Loan Transfer Screw-Up Leaves Couple Facing Foreclosure; RESPA Suit Claims Original Lender Failed To Pass Along House Payments To New Mortgage Holder

In Lancaster, Ohio, The Columbus Dispatch reports on local couple Kreg and Audre Smith and the problems they now face due to a screw-up that occurred when their home mortgage loan was transferred from one lender to another:

• The Smiths aren't rich, but neither did they struggle to make the $876 monthly payment. They arranged for Fifth Third to deduct the money directly from their Chase bank account. In November 2008, Fifth Third notified them that their mortgage had been transferred to U.S. Bank. A month later, Audre noticed that Fifth Third had deducted a payment for December. She assumed that money was passed on to U.S. Bank. The same thing happened in January, and Audre assumed the same thing.

• Those assumptions, though, proved in error: On Jan. 12, 2009, U.S. Bank alerted the Smiths that they were two months behind in their payments and advised them to contact the bank's default counseling department.

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• In July came the inevitable: U.S. Bank filed a notice of foreclosure in Fairfield County. Audre sought help from the Ohio Poverty Law Center, which has since done battle with U.S. Bank in court. Douglas Rogers, a former partner with Vorys, Sater, Seymour and Pease who now works at the law center, took the Smiths' case.

• He is arguing that the banks violated the Real Estate Settlement Procedures Act, commonly known as RESPA, which prohibits a transferred loan from being treated as delinquent if the original lender doesn't pass on the payment. Rogers wants the court to compel U.S. Bank or Fifth Third to resume the loan after bringing it up to date.

For more, see Bank glitch traps Lancaster pair in web of foreclosure.