Senators hold hearing on Pennsylvania mortgage scam

By PETER JACKSON

(AP)

Pennsylvania's U.S. senators heard testimony Monday from representatives of mortgage banks and victims of a scam that left more than 800 central Pennsylvania homeowners on the hook for millions of dollars more than they thought they owed.

Sens. Arlen Specter, R-Pa., and Bob Casey, D-Pa., characterized the hearing as a listening session intended to encourage communication between the homeowners and their banks. U.S. Rep. Tim Holden, D-Pa., also helped preside over the hearing.

"Our key point is to keep people in their homes and to give them reassurance that they're not going to be evicted, there's not going to be foreclosures, and there's going to be every effort to be made to do more," Specter said following the two-hour session.

About 300 people, most of them affected homeowners, attended the hearing on the campus of Penn State-Harrisburg.

The owner of six now-defunct Reading businesses _ including the mortgage firms Personal Financial Management and Image Masters Inc. _ has pleaded guilty in federal court to mail fraud in the case.

Wesley A. Snyder., 71, faces as much as 30 years in prison for his role in what federal prosecutors described as a Ponzi scheme in which the homeowners and 31 investors were defrauded out of more than $29 million over nearly two decades.

The bulk of the losses involved homeowners who obtained "wraparound" or "equity slide-down" mortgages in which they borrowed more than they needed to finance or refinance mortgages, then gave the difference to Snyder's firms to invest in return for a lower interest rate.

At the hearing, three homeowners who lost tens of thousands of dollars apiece described painful disruption in their family finances. Two complained of shabby treatment by their banks as they tried to sort out what was going on with their mortgages.

"We should never have been put through the rigamarole and the calls" from the bank, said Roger Hess, a postal worker from New Holland. "We didn't do this to ourselves."

"I cried a lot," said Michelle Weaver, of Lancaster, recalling the discovery that she and her husband were out $35,000. She said their children, aged 6 and 10, "understand that they're not going to get presents this Christmas."

Officials from six banks that hold about three-quarters of the 811 affected loans testified that they are complying with an order by a federal judge in Philadelphia requiring them to accept reduced mortgage payments and defer until at least Jan. 31 any foreclosure actions.

A spokesman for one bank said it has voluntarily extend those terms through May, while another said an extension was likely.

Casey challenged the bankers to "do more" and urged them to stay behind after the hearing and talk with individual homeowners.

"They're the people who are living with this _ not me and not you," he said, drawing applause.

Snyder, who filed for bankruptcy in September and remains free on a personal recognizance bond, is scheduled to be sentenced in March by U.S. District Judge Yvette Kane. His business practices continue to be scrutinized by several state and federal agencies.

Customers are pursuing a class-action against him and the lenders that provided the underlying financing. Prosecutors say Snyder already lost most of the money trying to prop up his businesses, and they have warned victims not to expect much in the way of restitution.

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