Foreclosures came out of blue for two families

Borrower advocates say the cases might have been cured if Georgia law required court intervention before foreclosing, because such issues would have been exposed and resolved.

Bankers say these are regrettable cases, but that the state’s non-judicial foreclosure system works for lenders and borrowers alike.

The mortgage industry nationally has been roiled by claims of improper foreclosure processes. The extent of the problem in Georgia is unclear, but consumer advocates say the cases they've seen suggest broader problems.

A spokeswoman for U.S. Sen. Saxby Chambliss said his office has dealt with hundreds of constituents alleging problems with their lenders, the modification process and foreclosures.

Bronwyn Lance Chester, a Chambliss spokeswoman, called such complaints “our most active and numerous caseload.”

Lenders say even if some paperwork was flawed, the overwhelming majority of borrowers wind up in foreclosure for failure to pay their bills, and most foreclosures will stand.

Whether outliers or emblems of a failed system, the Reyes and Salmon cases show how circumstances can quickly send financially distressed homeowners into a spiral.

In early 2009, Reyes fell behind on her mortgage after a series of setbacks including losing her job. Damage to her four-bedroom Spalding Drive home from a 2007 storm also took a toll on her savings, Reyes said, as did an illness to her mother and the death last year of her father.

Reyes, who cares for her mother with some financial help from a brother, sought a mortgage modification to reduce her interest rate.

“I haven’t mooched, I haven’t asked for anything for free,” Reyes said. “All I was trying to do was to lower the payment a little until I got back on my feet.”

Reyes had built the four-bedroom home in 1998 and didn't want to lose what she called her dream home.

After months of phone calls and providing Litton her financial data, Reyes said she was told approval of a loan modification was assured and the foreclosure had been halted. A lawyer processing the foreclosure confirmed it, she said.

But two men came to Reyes’ door on a Saturday afternoon in October 2009, telling her their company had bought the house at a foreclosure auction days earlier.

“I was dumbfounded. I thought it was some kind of joke,” Reyes said.

It turned out that two law firms hired by Litton started separate foreclosure proceedings simultaneously on Reyes’ home, according to Reyes' attorney, Tom Stubbs. One was canceled when Reyes was assured of a modification; the other inexplicably wasn’t, Stubbs said.

Litton declined to comment for this story.

Stubbs said if Georgia had a system requiring foreclosures be heard in court, “this never would have happened.” A court likely would have found two foreclosure proceedings were processed, Stubbs said.

Stubbs also said foreclosure documents in the case have documentation errors, including agents working for Litton misrepresenting themselves.

In documents, known as assignments, filed in both foreclosure cases, a lawyer processing one of the foreclosure proceedings and an employee for Litton in the other assignment misrepresent themselves as officers of the Mortgage Electronic Registration Systems, or MERS, Stubbs said.

MERS, a bank-owned database that allows lenders to buy and sell mortgages electronically, is being used in foreclosure cases to assign ownership of loans. MERS, which has few employees, allows agents of mortgage companies to act as agents on its behalf. The practice, which is key to completing a foreclosure, has been questioned by consumer attorneys.

Reyes remains in her home while facing a lawsuit from the investor who bought it on the courthouse steps. The investor wants title to the home and Reyes and her mother evicted.

Patrick and Dawn Salmon, the Snellville couple, also suffered setbacks that caused them to be delinquent on home they bought in 2006 for about $280,000.

They were able to catch up earlier this year, draining their savings and retirement accounts. The couple could have sold their rental home, but instead approached Litton about a loan modification under the federal government’s Home Affordable Mortgage Program (HAMP).

Patrick said a Litton representative told him the company wouldn’t consider a modification unless they were behind on their mortgage. The Salmons skipped a payment.

Later, during the modification process, Litton returned two monthly payments, according to documents provided by the couple.

Their home was listed for foreclosure, but Litton promised in its letters to the Salmons “no foreclosure sale will be conducted, and you will not lose your home during the HAMP evaluation period.”

John Bartholomew, a lawyer at Atlanta Legal Aid Society, said debtors trying for HAMP modification cannot be foreclosed once they’d entered the evaluation period, or within 30 days after being denied for federal relief.

Yet the home was foreclosed Aug. 3, one day after Litton denied the Salmons' HAMP application. A few days later the family returned home from a funeral for Dawn’s father in New York, unaware their modification had been denied or their home foreclosed.

The Salmons said they had provided Little numerous financial documents and were still answering the company's questions when their home was foreclosed.

“We thought everything was fine,” Dawn said.

After finding a foreclosure notice on the door, Patrick Salmon said he and his wife called and wrote the foreclosure attorney, Litton, members of Congress and the White House. Dawn said the mortgage company wouldn’t return calls or speak to her.

A real estate agent working for Litton offered them $500 to leave the keys and walk away by the end of August, Dawn said.

“It was a slap in the face,” she said. They started packing but kept calling Litton.

In late August, Dawn got through to a Litton agent who said the foreclosure would be rescinded.

But Dawn said they still haven’t gotten a bill, nor do they know how much they are in arrears.

“We want closure to this,” Patrick Salmon said. “We want our home; we want to pay our bills. We want to do the right thing.”