Chapter 5
Unconscionable
Matt sat at his desk and began reading with only mild interest some materials Rich had given him about the mortgage crisis. Real estate had never been something that appealed to him much. He had taken basic property law at SMU but it seemed so mundane and boring that he had learned just enough to pass the course and move on to more exciting things like personal injury where an attorney could make some serious bucks. Unfortunately, tort reform in Texas had made a personal injury practice less lucrative, so Matt began searching for something else. That’s when he and Lynn discovered the potential of a bankruptcy practice in a credit-driven economy. It had worked well—too well, in retrospect.
From his reading he learned that home mortgages were now bought and sold like stocks and bonds. That meant the notes and deeds of trust had to be standardized so that they could fit into a portfolio and be sold in bulk. The problem with this practice was the effect it had on the mortgagor or consumer. Often these loans would be transferred between different investors several times a year and new servicers would be appointed to collect the mortgage payments and make sure the property was properly insured and the taxes paid. Of course, each time a new servicer came into the picture there was a new opportunity for error in the accounting of the loan.
Matt learned that trading in mortgage loans was so lucrative that the mortgage companies had drastically lowered their minimum requirements to be a home owner in order to increase their loan portfolios and their profits. This seemed good for the consumer since it meant a family could get into a new home with no money down, greatly reduced personal income requirements, and only modest credit. It was good for the construction industry, too, because it meant increased housing starts, greater sales of lumber and building materials, and more jobs. It seemed like everybody profited, so Matt wondered how there could be a crisis.
The intercom squawked, and Suzie advised him that a new client had arrived for a consultation and that his father wanted him to join them. Grabbing a legal pad, he got up and walked briskly to the conference room. He walked in and observed a young woman in her late twenties shuffling through a large stack of letters and documents. She looked upset and profoundly sad.
“Matt, this is Cindy Sharp.”
Cindy nodded but didn’t get up. Matt took a seat next to Rich and started taking notes on his legal pad.
“Okay,” Rich said. “You said over the phone that your husband recently committed suicide.”
“Yes, we had the funeral last week.”
“I’m very sorry. Did I understand you to say that you blamed his suicide on your mortgage company?”
Matt looked up in surprise, his interest piqued.
“Yes, Reliable Mortgage Servicing. They took over from North American Servicing, our original servicer.”
“So, how did they cause your husband’s suicide?”
“They promised not to foreclose, but it was a lie. They kicked us out of our house, removed all our furniture, and left it all out on the front lawn.”
“Really?”
“Yes. Tony got very angry and attacked one of the constables who was taking stuff out of the house. They arrested him, took him to jail, and charged him with assaulting a police officer. He was so humiliated by the foreclosure and the arrest that he wouldn’t even let me visit him while he was in jail—said he just wanted to find a hole and crawl in it.”
Matt grimaced in disbelief. “Wow, I can’t believe they arrested him.”
“Well, they did and when I got word he was being released I came down to the county jail, but they’d already let him out and he was gone when I got there. They found him that same afternoon back at our empty house hanging by the neck from the staircase.”
Matt looked at Cindy in horror. “Oh, my God!”
Rich shook his head. “How did he get in?”
Cindy started to sob. “He broke a pane of glass out of the back door and unlocked it. Then he went upstairs, tied a noose around his neck, tied the other end to the railing on the stairs, and then jumped off.”
Matt felt a chill go down his spine.
Rich got up and retrieved a box of tissues for Cindy.
“So, who found him?” Matt asked.
“Ronald Goddard, the bastard who evicted us from our home. I hope he rots in hell!”
“Somebody from the mortgage company?”
“No. The real estate agent they hired to evict us.”
Matt nodded.
“So your home was recently foreclosed,” Rich continued.
“Yes,” Cindy replied. “Just last month.”
“Okay. Why don’t you start from the beginning. Tell me when you first got behind on your mortgage.”
“Tony, my husband, was a bricklayer for Arrow Construction Company. He worked for them for fifteen years before they filed bankruptcy last year. As you probably know, there hasn’t been any new construction in this area for a couple of years.”
“Right,” Rich acknowledged. “The real estate market has pretty much collapsed.”
“So, he had to go on unemployment, but that’s only about a third of his normal pay. I’m a schoolteacher and my pay isn’t enough to support the family. We have three children under seven.”
Rich shook his head and Matt continued to take notes.
“We had to cut our expenses way back to make ends meet, and we were doing okay until Tony’s unemployment ran out. Then we began to get behind on our bills.”
“So, that’s when you got behind on your mortgage payments?” Rich asked.
“No. We got behind on our credit cards but we kept the house note current. What happened was our mortgage company, North American Servicing, sold our note to Reliable Mortgage Servicing—they call themselves RMS on their letterhead. We got a notice to make our payments to RMS but we had already sent the payment that month to North American. We paid by money order so we couldn’t stop payment or anything.”
“Okay. So, what did you do?” Rich asked.
“I called North American and told them what had happened and they said not to worry about it, as they would forward the money to RMS.”
“But that didn’t happen?” Rich said, shaking his head knowingly. He’d heard this story time and again. It was ridiculous how the mortgage servicers treated people. They should know that when they take over a loan and the note is a month late it’s probably their fault, yet they immediately come down on the consumer and treat him like a deadbeat.
“No. In fact we immediately started getting late notices and telephone calls claiming we were a month behind.”
“So, what did you do?”
“We called North American again, and they acted like they’d never heard from us before. We had to start all over again and explain what had happened. It was so frustrating I could have screamed. I told them that we had sent our payment to them and they were supposed to forward it, but RMS hadn’t gotten it yet. So, they checked their computers and finally acknowledged that they had received the check but that the funds hadn’t been remitted to RMS yet. When I asked them why, they had no explanation but assured me the payment would go out the following day.”
“Okay, so what happened next?” Rich asked.
“We kept getting late notices and each time they’d charge us a late fee. Then we got a notice that they had paid our property taxes and were increasing our house payments.”
“Why did they do that?” Matt asked.
“I don’t know. We’ve always paid it in the past when we got our income tax refund. But they said since our account was delinquent they assumed we wouldn’t have the money to pay the property taxes so they paid it for us. That meant now we owed a payment of $1,212 plus one-twelfth of the property tax amount, or $1,572 per month.”
“So, when you got your income tax return why weren’t you able to get caught up?” Matt asked.
Cindy sighed. “That’s when Tony was diagnosed with prostate cancer and had to have surgery right away. He was out of
commission six weeks. During that time I had to put the kids in after-school care. Between that expense and the deductibles on Tony’s treatment I missed another house payment.”
Matt shook his head. “Boy. Talk about bad luck.”
Cindy nodded. “I was at wits’ end about missing a house payment, so I called them and explained the situation. They passed me around for a while until I talked to a Joan Londry of the modification department. She said they had a hardship program for people in situations like ours and she didn’t see why I wouldn’t be eligible for it.
“She said the way the program worked was they would take the delinquency and tack it on to the end of the note so once the modification took place I would be current and only responsible for regular monthly payments. I was so relieved because that was exactly what I needed.
“So, when they sent me the paperwork, I filled it out and sent it in along with other documents they wanted. They said it would take thirty days to process and that I didn’t need to make any mortgage payments while the modification was being considered.”
“Let me guess,” Rich said. “You didn’t hear from them about the modification within thirty days?”
“No, so I called them and it was like I had never talked to them before. They said they couldn’t find my modification application, but not to worry because they would note in the computer that a modification was in process. So, this time when I sent them my mortgage modification package I sent it by FedEx and tracked it to make sure they got it. Then, just to be sure, I called them and they confirmed that they had the application and supporting materials.
“A week later I was shocked and dismayed when I got a letter from an attorney advising me that I was sixty days past due on the mortgage, had an escrow shortage, and that they were considering accelerating my note and foreclosing. Tony went absolutely crazy when he saw the letter. He was recovering from surgery and already a mental wreck. This undid him.”
“I can imagine,” Matt said, shaking his head.
“He was angry at first, then became depressed, and finally quit talking. He’d just sit on the sofa all day with a somber look on his face. He quit shaving, hardly spoke to the children, and would only get up to go to the bathroom and go to bed. I wanted him to see a psychiatrist but he refused. I told him he had more time to deal with the mortgage company than I did, so he should call them, but he didn’t. When I finally found time to call them myself a man named Ahmad Sheik said not to worry about the attorney letter as it was just routine. He said the computer sent any account over sixty days to their attorneys automatically but as long as they were processing a modification, they wouldn’t foreclose.
“By this time I didn’t trust them, so I asked for something in writing. In response I got a form letter acknowledging the receipt of my modification package and stating that as long as it was being processed they would not foreclose. Obviously, this letter eased my concerns and I put the foreclosure out of my mind, concentrating then on getting Tony out of bed and functioning normally again.
“Another few weeks went by and, not hearing anything, I called the modification department again and, for the third time, they acted like I had never called them. I asked for a supervisor and a Lois Ross came on the line. She said they had no record of my modification application. When she said that, I was so outraged I could hardly breathe. I told her I had a FedEx tracking number showing the package had been received and RMS’s own confirmation number acknowledging receipt. But that didn’t matter to her. She insisted they didn’t have it and asked me to send it in again. I was flabbergasted at this, but I had no choice but to do as she requested.
“The next day I faxed the packet to them and got a confirmation that it had been received. Later that day when I got the mail I noticed there was a certified mail notice. The notice scared me but it was impossible for me to get to the post office until the next morning. When I finally opened the certified envelope I discovered it was a default letter and a notice of trustee’s sale. When I got back home I immediately called the supervisor, Lois Ross, who I had talked to the day before, and she acknowledged that she had the paperwork and not to worry about the foreclosure notice. She assured me the modification application would stop the foreclosure.”
“But it didn’t?” Rich interjected.
“No. Several weeks later Tony noticed a man taking photographs of our house. That upset him, so he confronted the man, who identified himself as Simon Artis and told Tony that RMS had hired him to do an appraisal of the property. When he asked him why they would do that, he advised him that our house had been foreclosed and the RMS was putting the property on the market for sale.”
“Jesus!” Matt said. “I can’t believe they did that to you.”
“It happens all the time,” Rich replied. “I told you most mortgage servicers are totally incompetent and don’t care about their customers. Their only concern is to maximize the fees they can charge the mortgage lender.”
Matt just shook his head in anger. “So, what did your husband do then?”
“He told them we had a modification in progress and that they’d promised not to foreclose. Artis just laughed at him and said we had ten days to get out or they’d go to the justice of the peace and file an eviction suit.”
“How did Tony react to that?” Rich asked.
“He told the guy that if anybody set foot on our property he’d shoot them.”
“Was he serious?”
“No. He doesn’t own a gun. Tony wouldn’t hurt a soul, but he was very upset and worried about what was going to happen to us. We had no money and if we were evicted we’d be out on the street. We have relatives but they are out of state and I’d lose my job if we left Dallas.”
“So, What did you do?” Matt asked.
“I called Lois at RMS again and asked her why they had foreclosed when we had a deal. She told me to send them a letter explaining what had happened and asking for them to set aside the foreclosure sale.”
“So, did you do it?”
“It seemed like a colossal waste of time, but I did what she suggested. Unfortunately, they still filed the eviction suit and set it for hearing in ten days. At the hearing we told the judge what had happened, but he said his hands were tied and gave us seventy-two hours to get out of the house.”
Matt couldn’t believe what he was hearing. He realized now the mortgage lenders were just as greedy and underhanded as the credit card companies that he had been up against before he went to prison. The more he heard the angrier he became.
Cindy continued. “We slept that night at the Kamona Motel. It was a really sleazy place but it was cheap. The next day when we went to the house to start packing we found it padlocked. We called Simon Artis, but only got his voice mail. We slept another few days at the motel, but the fourth night we were out of money and slept in the park. On the fifth day we went by the house and the constables were there removing everything and placing it in the yard. When Tony saw them throwing our stuff out on the grass he became outraged and started yelling at the constables and getting in their faces. They told him to back off, but instead he took a swing at one of them, and they arrested him.
“The kids and I slept in the park again that night. In the morning I took them to school and then went to work. Later that day I got a call from someone at the jail informing me that they were letting Tony out and that I should come pick him up. When I got there he was gone. He hadn’t waited for me. I drove around looking for him, but I never thought of going back to our house. The police called me in the late afternoon and told me Tony was dead.”
“Did he leave a suicide note?”
“Yes. He apologized to me and the kids for letting us down and said we were better off with him dead.”
Matt looked at Rich and then at Cindy. “I can’t wait to sue those bastards,” Matt said angrily.
“Do you think we have a case?” Cindy asked.
“Yes. I can think of several legal theories that should work—unfair
debt collection, breach of contract, and fraud.”
Cindy nodded. “Good. I want them to pay!”
Rich explained the standard contingency fee contract that stipulated that if they settled the case without filing a lawsuit they got 25 percent of the recovery, 33 percent if they had to try the case, and 50 percent if the case was appealed after trial. Cindy thought that was fair and signed the contract. Matt said he’d start working on a petition immediately and when it was ready he’d have her come back in to make sure he had the facts correct before they filed it. After Cindy had left, Rich asked Matt what he thought about the case.
“I can’t believe how she was treated. It’s so outrageous; it’s hard to believe it really happened the way she said it did.”
“Oh, I’m sure RMS will have an entirely different story, but I’d bet on Cindy’s version,” Rich said.
When Matt got back to his research into the mortgage crisis he found himself much more interested and focused. He wanted desperately to make RMS pay for Tony Sharp’s death. What they had done to Cindy and her family was unconscionable and he vowed to do whatever it took make them pay.