More Mortgage Servicer Horror Stories; Screw-Ups Lead To Foreclosure Threats, Ruined Credit For Homeowners Who Never Missed Payments

In Lutherville, Maryland, The Baltimore Sun reports:

• Anca Safta never missed a payment on her loan to expand her Lutherville home. But that didn't stop Safta's mortgage servicer from citing her this year for failing to pay, reporting her to credit agencies and threatening to foreclose.



• "It was just a nightmare," said Safta, a physician at the University of Maryland Medical Center who got the loan to build an extension for her parents to live in. What happened?



• Her servicer had not credited the payments to her account. It might seem to be a simple problem. It's not. A growing number of lawsuits, investigations and studies indicate that servicer blunders and outright misconduct are common — and difficult for homeowners to resolve. Borrower advocates and regulators say the system is effectively broken.



• "This isn't just a few technical errors," said Anne Balcer Norton, the state's deputy commissioner of financial regulation. "The entire servicing model needs to be revised."

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• Three years ago, Baltimore homeowner Brian J. Casey asked his servicer for a payoff statement so he could refinance. Litton Loan Servicing, which had taken over his account from a failing servicer, said Casey's balance due was higher than his own records indicated.



• Casey said Litton had not credited him for a payment made to the previous servicer, and had tacked on fees that he questioned. So he asked for the loan history.



• "They formally told me by electronic mail, 'We don't have it,'" said Casey, 55, who runs a Towson-based banking consultancy. "Literally, 'We don't have the records.'"



• Casey said he pressed for a resolution but didn't get anywhere. Litton, meanwhile, piled on more charges and started foreclosure proceedings. While Casey acknowledged that he had been late on payments, he said he was less than three months behind — the point at which foreclosure is allowed.



• Casey said he has spent more than $30,000 in legal fees trying to save his family's home, get his account questions answered and fix his ruined credit. "It was like an absolute runaway train," he said.



• Baltimore-based Civil Justice, a nonprofit that specializes in mortgage problems, has made Casey and his wife the lead plaintiffs in a federal class-action suit against Litton. The class-action allegations focus on foreclosure robo-signing, in which servicer representatives sign documents without checking for accuracy or allow their signatures to be faked by others.



• But Civil Justice says it's also common to see payment records mismanaged in the handover from a failing servicer to a new firm. "In this case, it could have been resolved very easily," said Phillip Robinson of Civil Justice. "It … escalated and snowballed because Litton just ignored him."

For more, see Problems rampant in mortgage servicing, advocates and regulators say (Errors, misbehavior point to need for reform).

See Misbehavior and Mistake in Bankruptcy Mortgage Claims for more on mortgage servicer screw-ups (in the context of bankruptcy cases).