Bank backtracks after improper foreclosure

Andu Trisa Long thought her home had been saved.

Unemployed for nearly a year, she had fallen behind on her mortgage payments after burning through savings. Through a state-run, but federally funded program, her mortgage company would be receiving thousands of dollars in taxpayer money to stave off foreclosure.

But, as the 54-year-old Mableton woman stood in her foyer one October afternoon, she could hardly believe what she was reading. It was an eviction notice and offer to give her as much as $3,000 if she quietly moved out of the house she built with her husband in 1999. Just leave the keys, the letter from law firm Pendergast & Associates said.

In the coming weeks, the state would wire CitiMortgage, the servicer for her loan, at least $13,000 to make Long’s mortgage current. But unbeknownst to the state or Long, Citi had already foreclosed, despite reaching an agreement with the program, known as Homesafe Georgia.

Long’s foreclosure shows just how little protection Georgia consumers really have. Even when they’ve been awarded state and federal assistance, homeowners can get caught by a foreclosure machine with little oversight or repercussions for errors.

Despite federal rebukes ordering mortgage companies to clean up their acts and a national mortgage settlement among the attorneys general of 49 states, including Georgia, consumer advocates say there are still problems.

And in Long’s case, the lack of oversight in the foreclosure process put taxpayer money at risk, too.

Spokesmen for Citi and the owner of Long’s mortgage, federally-backed Freddie Mac said their organizations did nothing wrong.

But Long is frustrated by mortgage companies.

“They work with paper, but that paper is someone’s life, someone’s home that they built from the ground up,” she said.

Long and her husband, Nelson, fell behind on their mortgage after she was laid off from her job as a fundraiser for nonprofits and his work as a builder tapered off.

She said they got the run around from Citi on various mortgage assistance programs before turning to HomeSafe, which received funding under the Troubled Asset Relief Program in 2010 and launched early last year.

HomeSafe is designed to prevent foreclosures, which can have dramatic effects not just on those involved, but also neighbors because they lower property values. Georgia’s foreclosure rate was the sixth highest in the U.S. in October, according to research firm RealtyTrac.

HomeSafe provides a bridge in mortgage payments while struggling homeowners try to find a new job or a better job. Eligible borrowers receive a zero percent interest loan, which can be forgiven over five years if the borrower stays in the home.

State officials said Citi never should have foreclosed because the banking giant gave its approval for Long to receive assistance under HomeSafe more than two weeks before the scheduled repossession, and the program requires mortgage companies to stop foreclosure proceedings at that time.

It’s just another example experts say of the lack of consumer protections in Georgia’s so-called non-judicial foreclosure process.

Georgia, like most states, has no “judicial review” in which a judge verifies basic facts before a bank can re-take a house. In the “non-judicial” system, bankruptcy or a lawsuit are the main means of disputing a foreclosure.

Advocates for borrowers say it’s impossible to know how many improper foreclosures have occurred, because no one is monitoring the validity of the paperwork.

The financial industry says faulty foreclosures are exceptions. Bankers say the vast majority of borrowers are far behind on their mortgages and the non-judicial process is more efficient in clearing the glut of foreclosed houses, which helps bring homes back to market and helps heal the housing sector. And, they point out, faulty foreclosures have happened in other states with judicial review.

After calls from The Atlanta Journal-Constitution, Citi and Freddie Mac — the holders of Long’s mortgage— on Wednesday cancelled a court hearing and said they will rescind the foreclosure.

“While it’s good to hear in this case that (Citi) and Freddie Mac ultimately did the right thing in rescinding the foreclosure, it really underscores the bigger problem that there is not adequate oversight to protect homeowners in Georgia, one of the states hardest hit by the foreclosure crisis,” said Elena Parent, executive director of Georgia Watch, a consumer watchdog agency. “In this case, the consumer clearly did all the right things and still faced the terrifying prospect of losing her home.”

A spokesman for Citi declined to discuss Long’s situation on the record and said the company did not do anything wrong. Citi, he said, acted as a servicer on the loan on behalf of its owner, federally-backed mortgage giant Freddie Mac.

“As the loan’s servicer, we act under the direction of the investor who owns the loan, in accordance with their guidelines and expectations,” Citi said in a statement. “This case is currently under the investor’s review, and we will continue to proceed as they direct us.”

A Freddie Mac spokesman confirmed the eviction proceedings have been canceled, and Long will be able to stay in her home under the terms of her mortgage assistance plan.

The AJC and other media around the country have reported on “dual tracking,” a bank practice of preparing to foreclose on a property while simultaneously negotiating with the borrower for some form of mortgage relief. At times, lenders have foreclosed despite reaching terms on a loan modification or even after a borrower complied with a new agreement.

An agreement reached last year between the federal government and several major mortgage firms, including Citi, was designed to stop dual tracking.

HomeSafe, a state-run portion of the U.S. Treasury’s Hardest Hit Fund, provides assistance with up to 18 months of payments. Georgians who are unemployed or underemployed and six months or fewer behind on their payments can apply. The state negotiates assistance with the mortgage firms who must agree to the terms. In exchange, the lender stops a foreclosure, if one has been initiated.

In theory, mortgage companies like it because they are guaranteed monthly payments while the borrower finds new or better work.

Under terms of the HomeSafe program, mortgage companies are required to cancel foreclosures once they approve of the state enrolling borrowers in the program, said Saralyn Stafford, a division director of the Georgia Department of Community Affairs, which administers HomeSafe.

Stafford said Citi gave its approval to the state on Sept. 17, more than two weeks before Long’s home was slated for repossession.

Citi foreclosed as scheduled Oct. 2, sent Long an eviction notice days later and proceeded with scheduling a hearing at the Cobb County courthouse despite receiving a payment Oct. 9 to bring Long’s loan to current status and a mortgage payment on Oct. 25.

Long’s case appears to be another variation of dual-tracking, said Sarah Bolling Mancini, Long’s attorney at Atlanta Legal Aid Society.

After the foreclosure and eviction notices, Citi even sent a note requesting a mortgage payment from Long for the month of October, Mancini said.

“This calls into question their compliance with that settlement,” she said.

Mancini wrote letters to Citi’s foreclosure law firm, Atlanta-based Pendergast & Associates, to stop the eviction and rescind the foreclosure. Mancini said she was prepared to file suit before they canceled the eviction because the law firm and Citi were not responsive.

Long is currently making her portion of the monthly payments , with HomeSafe covering the remainder.

She’s also looking for a job.

“I have faith in God and I know all things happen for a reason,” Long said.

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