Commercial Real Estate, Mortgage Financing, Law
Berlandi Nussbaum & Reitzas LLP
Mortgage Lender Error
When boxing promoter Don King used to crow, “Only in America,” it was a hopeful, if self-serving, proclamation that anything is possible in America for those dedicated to improving their stations in life. Unfortunately, in today’s America, in the wake of the historic mortgage industry implosion of 2008 that served to tear the mask off the banking industry only to reveal a well-capitalized Barney Fife running things, that same statement serves as a grim warning that can, and probably someday will, bumble its way into your financial world too.
Case in point: Our firm recently handled a foreclosure defense that was entirely bank-driven. The ludicrous story began when our client’s lender initiated a letter to our client stating that the client ‘might be eligible for a mortgage modification’ on his condominium apartment in Manhattan. Our had no need for a mortgage modification, but as any logical businessman would do under the circumstances, he figured there was nothing to lose by taking the bank up on its offer and submitting an application. Remember those words: “nothing to lose”.
Immediately after his application was submitted, he was told by the bank that, because he now had a modification application pending, the bank would no longer accept loan payments on his mortgage. For our client, this didn’t require any action of any kind, because when he first closed on his loan he set up an automatic payment whereby he authorized the bank to simply withdraw funds from his account every month. So the client took no action at all, but the bank—which still had the authority to withdraw monthly payments from the account—elected not to. This would have been fine, if not for the fact that the bank then foreclosed on our client based on those very same “missed” payments. And here’s where it gets really weird.
Two days after the bank foreclosed on our client, it sent him a letter denying his mortgage modification application, and then, a little less than a month later, sent him another letter saying that the bank had not yet made a decision on his mortgage modification application. Only in post-2008 America.
At this point, because of all the conflicting information, the poor man had no idea what was going on or what to do. Was he being foreclosed on by his bank? Was he still being considered for a mortgage modification?
Naturally, he tried calling the bank to find out what was going on. He tried the foreclosure department; he tried the legal department; he tried the mortgage modification department; he even tried the misnomer of all misnomers, the customer service department. No one knew what was going on. No one knew what the department down the hall from them was up to. No one had the authority to make a decision or even to get a decision-maker for him to talk to.
Meanwhile, letters kept coming. Another letter arrived denying his mortgage modification application (again)…followed by FIVE letters, each saying that the application remained under review…followed by two more letters saying the application had been denied…followed by another EIGHT letters saying that it remained under review. (Incidentally, not a single letter was signed by any individual, whom we would’ve been able to call to discuss the matter, nor, we were told, was anyone at the bank able to receive incoming emails. In short, it was not only a tragically dysfunctional system, it seems intentionally designed to be that way.)
My firm fought the foreclosure for nearly two years. For nearly two years, the case crawled phlegmatically through an overburdened court system. My client spent money; the bank spent money. Still, no one ever stepped forward from the bank with any knowledge, authority or interest in discussing the case, explaining what had happened or how to fix things. (Because throughout the case, our client remained financially capable of fixing whatever was wrong, if only someone at the bank would tell us what had caused all of this.)
Finally, we reached the point where a hearing was scheduled to determine whether the bank had even served my client the right way to begin the lawsuit. As a courtesy, we asked the bank’s attorneys to meet with us to talk about the case, and fortunately, by that time, they had hired a law firm that was willing to communicate, unlike the foreclosure mill that had been handling the case up to that point.
We met with them, and demonstrated, point by point, how irresponsibly their client had behaved for the past two years. At the end of the meeting, we offered to let them save face by dropping the case before walking into the hearing on jurisdiction, where they would surely lose.
They accepted our offer, and dropped the case.
So let’s look at the scorecard. The bank sued for foreclosure in October, 2010, for reasons that we have still never learned. Two years have passed. Both sides have paid lawyers. The bank has alienated an affluent, excellent borrower and client. And that bank is, today, in exactly the same place, legally, as they had been in two years earlier, except that they have not received loan payments for almost two years. Today, as I write this, the bank has still refused to engage in any type of substantive conversation with us.
Why? Because the bank is too big, automated and disorganized to make a phone call. Only in America.