In almost every case we handle, we see the absolute cruel torture that the banks put homeowners desperate to save their homes through as they seek mortgage relief. One of the most dramatic examples of this phenomenon is seen in the story of Tim and Sandra Hake. Their financial struggles started almost a decade ago as Sandra suffered health problems resulting in medical bills the Hakes could ill-afford.
A few years later, Sandra’s elderly mother developed cancer, requiring Sandra to take time off of work to care for her. Despite the financial strain these problems imposed on their household budget, the Hakes tried their best to stay current on the mortgage payments to City Lending.
Finally, when circumstances seemed most desperate, the Hakes’ guardian angel appeared in the form of a mortgage relief program called Restoring Stability. After completing the application process, the Hakes thought their prayers were answered when they received a phone call from the Agency in April, 2012 telling them that they qualified for over $22,000 of assistance, an amount which would pay off their entire loan balance! Common sense would tell anyone in such a situation that their mortgage problems were over. After all, what lender doesn’t want to get its loan repaid in full?
Unfortunately, as the Hakes soon realized, common sense doesn’t seem to apply in the world of securitized mortgages. When a loan is securitized, or bundled with thousands of other loans in a loan pool or trust for the purpose of selling stock in the trust, the real “lenders” are the purchasers of the stock. It is their money which funds the loans in the trust. Therefore, the loan servicer has no ownership interest in the loan it services. Worse yet, however, is the fact that the servicer actually gets paid more for servicing a loan in default. The bottom line? The servicer is financially incentivized not to accept the homeowner’s mortgage payment if it sees an opportunity to keep the homeowner in default.
This cold hard reality explains why City Lending refused to accept a check from the government which represented the full payoff of the Hakes’ loan – twice. Luckily for the Hakes, they do not have to sit idly by and accept the mistreatment they received at City’s hands. A loan is like any other contract in that it is a bilateral transaction, imposing duties and responsibilities on both parties. In the case of a lender, it has a legal duty to accept a full loan payoff and cancel the mortgage. Thus, when City refused to accept the payoff, it violated its duty to the Hakes, a duty which now the Hakes have the right to legally enforce. It is indeed unfortunate that their bank put them through torture, but the good news in the end for the Hakes is that justice will prevail, and they will be in their home for years to come.
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Next week: The story of Daniel, whose right to have his day in court in his foreclosure case was secured by a favorable decision from the Court of Appeals, reversing the trials’ court grant of summary judgment to the bank.
Copyright 2012 Daniel L. McGookey