Foreclosure Stories: A prisoner of your loan

Jun 14, 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 that makes it profitable to foreclose. The names used have been changed for privacy purposes. This is the Williamses Tale.

One of the saddest fallouts from the advent of the absolutely corrupt system of loan securitization, or the process by which a loan is bundled with thousands of others in a pool or trust for the purpose of selling stock in the trust at enormous profits, is that it makes the unwitting borrower a prisoner of his or her loan. I have seen this in virtually every case I’ve handled, but none has been more compelling in this regard than that of the Williamses.

The Williamses refinanced their modest condo in 2007, planning to move onto the next phase of their lives by either selling or renting it after five years and settle in another home. Despite their best-laid plans, however, in October, 2008, the Williams’ household income suffered a dramatic blow when Mr. Williams’ employer shut down its’ operations, eliminating his income. At that point, the Williamses did what I’ve seen so many good people do in similar situations – they reached out to their bank for help by asking for a modification of their loan terms. And as I’ve seen in as many situations, their bank, Cheat, responded by putting them through a torturous path which led to nowhere.

Shortly into the loan modification process, the Williamses discovered they were trapped in their loan with Cheat. Even though they had sterling credit, with Mr. Williams’ loss of income, they could not get a loan with another bank, and escape the clutches of Cheat. Thus, they were left with one option – gain a loan modification with Cheat which worked within their new budget, or eventually lose their home. In the short run, however, the Williamses were able to continue making their regular monthly mortgage payments by dipping into their savings and retirement funds. They did this despite being encouraged by Cheat to stop making payments, being promised that a modification would be forthcoming.

As the months dragged on, however, no modification was offered, despite the fact that the Williamses, like a puppet on a string, repeatedly continued to do everything they were told by Cheat, sending in numerous financial packages as part of their application process. Their situation became even more dire in March, 2009, when Mr. Williams was diagnosed with cancer. Then, in April, 2009, Cheat told the Williamses again to stop making their payments as the modification was imminent. Believing what they were told, this time the Williamses did as instructed and stopped making their payments. Finally, like the cavalry coming over the hill in an old Western movie, relief seemed to come in May, 2009, in the form of a “Forbearance Agreement”.

In fact, their first payment under the agreement was due the very day they received it in the mail: May 1, 2009. The Williamses mailed their first payment the very next day. Because the agreement called for the successful completion of three “trial” payments before their loan would be permanently modified, the Williamses took great care to make sure their next two payments were made ahead of time. However, little did the Williamses know that their nightmare was not only not over, it was actually just beginning.

This was because Cheat, contrary to its promises, never gave the Williamses the modification promised. Instead, it went back to its ways of repeatedly putting them through the wringer, requiring them to complete and submit financial package after financial package, like Don Quixote’s futile quest to reach an unattainable goal. To this day, the Williamses have not gotten what they were promised three years ago: a permanent loan modification. This despite the fact that they:

 1)    phoned Cheat over 122 times;
 2)    sent in four authorization letters allowing Cheat to obtain personal information;
 3)     were disconnected or transferred while trying to contact Cheat by phone 43 times;
 4)    spoke with 51 different client representatives;
 5)    sent in personal financial information 20 times;
 6)    sent certified mail to Cheat 15 times, and
 7)    faxed, mailed or emailed Cheat 45 times.

And if this wasn’t horrible enough for the Williamses, do you want to know the worst part? After a two-year battle with cancer finally ending with it going into remission, Mr. William was turned down for employment at a new job he was otherwise very well-qualified for, for one reason – his credit score was trashed by Cheat throughout this whole nightmarish process. And thus the Williamses, as with millions of American homeowners, have been victimized by a system, sanctioned by our government, which gives our largest banks the ultimate power over our lives, a power not only to take the roofs over our heads away, but even the ability to go out and get another loan or to gain the employment necessary to pay on a new one.

What Cheat essentially did to the Williamses is a phenomenon experienced by millions of Americans: It made them a prisoner of their loan. Cheat took away the Williams’ ability to escape its clutches by going out and getting financing from another bank by ruining their credit score with an end goal of foreclosing. Why? Because as I’ve preached so many times before in the column, it is profitable to foreclose in the world of securitized loans.

Since our representation of the Williamses, Cheat has started to sing a far different tune than it had previously. Now it is anxious to settle up with the Williamses. The problem is that, after all they have been through, the Williamses aren’t anxious to settle with Cheat. Given the horrific treatment they received at Cheat’s hands, there is no doubt that the Williamses will be in their home as long as they want to be. The lesson in the Williams’ story is this: Albeit an extremely unfortunate thing to say, do not trust your bank to be on your side. Do not give it any opening to claim you have done something wrong, if at all possible. And above all else, document, document, document every communication with the bank, getting as much as possible in writing.

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Next week: The story of the Hallers, who despite making every payment on time on their Fannie Mae loan, were foreclosed on. Why? With a change in loan servicers, their payments weren’t properly recorded, indicating they were in default according to the bank’s records.