Almost five years after state Chief Justice Stuart Rabner moved to clean up New Jersey’s foreclosure procedures, the experiences of one family show questionable documents still ensnare borrowers, lenders, and even lawyers.
On her husband’s deathbed in November 2006, Mammie Yvonne Evans of Maplewood agreed to refinance their mortgage through the now-defunct Worldwide Financial Resources of Morganville. She said she was pressured to do so by an agent of the mortgage company, who came to her husband’s bedside to get her signature.
But instead of going down as promised, her payments shot up by $431 a month after a brief teaser rate expired. If Evans did not closely read all the paperwork, she also was not given all the required paperwork. If she had been, she would have seen that she only qualified for the refinancing because Worldwide grossly inflated her income. Despite this omission, the company would not allow her to rescind the loan.
At 61, with no previous experience in home ownership, Evans did what she thought she must. For 14 months, she struggled to make payments using her income as a cleaning woman. Then she ran out of money. A few months later, her lender was under investigation by federal authorities. By August 2009, it was out of business.
In 2011, the CEO of Worldwide Financial Resources, David Findel, was sentenced to 63 months in prison for running a loan-fraud scheme. While based on the same pattern of misrepresentation and missing documentation, the sentence did not provide relief to Evans and similar victims. Although the product of fraud, her mortgage continued down the pipeline, one of millions chopped among investors who, like Evans, accepted what they were given.
Another member of Evans’ family is also struggling with foreclosure. In April 2002, Evans’ aunt Elaine Turner bought a house in Plainfield along with her son Tural Turner. For a few years, it paid off. As property values rose, the Turners capitalized by refinancing at least twice, and the promissory notes passed through many banking hands. But the Turners ran into financial trouble in 2010 and fell behind on payments.
Tural Turner died from complications of diabetes in early 2011. Soon after, his mother began suffering from Alzheimer’s disease. As relatives try to help Elaine Turner keep her home, they face a convoluted and sketchy trail of documents.
These are two examples of how foreclosures and the housing bubble are still affecting people throughout New Jersey. Both Evans and Turner are fortunate to have yet a third family member fighting on their behalf, demanding that the court system provide appropriate documentation and consider contributing circumstances before foreclosures are final.
Others involved in the case have not been so fortunate. These type of delays have led the attorneys for the banks seeking these foreclosures to file for bankruptcy.
Foreclosures completed in New Jersey during the second quarter of 2015 took an average of 1,206 days to be resolved, according to RealtyTrac, an Irvine, CA, real-estate analytics firm. That was almost twice the national average, which itself was the longest since the company began keeping the statistic eight years ago.
The process can be wearing on families, especially those who feel they have been defrauded. Those with financial resources remaining can fight in the state courts, which must approve foreclosures. The action is not complete until a foreclosing lender conveys the property at a sale administered by the county sheriff.
But borrowers are not the only ones who can be ground down if a case crawls.
One of New Jersey’s pre-eminent foreclosure law firms had been handling the current cases against Evans on behalf of JP Morgan Chase, and against Turner on behalf of Wells Fargo. But in August, Zucker, Goldberg & Ackerman of Mountainside followed through on a previous warning and filed for bankruptcy.
The attorney representing the firm in bankruptcy, Daniel Stolz of Wasserman, Jurista & Stolz of Basking Ridge, blamed complications in foreclosure cases, including although not limited to “the extent of the robo-signing.”
The complexities of documenting cases “caused additional delays and expenses that substantially harmed Zucker, Goldberg,” Stolz said.
Since home ownership peaked in the United States in 2014, foreclosures have taken more than 7.8 million houses, according to RealtyTrac. That has meant big business for law firms representing lenders and investors. Last year, Zucker, Goldberg generated $30 million in gross revenue.
But the flip side is that the firm normally took those cases for a flat fee. When they moved promptly, that was a safe play. So far this year, New Jersey borrowers are contesting only 4 percent of foreclosure cases, according to the state Administrative Office of the Courts.
That is actually down from December 2010, when Rabner, responding to instances of fraud or mishandled documents here and in other states, ordered major lenders to demonstrate the accuracy of their documentation and testimony in foreclosure proceedings.
In the 21st century, mortgages were transformed from a straightforward transaction between a borrower and a lender that was often local. Instead, they became pieces to be sliced, diced, repackaged, sold, and resold along with many others in mortgage-backed securities.
The problem for the lenders and investors who now hold those securities comes when a foreclosure is scrutinized in court. Usually, they did not initiate the loans, and must show the chain of transactions by which they acquired a particular mortgage note. At times, documents come only from a small private company established by major lenders, Mortgage Electronic Registration Systems of Reston, VA, rather than from public records.
Even as researching cases grew more challenging, Zucker, Goldberg clients imposed strict requirements on when and under what circumstances they would pay the bills, creating cash-flow problems for the firm, according to Stolz. The firm has about $20 million of unsecured debt to creditors such as Land Records of America of Irving, TX, and Superior Legal Services of Bordentown.
Democrats in the New Jersey Legislature are trying to speed the foreclosure process. But as with previous initiatives, this one has gotten bogged down, with some initial supporters walking away.
Even if they had been adopted as introduced eight months ago, twin bills S-2679 and A-4075 might not have solved Zucker, Goldberg’s problems with contested foreclosure cases. But the bills would put the vast majority of foreclosures on a rocket. In exchange for paying set fees — $250 for court costs, $250 for sheriff’s costs and $500 for housing-counseling programs — the legislation would allow lenders to file for expedited completion of uncontested foreclosures and go to sheriff’s sale in just 90 days.
In late 2013, the state courts took action against plaintiffs who were dragging out foreclosures, dismissing 83,500 cases for lack of prosecution, noted Peter Oneglia, deputy chief of staff to Assemblyman Carmelo Garcia (D-Hudson), a principal sponsor. The pending legislation would have the same effect on borrowers who have remained in their homes while not making mortgage payments, he said.
“The goal is for those people to look to the future, and there is also an element of accountability,” Oneglia said.
“It was a very simple, very workable, clean bill,” said E. Robert Levy, executive director of the Mortgage Bankers Association of New Jersey and a leading advocate of the change. Getting foreclosed properties back on the market faster “would make neighborhoods better and make property values better,” he said.
But A-4075 came out of the Assembly Financial Institutions and Insurance Committee amended to allow homeowner and condominium associations to move for expedited judgment and sale as well. The amended bill reflected a recent court ruling that granted standing to association liens for payment of back fees, but limited their duration.
That new element could create issues among lienholders that negate the faster timeframe, Levy said. As a result, the mortgage bankers “no longer support this legislation in its current form.”
Some housing advocates initially joined officials who administer foreclosures in welcoming the potential infusion of fees from the legislation. On further review, though, they began to question how a family trying to find a new home in 90 days would have time for counseling. Those who want to fight foreclosure sometimes have difficulty even finding an attorney to take their case in that time, advocates said.
“We shouldn’t be running people out of their homes” while trying to counsel them, said Staci Berger, chief executive officer of the Housing and Community Development Network of New Jersey.
As yet, neither Mammie Yvonne Evans nor Earline Turner have been forced from their homes. But that is not because banks have stopped trying, said Evelyn Wade of North Miami, FL, a relative helping in the fight.
In Evans’ case, a Worldwide Financial Resources representative convinced her to buy a new mortgage in a room at the Overlook Hospital as her husband Sammie was dying of cancer. She signed on his behalf, and his death certificate shows he succumbed the next day. Although Mammie Yvonne Evans, now 70, had a small cleaning business, her husband provided three-quarters of their income, Wade said.
“Mr. Evans never should have been listed as a borrower on this loan,” Wade said. “That lender knew Yvonne could never afford the payments on her own.”
“I didn’t realized that they had increase[d] my salary to $4,100 for cleaning business when I never ever made that much in a month to put through the mortgage,” Evans wrote.
Like many mortgage-fraud victims, though, Evans tried to cooperate with the lender, which may yet prove to be the Achilles heel in her defense. Instead of contesting the higher payments immediately or trying to rescind the loan, she began using her husband’s death benefit to pay the mortgage.
“She was grieving, she’d lost her husband, she had other things on her mind,” Wade said.
Earline Turner faces similar problems because of her ill health and her son’s death, making it difficult for her to reconstruct events. More troubling, Superior Court Judge Paul Innes approved the foreclosure as uncontested on July 7, although the Keaveney Legal Group of Mount Laurel was representing Turner. An attorney with the firm, Joshua Thomas, filed on August 28 to vacate the judge’s order, but it’s unclear what is happening with the motion.
Since then, there’s been a lot of emails back and forth between the firm and Evelyn Wade, and it’s not clear to me that they’ve filed the necessary supporting documents.
Working on Turner’s behalf, Wade pointed to the last of several refinancings in the case. It came shortly after Wells Fargo had taken over servicing the mortgage on the Plainfield property in October 2008.
Two months later, 10 days after Earline Turner had made a mortgage payment, Wells Fargo notified her the loan had been discharged, without identifying the lender that took it over. In January, the Turners obtained a mortgage from Mortgage Lending Direct of Florham Park, “The Money Store.” But MLD then transferred the mortgage back to Wells Fargo through MERS.
Reviewing the paperwork, Wade points out some of the problems that beset attorneys working on foreclosure cases. There are two copies of the mortgage assignment between MLD and Wells Fargo, one signed and one unsigned. The application affidavit is unsigned, not notarized, not completely filled out and does not list incomes for either of the borrowers.
“The mortgage assignment that MLD did to MERS wasn’t filled out completely or notarized,” and dated two years after the fact, Wells said. She notes that the man who signed on behalf of MERS is a Wells Fargo employee, still a common practice in the industry.
Certifications in the case do not describe a review by the Wells Fargo attorney, only that he read the one from a bank executive. That practice drew criticism from retired judge Richard Williams, who reviewed the big banks’ foreclosure practices in the wake of Rabner’s action. It falls short of the “diligent inquiry” standard in the new court rules, Williams said.
The complexities of the case do not give Wade any sympathy for Zucker, Goldberg, but she said they do explain the breakdown of the firm’s business model.
“It was fine when foreclosure cases took six months,” she said. “But it’s not so good when they’re taking two years and more and the banks aren’t paying them until the end.”
On the other side, Stolz would not comment on particular cases, but said the situation “probably benefitted those defendants who were looking to stay in their homes without making payments on their mortgages.”
Meanwhile, Zucker, Goldberg’s demise will be “a gradual process” over the next two months, according to Stolz. He added he expects the attorneys will “scatter to the winds,” leaving clients to find new representation.