Jose and Maria Perez bought a house outside Seguin three years ago, thinking they’d found a good first home in which to raise their two young children.
Last year, the couple decided to take advantage of lower interest rates and refinance their mortgage. They paid off the original loan, which had been underwritten by Morgan Financial, in August 2009. Jose Perez has copies of a settlement statement, a wire transfer receipt and title company documents showing the loan was paid.
Since then, they’ve remained current on their new loan, Perez said.
About a month after the refinancing, Jose Perez began to receive collection letters from Bank of America, which claimed it had acquired the original loan from Morgan.
Perez, an electrical technician, called BofA repeatedly and informed them that the loan had been paid in full. He has the documents to prove it, including a wire transfer receipt and a settlement statement from the title company.
“I was trying to deal with it myself,” he said. “I would get transferred and transferred. They would assure me that it would stop.”
For a while, it would. Then the notices would begin arriving again.
Last month, Perez got a letter declaring the loan was in default and that his home was slated for a foreclosure sale on Nov. 2. Texas allows such nonjudicial foreclosures in some cases, but this shouldn’t have been one.
Perez filed suit against Bank of America two weeks ago in hopes of forestalling the foreclosure. The lawsuit demands that the bank provide evidence that it owns the now-paid loan.
In other words, Perez wants the bank to produce the paperwork to back up its claims. That paperwork, of course, doesn’t exist.
A hearing in the case is set for Monday in Seguin. The lawsuit seeks to prevent BofA from any nonjudicial foreclosures in Texas.
A BofA spokeswoman said that as of Friday the bank had canceled the foreclosure and hoped to resolve the matter with the Perezes. She declined to comment further because of the lawsuit.
The Perezes aren’t real estate speculators. They didn’t buy more home than they could afford, and they never fell behind in their payments — not on the original loan, and not on the refinanced one.
Their case underscores the problems at the root of the foreclosure mess. In the rush to securitize loans for hungry Wall Street investors, the banks cut corners. They used straw lenders, or stand-in nominees, as the named beneficiaries on deeds of trust.
In the Perez case, the lender listed on the deed is the Mortgage Electronic Registration System, a nationwide service that has become the nominee for lenders on thousands of mortgages. The use of nominee lenders saved the banks time and money, but it often resulted in incomplete loan documents, often because they weren’t filed with county clerks as had typically been the case in Texas.
In the Perezes’ case, it appears, based on the documents filed with the lawsuit, that the bank bought and attempted to collect on a loan that had already been paid because the deed hadn’t been filed properly.
It’s no wonder that attorneys general in all 50 states are investigating the big banks’ foreclosure practices. BofA halted foreclosures nationwide earlier this month, then deemed that any paperwork problems were minimal and resumed the process.
The Perez case shows the problems are far bigger than the banks are letting on. It’s a reminder that the banks can’t be trusted to ensure the paperwork is in order.
What’s at stake is nothing less than the due process to which homeowners are entitled.
It’s enough to ruin confidence in the American Dream.
Perez and his wife bought their house a year after they were married. They saw it as a good starter home.
“This was kind of like a steppingstone,” he said. “We wanted something better later on, but this has been pretty rough. We’ve really been looking at apartments lately.”