This is the second of two stories about a family in Elk Rapids who encountered a mortgage modification scam artist and wound up on the brink of losing their home. Last week, the Express looked at what happened to Pablo and Guadalupe Bocardo that caused their home to be foreclosed.
This week, we look at the efforts of their attorney to fight Fannie Mae to get their house back.
There is a federal lawsuit in Grand Rapids concerning a house in Elk Rapids that, on the surface, looks like it would be in everybody’s best interest if the sides could just work something out.
On one side you have the couple that’s lived in a house for 12 years, who have raised four children there, beautified the yard and made improvements. They’ve put mortgage payments in escrow and have a good income. They want to live in the house and they are ready to deal.
On the other side you’ve got the bank, Fannie Mae – a quasi-government mortgage lender -- which, although this property may be just one line on a spreadsheet that’s a thousand pages long, it seems it would want to make money rather than lose it.
When the case, Bocardo v. Select Portfolio et al, came before a U.S. District Court Judge last month, the judge came to just that conclusion -- this is a case where, rather than spending untold amounts of money on attorneys, the sides should just work something out.
“You’ve got somebody living in the house with income to pay, ... that’s the makings of a deal typically, no matter where they are in the process,” Judge Robert Jonker said. “Even if the bank has a complete winning hand from a legal point of view, you know, why take it if you’ve got somebody in the house who wants to stay there and can afford to pay for it?”
Later in the hearing, Jonker said the bank would make a deal, if this were a rational world.
“You know, six months from now, everybody loses. Everybody. Including Fannie Mae, because they have got to sell the house at a discount in a distressed market. When if everybody knew the real facts they’d say, ‘Jeez, we’d rather not (take over this home). We’d rather see if there’s a (loan modification) possible, especially under these circumstances.’” But in these times, in real estate at least, this is no rational world.
TRIAL DATE SET
Those comments come from a May 7 hearing as attorneys for Fannie Mae and mortgage servicer Select Portfolio sought to have a lawsuit filed on behalf of Pablo and Guadalupe Bocardo thrown out of court.
The banks had already successfully had the case moved from state court in Antrim County to federal court where they thought they would easily get the case dismissed, but their lawyers were wrong.
Jonker sided with the Bocardos’s attorney, Jason Jenkinson, and ruled that the lawsuit he filed that challenged the foreclosure of the Bocardo’s home could proceed. A trial date has been set for June, 2013.
Part of Jonker’s ruling was based on the fact that the Bocardos lost their home because they fell victim to a woman who was running a mortgage modification scam.
Monthly payments the Bocardos paid to convicted felon, Tashia Winstanley, that they thought were paying their mortgage, were actually embezzled. Winstanley wound up in prison; the Bocards wound up foreclosed.
WHERE’S THE PROOF?
But Jonker’s ruling went beyond that. Jonker also said he thought another argument from Jenkinson was worth exploring.
Jenkinson argued that, perhaps as a symptom of the frenzied real estate market that led up to the 2008 financial crisis and the wave of foreclosures that followed, Fannie Mae could not prove that it actually owned the home.
Jenkinson’s argument is extremely complicated and delves into complicated law regarding title and real estate, but in its simplest form it is this -- only a mortgage holder can foreclose on the mortgage, not some other party, and in this case, the party that foreclosed on the Bocardos did not own the mortgage.
According to the paperwork in the Antrim County register of deeds, Fannie Mae never had any ownership in the Bocardo’s home, until they owned it after the sheriff’s sale.
At the hearing the judge said there might be some reasonable explanation, but he thought the paperwork submitted by both sides up to that point raised enough questions and the matter should be looked into, even if it takes a federal trial.
NO ONE TO NEGOTIATE
Jenkinson’s novel argument could have big implications if his case prevails.
He said there are thousands upon thousands of foreclosures that have happened in a way similar to the Bocardos’ case. Those foreclosures could be thrown into doubt if he wins this case, he said.
And yet, despite the huge stakes, all he and the Bocardos say they really want is to settle. They want Fannie Mae to help work out a loan modification or a new mortgage for them, as complicated a process as that might be, so they can remain in their house.
Jenkinson said he thought after the May 7 ruling that the other side would be open to negotiations, but he soon learned he was wrong.
It appears even the attorney on the other side of the case, the one working for Fannie Mae and Select Portfolio and the foreclosure company, can’t penetrate the bureaucracy he represents.
“Their attorney says that he’s contacted them and he hasn’t heard back from them,” Jenkinson said. “I am stumped as to why I am not hearing back from them.”
Jenkinson said at a point, anyway, it appears it is impossible to negotiate their position because there is no one to negotiate with.
Part of what Jenkinson and the Bocardos are up against is like a giant man-made machine that has come to life on its own and operates outside of any one individual’s control. The gears and motors and moving parts of this machine are too complex to be understood.
It’s a many-tentacled beast made up of offices and lawyers and foreclosure mills and attorneys and morgage servicers and automated loan servicing systems that means people facing foreclosure and eviction deal with computers and not an actual human being.
NO ONE RESPONSIBLE
Steve Dibert, president of MFI-Miami, a company that assists in foreclosure defense which is assisting in the Bocardo case, said the system is set up that way on purpose.
Fannie Mae and the large mortgage servicers and the law firms that act like foreclosure mills are designed so that paper passes from desk to desk and decisions are never made by the same person. That way, no one is responsible for what goes on and decisions cannot be traced back to one person.
When a foreclosure is set into motion, it seems, there’s no one person or even one office to call to attempt to sort things out.
Why won’t the banks modify loans in cases where people have income and where it would seem to be in everyone’s interest to strike a deal? What about in cases where it can be proven a homeowner was the victim of mortgage fraud? Why isn’t there a way for a bank to take that into account?
“I don’t believe that they know how to handle the depth of what has happened in this country with foreclosures,” Jenkinson said of Fannie Mae.
Another aspect to the problem, in Michigan anyway, is that while Fannie Mae is the catalyst for many foreclosures, the actual foreclosure work is farmed out to servicers and law firms that Jenkinson and Dibert refer to as “foreclosure mills.”
“It is absurd. Fannie Mae wants to be the hand that does everything but doesn’t get dirty,” Jenkinson said. “It fails because it’s going to fail. This process is never going to start working, ever.”
SEARCH FOR COMMENT
As a reporter trying to find answers about what happened in a particular mortgage foreclosure case, I found myself down the same rabbit hole as someone attempting to modify a mortgage.
It seems no one wants to comment about an ongoing foreclosure case.
The attorney who argued the summary dismissal hearing in federal court for Fannie Mae, William Todd Van Eck, of Rockford, said he could not comment on the case because he was not the lead attorney.
He referred questions to Orlans Associates, a law firm in Troy, which Jenkinson and Dibert refer to as “a foreclosure mill,” but Van Eck said he did not have a name of someone there who would be able to answer questions.
At that firm, after navigating through several layers of a voicemail system to reach the litigation department, my request for comment about the Bocardo case was referred to the voicemail of someone said to be “one of our managing attorneys.”
That voicemail was not returned.
Similarly, Fannie Mae would not answer questions.
Fannie Mae has a media relations department and a person reached there, in Washington D.C., said he could not answer any questions about the Bocardo case because it involved pending legislation and he could not speak on the record about Fannie Mae in general.
A message left at the “customer advocacy department” at Select Portfolio in Salt Lake City, Utah, was returned by a representative from Credit Suisse in New York who said media inquiries were referred to him from Select Portfolio because that company is owned by Credit Suisse. He said he could not comment due to confidentiality rules.
On June 25, after the Express made these calls, Jenkinson received an email from attorneys for the defendants requesting paperwork so they could consider a “potential” loan modification.
TOO LATE TO THE TABLE
If the hearing transcript doesn’t explain why no one at the banks will discus modification with the Bocardos, it does at least explain the banks’ position as to why the Bocardos’ property should be foreclosed. Basically, Van Eck argued at the hearing, the couple did not properly follow the legal process.
Van Eck argued that the Bocardos had no standing to challenge the foreclosure because they came to the table too late.
He argued that a legal process was followed in the case by the banks and Fannie Mae wound up with the property because they bought it at a sheriff’s sale.
“At each phase in the foreclosure, the ability of the debtor to come in and to make argument, legal argument, is reduced,” Van Eck argued.
In other words, when a property goes into default, it’s fairly easy to work something out or make a challenge. That’s a little harder in the redemption phase, after the foreclosure sale. And in the third phase, after the redemption period has expired, there is very little a person who lost their home can do.
“The only argument that remains is the title argument and whether sufficient process was followed under the foreclosure action,” Van Eck said.
Jonker agreed that the Bocardos filed their lawsuit too late. But he said at the hearing he would cut them some slack given their circumstances -- that they were in the position they were in because they were victims of fraud.
But more importantly, Jonker agreed with Jenkinson’s argument that “there’s ambiguity, inconsistency” in the mortgage and foreclosure process, and he said the case should go forward.