Foreclosure Stories: Manufacturing default

Apr 5, 2012


This is a weekly column by Sandusky attorney Dan McGookey, devoted to telling true stories of homeowners who have been victimized by a lending system which makes it profitable to foreclose. The names used have been changed for privacy purposes. This is Alice 's tale.

After a series of rough years leading up to 2009, Alice and her husband finally got their mortgage payments up to date on their modest home. Since then Alice has regularly sent her $750 monthly payment in on time. However, despite doing so, Alice’s loan servicer, OCEAN Loan Servicing, routinely has charged her a late fee. Upon investigating this, Alice discovered that OCEAN was regularly holding her payment two to three weeks before crediting her account, thereby creating a default where one didn’t actually exist. Presently OCEAN is claiming that Alice owes just under $10,000, and is threatening foreclosure if that sum is not paid.

    Alice and her husband, both in their mid-sixties, are proud people and are terribly embarrassed by their predicament. When they first came into my office recently, I assured them that we would get their situation straightened out, that they were not going to lose their home, and that they would be treated fairly. To that end, since they are not in foreclosure, we have sent a Qualified Written Request (QWR), or a request for information pertaining to the loan required by federal law to be produced by the servicer, asking that various information be produced, including Alice’s Loan Payment History.

    Once received, we will compare Alice’s records of payments sent with those recorded in the History, and will expose OCEAN’s fraud. At that point we will be able to use that fraud against OCEAN by not only demanding full restitution for all injury and damage caused Alice and her husband, including restoration of credit and elimination of all bogus charges assessed against them, but also demanding recompense in the way of a drastic reduction of their 7.5% interest rate. This in turn will lead to dramatically reduced monthly payments, saving Alice tens of thousands of dollars over the remaining life of her loan.

    Alice’s story is an example of a phenomenon we are seeing with increasing regularity – one where the servicing bank actually manufactures a default, where one otherwise did not exist. Sad to say, misapplied payments are, in my experience, now the norm, rather than the exception to the rule. I invite all homeowners to send in a request to your bank for your Loan Payment History to your bank, and carefully compare it to your record of payments made after you receive it.. You very well might be surprised at what you find out.

    Note from the author: If you have questions or comments regarding this or any Foreclosure Story article, please visit

    Foreclosure Story Update: Just last week we told the story of Carl, in Bank Forecloses Based On Its Own Mistake. Since that time we have accomplished three of the four objectives we sought on Carl’s behalf: 1) an agreement to dismiss the foreclosure action; 2) complete and accurate accounting of all payments made by Carl; and 3) restoration of Carl’s credit. Only one more objective remains – a lowering of Carl’s interest rate as reimbursement for the anxiety and expense caused him by the bank’s wrongful foreclosure, a goal I’m confident we’ll accomplish. Stay Tuned!

    Next week: The Story of Kyle, whose bank, after mistreating him, has offered a zero percent interest rate over the remaining life of his loan, effectively reducing his principal loan balance by more than half.

Copyright 2012 Daniel L. McGookey