Posted on Friday, February 4, 2011
Although Teresa O'Neal and Marco Delgado are among the millions who have lost their homes to foreclosure, they're fighting back by claiming a giant lender used "false and insufficient" documents to seize their properties.
The two Tampa-area residents are seeking class action status for a suit against Bank of America. They claim the foreclosure process was tainted by flawed documentation and want their homes returned.
The suit against the biggest U.S. lender by assets and deposits is the latest chapter in a national controversy over how financial institutions and their attorneys handle foreclosures. They have been accused of forging signatures, fabricating evidence and backdating documents.
Bank of America now owns 340 repossessed properties in Miami-Dade County, 304 in Broward County and 157 in Palm Beach County, according to property records. That number will grow. Bank of America has about 55,000 pending foreclosures in Florida, according to the Florida attorney general's office.
Bank spokeswoman Shirley Norton said the bank "intends to file a motion to dismiss" the suit and said the bank-owned properties won't be pulled off the market. She declined further comment.
More than 1,000 people across Florida could qualify to join the suit, said Tampa attorney Lee Atkinson, who is representing O'Neal and Delgado. The lawsuit won't affect foreclosed properties that the bank sold to a third party.
In addition to returning properties to their former owners, the suit, filed in the Tampa federal court, also seeks unspecified damages and calls for deficiency judgments against the homeowners to be voided. The deficiency balance is the portion of a loan that remains unpaid after a property is sold through foreclosure.
The suit claims Bank of America representatives forged or signed affidavits without having knowledge of the foreclosure cases. The affidavits are guarantees by lenders that they are the rightful owners of the mortgages.
Lenders usually sell residential loans to companies that place them into investment pools. Some loans have been sold multiple times and lenders and loan servicers lose track of the original documents. Industry critics say lenders and foreclosure processors often sign the affidavits attesting that they own the note even though they lack documentary proof.
The suit also says foreclosure documents were executed by nonregistered notary publics in violation of Florida statutes.
"Through this pattern of criminal activity, [Bank of America] has unlawfully acquired or maintained an interest in, or control of real property, and currently holds title to the real property unlawfully obtained," according to the Jan. 12 complaint.
The specific allegations against Bank of America and other lenders mostly arose from depositions given by former and current employees of lenders, loan servicers and foreclosure law firms.
The claims are being investigated by 50 state attorneys general.
Lisa Epstein, a West Palm Beach foreclosure activist, says the Bank of America lawsuit is important regardless of the outcome.
"This class-action suit is actually an outgrowth of more acceptance of the fact that these foreclosures are fraudulent," said Epstein, a former oncology nurse who helped create an online movement almost two years ago to raise awareness about questionable foreclosures.
"Anything that brings some sort of recourse for all of the fraud and financial crime that has been committed, leaving families homeless, is a good thing. It focuses more attention on this issue."
Many of the claims in the lawsuit mirror findings of the Economic Crime Division of the Florida attorney general's office. Two weeks ago, members of the economic crime unit appeared before the Florida Senate Banking and Insurance Committee to discuss "unfair, deceptive and unconscionable acts" employed by lenders and servicers including using fake witnesses, notaries and documents.
Many of the problems cited came to light as part of an ongoing probe of four Florida foreclosure law firms.
"That report is very helpful because it gives 90 pages of examples of the various kind of things that were done," Atkinson said. "The foreclosure practices got so out of control, the law firms were turning foreclosures in the most expeditious and efficient way possible — even if, it wasn't legally accurate and correct."
Atkinson plans to incorporate the attorney general's findings, including depositions taken by its investigators, in his case.
In the Bank of America suit, Atkinson cites statements by a former employee of the Law Offices of David J. Stern, once one of the nation's larger foreclosure firms. Tammie Lou Kausta testified on back-dating signatures and signing affidavits without reading any document related to the case. Until late last year , Bank of America used the Stern firm to process its foreclosures.
Liliana Fiano, a former Bank of America borrower, welcomed the class action suit even though it comes too late to help her.
Facing foreclosure of her four-bedroom Weston house in 2008, she sold it through a short sale. She still owes the lender $98,000 and may have to file bankruptcy, said Fiano, who now makes a living selling Italian clothing.
Though she has no evidence that her foreclosure case was handled improperly, the experience of losing her home has turned her into an activist.
The mortgage broker-turned-foreclosure advocate spends hours researching court filings on behalf of homeowners facing foreclosure to help them identify questionable documents and build their defenses, Fiano said.
"I look at their cases and make them aware of the different class action lawsuits that they could join to pursue some remedy," she said. "A lot of people don't know about this … My mission now is to help people fight foreclosure fraud," she said.
Melanie BellFacing foreclosure, Liliana Fiano sold her Weston house in 2008 through a short sale but still owes the lender $98,000 and may have to file bankruptcy. She is now a foreclosure advocate. "My mission now is to help people fight foreclosure fraud," she said.
By Paola Iuspa-Abbott, DAILY BUSINESS REVIEW