Article
Courtesy of The Orlando Sentinel By MICHELLE
CONLIN
Published
December 9, 2010
Christopher Marconi was in the shower when he
heard a loud banging on his door. By the time he grabbed a towel and hustled to
his front step, a U.S. marshal's sedan was peeling out of his driveway. Nailed
to Marconi's front door was a foreclosure summons from Wells
Fargo, naming him as a defendant. But the notice was for a house Marconi had
never seen — on a mortgage he never had.
Tom Williams was in his kitchen thumbing through the mail when he opened a
letter from GMAC. It informed him that the bank would confiscate his house
unless he immediately paid off his mortgage balance of $276,000. But Williams
had never missed a mortgage payment. And his loan wasn't due to mature until
2032.
Warren Nyerges opened his front door in Naples, Fla., to find a scraggly-haired
summons server standing on his stoop. He plopped a foreclosure notice from Bank
of America in Nyerges' hands. But Nyerges had paid for his house in cash. And
he'd never had a checking account, much less a mortgage, with Bank of America.
By now, you may have heard the stories of bank robo-signers powering through
hundreds of foreclosure affidavits a day without verifying a single fact. But
most of those involved homeowners who had stopped paying their mortgage. They
were genuine defaulters. Now a new species of homeowner is getting pushed into
foreclosure hell.
People have always loved to complain about their banks. The push-button circus
that passes for customer service. The larding on of fees. But the false
foreclosure cases are hardly the usual complaints. These homeowners paid their
mortgages — or loan modifications — on time. Some even paid off their loans.
Worse, those on the receiving end of a bad foreclosure claim tell similar
stories of getting bounced from one bank official to the next with no resolution
while the foreclosure process continues apace.
Many have to resort to paying a lawyer, even after presenting documentation.
They say they have to sue not only to stop the wrongful foreclosure but also to
attempt to win back their costs.
There are no official statistics for these homeowners, but lawyers, real estate
agents and consumer advocates say their ranks are growing. In November, during
foreclosure hearings on Capitol Hill, senator after senator scolded the banks
about wrongful foreclosures. They said their offices were deluged with
complaints from people who had done everything right but were being treated by
banks as if they had done everything wrong. And the Florida attorney general's
office is also investigating the issue as part of its foreclosure probe.
"This is the worst I've ever seen it," says Ira Rheingold, an attorney
and executive director of the National Association of Consumer Advocates. Diane
Thompson, a lawyer with the National Consumer Law Center, has defended hundreds
of foreclosure cases. "In virtually every case, I believe the homeowner was
not in default when you looked at the surrounding facts. It is a widespread
problem throughout the country."
Homeowners in Florida, Nevada, Texas and Pennsylvania have filed lawsuits
alleging that they were victims of mistaken foreclosure. In many of those cases,
the bank went so far as to haul away belongings and change the locks on the
wrong homes.
One such suit was filed in March by Pennsylvania homeowner Angela Iannelli. She
was up to date on her payments when, she says, she arrived home in October 2009
to find that Bank of America had ransacked her belongings, cut off her
utilities, poured anti-freeze down her drains, padlocked her doors and
confiscated Luke, her pet parrot of 10 years. It took her six weeks to get the
bank to clean up the house.
Iannelli's lawyer says the parties are in the process of "mutually
resolving the issues" and the lawsuit is "in the process of being
discontinued." Bank of America did not immediately respond to a request for
comment on her case.
But the incidents haven't stopped. Maria and Jose Perez of Seguin, Texas filed
suit in October after Bank of America sent them a notice that their house was
scheduled for a foreclosure sale Nov. 2. The couple say they are current on
their mortgage payment and they have no loan with Bank of America. A trial is
set for June 13.
Now the class actions are coming. In Kentucky and California, class-action
lawsuits have been filed against major lenders on behalf of homeowners in loan
modification programs who allege that they made all of their payments but got
foreclosed on anyway.
"It is mind-boggling that these large banks accepted billions and billions
of TARP money from the government, and they are just committing a fraud on the
American people," says Jack Gaitlin, who filed the Kentucky suit on Oct. 4.
He was referring to the 2008 government
bailout of the banks, the Troubled Asset Relief Program.
To understand the banks' back-office dysfunction, you have to travel back to the
credit bubble of the early 2000s. Rising home prices were turning real estate
into the new national casino. Lending standards evaporated. No job or down
payment necessary! Banks, meanwhile, stopped holding on to mortgage loans and
pooled them into securities that were sold to investors.
The banks charged fees for servicing the mortgages — tasks such as collecting
monthly payments. The banks slap on the biggest fees when a borrower can't make
payments and the bank forecloses. Says Rheingold, "They created a servicing
model where they made the most money by foreclosing on people as quickly and
cheaply as possible." When a foreclosed house is put back on the market and
sold, the proceeds are used to pay creditors, like mortgage servicers, first.
Now it's becoming clear just how chaotic the whole system became. Depositions
from employees working for the banks or their law firms depict a foreclosure
process in which it was standard practice for employees with virtually no
training to masquerade as vice presidents, sometimes signing documents on behalf
of as many as 15 different banks. Together, the banks and their law firms
created a quick-and-dirty foreclosure machine that was designed to rush through
foreclosures as fast as possible.
Former employees at banks and foreclosure law firms have testified that they
also knowingly pushed through foreclosures on the wrong people.
Tammie Lou Kapusta is a former paralegal with the law offices of David J. Stern,
a Florida firm that works for all the major banks and handles up to 70,000
foreclosure cases a year. Kapusta testified in September that she received as
many as 50 calls a day from homeowners who said they were the victims of
mistakes. But she was told, she testified, to ignore the callers and push
through the foreclosures anyway. The law firm is under investigation by the
Florida attorney general.
The banks say they are reviewing their mortgage and foreclosure procedures and
most of the people involved in foreclosure deals were behind on their payments.
As for people wrongly caught in the foreclosure net, they say they are reviewing
those cases, too.
But what emerges from court filings, depositions, and interviews is that once
the bank places you on its foreclosure assembly line, it becomes nearly
impossible to get off.
The minute Marconi ripped the foreclosure notice from the door of his house in
Garrison, N.Y., on Oct. 20, he saw he was named as a defendant along with a
woman who had run a red light and smashed into Marconi's car four years earlier.
Marconi had received a payment from her insurance company. It was her house, in
Rye, N.Y., that Wells Fargo was foreclosing on.
Marconi explained the bizarre mix-up to Wells Fargo's customer service
department, its ethics complaint department, its law firm and the office of the
chief executive officer, John Stumpf. Marconi says they all told him that they
could not help him and that he needed to get a lawyer.
Wells Fargo spokeswoman Vickee J. Adams says Marconi was named in the
foreclosure suit because he filed a judgment against the woman in the car
accident. It is common for lien holders to be mentioned in foreclosure
documents. But Marconi says the judgment against the woman was satisfied in
April 2009.
"Now I have to pay a $3,500 retainer for a lawyer to get my name pulled off
some lawsuit by Wells Fargo," Marconi says.
Equally puzzling is the case of Williams, the chief executive of a food
distribution business in Kansas City, Kan. Williams lives in a 3,000-square-foot
house with a luxurious patio and pool out back. Before his GMAC nightmare began,
he says his credit score was 794 out of 800. "I've never been any days late
on anything, ever," Williams says.
But when Williams, 52, tried to pay his $2,500 monthly mortgage payment online
on Aug. 5, he found out that GMAC had put a "stop" on his mortgage
account.
Since that day last August, Williams has found himself trapped in an alternative
banking world worthy of the Twilight Zone. The trouble couldn't come at a worse
time for Williams and his wife, Carol. She was in the process of buying the
upholstery business where she has worked for 10 years. Bank of America lowered
Carol's credit limit, citing "serious delinquency on other accounts."
And the couple's credit score is sinking by the day.
During the past four months, Williams says he has talked with 25 GMAC
representatives. He has twice contacted the offices of the CEO and the chief
financial officer. He has sent packages of paperwork documenting and verifying
his claims. And, he says, various GMAC employees have promised to straighten it
out immediately. All the while, GMAC has repeatedly refused to take his mortgage
payments, going so far as to mail them back to him. It is routine for banks to
refuse payments once they start foreclosure proceedings.
Finally, on Nov. 9, a GMAC employee who said she worked in the executive offices
contacted Williams and told him that an audit had revealed the bank had lost his
loan's paperwork. But she couldn't explain why the stop had been put on
Williams' account, why the bank was rejecting his payments or why the bank was
assessing him for late fees every month. She said she would send letters to his
credit agencies to correct the misinformation.
On Nov. 15, she sent Williams a package of documents for a loan modification and
stressed that it was urgent that Williams "immediately" sign and
return them, "prior to the Nov. 24 regulatory deadline." If Williams
didn't do so, the GMAC employee said in an e-mail, the loan modification
"would no longer be valid."
Williams emailed the woman with several concerns and questions about the
documents but he never heard back from her. He felt the only option he had left
was to hire a lawyer. "It's really a bite — and I can't tell you how it
chafes me — to have to pay hundreds of dollars an hour just to get to make my
house payment because the mortgage company can't find their loan
documentation," says Williams.
GMAC spokesman James Olecki says the bank is looking into Williams' situation.
Even those who have managed to clear up their misunderstanding say the fight was
a full-time job.
After going to court and serving as his own lawyer, Nyerges got Bank of America
to drop its foreclosure action. All along, he had been showing employees of Bank
of America a copy of the $165,000 cashier's check he used to pay for his house
in September 2009. "No one at Bank of America could wrap their brain around
this concept that I had no mortgage," he says. In September, the court
awarded Nyerges $2,500, plus 6 percent interest, for his costs.
Says Bank of America spokeswoman Jumana Bauwens, "This was an unfortunate
error that was corrected when it was brought to our attention."
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