Homeowners challenging lenders’ right to collect

<tr>

Sept. 02--Seven years after the meltdown of the subprime mortgage market, New Jersey continues to be a hotbed of home repossessions by lenders, resulting in reams of foreclosure-fraud and improper-debt-collection complaints that mainly target intermediaries known as mortgage servicers.

Fort Lee homeowner Eun Ju Song, who was notified last year that he was in default on his loan and is facing foreclosure, claims mortgage companies botched transfers of ownership rights to the mortgage he signed in 2006 and forged documents to try to fix the problem. In a federal lawsuit filed in Newark in May against Bank of America and the mortgage servicer Green Tree Servicing, he claimed that they haven't shown they have any legal right to collect.

"With no properly recorded owner of the plaintiff's mortgage, there is no one or entity entitled to enforce the conditions of the mortgage obligation," the complaint says.

Jerry K. Wong of Clifton filed a lawsuit in May against Green Tree, which for the past couple of years has been one the most prolific foreclosure filers in the state. Wong accuses Green Tree, based in St. Paul, Minn., and one of its subcontractors of misrepresenting themselves as creditors when trying to collect on his loan, which went into default in late 2012. Such practices are a violation of the federal Fair Debt Collection Practices Act, according to the lawsuit, which seeks $500,000 in statutory and other damages.

Green Tree did not respond to requests for comment.

In West Milford, homeowner Paul Onder has been in a stand-off with the Utah-based debt collector Select Portfolio Services for four years over the same question: Who owns the mortgage? He said he hasn't made a payment on his $450,000 debt consolidation loan since 2010.

"They want me to pay money? Where is that money going?" he said Wednesday in an interview.

SPS could not be reached for comment.

Disputes like these could multiply in the months ahead as the numbers of new residential foreclosure filings continue to rise. New filings in New Jersey in the 12 months ended June 30 climbed 38 percent, to 47,534 filings from 34,347 the previous 12 months, according to the New Jersey Administrative Office of the Courts in Trenton.

In the year ended June 30, 2012, there were 12,341 foreclosures filed.

Foreclosure filings have implications for borrowers' credit history. Realtor.com says a foreclosure will reduce a credit score 100 to 300 points and will remain on the borrower's record for seven years.

Statistics from the state Department of Banking and Insurance show that loan servicers Wells Fargo, Green Tree, Seterus and Nationstar Mortgage have racked up the biggest numbers of foreclosure filings. Wells Fargo and its affiliates made the most filings by far, with a combined 1,770 new foreclosure filings in the second quarter.

"The trend we are seeing with regard to foreclosure filings in New Jersey is consistent with what the Mortgage Bankers Association reported in their latest National Delinquency Survey," Kevin Friedlander, a Wells Fargo spokesman, said in an email.

"We work hard to help people stay in their homes when they encounter financial difficulties. As of May 2014, we have more than 961,000 modifications in place," he said, referring to nationwide levels.

The mortgage-bankers group said earlier this month that the rate of new foreclosures fell in New Jersey in the second quarter but was still the highest in the nation. Loans in New Jersey on which foreclosures were started in the April-June period amounted to 0.9 percent of total outstanding loans, down from 1.06 percent during the first quarter.

Meanwhile, New Jersey loans in any stage of the foreclosure process remained at the high level of 8.10 percent of total loans as of June 30, barely changed from the first quarter. That also was the highest percentage in the country and more than three times the national rate of 2.49 percent.

Delayed by court order

Reasons for New Jersey's high levels of foreclosures include its sluggish recovery from the recession and the winding down of assistance programs that kept foreclosures at bay. Also, a late 2010 state court order that required debt collectors to amend their practices resulted in many filings being delayed for more than a year.

Meanwhile, many cash-short homeowners have defaulted on loans that were modified by their mortgage companies after the financial crisis, according to industry observers.

Paramus-based Hudson City Savings Bank, a lender and servicer that filed 96 foreclosures in New Jersey courts in the second quarter, is having recent filings challenged by homeowners in New Jersey and several other states.

Green Tree, which acquired servicing rights last year from Bank of America on $84.4 billion in loans belonging to the government-sponsored mortgage giant Fannie Mae, filed 938 new residential foreclosures in the April-June period, up from 830 in the first quarter, according to a state regulator.

Green Tree's parent company, Walter Investment Management of Tampa, Fla., disclosed in a regulatory filing several months ago that federal regulators have advised Green Tree that they "have sought authority to bring an enforcement action and negotiate a resolution related to alleged violations of various federal consumer financial laws."

Illegitimate foreclosure practices, like robo signing documents and failing to properly record transfers of mortgages from one entity to another, have been well documented as previous lawsuits and regulatory settlements provide lawyers who represent financially troubled homeowners with blueprints to follow when filing civil suits.

Only rarely are mortgage debts completely forgiven by judges, but aggrieved homeowners may get debt reductions or other settlements, according to industry observers.

The ratings agency Standard & Poor's has estimated that U.S. banks have $55 billion to $105 billion in exposure in mortgage-related lawsuits, on top of what they are paying in government settlements. S&P has said the industry has sufficient reserves to absorb those losses.

In 2012, Bank of America, JPMorgan Chase & Co., Wells Fargo & Co., Citigroup and Ally Financial joined in a $25 billion settlement with state attorneys general and federal agencies to address mortgage loan servicing and foreclosure abuses and fraud, including robo signing.

Separately, the Consumer Financial Protection Bureau and 49 state attorneys general announced in December a $2.1 billion settlement with the loan servicer Ocwen Financial. Ocwen was accused of illegally pushing borrowers into foreclosure, in part by failing to properly credit mortgage payments.

That settlement included $151 million for nearly 1,900 foreclosure victims in New Jersey whose mortgages were serviced by Ocwen or two companies Ocwen acquired _ Litton Loan Servicing and Homeward Residential Holdings _ and who lost their homes from Jan. 1, 2009, to the end of last year. The foreclosed borrowers have until Sept. 15 to file a claim.

"We have had these massive settlements, but there is no effective oversight to make sure families and communities are stabilized," said Mary Szacik, lead organizer for Newark-based New Jersey Communities United, which has been conducting mortgage-fraud workshops for homeowners the past two years, mostly in churches.

Her organization tries to uncover illegitimate foreclosure practices to give the homeowners they counsel more leverage in negotiating loan modifications with lower monthly payments and a better chance to stay in their homes.

Described as 'obstructionists'

"Mortgage servicers tend to be obstructionists," she said. "Even who they are collecting the debt for, that tends to be murky."

Servicers are facing lawsuits in New Jersey from both ends of mortgage lending.

In May, Elmwood Park-based Spencer Savings Bank filed a lawsuit against Bank of America, alleging "abject lack of diligence" in servicing 42 problem loans Spencer owns. The community bank seeks compensatory damages stemming from the larger bank's alleged failure to start foreclosures or take other actions when borrowers fell behind on payments, according to the court documents.

A spokesman for Bank of America said the company would not comment on pending litigation.

The Spencer complaint is similar to one filed in late 2012 by the Parsippany-based mortgage company American Financial Resources, which alleges Bank of America breached a mortgage-servicing contract on $2 billion in loans American Financial acquired from Bank of America's predecessor, Countrywide, in 2008.

Meanwhile, Onder remains in his West Milford home while his standoff with Select Portfolio Services grinds on.

"They are paying my taxes, and they are paying my insurance," he said. "All they are doing is threatening because they have no leg to stand on."

––––

Email: newman@northjersey.com

___

(c)2014 The Record (Hackensack, N.J.)

Visit The Record (Hackensack, N.J.) at www.NorthJersey.com

Distributed by MCT Information Services