In recent weeks, the public discourse surrounding the foreclosure crisis has shifted away from Wall Street and the lending industry’s bad acts, focusing instead on homeowners’ supposed “windfalls” as they stop paying their mortgages sometimes for months or years. Presenting the foreclosure crisis through such a distorted lens is a disservice to all homeowners. It creates artificially sharp divisions between those who are paying and those who aren’t, ignores the extraordinary hardships that caused so many homeowners to fall behind, and perhaps most importantly, deflects attention away from the financial institutions that not only bear significant responsibility for creating the mess in the first place, but also possess the greatest ability fix it. Interestingly, nobody seems to talk about one of the reasons many homeowners in foreclosure aren’t paying – their banks won’t take their money.
In today’s blog entry, we feature three Legal Aid foreclosure clients whose ultimate goals and requests to their lenders were simple: let me pay so I can stay in my home. In each case, it was the lender who created a barrier to payment and resolution – and only with extreme homeowner persistence, combined with significant advocacy and escalation efforts, did each homeowner ultimately prevail. Each of the clients’ names below has been changed to protect their identity.
1. Bank insists on dealing with deceased borrower
Ms. Burns lost a major income source, causing her to fall behind on her mortgage. When she attempted to start making payments again a few months later, the bank sent the money back and informed her that it was moving forward with foreclosure. A housing counselor tried to help Ms. Burns, but was blocked by the bank, which refused to speak with the counselor or Ms. Burns about the loan. According to the bank, the only person with whom it could discuss the loan was Ms. Burns's deceased husband, who had passed away ten years before. The bank maintained its position even though Ms. Burns was the sole owner of the property and the bank had been taking her mortgage payments for a decade. Upon taking the case, Legal Aid escalated the issue to bank supervisors, complained to local and federal regulatory authorities, and raised the issue with the bank’s foreclosure attorney. The bank finally relented by allowing Ms. Burns to apply for a loan modification on behalf of her late husband’s estate. She successfully completed a trial modification plan, obtained a permanent modification of her mortgage, and is now current with her payments and stable in her home. (Case start to finish time: 12 months.)
2. Send it again
Ms. Taylor, an elderly schoolteacher who had lost work hours due to medical disabilities, sought hardship assistance from her bank, and with Legal Aid’s help, was ultimately able to qualify for a permanent loan modification. Her interest rate was reduced and she made her new mortgage payments on time each month. However, as the months went by, Ms. Taylor continued to receive correspondence from the bank indicating that she was still in default and at risk of foreclosure. For the first few months, the bank insisted that Ms. Taylor merely needed to continue waiting until its computer systems were updated to reflect the terms of the modification. However, four months after Ms. Taylor signed the permanent modification agreement, a bank representative informed her that there had been a problem with the modification documents and she must go through the entire process again. Legal Aid escalated the issue and demanded more information regarding the problematic documentation. The bank eventually revealed that the modification documents were illegible – not due to any fault of Ms. Taylor, who had signed the bank’s documents and sent back the originals as required, but rather due to the bank’s illegible scanning of the documents and failure to retain the originals. Legal Aid immediately provided the bank with a clear, duplicate copy, and the bank proceeded to finalize the modification that had previously come so close to falling apart. How smoothly this process would have worked without the benefit of counsel is anyone’s guess. (Case start to finish time: 13 months.)
3. Just tell me how much to pay
Mr. Diaz came to Legal Aid with an imminent foreclosure sale of his home, which threatened to leave him and seven of his family members homeless. The total remaining balance on the mortgage was relatively low, but with a sale date drawing near the bank would only accept payment of the full amount owed on the loan plus interest, fees and costs. Mr. Diaz did not have the money the bank was demanding at that time. Legal Aid investigated and questioned the bank’s authority to foreclose on the home, ultimately resulting in cancellation of the sale. Months later, Mr. Diaz’s financial situation changed such that he could pay off the entire remaining balance on the mortgage. He desperately wanted to do so, so that he would never have to face a potential foreclosure again. However, the bank then stated it was unable to tell Mr. Diaz how much to pay because he was not the named borrower on the mortgage, even though he owned the home and had been making the mortgage payments for years. Mr. Diaz explained that the named borrower on the loan had gone missing years ago, that it would be impossible to locate him, and that all he wanted to do was pay the bank the entire remaining balance on the loan. The bank would not budge. Only after several months and significant escalations by Legal Aid did the bank ultimately relent and agree to provide the payoff figure. Mr. Diaz promptly paid his entire remaining balance and now owns his home free and clear of any mortgages. (Case start to finish time: 15 months.)
Legal Aid congratulates these clients on their persistence and thanks them for helping to share a much different perspective on the foreclosure crisis.