Tuesday, March 22, 2016

Florida Appeals Court Bags Sleazy Loan Servicer For Double-Crossing Homeowner Seeking Loan Modification; Bank Collected $52K Upfront For Reworking Mortgage Terms, Then Welched On Deal, Pocketing The Cash & Foreclosing On Home

In Miami, Florida, the Daily Business Review reports:
  • Homeowners who made a $52,000 catch-up payment to stop foreclosure under a mediated settlement agreement claim the lender took their money but double-crossed them on a loan modification deal.

    Gene Lentz, Maria Lentz and Gladys Marcos raised the allegation in their appeal to the Third District Court of Appeal, which ruled in their favor and ordered Monroe Circuit Senior Judge Sandra Taylor to enforce the settlement.

    They faced foreclosure in 2010 after reportedly defaulting on a Community Bank of Florida Inc. loan with a $337,328 balance. After the trial court ordered the case to mediation, the parties reached an agreement to modify the loan if the borrowers qualified.

    The new arrangement dropped the interest rate from 7.5 percent to 6 percent but increased the principal by $41,000 for the bank's legal fees and $4,100 for other expenses, according to court documents. The borrowers were required to pay all closing costs under a deal with a 40-year amortization and a balloon payment due after five years.

    It also required the homeowners to pay $52,000 within 72 hours of reaching the agreement to cover past-due payments on their original loan, court documents show. The bank was supposed to hold those funds in escrow and refund them if the borrowers didn't qualify for the loan. If the modification was approved, the parties were supposed to meet at Community Bank's Homestead office within 45 days to close the deal. The bank would then dismiss the foreclosure case with prejudice and inform credit reporting agencies of the modification.

    After the deadline passed, "the record indicates the bank did not prepare any documents associated with the new loan," District Judge Edwin Scales wrote in the decision issued March 9.

    Both sides blamed the other, with the bank claiming the homeowners failed to provide insurance documents, bank statements and other information needed to process their application.

    "Despite its not receiving complete information to qualify the borrowers, the bank did not return the $52,000," Scales wrote in the unanimous decision with Chief Judge Richard Suarez and Judge Frank Shepherd concurring.
    ***
    The bank [] removed the $52,000 from escrow, applied it to the old loan and successfully filed for foreclosure.

    The appellate panel found the trial court erred by not enforcing the settlement agreement, which would force Community Bank to return the catch-up payment or offer the modification. The court reversed summary judgment and remanded the case to the trial court to enforce the terms of the settlement.
For more, see Keys Homeowners Claim Double-Cross on Loan Modification; Court Agrees (may require paid subscription; if no subscription, try here, then click appropriate link for the story).

For the court ruling, see Lentz v. Community Bank of Florida, Inc., No. 3D14-726 (Fla. App. 3d DCA, March 9, 2016).

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