Oh what a tangled web we weave, When first we practice to deceive”--Sir Walter Scott

When you got a mortgage did you believe the company who you signed a mortgage note to was the one you were going to owe the money to?  I think that most Floridians, and most Americans did.  Did you ever anticipate that because of the original noteholder selling off your note that was signed with your mortgage paperwork you would be unwittingly placed in a situation that would become impossible to get out of?  Did it ever occur to you that your loan might be split into a million little pieces and sold to a lot of people.  This is a real story of one seller's experience with their mortgage and a bank's refusal to work with the seller to mitigate their losses.

This is a story about a homeowner who did not buy more than they could afford.  However, six months after their purchase the seller experienced a dramatic decrease in income.  Caught up in circumstances they couldn't escape from they tried to downsize their expenses.  They worked as hard as they could to replace the income, but could not find a way to replace the income.  Because the economy had taken a nosedive as had Florida real estate...they could not even sell assets for what they owed on them.  They desperately wanted to reduce their expenses and stay current on everything, and they were able to for a little while...but their hole got deeper and deeper.  As they desperately tried to reduce their expenses...they found that they were less and less able to because of the devastating drop in real estate values caused by other foreclosures.

They appealed to Suntrust mortgage for a loan modification. 

After treading water for a couple of years and working 80 hours a week, they slipped underwater.  They could not do it anymore.  They were, figuratively speaking, at the end of the line.

Suntrust repeatedly told them that they could NOT help them until they went late on their mortgage.  Yes.  They were told repeatedly by Suntrust customer service to quit making their payments so they could get a modification.

Once they stopped paying, for months they were told that they made too little money for a modification. 

Once their income increased slightly a modification was quickly given on the second mortgage.  However, this modification did not reduce the amount that they owed every month...it simply switched them to a lower interest rate and took it from an adjustable interest rate to a fixed rate.  They signed the modification because they felt certain that the first would be modified as well.  Their income had picked up some, although not to the levels it had been when they purchased the home.  They started paying on the second mortgage again.  They had no reason to believe that Suntrust would not modify their second.

The foreclosure paperwork came.  Suntrust had filed a lis pendens and started the process of foreclosure on the first mortgage.  Pregnant with their fourth child, they became fearful that their small kids were going to end up homeless.  They started calling Suntrust more often.  Suntrust was just sitting on their file.  They had been told months prior that it had been assigned to the negotiator, but they were not allowed to speak with the negotiator, nor would the negotiator call them back despite repeated messages being sent.  Months had rolled by with no resolution on the first mortgage after being told by Suntrust to quit making the payments, and doing everything Suntrust asked for the modification, and the lawsuit came.

In the foreclosure lawsuit, Suntrust represented to the court in St Johns County that they owned the note.  Suntrust also represented to the court that they lost the note but were trying to get a copy of it.  Suntrust represented to the court that they had NOT transferred the note.

A Qualified Written Request (QWR) was sent to Suntrust for both mortgages to try to figure out what had transpired since the note was signed.  Suntrust, although required by law to respond,  failed to respond and provide this information.

Months passed with Suntrust continuing to claim that they owned the note.  The owners continued to call Suntrust to check on the status of their loan modification.  At some point Suntrust mentioned that it was taking so long because they were having to take it to Wells Fargo.  That was news to these owners...especially since Suntrust was continuing to represent to the court that they owned the note and had not transferred it.

Suntrust was apparently lying to the court about their ownership of the note that they could not find.

Eventually a court filing had what appeared to be a copy of the note.  Coincidentally it was only endorsed one time TO SUNTRUST (even though the note was issued to them in the beginning.) Not to a third party.  Furthermore the endorsement appeared to be an endorsement of a copy instead of the original note due to the difference in the quality of the print.

A year after making their last payment the sellers, in desperation to find a normal life again for their kids, filed for bankruptcy knowing that was the only option left to get out of the hole.  They were told by the bankruptcy attorney that they would only have 30-60 days to vacate the home. 

Tearfully they packed up their four kids and left the house for the last time.  The little ones did not understand why they were leaving their house that they loved.  The kids' rooms had been painted and decorated in their kids favorite colors.  They had been marking their kids height on the laundry room door with dates since they had moved their family into this home.  This was where they regularly came to see just how big the little ones had gotten.  These memories and mementos of the first years of their children had been left forever, unable to go with them.  As is common in this type of situation, toys and books had to stay behind that could not fit on the moving truck.  Images of lives torn apart remain.

This was supposed to be their "live in forever" home.  But life happened and their hopes and dreams were torn away.

After the bankruptcy, the owners were dismayed to discover that in their latest document filing, Suntrust stated that they were the servicer (not that they were the owner).  

The true identity of the owner of the note remains secret.  The whereabouts of the note are still unknown.  Suntrust continues to press forward with the foreclosure although they are not the owner of the note, as they repeatedly represented to the court, and no one knows where the note is.  The person with the note has the right to collect.  It is probable that the note was sold off in a pool of securities so there could be thousands of owners of pieces of the note.  But this information has been hidden from the owners, and the court system.

This is probably why a modification never happened that would have allowed this family to stay in their home.  It appears that Suntrust has not complied with the law.  Suntrust appears to have lied to the court.  A judge will probably still sign off on the foreclosure despite all of this.

When this home is eventually sold, either through a REO or a short sale, for 50% of the purchase price of the home...who wins?  Not the note holder.  The loan could have been modified and they could have still recouped their money.  Not the owner.  They would have loved to keep their family in their home but could not get a modification or a straight story on who even had the note.  The emotional devastation they have experienced will be with them for the rest of their lives.  Not the children who were uprooted from their lives and friends.  Not the neighbors.  They will experience further erosion to their home values because of this home which will likely be sold below fair market value. 

The buyer will win.  They will get a beautiful home at a rock-bottom price.  The servicer, Suntrust, may win.  They were, after all, able to:

  • Write the loan and make money on the front end.
  • Sell the loan and possibly make money.
  • They probably had insurance policie(s) on the loan, so someone may be collecting premiums.  Not sure if that is Suntrust or the mysterious noteholder or both.
  • If they are allowed to handle the property after it goes back to the bank they will make more money on that end as they manage the REO process.

The fact is that, in this volatile real estate market, foreclosure rarely makes good financial sense for the person who owns the note.  So why is this outcome so common?  Why isn't there more mitigation of their losses going on?

What if a year, or more, ago the note had been modified.  This seller resumed making payments on the home at a level they could afford with their reduced income that occurred after the purchase of the home.  A modification would still have net the noteholder FAR more money than they will eventually get and saved the expense of foreclosure.

The house still sits empty six months later and is still in the name of the owners although they do not legally owe any money for the home.  Upon questioning the bankruptcy attorney, they were told that bankruptcy code says that HOA dues incurred after the bankruptcy is filed still has to be paid by the owners.  All along they were told by the bankruptcy attorney that they didn't "care" what happened to the home.  Now they see many reasons that they should care.  They have decided to try to short sale the home.

Unfortunately, this is not an isolated story.  This is not the only bank that does this in the regular course of business these days.  Foreclosure is utter, complete devastation in the lives of many. 

Do not be so quick to blame.  These sellers, like most we see in this situation, could NOT sell their home for what was owed on it or they could have quickly gotten out of this situation and it would not have led to financial and emotional ruin.  In a normal real estate market this would not have ended up at this point.  The sellers would have sold their home and downsized to something more affordable for their new income. 

These sellers purchased a home they could afford during a better time of their lives and could not have anticipated the permanent reduction of income they experienced.  When your neighbor forecloses...it still has huge consequences on you.  Believe it!  As the value of homes decrease, it raises your chances of stepping into the exact same shoes of this seller.  All it takes is one unexpected event and your world can crash around you and pull you down, down until there is no escape.