For nearly a decade, Beth Jacobson lived inside the vast machinery of subprime mortgages that shook the nation’s economy.
In sworn court testimony, she described watching loan officers comb through heavily African American areas such as Baltimore and Prince George’s County, forging relationships with churches and community groups to sell their members shoddy mortgages. She says she processed loans for homeowners with sterling credit ratings with higher interest rates than they needed to pay. And she says she pumped out millions of dollars in mortgages to people with no paperwork and low incomes, becoming Wells Fargo’s top-producing loan officer.
The rise and fall of subprime loans and foreclosures.
The machine made her rich — the questions came later. Now, she has recast herself as a crusader for consumers in a battle that has pitted her against the system she once pushed.
The 51-year-old Maryland resident has emerged as a defining character in the ongoing saga of the country’s housing crisis, from the headiest days of the bubble to the current flood of foreclosures. Her scathing affidavit detailing “the stagecoach to hell” at Wells Fargo is a key part of the groundbreaking lawsuit filed by the city of Baltimore against her former employer. The case spawned copycats across the nation, and federal regulators launched investigations mirroring its allegations.
The company flatly denies any wrongdoing, especially when it comes to Jacobson’s claims. It calls her testimony misleading at best and, at worst, outright lies.
The consequences are still unraveling. Wells Fargo is under investigation by the Justice Department over alleged fair-lending violations, and it has spent millions of dollars to put similar charges to rest.
Jacobson has faced her own fallout. Her income plummeted after she left Wells Fargo five years ago, and creditors are knocking. A vacation home and an investment property she bought at the height of the market were both foreclosed on. She and her husband divorced last year.
Yet she has placed herself back inside the machine. Her new business focuses on homeowners navigating complicated loan modifications and examines mortgage documents for fraud. She has used an obscure clause in the federal financial regulatory overhaul to help her clients win thousands of dollars from their mortgage companies. She tracks auction notices and pursues strangers on Facebook to tell them to fight their banks.
Jacobson’s journey through the housing boom and bust mirrors the country’s own struggle for recovery — a messy, complicated affair in which blame is plentiful but redemption is hard to find.
“The whole system’s crazy,” she said.
Get people approved
Jacobson had never heard of a subprime loan when she joined Wells Fargo in 1998.
Wall Street had just figured out how to generate enormous pools of money that could be used to extend these mortgages to people with low incomes or poor credit. Many of them were minorities who traditionally had been unable to qualify for a loan. The trade-off was that they paid higher interest rates and often accepted adjustable terms.