Trying ordeal shows system’s weaknesses
Atlanta Journal ConstitutionBotched transfer leads to nightmare for owner. State lacks judicial review, but some say there are other remedies.
February 20, 2012
By J. Scot Trubey
Helen Smith-Tyler’s foreclosure nightmare started with a repo notice on behalf of Bank of America — which didn’t even hold her mortgage.
Nearly two years later, the 58-year-old widow has filed personal bankruptcy and sued both the bank and a law firm, all part of an effort to keep her Lithonia home and undo the damage from a case of mistaken lender identity.
“It’s very stressful. There’s no sleep,” Smith-Tyler said.
Although her case stems from an unusual collision of events, critics of Georgia’s foreclosure process say it shows how few consumer protections the state offers, starting with the lack of so-called “judicial review” in which a court verifies basic facts before the process goes forward.
Her case also reflects the daunting task of keeping track of mortgage documentation that was created by the giddy days of the housing boom and the foreclosure and banking crisis that followed.
There’s a lot to keep track of in Georgia. The state has the fourth highest rate of foreclosures nationally, with 12,467 homes — about 1 in 328 — the subject of a filing in January alone, according to recent data from RealtyTrac. Many loans had been refinanced or sold by the original lender.
Smith-Tyler took out a loan in 2004 and said she refinanced in 2009 to take advantage of a lower interest rate.
Despite scraping by on a lower-wage restaurant job after being laid off from AT&T, Smith-Tyler said she was current on her mortgage at the time, although she also had substantial other debt of about $40,000 in lines of credit, according to her bankruptcy records. And she was a guarantor of her children’s student loans.
Things went awry when, just a few days after her refinancing closed, the servicer for both the original and refinanced mortgage, Florida-based Taylor Bean & Whitaker, was raided by federal regulators and then shut down. Its chairman was convicted last year of orchestrating a $3 billion mortgage fraud scheme.
Regulators assigned a Bank of America loan servicing subsidiary to assume servicing on thousands of Taylor Bean mortgages.
The problem was that Tay-lor Bean had not filed documents that would have shown Smith-Tyler’s old loan was paid off and closed via the refinancing, an attorney for Bank of America later told a bankruptcy judge.
Smith-Tyler said she wasn’t aware of Taylor Bean’s seizure. When she got a letter from Bank of America saying it was taking over her loan, she said she assumed it referred to the refinanced loan. But Bank of America was actually trying to collect payments on the old loan.
Then she started getting bills on behalf of another company, RoundPoint Mortgage, that was handling the refinanced loan.
She was unable to convince either company that the dual billing was an error, according to her suit. During a call with both companies, she said she was told to pay Bank of America, but after continuing to get dual bills she stopped paying either and set aside the money while trying to clear up the confusion.
In March 2009 McCalla Raymer, a law firm representing Bank of America, moved to foreclose. Smith-Tyler, who said she still had no clear explanation for the double billing, sought legal advice and filed for personal bankruptcy as a defensive measure.
“Bankruptcy is one of the sure ways to stop a foreclosure,” one of her attorneys, Joy Neismith, said.
Smith-Tyler continued to set aside mortgage payments, and her attorneys say she never would have fallen behind on the mortgage if not for the duplicate billing.
A claim by a third mortgage firm emerged in bankruptcy.
The flaws in the near-foreclosure on Smith-Tyler’s home were found through the evidence process in bankruptcy court, and then only after intervention by the U.S. Trustee Program, which acts as the watchdog of bankruptcy court, according to Smith-Tyler’s attorneys.
Slightly more than half the states, including Georgia, do not have judicial review of foreclosures, leaving bankruptcy or a lawsuit as the main avenues of dispute. Officials acknowledge it’s impossible to know how many improper foreclosures might have occurred in Georgia.
The industry’s stance is that Georgia foreclosure problems are isolated and that the non-judicial process is more efficient in clearing the backlog of repossessions.
Fraud has still occurred in many states with court intervention. A recent $25 billion settlement between the states and the five biggest mortgage firms will help correct abusive practices and offer more protection than judicial review, said Lauren Kane, a spokeswoman for state Attorney General Sam Olens.
Robert Thompson, an Atlanta lawyer who challenges foreclosure cases, said there are flaws in many foreclosure cases, and the bundling and selling of mortgages has made it harder to determine the true owners of many mortgages. “It’s chaos,” he said.
Bank of America has withdrawn its claims and its lawyer in court transcripts admitted it had no right to Smith-Tyler’s loan, or to months of payments she made after her refinance . The bank also was ordered to return more than $7,000 of Smith-Tyler’s mortgage payments for disbursal to Nationstar, which had taken over for RoundPoint and was determined to be the rightful servicer of her refinanced mortgage.
Smith-Tyler’s suit alleges Bank of America and McCalla Raymer filed a foreclosure they knew or should have known was wrong. It claims that a pre-foreclosure title search by Mc-Calla Raymer showed that her loan was refinanced in 2009. Yet the firm filed a document that essentially transferred the old loan to Bank of America as an active mortgage, the suit contends.
McCalla Raymer declined to comment. A spokesman for Bank of America Home Loans declined to comment about specifics of the case, but blamed the confusion on events surrounding the shut down of Taylor Bean.
Bank of America and McCalla Raymer denied their respective actions were reckless or forced Smith-Tyler into bankruptcy, according to court responses the defendants filed Friday.
Smith-Tyler remains in her home, making payments through bankruptcy. She doesn’t really know how much she owes.
She said the case turned her into a “hermit” on her quiet street.
“I love my home. That’s my pride and joy,” Smith-Tyler said. “Whatever it took to avoid [foreclosure], I wasn’t just going to walk away from it.”
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