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Elliston couple files lawsuit in mortgage mess

roanoke.com | May 10, 2015

By Dan Casey

There are lots of crazy stories about the mortgage servicing mess dating from the mid- to late 2000s, and I’ve written about a couple of them.

But the case of Trinity and Jessica Heckman may be the mother of all mortgage nightmares. The married couple — he’s a police officer, she’s a hospital nurse — live with their 2-year-old son in a modest home in Elliston that they purchased in 2006.

Late last year, the Heckmans were surprised to learn they don’t own it. That’s because it was sold seven years ago in a foreclosure auction and nobody informed them, they said. Nevertheless, they’ve continued to make their payments.

When their current mortgage company tried to hike those payments by 39 percent last year, they consulted Floyd lawyer Jonathan Rogers. After investigating, Rogers advised them to stop making any payments.

Now the Heckmans are suing some really big players in the mortgage and housing game. In March, they filed a lawsuit in Montgomery County Circuit Court to regain ownership of a house they had thought was theirs.

It alleges fraud, breach of contract and negligence on the part of SunTrust Mortgage, Nationstar Mortgage, and a third company, Professional Foreclosure Corporation of Virginia, which auctioned off the house.

The Heckmans also are suing the Federal National Mortgage Association, aka Fannie Mae, which bought their house at the January 2008 foreclosure sale. Apparently, it still owns the place, although the lawsuit doesn’t accuse Fannie Mae of any wrongdoing.

The couple is seeking compensatory and punitive damages totaling more than $1 million, as well as the return of their house.

SunTrust and Professional Foreclosure have yet to reply to the lawsuit; Nationstar on April 27 filed a response that denies the claims against it.

Keosha Burns, a spokeswoman for Fannie Mae, said she couldn’t comment on specifics because of privacy considerations. But the allegations outlined in the Heckmans’ lawsuit don’t reflect the agency’s records in the case, she said.

“It’s always our goal to keep people in their homes,” Burns said. “We work with homeowners to help them stay in their homes.”

Counting principal, interest, taxes and insurance, the Heckmans have paid well over $100,000 on what was originally a $134,000 loan, Rogers noted. To learn almost 10 years later that they have no ownership stake in the house “is ludicrous,” the lawyer added.

From the chronology of events the lawsuit depicts, it’s unclear whether the defendants’ actions were deliberate, an unfortunate series of bungles or a combination of the two. Errors and mistakes have become increasingly common in the mortgage industry in recent decades, as it has transformed largely from a retail lending business into one of mortgage-backed bonds marketed by giant Wall Street investment banks.

A piece of the American dream

Trinity Heckman, 35, and Jessica Heckman, 33, bought the house in June 2006 with a $134,000 loan provided by Flick Mortgage Partners.

It was the first time either one of them had owned a house, and to say they were proud would be an understatement.

The original mortgage payment was $1,100 per month. Soon after the Heckmans moved in, Flick transferred the mortgage servicing to SunTrust.

“We were just sending in a check, mailing it in,” Jessica Heckman told me.

A few months later, she said, they received a letter from SunTrust advising them they could pay off their 30-year-mortgage more quickly if the payments were automatically deducted from Jessica’s bank account every two weeks. So the couple agreed.

And for three or four months, SunTrust did that. But in February 2007, the Heckmans got a worrisome phone call from SunTrust.

“They said we were three months behind,” Trinity Heckman said. “We couldn’t figure out how.”

Jessica told the SunTrust rep that she had an automatic withdrawal agreement with SunTrust, and that $550 was being deducted from her account at BB&T every two weeks. Her bank statements reflected the withdrawals, she said. The SunTrust rep said he would check into it.

“They called back like a week later,” Jessica told me. “They said, ‘Oh, we got you confused with a Trinity and Jessica Heckman in Tennessee ’ … they said, ‘Sorry for the inconvenience.’?”

About six more months went by without incident. Then in November, SunTrust sent the Heckmans a letter declaring they were in default on the mortgage. It said they were six months behind.

That’s when Jessica looked more closely at her bank statements, which she acknowledges she had not carefully reconciled each month. Although those showed the $550 withdrawals every two weeks, Jessica said, the statements also showed that in September 2007, SunTrust Mortgage had redeposited more than $6,000 to her account in a single transaction.

By then, her account balance was more than $6,000 higher than it should have been. Jessica said she offered to give back the redeposit to SunTrust. But the SunTrust rep demanded $12,000 to put a halt to foreclosure proceedings, she said.

“I said, ‘Where are you getting this $12,000 from?’?” Jessica told me. And the SunTrust rep explained the additional amount was owed in late fees and attorneys’ fees. The Heckmans didn’t have that amount of money, but they felt desperate to keep the house.

The SunTrust rep told the couple he would help them apply for a mortgage modification loan. They said he told them it would keep them in their home. But while their application was being processed, they would have to make $1,400-a-month payments to try to “remain in good standing,” Jessica quoted him as saying.

The Heckmans said they agreed. Jessica filled out paperwork for the mortgage modification and faxed it to SunTrust, and the couple began making the higher payments beginning in January 2008. But unknown to them, that didn’t stop the foreclosure proceedings.

The eviction notice

In December 2007, right around Christmas, Jessica Heckman got a phone call from her cousin, Vanessa Richardson. She had items stored in a detached garage at the Heckmans.

Richardson had spotted a legal ad in The Roanoke Times noting the Heckmans’ home would be sold at a foreclosure auction on Jan. 4, 2008. The ad appeared on Dec. 20 and Dec. 27, 2007.

It noted the home was being auctioned off by Professional Foreclosure Corporation of Virginia. That was a subsidiary of a Virginia Beach-based law firm that specializes in debt collection. SunTrust, according to the Heckmans’ lawsuit, directed Professional Foreclosure to auction the house.

Richardson asked, “What is going on? I see your house is being foreclosed upon. Do we need to come and get our stuff?” Jessica recalled.

Jessica said she called SunTrust again and informed them of the ad, and said, “I thought it [foreclosure] was being stopped.”

The SunTrust rep “advised me that it was being stopped, and they had contacted [Professional Foreclosure], and that it would not go for sale at the auction, and that we would have the loan modification complete before anything was to happen,” Jessica said.

But the auction appears to have occurred anyway, on Jan. 4 at 11:30 a.m. on the steps of the Montgomery County Courthouse in Christiansburg. The buyer was Fannie Mae, which paid $117,500 for the Heckmans’ house. The sale was recorded on Jan. 22, 2008, in Montgomery County Circuit Court.

The Heckmans were unaware the auction ever happened. They never received any mail warning them it would take place. But early in February 2008, Jessica arrived home from work and found an eviction notice on their front door.

“It was a white piece of paper. It said ‘EVICTION.’ It said you have two weeks to get out,” Jessica told me.

“I called SunTrust,” she added. “I said, ‘My house is sold. I have an eviction notice.’ They said, ‘Oh, that must have been a mistake,’?” and that the Heckmans shouldn’t worry about it.

Debt climbs to $154,000

According to records in Montgomery County General District Court, the eviction action was brought by Fannie Mae, but it was quickly dropped. The Heckmans stayed in the house.

They continued making the $1,400-per-month payments. And in May 2008, their mortgage modification loan was approved by SunTrust, even though Fannie Mae now held the title. The bank recorded the modification loan in October at the Montgomery County Courthouse.

It increased the Heckmans’ debt to $154,000, because SunTrust added roughly $20,000 in late fees, application fees and attorneys’ fees into the modification, the Heckmans said. Counting principal, interest, taxes and insurance, their new payment climbed to $1,444, Jessica said.

They made those to SunTrust through December 2010, when the loan was transferred to Nationstar Mortgage, a major servicer based in Texas.

Except for the fact that their monthly payment was $344 higher than the original, nothing seemed amiss until August 2012. That was when Nationstar sent the Heckmans a check for $1,000. Jessica called and asked why.

“They said we’d overpaid the escrow,” Trinity Heckman recalled. It’s the fund that mortgage companies use to pay real estate taxes and insurance on their clients’ homes. Around that time, Nationstar also cut the Heckmans’ monthly payment to $1,333, which they were happy about.

Then in the spring of 2014, Nationstar offered to refinance the Heckmans’ home at a lower rate. That would cut their monthly payments even more. The Heckmans sought to take advantage of the offer. And that’s when a new problem cropped up.

‘Screwed all the way around’

Remember in August 2012, when Nationstar had sent the Heckmans the $1,000 check, and then cut their monthly payment from $1,444 to $1,333?

The Heckmans discovered that wasn’t the result of an escrow account overpayment. Instead, they told me, it was because Nationstar had stopped paying the flood insurance on their house, and paid the premium back to them instead. That was the source of the $1,000 check, they said. The cut in the monthly payment was because Nationstar was no longer escrowing the monthly premium, the Heckmans added.

They learned this last year when Nationstar denied their application to refinance the loan because they lacked flood insurance.

But fixing the issue wasn’t as simple as merely reinstating the insurance. That’s because the flood zone maps had changed in the interim.

When the Heckmans bought their house in 2006, it was assessed as a “category D” flood risk, which is low. But by 2014, their house was now in a “category A” flood zone, where the risk was much higher.

The Heckmans visited their insurance agency, Castle Rock Insurance Agency in Christiansburg. They said an agent told them that if their earlier flood insurance policy had been maintained, the rate wouldn’t have changed, even though the risk had.

But because the policy had been cancelled for nonpayment, and the flood risk was now higher, a new policy would cost about $520 per month, compared to their old policy, which was somewhere around $100 per month.

The agent said, “ Y’all are just getting screwed all the way around,” Jessica told me.

And then in November 2014, Nationstar raised the Heckmans’ monthly payment to $1,855, to reinstitute flood insurance on their home. The Heckmans could not afford it.

Enter the lawyer

They retained Rogers to fight the higher payment. And the more he looked into the history of their mortgage, he said, the bigger the mess he found.

It started with the foreclosure auction in 2008, which Rogers said was illegal in myriad ways. For starters, the Heckmans were never formally notified of the auction, as required by law.

Afterward, SunTrust “fraudulently continued to insist that the Heckmans pay for taxes and insurance and other amounts associated with ownership of real estate even though SunTrust knew the Heckmans no longer owned their home,” the lawsuit states.

Rogers contends the later loan modification was illegal, too, because the Heckmans no longer held title to the house. That had been rendered moot by the auction. The deed was, and still is, in Fannie Mae’s name, according to an opinion from Montgomery County Commissioner of Accounts Daniel Hamrick.

Moreover, a little more than two years after Nationstar took over the loan, it instigated a routine title search on the property. That also showed the Heckmans didn’t own it, but Nationstar never told them. Instead it continued accepting their payments. The lawsuit alleges the Heckmans were defrauded each time those payments were accepted.

After the foreclosure sale, Professional Foreclosure filed no accounting of the proceeds with the Montgomery County Commissioner of Accounts, as required by Virginia law, the lawsuit charges.

That’s backed up by a letter Rogers obtained from Hamrick, the commissioner of accounts. It states: “There are no documents of record in the Clerk’s office regarding an accounting that would have been required upon the trustee’s foreclosure.”

“Professional Foreclosure Corp. received $117,500 from Fannie Mae at the auction,” Rogers said. “That money is supposed to be applied [to the Heckmans’ original debt]. Where did the money go?” That is unclear.

Professional Foreclosure Corp. did not respond to my attempts to get answers about its role in the foreclosure auction. Michael McCoy, a spokesman for SunTrust, and John Hoffman, a spokesman for Nationstar, each declined to comment because the matter’s in litigation.

Nationstar has asked the court to dismiss it from the lawsuit. “Plaintiffs’ damages, if any, were not caused by Nationstar, but by another person or entity for whom or which Nationstar is not responsible,” it responded in a court filing.

In November, Rogers advised the Heckmans to stop making any payments on their mortgage because it appears they don’t own their house.

As a result, Nationstar in January and February sent the Heckmans default notices indicating the company intended to foreclose. The entire mess has caused a downgrade in the Heckmans’ credit scores.

Trinity’s score is now around 520. It used to be around 700, he said. He said needs to keep a high score to maintain his job. (He asked me to keep the name of his department out of this story.) Jessica’s score is around 600 now; she said it used to be 690.

“There’s so many multiple screw-ups in this matter,” Rogers said. “I feel like there’s some deliberateness in the mindset of the mortgage industry, ‘We’re going to string them out.’ I do believe there’s more than inadvertence.”

He added: “I think a Montgomery County jury is going to enjoy this case.”

Stay tuned.

 

 

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