The Star-Ledger

Court Plan Redefines Mortgage 'Gray Area'

Major banks ordered to disclose procedures

The Star-Ledger — Sunday, January 23, 2011

By Sarah Portlock / The Star-Ledger

James Atkins feels trapped in mortgage limbo.

Every month, he makes monthly payments for his single-family home in Hamilton at a rate that's nearly double his original amount, owing to the time he missed several payments in 2006 after a work injury forced him to retire. But he sorted out an arrangement with his lender, Countrywide Financial, to get back on track. He went back to work, landing three jobs and using his pension to make the payments. By the spring, Atkins said he hopes to be back to his initial amount.

And yet, every month, the Mercer County resident receives certified letters threatening foreclosure from Bank of America, which took over the mortgage when it acquired Countrywide in 2008.

"It's frustrating," he said. "It's like when you're doing the right thing and people are saying you're not, and you get frustrated because there's no one to turn to. It's a gray area."

So in December, when New Jersey's chief justice cracked down on some of the country's biggest mortgage lenders over fears that homeowners were unnecessarily put into foreclosure and that the court system might be compromised, Atkins — along with housing counselors, consumer advocates and other homeowners caught up in the mess — breathed a sigh of relief.

Finally, it seemed, someone is listening.


"A state of lawlessness has existed for a number of years in this backwater of our court system, the foreclosure law," said Mark Malone, a lawyer from Metuchen who has been working closely on foreclosure matters with Legal Services of New Jersey.

"What the court has done is extraordinary," he added. "It's really a heartening development."

At the heart of Chief Justice Stuart Rabner's three-point initiative is calling to court six banks that filed more than 40 percent of the state's foreclosure actions in 2010 — Bank of America, JPMorgan Chase, Citigroup, Wells Fargo, Ally Financial and OneWest Bank. The lenders must document their past and proposed foreclosure practices and, if the court finds any part unsatisfactory, all pending foreclosure matters will be suspended. The banks are due in court on Feb. 14.

In extensive motions filed in response earlier this month, the banks outlined steps they said they've already taken to address the issues. Officers are also reviewing internal procedures for handling foreclosure proceedings and how attorneys process claims, according to court documents.

Foreclosure numbers in New Jersey have skyrocketed in the past five years, reaching more than 58,000 in 2010, from nearly 25,000 four years earlier, according to judiciary figures. An estimated 95 percent of those filings are uncontested, the court order said.

Homeowners in danger of losing their homes are flocking to housing counseling services, like New Jersey Citizen Action, which has watched its client roster quadruple in just a few years. In 2010, the organization worked with nearly 1,900 new clients, up from 474 in 2008. But that figure jumps to more than 2,500 for 2010, when people who are already in foreclosure proceedings are factored in, according to the nonprofit's figures.

Among homeowners' and counselors' largest frustrations are the attempts to seek help from the lenders, only to get different responses from each bank representative.

"The anonymity is the black hole," said Phyllis Salowe-Kaye, executive director of Citizen Action. "The papers start getting lost, you don't talk to the same person, you don't get anything that's a permanent resolution, or sometimes you get no resolution."

As a result, high numbers of homeowners are hauled into court, where those involved suspect bank representatives rely on incorrect case information because the paperwork was filed incorrectly. What's at risk now is the very integrity of the court system.

"If people can't trust what happens in courts is truthful, then that's a real problem," said Ira Rheingold, executive director of the National Association of Consumer Advocates in Washington, D.C. "We can't allow banks to get away with claiming, Well, we know you owe the money and you're behind but we're entitled to your home,' and yet without actually providing proof."


To those deeply entwined in the crisis, what the court has done is a landmark — and much-welcomed move — but ultimately the question is whether it will result in any seismic overhaul of the system.

"There's got to be a balance between efficiency in getting things done fast and without too much fuss, and also respecting our rules," said Peggy Jurow, who leads Legal Services of New Jersey's Anti-Predatory Lending Project.

"This disobedience needs to be the exception, not the normal way of doing business."

For Atkins, the Hamilton homeowner facing foreclosure, what he suspected happened with his case is what a Bank of America spokeswoman confirmed: the bank's computer recognized Atkins as delinquent and began automatically sending him what's known as a breach letter detailing the foreclosure process. His repayment plan was not necessarily a contractual change to his mortgage but rather an informal agreement to make up for earlier unpaid bills, said spokeswoman Jumana Bauwens.

"The breach letter was probably a result of a sweep in the system that if somebody is 90 days past due, a breach letter is sent to them," she said.

She added, "He looks like he's on the road to success as far as completing his repayment plans, and going back to his original mortgage payment."

But each time Atkins tried to call the bank, he said he received different answers about the letters. He sought help from nonprofit organizations, but was told that as long as he was making payments, there wasn't anything anyone could do. So Atkins keeps his head high and keeps making his payments.

"There are certain things you have to let go," he said. "If you're doing the right thing, even though people are doing things wrong, you're going to come out on top. This is key for me."

Sarah Portlock: (973) 392-5994 orsportlock@ "The papers start getting lost, you don't talk to the same person, you don't get anything that's a permanent resolution, or sometimes you get no resolution." Phyllis Salowe-Kaye, executive director, Citizen Action MORE ONLINE Get the latest New Jersey headlines from the newsroom of The Star-Ledger, 24 hours a day, 7 days a week.

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