About 18 months ago, a letter came from a New York law firm inviting me to participate in a class-action lawsuit. The case involved a mortgage company that had gone broke during the big housing bust of 2007.
There were a number of reasons why the real estate market crashed. One was that some powerful members of Congress were insisting banks and loan companies provide home mortgages to those who really couldn’t afford them. Another was a popular financing scheme — sarcastically known as NINJA loans (no income, job or assets).
During the “boom,” everyone wanted part of this moneymaking action. Loan companies began to appear out of nowhere. They filled small offices in suburban strip malls across the country. Once the momentum was underway, becoming a homeowner was as simple as signing a loan application.
I wanted my piece of the pie by investing in a home loan mortgage company. It was not a fly-by-night outfit, but one with a reputable name on Wall Street that was traded on the New York Stock Exchange.
However, staying ethical for these guys was apparently just too much. No doubt they looked around and saw their competitors making money hand-over-fist with NINJA loans. It was an irresistible temptation.
When the crash finally came, it hit hard. Millions of homes were in foreclosure. As most remember, Stockton was reported to be the worst in the country for these unprecedented financial failures.
The company in which I had invested lost hundreds of millions of dollars. Their stock went from $24 per share to just a few pennies and was delisted from the Exchange — hence, the reason for the class-action litigation.
“Why not participate in the suit?” I thought. If I could recover a fraction of my losses, it would be worth the effort.
Of course, the law firm’s agent didn’t make it easy. You see, the more victims who join as claimants, the less assets of the bankrupt company are left to split “fairly,” as determined by a court.
First of all, I had to “prove” that I owned the stock during the period of unscrupulous activity. That meant going through old records from years past and making copies of these statements.
Next, I had to fill out a four-page form — duplicating some of the copied information, along with my standing as a claimant in the suit. I also had to sign a disclosure stating my participation barred me from pursuing any claim as an individual against the bankrupt loan company.
Finally, I rechecked everything to make sure all the paperwork was in order. The legal-sized envelope was sealed, taken to the post office and sent by certified mail. Two weeks later, I got a form letter confirming my claim had been received.
Months went by, and I heard nothing. When a year had passed, I’d actually forgotten about the whole issue.
Then last week, I was sifting through the mail. There, among the bills and pizza coupons, was what appeared to be a check. The return address was “Litigation Settlement Fund.” My ship had come in — or so it seemed.
I didn’t open the letter at the post office. Instead, I headed home — dreaming of what my settlement share would buy: Perhaps dinner for two at a fine restaurant? How about a weekend in Carmel? Maybe a trip to Disneyland?
I sat at the breakfast table and cut open the correspondence with a kitchen knife. Suddenly, my mind went blank. I couldn’t believe what my eyes were telling me. There was an official cashier’s check in the full amount of $2.23!
Two dollars and twenty-three cents? This was all that remained of my few thousand-dollar investment? Well, I’m sure the law firm handling the case had no problem taking the first cut, which probably amounted to several million.
I had just completed another lesson in life. As a result, I’ll think twice the next time I receive an unsolicited letter to join a class action suit.
After filling out the paperwork and waiting more than a year for a “proportionate share,” the final settlement didn’t even pay my postage!
Steve Hansen is a Lodi writer.