N.H. state and federal courts see a big increase in the number of suits challenging foreclosures
A Swanzey woman claims a mortgage originator deliberately lied about her income in order to push through a refinancing, and then the bank pressured her husband -- suffering from dementia -- to sign on to the mortgage to make it easier to foreclose on the property.
A Wolfeboro borrower claims that he wanted to pay off the note in full, but couldn't get a straight accounting from the bank. Indeed, the bank even cited the wrong date, book and page number and parties when recording the mortgage assignment.
Another borrower claims he was told by a bank to stop paying the mortgage on his Jackson home in order to qualify for a modification program, and then he was given the runaround when he tried to get on the program, and then the bank filed for foreclosure, telling him it was too late to be eligible.
Whether any of these claims is true is up to courts to decide. But these are the kinds of complaints against major banks being made in the state, and now federal, courts as a small but growing number of homeowners begin to challenge foreclosures.
In 2011, about 210 homeowners -- or 5.5 percent of the 3,863 foreclosure deeds filed in New Hampshire that year -- sued their mortgage company, almost triple the 75 (2.1 percent) that filed suit in 2008. This year, if the pace keeps up, about 240 will be filed.
"Banks' actions are egregious, and more and more people are doing something about it," said Jeremey A. Miller, a Concord attorney who specializes in defending homeowners from foreclosure.
But attorneys for the banks tell a different story.
"I’ve noticed an uptick in New Hampshire," said Paula-Lee Chambers, a Boston attorney who defends the banks against such actions. While "there are some real hardships, generally speaking, a lot of loan servicers bend over backwards to modify to keep people in their homes. They generally don’t want to foreclose on these properties."
Chambers and other bank attorneys -- frustrated by what they see as the slow-moving pace of the suits in staff-starved state courts -- are increasingly seeking to move the suits into the federal courts, which also have seen an increase in foreclosure challenges.
Nationally, 7,500 foreclosure cases were filed in federal court in 2011, compared to just over 2,000 four years earlier. In New Hampshire, only two were filed in both 2008 and 2009, and some 15 in 2011. If the pace through mid-May keeps up, about 35 will be end up being filed in federal court in 2012.
Nearly all of the mortgage companies, based out of state, have the right to move these cases to federal courts, and are increasingly doing so because they say the federal court bureaucracy moves much quicker.
"I’m sure it does," said Don Goodnow, the director of the New Hampshire Administrative Office of the Courts, which works with the state's courts. "It is better funded."
But Concord attorney Miller sees the move to federal courts as an attempt by mortgage companies to intimidate homeowners by moving their suit "to a big granite building in Concord."
In New Hampshire, the idea alone of homeowners taking their banks to any court is striking. That's because New Hampshire is one of the few states in the country where banks don’t need to go to court to take someone’s home in the first place. The Granite State, along with Tennessee and Michigan, are the only three states that allow "non-judicial only" foreclosures, according to the website RealtyTrac.
In New Hampshire, banks only have to give proper notice of a pending foreclosure, and if there is no response, can simply sell off the home at auction.
"You can go to court in order to stop it," said Ruth Hall, a Union attorney who represents homeowners, but because the action doesn’t start in court "a lot of people don’t know" that they can.
New Hampshire homeowners, however, are finding out they can as word gets out about more settlements and deals with banks and mortgage companies to settle charges that they took shortcuts when selling loans on the secondary market. One such $25 billion national settlement involving the nation's five biggest banks was announced in February by a group of attorneys general, including New Hampshire's attorney general, Michael Delaney, who said that the state should get $43.6 million out of the deal.
Under the deal, the state is supposed to receive $11 million for education and enforcement related to mortgage fraud and another $4.5 million to compensate eligible homeowners who already lost their homes -- money the state has yet to see.
The banks are supposed to use the rest of the money to lower interest rates or write off principal to help homeowners who are facing foreclosure or whose mortgages are underwater stay in their homes. But that relief has been slow in coming as well.
For instance, the AG's office publicized the five contact numbers the banks gave them for homeowners who want to take advantage of the mortgage relief program.
"They would call the number provided, and they would hear, 'What settlement?’ or that kind of nonsensical statement," said James T. Boffetti, senior assistant attorney general.
To be fair, he said, these are massive banks. Bank of America hired some 16,000 people to implement the settlement, and it takes a while to get it up to speed. And Wells Fargo (the most frequent target of federal suits locally and nationally) actually sent letters out reducing people’s interest rates.
But the state also has had some 1,500 calls to its foreclosure hotline, along with 400 written complaints since February, said Boffetti. That’s a lot of calls, considering that the AG's existing consumer hotline fields 4,000 calls the entire year.
Boffetti said there has been no enforcement action taken at this stage. The first thing is to get the banks to correct their errors and to let uncorrected patterns emerge before taking any actions. One of the biggest violations thus far is that the banks don’t seem willing, or are perhaps unable, to provide a single point of contact for homeowners.
That single contact is important, said Boffetti, because one of the most frequent complaints he hears is that "people have been getting bounced around. (The banks) have to adjust the way they do things, and I’m not sure they are close to doing that. Frankly, it looks like they are struggling to get up to speed."
'Incompetence beyond belief'
Whatever the cause for the delays, the result is frustration and often the loss of a home.
Concord attorney Miller cited the $25 billion settlement in a recent case filed in April in Belknap County Superior Court on behalf of William Finer against Wells Fargo Bank.
In that filing (which has since moved to federal court), Miller said he tried to contact the bank to forestall the foreclosure, so Finer could take advantage of the program to save his Meredith home, but was told the bank couldn’t speak to him until he got authorization to do. By the time that happened, the bank allegedly told him he was too close to the foreclosure sale to prevent it.
This "not only flies in the face of the highly publicized foreclosure settlement" but was also a "blatant breach" of good faith, Miller wrote.
Doug Leoni -- another Miller client -- said he got a similar runaround from Bank of America in trying to get into the Home Affordable Modification Program (HAMP) in which BofA agreed to participate when it accepted $45 billion of federal money as part of the Troubled Asset Relief Program, or TARP.
"The incompetence was beyond belief," said Leoni. "They have more bodies to answer the phones so they can dismiss you."
Leoni -- who got into financial trouble with his business shortly after purchasing his home -- said that a BofA representative told him he needed to stop making payments in order to be delinquent enough to be eligible for a modification. But once he was eligible, it took months before he could get an answer from the bank, and that answer was that he needed more documentation. When he sent the documentation in, "They said I didn’t do it in the time required."
The banks, he said, "don’t have to play by the rules and we do."
Beyond the well-documented "robosigning" and a raft of technical problems with banks' mortgage origination paperwork, there's another reason for banks facing suits over foreclosures, said Miller: "They are giving people loans they have no business giving," he said.
This is what allegedly happened to Ed and Marilyn Lehane, according to a complaint filed by Joseph Hoppock, a Keene attorney, against Wachovia Mortgage, a division of Wells Fargo, and the loan originator Bridgeview Mortgage.
In 2008, the couple, or more accurately Marilyn Lehane, refinanced their Swanzey home, where they lived for more than two decades. They were told they had to throw in some Westmoreland land as extra security. This increased the size of their mortgage by $63,000, to $183,000, and upped their monthly payments by about almost $90 a month.
The loan was only issued to Marilyn because Edward had credit problems, the complaint said. However, Bridgeview included the income of Edward and the couple's son in approving the loan and then sold it to Wachovia.
Bridgeview "purposefully" misrepresented the income, and "Wachovia accepted this information knowing it was false (or should have known it was false)" according to the complaint.
Then, in November 2011, an attorney handling the matter for Wachovia wanted to correct the "error" of having only one name on the mortgage and two on the deeds. The attorney allegedly threatened to sue Edward if he didn’t sign the loan.
Edward Lehane -- who at this time was suffering from dementia -- signed the mortgage, allowing Wachovia to institute foreclosure proceedings, the lawsuit alleges.
At other times, plaintiffs do use the argument that a mortgage is simply not valid because the assignment is improper. That’s the argument of Sintario Asano in contesting the 2004 mortgage of a Wolfeboro property on behalf of the Belinda Asano revocable trust.
Ameriquest -- a company notorious for predatory lending practices that has since gone under -- transferred the $305,000 mortgage to another firm, City Residential. But the recording assignment date, the book and page number and even the transfer of the parties (from Deutsche Bank to Saxon Mortgage instead of from Ameriquest to Citi Residential) were all wrong.
Asano is using the false information to try to stop the foreclosure, but he claims he’d like to stop it by paying off the mortgage in full.
"This is not a case where an impoverished borrower is improperly trying to stay in a home that said borrower cannot afford," says the complaint. "Instead, this is a case where the borrower has ample resources but through oversight failed to make timely payments."
Boston attorney Chambers, who is representing Deutsche Bank National Trust Company as the current trustee for the mortgage, won’t comment on any particular case. But she did emphasize that in general, a flaw in assignment is not enough to stop a foreclosure.
At least that is the opinion of the New Hampshire Supreme Court. The ruling came in February in Dow v. Bank of New York Mellon Trust Company. In that opinion, the court ruled that improper documentation doesn’t mean that a borrower is off the hook.
"That would leave the lender with an unsecured debt," wrote the court. "That would clearly be an inequitable result that is inconsistent with the intention of the plaintiff and the lender at the time of the original loan."
The court added that if it ruled otherwise, it would "cause a severe disruption in the real estate market by creating uncertainty regarding a mortgagee’s authority to foreclose" and would give the debtor a "windfall" that would not be "consistent with the concepts of equity and justice."
In other words, summed up Chambers, "even if there is a question of who presently holds the mortgage, the loan still needs to be paid."