The New York Times published an investigative report on March 30, 2007 entitled Foreclosure Machine Thrives on Woes. The article addresses what has become a growing problem in bankruptcy cases:
- out of control fees and costs added to mortgage loan balances
- failure of mortgage companies to properly account for payments
- refusal or failure of mortgage companies and their counsel to resolve disputes amicably
The Times tells the story of a Georgia couple – the Atchleys – who filed Chapter 13 and paid their mortgage but found themselves on the receiving end of multiple motions for relief asserting that mortgage payments had been made. In addition to the stress and cost of dealing with these inaccurate motions (which would be withdrawn at the last minute), the Atchley’s discovered that their payoff balance was being adjusted higher and higher with questionably fees and costs. The Atchleys eventually sold their house but now the United States Trustee has sued Countrywide claiming that its pattern of conduct was an abuse of the bankruptcy system.
The Atchleys decided to sell their home, and contend that they lost over $20,000 in equity. I have seen similar cases in my own practice. One case in particular comes to mind. My client filed bankruptcy to stop a property tax sale, and subsequently fell behind in her ongoing mortgage payments. She then decided to sell her condo (there was significant equity), the closing attorney gave her a payoff figure that seemed extremely high. I looked at the payment ledger and I saw overcharges and double billing. One item showed a charge of $650 as attorney’s fees arising from a Motion for Relief. However the Order on the Motion for Relief provided for only $550 in attorney’s fees and my client had already paid that fee directly when she cured her post petition arrearage. There was also a $2,500 “analysis charge” that no one could explain.
While Chapter 13 remains the only option to stop a foreclosure, you should realize that there is a good likelihood that if you file, your payoff balance will go up and that you may have limited recourse to challenge these charges.
Thanks to my colleagues at Clark and Washington for bringing the New York Times article to my attention.