The Skanner News | By Lisa Loving | August 22, 2013
RealtyTrac reported last week that Oregon is the second hottest spot in the nation for home foreclosure.
And as The Skanner News went to press this week, the national Consumer Financial Protection Bureau issued a report faulting mortgage servicing processes – and calling out Attorney General Eric Holder for not doing enough for consumers.
That’s no surprise to Northeast residents Michael and Judy McEldery, who are getting ready to fight an unusually sticky court battle over the North Portland home that has been in their family for 50 years.
Their lawyer says the case involves clear evidence of fraud by Nationstar Mortgage, the servicing company that bought McElderys’ mortgage after it was resold several times.
“This case reveals a corporate system that’s not governed by sound policies or individual decision-making. Nationstar’s conduct in this case appears solely motivated by the prospect of maximizing profitability and market share,” the McElderys attorney Mike Fuller says. “And the law is on their side most of the time.”
While many critics blame defaulted homeowners for creating their own financial problems, the issue of mortgage fraud, detailed in a recent FBI report touches many homeowners in crisis.
At issue is the federal insurance that mortgage servicers rely on when consumers default on loans; the Federal Housing Administration literally pays out claims to mortgage servicers based on these defaults.
And the FHA has paid out some $12 billion in claims now considered fraudulent by the U.S. Department of Justice.
Nationstar Mortgage’s Portland-based attorney did not return a request for comment.
For the McElderys, it all began several years ago when they moved back to Portland to take care of Judith’s mother, who had Alzheimer’s. To make ends meet Judith started caring for children in her mother’s 106-year-old house.
The family home had long been paid off, but, Judith says, they landed into the home loan market after a disgruntled ex-family member complained to the City of Portland that the building needed repairs.
So McEldery borrowed money for the repairs, landing his family in the hands of a chain of mortgage companies that started with World Savings and ended with Nationstar.
“I don’t know if World Savings went out of business or what happened,” Judy says. “Anyway, our lender started changing, and it went to two other companies before Nationstar got it.
“You can’t keep up — all of a sudden you got a letter from a different company that says they have your mortgage. And nobody is telling you anything.”
Somehow the situation worsened no matter what the McElderys did.
“They said the mortgage would go up once a year,” she says. “Our mortgage was going up every ninety days.”
When Judith called the “Homeowners HOPE Hotline” phone number for the federal Department of Housing and Urban Development listed at the bottom of each bill, nothing happened.
“It took awhile but I did end up talking to a person,” she says. “They told me that I could dispute them and attempt to fight them but that was all on me.”
By September of 2012, the McElderys were sliding into default and could no longer make their mortgage payment.
In January 2013, Nationstar offered the McElderys a deal: If they agreed to pay a reduced amount for three months, they could stay in their home and modify the mortgage.
They took the offer and started sending checks; after a couple of months, Nationstar claimed they never received the second payment.
At the same time they were negotiating on the phone with Nationstar — and even sending more payments — the company had already started the foreclosure process.
In June of this year, Nationstar literally demanded payments from the McElderys while at the same time returning one.
“Enclosed you will find we are returning the funds you have submitted on your account that were insufficient to resolve your delinquency,” the letter from Nationstar’s “Loss Mitigation Department” says. “At this time, we are continuing with our collection efforts.”
Sound bad? There’s more.
A month after the foreclosure was initiated, Nationstar Mortgage cashed the “lost” check that triggered the foreclosure itself — but didn’t stop the foreclosure action.
Judith McEldery says a Nationstar staffer told her on the phone that perhaps the lost check had been deposited in somebody else’s account; the copy of the cashed check returned to the couple includes an endorsement on the back with a complete stranger’s name.
“It’s not uncommon for a borrower who is behind on mortgage payments to try to modify their loan, and it’s not uncommon for borrowers to receive offers to modify their loan and then not end up getting a modified mortgage,” says the McElderys’ attorney, Michael Fuller with the law firm Olsen Daines.
“What’s uncommon is that after Nationstar initiated foreclosure, started to kick the McElderys out of their home, they went and found the payment that was allegedly missing all along, and even collected payments that were sent by the McElderys in good faith after the three month period ended.
“And they refused to return them,” Fuller said. “And they refused to stop foreclosing.”
