Ricky Rought paid cash to the Deutsche Bank National Trust Company for a four-room cabin in Michigan with the intention of fixing it up for his daughter. Instead, the bank tried to foreclose on the property and the locks were changed, court records show.
Sonya Robison is facing a foreclosure suit in Colorado after the company handling her mortgage encouraged her to skip a payment, she says, to square up for mistakenly changing the locks on her home, too.
Thomas and Charlotte Sexton, of Kentucky, were successfully foreclosed upon by a mortgage trust that, according to court records, does not exist.
As lenders have reviewed tens of thousands of mortgages for errors in recent weeks, more and more homeowners are stepping forward to say that they were victims of bank mistakes — and in many cases, demanding legal recourse.
Some homeowners say the banks tried to foreclose on a house that did not even have a mortgage. Others say they believed they were negotiating with the bank in good faith. Still others say that even though they are delinquent on their mortgage payments, they deserve the right to due process before being evicted.
Some consumer lawyers say they are now swamped with homeowners saying they have been wronged by slipshod bank practices and want to fight to keep their homes. Joseph deMello, a Massachusetts lawyer who represents Mr. Rought, said the common denominator in many of the cases was an overwhelmed system of foreclosures in which banks relied on subcontractors to do much of the work.
“No one double-checks anything,” he said. “It’s completely high volume and that’s unfortunately what leads to this.”
It may never be known how many homeowners have legitimate claims against the banks, real estate and banking experts say, because lenders do not release such data and because the vast majority of cases never make it to court.
For the last month or so, some of the nation’s largest banks have temporarily halted foreclosures in some states amid accusations that the paperwork used as evidence to oust homeowners was incomplete or signed off by so-called robo-signers who did little to check its veracity.
Even if the paperwork was faulty, the fact remains that most homeowners in foreclosure have not paid their bills, often because they bought more house than they could afford or because they lost their jobs. As a result, they will most likely lose their homes eventually, once the banks clean up their paperwork and resolve any outstanding legal issues.
“We believe that the overwhelming majority of the cases will be that the loan was seriously delinquent and needed to go to foreclosure,” said Paul Leonard, vice president for government affairs of the housing policy council at the Financial Services Roundtable, an advocacy group for the nation’s largest financial institutions.
Consumer lawyers and housing experts acknowledge that it is relatively rare that a bank initiates foreclosure on a homeowner who is current on the mortgage or has no mortgage at all. More common, they say, are instances where homeowners have applied for mortgage modifications but get foreclosed upon anyway.
In a report to Congress released this week, a federal inspector general described the government-sponsored modification program, known as the Home Affordability Modification Program, as deeply flawed.
While about 467,000 mortgages had received permanent modifications under the program, an estimated 3.5 million homes will receive foreclosure notices this year, an increase of 26 percent over 2009, the report says.
“You have this promise of relief for borrowers but actually getting that relief is like a zigzag line from point A to point B,” said Jose Vasquez, a lawyer for Colorado Legal Services.
Ms. Robison’s case is a variation on the theme. When she returned home to Yoder, Colo., outside Colorado Springs, from a holiday trip in December 2008, she found the locks changed and her electricity, gas and water heater shut off. A sign on the door advised her to contact Safeguard Properties, a company hired by the mortgage servicer, Litton Loan Servicing.
“We are trying to be patient and settle this peaceably."
The notice came as a shock to Ms. Robison, a single mother of three who is now 36. She had renegotiated her mortgage just months before and was current on her payments. When she finally got back into her house, the food in the refrigerator was rotten and her lawn mower and air compressor had been taken.
When she called Litton, an employee admitted that the company had made a mistake in changing the locks, according to court documents. In order to reimburse her for her losses, Ms. Robison said, the employee told her he would “work something out” regarding her January mortgage payment, so she did not make it, court records show.
But when Ms. Robison paid her February and March mortgage payments, they were returned. And in March, Deutsche Bank initiated foreclosure proceedings. “I’ve been wanting to pay them the whole time, but they basically stopped taking my payments,” she said.
Deutsche has asserted its right to Ms. Robison’s house under a document that is meant to assign ownership of a mortgage note, known as an allonge. But Ms. Robison’s lawyer, Stephen Brunette, says Deutsche Bank is not named in the allonge that the bank submitted during court proceedings and does not appear on any other documents relating to her home.
Both Deutsche Bank and Litton Loan Servicing declined to comment about the case. A Deutsche Bank spokesman noted that the mortgage servicer, not the trustee, is usually responsible for handling foreclosures.
In Michigan, Mr. Rought says that the bank went after the wrong person.
Mr. Rought bought the cabin from Deutsche Bank on Jan. 27, 2009, paying in cash. He spent the next seven months fixing it up in anticipation that his daughter, Hannah, “would live in the house and be away from her parents for the first time in her young life,” court records show.
But in August of that year, when the Roughts pulled into the driveway, they noticed that something was wrong. The American flag was missing, the house had been broken into and the locks had been changed.
The Roughts’ belongings were gone too, including an heirloom dining room table, pots and pans, a pile of firewood — even the bracket used to hang the American flag. A contractor for Deutsche Bank, Field Asset Services, left a sign tacked to the front door, so the Roughts contacted them and said a mistake had been made.
A month later, however, Deutsche Bank’s representatives came to winterize the house, pouring antifreeze in the sinks and toilets and disconnecting the water pump. “We had expected an answer by now and quite frankly am appalled by the total lack of respect and professionalism of your company,” Mr. Rought wrote in a Dec. 1, 2009, letter to Field Asset Services. “We are trying to be patient and settle this peaceably. What would you do?”
Eventually, Mr. Rought hired a lawyer. Deutsche Bank declined to comment, and Field Asset Services did not return calls seeking comment.
Charlotte and Thomas Sexton, of Carlisle, Ky., fell behind on their mortgage payments because the payments on their adjustable-rate mortgage spiked upwards and Ms. Sexton lost her job.
They tried unsuccessfully to sell the home, to refinance it and to modify their mortgage payment. When the Bank of New York Mellon filed a foreclosure notice last summer, they went to a local lawyer, Brian Canupp, who, with the help of a forensic accountant, found a problem in the foreclosure filing.
Last month, a judge tossed out a foreclosure judgment after Mr. Canupp argued that the mortgage trust that claimed to own the Sextons’ promissory note —Mortgage Pass-Through Certificates Series 2002-HE2 — did not exist.
Instead, another trust, called IXIS Real Estate Capital Trust, Series 2005-HE2, claimed to own the Sextons’ note, court records show.
Ms. Sexton said that regardless of who owns her promissory note, she just wants to stay in her home and hopes that the bank will eventually agree to a loan modification.
“We found a mistake,” she said, “that gave us a light at the end of the tunnel.”