Case Study: Disappearing Money
When the Mortgage Is Paid but the Money Vanishes
Last month I wrote about the two kinds of defendants: those who think they must have done something wrong if they’re on the receiving end of a lawsuit, and those who will swear until the day they die that they did nothing wrong whatsoever. This effect is even more pronounced in foreclosure lawsuits, where a bank is trying to take someone’s home. Typically, foreclosure defendants actually did default on the mortgage, but only because of circumstances largely outside their control. Frequently, foreclosure defendants are only in default because the mortgage company promised them a mortgage modification if they were at least three months behind—a promise which is almost never kept by the bank, causing trusting homeowners to unwittingly leave themselves open to a foreclosure suit. Unfortunately, foreclosure law tends to favor the banks, even in situations like this where a servicer dupes its customer into voluntarily defaulting in the hopes of receiving a magical modification that never comes. It’s very sad that banks are allowed to get away with this on a regular basis.
Recently, I had the privilege of representing a very nice, hardworking woman in her foreclosure action. This woman was the second type of foreclosure defendant—the kind who said she did nothing wrong—and with good reason. When she came to our firm with pre-foreclosure letters from the servicer saying she was in default, she also brought with her copies of her bank statements that showed when she made each and every mortgage payment. Why was the servicer telling her she was in default when she had made all the payments?
In the hopes of avoid an unnecessary lawsuit, I sent a letter to the servicer informing it of the situation, and providing all the statements showing timely payments. I asked the servicer to review this documentation and fix whatever internal problem was causing it to show my client as being behind on payments. The response I got was the generic “we’ll look into it” letter.
Well, clearly the servicer did not look into it—at least, not well enough—because within a few weeks my client was served with a foreclosure lawsuit. The suit alleged that my client was behind on a certain payment, which baffled me since I actually had her bank statement from that month showing that she had made the payment. In a second attempt to avoid litigating a lawsuit unnecessarily, I sent an email to the foreclosure plaintiff’s attorney, once again explaining that a mistake had been made that needed to be remedied immediately. I received no response. What professional courtesy!
When Lawsuits Become Necessary
Having twice attempted to resolve the situation to no avail, I filed defenses on behalf of my client, and a filed a separate federal action against the servicer for violating the Fair Debt Collection Practices Act (FDCPA). Then, magically, someone decided to reach out to me to discuss the matter—but that someone still maintained that the servicer was right and had done nothing wrong. For months, the attorney for the servicer fought me, told me my client was delusional and that she should dismiss her case, and did everything he could to stonewall my attempts to get information to prove my client’s case.
However, eventually, the other shoe fell for the servicer and its attorney. While they were thoroughly uncooperative, my client had actually kept a lot of documents that others would have thrown away and not given a second thought. In sifting through my client’s documents, I found a ledger from the servicer which showed that it had inexplicably reversed several of my client’s monthly payments without justification. The result was that those payments mysteriously disappeared from the account, improperly showing my client to be “behind” by several months, despite the fact that she made all such payments. “Huzzah!” I exclaimed, and immediately relayed this information to the servicer’s attorney. I really had to fight the urge to end that e-mail with “I told you so!”
Another Success for the Client
Needless to say, the cases settled soon thereafter, and as a result for its hubris, the servicer paid a pretty penny. My client kept her house and pocketed enough money to make her mortgage payment for a few months, and the servicer had to pay all of the attorneys’ fees she incurred in fighting for almost a year. That’s what I call a win!