Posted on Wednesday, March 16, 2011
WHEN Zella Mae Green of Georgia filed for bankruptcy to save her home from foreclosure in 2004, she and her lawyer wanted to know two things: Did she actually owe any back payments on her mortgage? And, if so, to whom?
It didn’t seem like a lot to ask. But until last week, those questions had been unanswered for seven years.
Mortgages are complicated to begin with, of course. But when homeowners fall behind on their payments, the situation becomes far more complicated. Recurring fees and charges muddle the accounting. That banks routinely transfer the notes underlying a property can make things cloudier still.
But how Ms. Green’s case became her personal version of Jarndyce and Jarndyce, the endless lawsuit at the center of the Charles Dickens novel “Bleak House,” is a story for our times. The conflicting claims made over the years by employees and representatives of Wells Fargo, which says it holds the note on her property, are enough to make your head spin.
Wells Fargo and Ms. Green didn’t exactly agree on how much she owes on her mortgage. Ms. Green took out a $40,250 mortgage in 1988, never refinanced and figured she is four payments behind. Wells Fargo contended that she owes 113 back payments, totaling more than $48,000.
Ms. Green said she would have given up years ago if it weren’t for her lawyer. She would have forfeited her two-bedroom home in Decatur to one of the three institutions that have claimed — at the same time, mind you — to hold title to it. “It’s been a big mess for a long time,” she said in a recent interview.
Howard Rothbloom, a foreclosure defense lawyer in Marietta, Ga., represents Ms. Green. “The point of this whole case is that inaccurate, incomplete and conflicting information has been provided to Ms. Green over the course of seven years,” he said. “Determining the balance due on her loan should not have to be so difficult.”
THE whole episode makes you wonder, yet again, how many of the millions of foreclosures in recent years might have been based on questionable accounting or improper practices by loan servicers.
Years ago, Ms. Green, a widowed seamstress, ran into trouble on her mortgage several times. In the early to mid-1990s, after she was laid off and had to undergo an expensive emergency medical treatment, she filed for bankruptcy four times to hold on to her house. Georgia is a nonjudicial foreclosure state, and filing for bankruptcy lets borrowers keep their homes and work out a payment program overseen by a judge.
In the late 1990s, payment records show, Ms. Green got her mortgage back on track for about five years. Then a previous loan servicer began misapplying some of her payments, Mr. Rothbloom said. In January 2004, he took her case, filing a bankruptcy proceeding to stave off a foreclosure.
Wells Fargo took over servicing Ms. Green’s loan in May 2004. Mr. Rothbloom kept trying to determine who owned the loan and how much Ms. Green owed so that they could complete her case. “We filed a Chapter 13 bankruptcy to cure the arrearage, and we could never get a clear answer or supported answer as to what that arrearage was,” he said. “Bankruptcy rules require supporting documentation.”
Since then, he said, Ms. Green, 71, has paid her loan on schedule to a unit of Wells Fargo.
After two years passed, Mr. Rothbloom still had not received a complete and accurate accounting of Ms. Green’s loan. So he filed suit in May 2006 to determine who owned the note on her property. Because three institutions claimed ownership but none could produce the original note, Mr. Rothbloom began conducting discovery. During this exercise, three different Wells Fargo employees made three different representations to the court about the whereabouts of the note.
Story No. 1: The note was lost. Wells Fargo’s lawyers produced a sworn statement to that effect made on Oct. 20, 2004, by Lisa Joseph, a Wells Fargo employee. But that affidavit was incomplete. The section where Ms. Joseph was supposed to describe the diligent search she had conducted to find the note was blank. The document also said that a copy of the mortgage was attached. It wasn’t.
Hoping to verify that no one else might be holding the supposedly lost note, Mr. Rothbloom asked for Ms. Joseph’s deposition. Wells Fargo’s lawyers refused to supply her address. Instead, the bank produced an employee who knew nothing about the loss of the note or what Ms. Joseph had done to try to find it.
It was during that interview, in July 2006, that Story No. 2 emerged. The Wells employee said that the note had never been transferred to the bank, ergo, Wells could not have lost it, as Ms. Joseph had previously sworn.
Two months later, Wells filed a brief conceding that it did not own a security interest in Ms. Green’s loan but asking the court to dismiss Ms. Green’s suit. The court refused.
Late last month came Story No. 3. Wells told the court that it had found the missing note. It sits in the bank’s files in Maryland.
Over almost seven years, Wells Fargo employees swore to three different stories about the note on Ms. Green’s property. When asked two weeks ago how this could be, a spokeswoman for the bank said: “We regret any difficulties our customer experienced in this circumstance. This is the kind of situation we seek to avoid, and we are working on this customer’s situation to reach a solution.”
Late last week, Wells Fargo agreed to a settlement with Ms. Green. The terms are confidential. The deal came shortly after the United States Trustee, the unit of the Justice Department that oversees the nation’s bankruptcy courts, indicated it was interested in the facts of the case.
Fascinating how quickly these things get resolved when some daylight shines in.
By GRETCHEN MORGENSON, THE NEW YORK TIMES