All Joanne Keeley wanted to do was help her grandson buy a used car, but she ended up with an expensive mortgage she couldn't afford.
Walter Sellers, who arranged financing for the car, was moonlighting as a mortgage salesman and dangled a $1,220 monthly payment in front of her until the night before closing last May, she said, when he told her it would really be $1,790.
"He floored me," she said. It got even worse the next day at closing, when she learned that the $1,790 payment did not include taxes and insurance, which amount to $310 a month.
"I guess if it had been $1,790, I wouldn't have" applied for the loan, Keeley said recently at her dining room table in Aston, Delaware County, with her 6-year-old granddaughter at her side.
Sellers, who said he could not remember Keeley, declined to comment on her situation.
Keeley, 61, a widow who works part time as a supermarket cashier and collects her husband's Social Security, has fallen three months behind on her payments and figures she has to sell the house she has lived in since 1978.
Her ordeal offers a "window into the kinds of transactions that are bringing down the American financial system and the American homeowner," said Irv Ackelsberg, a lawyer with Langer, Grogan & Diver P.C., in Center City and an expert in subprime and predatory lending.
Global credit losses from the U.S. mortgage debacle and related financial turmoil will reach $1.2 trillion, the Goldman Sachs Group Inc. estimated last week.
While the Federal Reserve is taking unprecedented steps to prop up Wall Street, new state and federal laws and regulations are in the works to crack down on business practices that got Keeley and millions of other borrowers into trouble.
For example, the Federal Reserve and the Pennsylvania Department of Banking have proposed regulations that would ban mortgages, like Keeley's, that are made without a formal effort to verify the applicant's income or assets.
"We think that's wrong," said Pennsylvania Banking Secretary Steven Kaplan. "We think it makes the entire transaction less than careful, less than serious, less than professional, and I don't think that's the way things should be done in Pennsylvania."
Another proposed Pennsylvania regulation would require lenders to give borrowers "timely" notice of changes in the loan terms - not the night before closing or at the settlement table.
Legislation passed the Pennsylvania Senate this month that would require anyone who sells mortgages to be licensed. Now, only the company, such as Money Warehouse in Southampton, Bucks County, the one Sellers worked for, needs to be licensed as a mortgage broker.
Similar legislation has been proposed in New Jersey, said E. Robert Levy, executive director of both the New Jersey Association of Mortgage Brokers and the Mortgage Bankers Association of New Jersey.
It all comes too late to help Keeley with her mortgage, which Money Warehouse placed with Indymac Bancorp Inc.
The Pasadena, Calif., lender, which calls itself the second-largest U.S. home lender, behind Countrywide Financial Corp., said it could not comment on a borrower's specific situation without her written consent.
"Our strong desire is to work with our customers to help them choose the loan product that is best for them . . . and we would hope those mortgage brokers selling our products do so as well," said Grove Nichols, executive vice president for corporate communications at Indymac.
Indymac sent Keeley a good-faith estimate dated May 17 showing a monthly payment of $1,790, far more than the $1,220 she had applied for. She said Sellers told her not to worry, that he had sent the application to more than one lender and could still get her the lower amount.
"I trusted this man so much. He seemed like my friend," Keeley said of Sellers, recalling how he sat at her dining room table last April to gather information for the application.
Money Warehouse officials said they could not comment on a specific customer. However, company president Yuri Volin said in an e-mail that it was the lender's responsibility to disclose the terms of a loan. He did not comment on Keeley's accusation that Sellers told her he could get her a lower payment even after Indymac told her the loan would cost $1,790 a month.
Sellers, visited this month at the auto dealership where he connected with Keeley, said he worked for Money Warehouse on a freelance basis and did not remember Keeley.
His name is on a letter to Keeley from Money Warehouse and on her application, which was completed after Keeley's visit to the auto dealership for her grandson. Sellers referred questions to Money Warehouse. The firm has 12 offices in five states, according to its Web site.
The loan brought in about $6,500 in fees to Money Warehouse, including $1,487.50 from Indymac for getting Keeley to agree to an interest rate higher than the lender would have been willing to charge. It's not clear from the documents how much Sellers was paid.
One of the bad things about Keeley's loan is that the $1,790 monthly principal and interest payment for the first five years is $82 less than required to pay off the $238,000 loan in 30 years, leaving her with a massive balloon payment.
Keeley started down the "bad road" of refinancing in 2002, when her husband died and left her with two mortgages. She refinanced with Ameriquest Mortgage Co. and New Century Financial Corp., which was the first major subprime lender to implode last year, before the application landed at Indymac. "If I didn't panic, I probably would have had my house paid for."
When Keeley went to the car dealership last March, she was just a week away from closing on a refinancing through a mortgage broker in Westmont, Camden County. The monthly payment on that deal was supposed to be $1,600 a month with taxes and insurance included, she said.
When she told the salesman in New Jersey that she was going with a different company because she got a better deal, he warned her, she said, that the rug would be pulled out from under her the night before settlement.
That it happened did not surprise Ackelsberg, the Philadelphia lawyer, who looked at some of Keeley's loan documents, but did not see those from which he could determine whether any laws had been broken.
"People who are in the business of bait-and-switch marketing know what they are doing," Ackelsberg said. "They wait to change the terms until the transaction has progressed to a point where they know that it will be nearly impossible, psychologically, for the consumer to say no."
Ackelsberg and other experts said consumers tended to have high expectations of mortgage salespeople because they think of themselves as qualifying for a loan rather than buying one.
"If you walk through the doors of ABC Bank and there's somebody sitting behind a desk and you go talk to them to get a loan, you know that they are working for ABC Bank," Sandra Braunstein, director of the division of consumer and community affairs at the Federal Reserve, said in an interview published on the Web site of the Federal Reserve Bank of Philadelphia.
"But when the broker comes to your house and has coffee with you and sits and talks, you don't necessarily realize they are not working for you."
Now Keeley knows. "There's a word right here," she said, rubbing a finger across her forehead. "Sucker."
The worst part for Keeley seems to be the thought of no longer being able to provide a home for her four grandchildren who live with her. "I never thought," she said, "I'd be selling the house at this age."