Pipeline

Wrong Address

It might have sounded absurd a few years ago, but today, with the mortgage industry inundated with defaults, the notion is plausible: a lender foreclosing on the wrong home.

Alan Schroit claims that Bank of America Corp. mistakenly seized his Galveston, Texas, vacation residence. According to the lawsuit he filed this month in State District Court in Galveston, Schroit does not have a mortgage with B of A, or any lender for that matter; he owns the property free and clear.

He's suing the Charlotte company for an unspecified amount of damages that were sustained after the locks on his home were changed and the power was shut off, resulting in the spoiling of about 75 pounds of fish in his freezer.

Rick Simon, a spokesman for B of A, told The Daily News of Galveston County last week that "based on previous discussions with Mr. Schroit, we do not believe the case will show merit." (Bank of America offered no elaboration for American Banker by press time.)

Schroit suggests in his suit that cash or stock bonuses paid to B of A executives last year "may be an appropriate guide" for punitive damages the company should have to pay him.

Whatever the merits of his case, industry insiders say such mix-ups aren't unheard-of.

"Unfortunately it is something that happens often," said Sylvia Alayon, a vice president and the director of operations at Consumer Mortgage Audit Center, a due diligence and consulting firm in Fort Lauderdale, Fla. "That's just due to the sheer … volume of foreclosures that are occurring."

This past fall The Floyd County Times reported that Christopher Hamby of Wheelwright, Ky., had sued B of A, claiming the company wrongly repossessed his home. Like Schroit, Hamby said he did not have any relationship with B of A, mortgage or otherwise. Bank of America is the largest servicer of residential mortgages.

Eye on Foreclosures

Foreclosure filings jumped 14% in December from November, after four straight months of declines, according to data to be released today by RealtyTrac Inc.

Default notices, scheduled foreclosure auctions or bank repossessions were reported on 349,519 properties nationwide last month, a 15% increase from a year earlier.

For the year, foreclosure filings were reported on more than 2.8 million properties, a 21% increase from 2008 and a 120% increase from 2007, RealtyTrac said.

One in every 45 homes in the U.S. received at least one foreclosure notice last year, RealtyTrac said.

James J. Saccacio, the chief executive of the Irvine, Calif., company, said in a press release that the 2009 numbers would have been worse if there hadn't been legislative and industry-related delays in processing delinquent loans.

The substantial increase in foreclosures in December helped drive the number of 2009 filings to a record high, Saccacio said.

Foreclosures peaked in July, with more than 361,000 homes receiving a foreclosure notice. Saccacio said he expects foreclosures to remain high this year.

"In the long term a massive supply of delinquent loans continues to loom over the housing market, and many of those delinquencies will end up in the foreclosure process in 2010 and beyond as lenders gradually work their way through the backlog," he said.

Nevada had the nation's highest foreclosure rate for the third consecutive year, with more than 10% of Silver State housing units receiving at least one foreclosure notice in 2009.

Arizona had the second-highest rate, after foreclosures there spiked 40% in December, and Florida had the third-highest rate.

Denominator Effect?

First Horizon National Corp. said its inclusion in the Department of Housing and Urban Development's probe of 15 lenders was the result of a mathematical fluke.

In late 2008 the Memphis company sold its national mortgage company to Metropolitan Life Insurance Co. First Horizon's main subsidiary, First Tennessee Bank, continued to make residential loans in its home market.

First Tennessee and the other 14 lenders received subpoenas Tuesday from HUD for information on Federal Housing Administration loans they originated that defaulted. The lenders were selected in part because they had high default rates compared with the national average.

"We believe that a consequence of the materially reduced number of new FHA loans we have originated following the sale of our national mortgage business may be a mathematically forced increase in the percentage of loans resulting in claims" submitted to the FHA, Anthony Hicks, a spokesman for First Horizon, said by e-mail Tuesday evening. "A specific number of defaults as a percentage of a smaller pool of new loans results in a higher default rate."

HUD has emphasized that the "review" of the lenders is not an investigation, and that it has not accused the companies of wrongdoing or barred them from making FHA loans.

But some of the subpoenaed lenders have complained that they are being unfairly singled out and that the publicity could hurt their business.