. A friend's brother-in-law was working with the LDS church in Samoa and agreed to help them. He got a translator and tried to track down Elleia's birth parents-- the [? Soes ?] in the remote jungle village listed on Elleia's birth certificate.

They headed out past where maps could take them and eventually found some of Elleia's relatives. Not Tupu, her mother, but Ama, Elleia's oldest sister, and her husband Tovea who spoke English. [? Tovea explained that the girl had always lived with them, not in the nanny house, and that the [? Soe ?] family had a very different understanding of what they had signed their girl up for. It was this.

Ted Gesing

The [? Soes ?] seemed to believe this was a study abroad program and that they'd be receiving updates, photos, letters, and gifts. Of course, this was not at all what the adoption agency had told Mike and Kari, which is that this girl was left it a nanny house nine months earlier by a family they couldn't afford to feed her, and that it was a traditional closed adoption, where the birth family would have no claim to their child. The [? Soes, ?] it turned out, were farmers with plenty to eat and more to sell at market.

And worst of all was the story of the [? Soes ?] last interaction with their daughter. Someone from the adoption agency came by one evening to get the girl and told the [? Soes ?] that she was just spending a night in the nanny house to get used to being away from home. The man told them Elleia would be back the next day. Instead, that same night she was taken straight to the airport and put on a flight to New Zealand.

Ted Gesing

To understand why the [? Soes ?] would even agree in the first place to a deal like the one they described, it helps to know that in Samoa, there is no tradition of relinquishing your legal rights to a child. There are no orphanages there. There is no such thing as adoption. Samoans generally have large families, and it's not unusual to send a child for a time to other family members or friends who can better afford to raise him or her. To them, it just becomes an extended family. So to the [? Soes, ?] the idea of sending a child off to be taken care of and educated in the US didn't seem all that odd.

After hearing all of this from their man in Samoa, the Nybergs took a huge step. They went to the authorities. They told what they'd found to the State Department agent, who had processed their application to adopt, and to an agent from immigration and customs. Both agents were shocked. Mike and Kari knew that the case would escalate, but they had no idea what would happen to their family. They'd had Elleia for almost six months.

Ted Gesing

Kari didn't want to speak to us for this story. She did send me an email answering some of my questions but didn't address this particular point. So we only have Mike's perspective on this.

The government started its investigation, interviewing dozens of families in America and in Samoa. And for a long time, there was nothing Mike and Kari could do except wait. Finally, they decided to fly to Samoa themselves with Elleia to meet her family, the [? Soes. ?] At this point, Mike and Kari had been raising Elleia as their daughter for almost two years. The two families arranged to meet at an LDS temple in Apia, the capital. Elleia recognized her parents immediately and they picked her up and hugged her and cried.

Ted Gesing

It was hard to communicate. More than just a language barrier, there was a cultural barrier. It wasn't clear what to talk about. Mike says they didn't seem to want to discuss what had happened or why it happened. All they really wanted to know was what would happen next.

Ted Gesing

It was dark when Mike and Kari left the village to drive back to their hotel. In the car, they struggled to figure out what would be best.

Ted Gesing

When I asked Kari about this in an email, she said she also felt for Elleia's parents. She'd lost a child-- a two- month old-- and she said knowing there was another mother out there who lost her child broker her heart. "There was no way I would put another mother through that pain," she wrote. Mike and Kari decided to leave Elleia with her birth family. It's a decision Mike describes as the right one, but he still plays it over and over in his mind. His biggest consideration, he says, was his wife's relationship with Elleia.

Ted Gesing

In the end, Mike took comfort in the only thing that seemed like solid footing-- the idea that he could remedy an injustice by returning Elleia.

Ted Gesing

Mike and Kari returned to Utah alone. Mike says the house was strange without her. They kept her room the same-- her girly bed, some clothes that no longer fit. Her little bike was still in the garage. Every couple of weeks, they would call Samoa just to check in.

Ted Gesing

For weeks, I called the [? Soes ?] to hear their side of this, but it always went straight to voicemail. The one time I did get through, I spoke with Elleia's sister-in-law, who said they didn't have any minutes on the phone card and couldn't talk. If it seems hard to believe that they'd give Elleia back again, Mike says it's really pretty straightforward. He believes the [? Soes ?] had come to trust him and Kari and now thought of them as extended family. And her parents knew, if they sent Elleia back, she'd have all the advantages they wanted for her in America, and they'd still get to see her and be part of her life.

Ted Gesing

They went back to Samoa to pick up a Elleia.

Ted Gesing

Back in Utah, Elleia was soon at home again, sleeping in her old room, playing with her two brothers. She started up school in the fall. And mike said he was so hopeful about the whole thing that his wife would come to feel as close to Elleia as he did. But things didn't really improve.

Ted Gesing

The past three and a half years had been rough on Mike and Kari's marriage. The stress of adopting and then giving Elleia back was huge in itself, but on top of that was the investigation into the adoption agency, Focus on Children. The Nybergs were in constant contact with various law enforcement agencies. The case had sort of taken over their lives. It was exhausting. The day after they decided to split up, Mike called the [? Soes ?] to let them know. Now he was asking them what they wanted to do-- leave Elleia with him or take her back.

Ted Gesing

Mike still wonders about all of this-- every step. And when he does, he comes back to this weird balance where he believes he did the right thing, but he can't exactly explain why it was right, even to himself.

Ted Gesing

On February 25th, Brett Tolman, the US Attorney for Utah, spoke to the press about the sentencing of the owners and staff of the adoption agency Focus on Children. Two years earlier, he had filed his indictment-- 135 counts involving 37 families. But in the end, owner Scott and Karen Banks pled guilty to much reduced charges. They admitted to some false statements made in the adoption paperwork but not a lot more. They didn't admit to intentional deception or fraud. The judge required them to pay into a fund for counseling for some of the children and to help the US and Samoan families keep in touch, although the court isn't forcing the US families to initiate contact. Most important, the judge banned Scott and Karen Banks and all their employees from the adoption business for life.

International adoption fraud cases like this have almost never made it into US courts. There's only been one other instance so far. So adoption advocates all over the country were watching closely. And when they heard the plea deal-- no jail time, not even probation-- they were outraged. Tolman knew this and wearily explained why the case ended as it did. He clearly had struggled-- just like Mike Nyberg-- to make sense of the whole thing.

Ted Gesing

What that meant in practice was that Tolman and his team didn't want to drag the adoptive families through a trial, which many of the families feared could attract too much attention from the Samoan government or immigration and customs-- anyone who might question their right to keep their adopted children. There could still be civil suits. A custody fight. At least one Samoan father is actively trying to get his child back, but that's unusual.

Prosecutors say that most of the Samoan families are not seeking their children's return. In interviews, they told investigators they just wanted to make sure their kids were safe. They wanted to do what's best for them. And none of the other American families involved wanted to do what the Nybergs did-- return their children to Samoa.

As the prosecution team realized this, the meaning of justice in this case changed. Jonathan Lines handled the case for immigration and customs. He said a couple of his investigators were unusually disturbed by what they learned. As parents, they couldn't quite draw enough distance. And by now, neither Lines nor anyone else is prepared to argue that the kids should be returned to Samoa.

Ted Gesing

As for the other families in this case, most of them say they wish Mike had never gone to the feds at all, that there'd never been an indictment. They've been angry with Mike and they thought he was crazy to give back his daughter.

Rod Young was one of three parents who spoke at the sentencing. He testified in defense of Focus on Children, who brought him his son, [? Tawni. ?] Rod loves [? Tawni ?] so much he gets choked up just talking about him. And he makes the same argument the Bankses themselves made in their own defense. They did so much good in adoptions worldwide. They brought so much aid to poor communities. Plus, these kids are better off here. And if the Bankses cut a few corners in their business, that's only a tiny part of the whole picture. I spoke to Rod Young right after the sentencing.

Ted Gesing

Mike Nyberg can understand why other parents haven't done what he did. He gets that his extraordinary decision might never be repeated by other families.

Ted Gesing

Since February 2007, when Mike and Kari said goodbye to Elleia at the airport, Mike has gone back to Samoa once for a visit. He brought his two sons so they could really see where she was. Mike said they never understood it before just looking at the globe, at a tiny dot in the middle of the Pacific Ocean. Mike's dream is to one day have enough money to bring Elleia over here for extended visits every year or two. And in Samoa, not too long after Elleia's return, one of her older sisters had a baby boy. She named him Mike. A few months after that, another sister gave birth to another boy. They named this one Nyberg.

Ira Glass

Ted Gesing is a TV documentary producer.

Ira Glass

I'm Ira Glass, back next week with more stories of this American life.