Maryland Man Pays Off Mortgage; Loses Home To Foreclosure Anyway

In this story, reported in yesterday's Baltimore Sun, an immigrant from Ghana and his family lost their home to foreclosure involving a mortgage that they had already paid in full (or so they thought). The problem apparently started with a refinancing of a home mortgage in 2001 with Washington Mutual Bank ("WaMu") (the existing mortgage that was being refinanced, and which is central to the problem in this story, was also held by WaMu - acquired through a bank merger with a predecessor bank). Four years later, claiming that they never received the proceeds from the 2001 mortgage payoff, WaMu forecloses on the property, and the homeowner and his family lose their home.

The factors that make this story as troubling as it is are:

• WaMu claims that they never recieved the payoff of the existing mortgage from the closing agent back in 2001,


• However, WaMu was both the existing mortgage holder and the bank providing the refinancing; why they disbursed money to the closing agent on a new mortgage that was only going to be sent back to them anyway as a payoff of the existing mortgage is a question that apparently has no answer - the refinance on WaMu's books could have easily been handled in-house by making the appropriate bookkeeping entries,


• While there is no evidence that Dwayne E. Pope, owner of Advance Settlement Agency Inc., the now-defunct title company that handled the homeowner's refinancing, did anything improper in this particular case, the less-than-honorable Mr. Pope is currently doing "a 30 month residency" at the Federal Correctional Institution at Fairton, N.J. for embezzling more than $1.6 million in escrow settlement funds on apparently unrelated cases that occurred in 2002 and 2003,


• Assuming WaMu didn't get paid on the existing refinanced mortgage in 2001, it didn't do anything to immediately seek out the whereabouts of the payoff when the refinancing took place and when the transaction was still fresh in everyone's mind. Rather, they apparently fell asleep on its rights to demand payment until 2005, at which point it woke up from its four year nap and initiated a foreclosure action against the homeowner (at a point in time when the above mentioned closing agent / embezzler Mr. Pope was probably being criminally prosecuted, if not already in prison; I can only speculate that getting the relevant transaction records from someone in Pope's shoes is probably pretty tough, especially if such records may have already been destroyed),


• The homeowner couldn't prove in court that the mortgage was paid off because of the alleged loss of key documents by the mortgage lender and the now-incarcerated Mr. Pope (for example, the original check for the payoff is missing, and only a copy of the front of the missing check was found),


• The attorneys for Washington Mutual who foreclosed on the home filed an affidavit saying that it had lost the original promissory note that was signed by the homeowner (legally, the foreclosing mortgage lender is required to present the original promissory note as a prerequisite to foreclosure; but because the vast majority of foreclosures are not contested by the homeowner - usually because they don't know their rights - although many attorneys don't know what rights homeowners have in these situations, either - and they have neither the time or expertise to go out and find an attorney who knows what they're doing, nor the money to pay the attorney if he/she is found, mortgage lenders can typically get away with not presenting the original note in court simply by filing an "affidavit of lost note", knowing that the affidavit will probably go unchallenged),


• Reportedly, Maryland law puts homeowners at a severe disadvantage in foreclosure cases. Unlike renters in disputes with landlords, or cases involving even the smallest of small claims lawsuits, the law in Maryland reportedly neither guarantees a court hearing in disputes between homeowners and mortgage companies, nor does it require receipt of notice by a homeowner about a foreclosure. In addition, Maryland reportedly has the fastest foreclosures in the country.


• Proposed legislation was introduced in the Maryland legislature to require at least 30 days' notice and posting of the property before any foreclosure sale. The homeowner in this story actually testified at a state Senate hearing in this regard, giving his story. However, the proposed legislation ultimately failed, although reportedly, it is expected to be reintroduced next year.

For the whole story, see Out of townhouse, but not by choice (Immigrant loses his dream through foreclosure). - Story Page 1, Page 2, Page 3, Page 4.

Postscript - Legal Question

In the "too little - too late" department, I wonder if, given the inexplicable and (in my view, unreasonable) delay by WaMu in waiting four years to initiate the foreclosure action, coupled with the possible difficulty in obtaining all the relevant transaction records from Pope that could have proven that the mortgage payoff was received by WaMu (given Pope's own legal troubles that arose well after the 2001 refinancing), there was enough for the homeowner to assert a defense of laches in the foreclosure action under Maryland law, notwithstanding the fact that the statute of limitations on bringing a foreclosure action may not have expired.

Baltimore Sun Follows Up

I suspect that this story was troubling enough to those over at the Baltimore Sun that they decided to give this story more space in their newspaper today. For one follow-up story and an opinion article related to this story, see:

Help for homeowners (Md. officials vow hearings, reforms on foreclosure) (6-8-07)

The court of Catch- 22 (6-8-07). Kwaku Att Poku

Go here for other posts on this story, including links to media reports. Kwaku Atta Poku