I have always thought it was unfair to consumers that banks would appear to work with the servicer and the borrower to accept forbearance payments or loan modification paperwork, yet another department from the same bank would tell the servicer or trustee to continue with the foreclosure process. The larger the institution, the more rampant the breakdown in communication.
One thing I often remind borrowers is that when they have a junior loan (such as Home Equity Line of Credit), after a foreclosure, the junior loan will likely be assigned to a collection agency or sold to a scavenger fund who buys those notes for pennies on the dollar. That’s when the phone calling begins.
Today I read about the nightmare story of a couple in bankruptcy (Eastern District of North Carolina, Case No. 08-00120-8) who worked out a plan with Countrywide, essentially allowing the foreclosure of two of their properties–but Countrywide’s successor (Bank of America) continuing to harass them. This was memorialized by a court Order around October of 2008. Apparently Bank of America took their sweet time too in actually conducting the foreclosure so the Homeowner’s Association fees and property taxes continued to accrue. In fact, the bank has yet to foreclose on one of the properties. Instead, the bank commenced a two year campaign of trying to collect a debt that it had already compromised.
The debtor, Ms. Kirkbride did send a copy of the court’s order to BofA and they acknowledge receipt but did not reply. Additionally, BofA continued to report the debt as being owed to the credit reporting agencies.
The bankruptcy judge sanctioned Bank of America $63,000.00 on November 19, 2010.
What really happened here? I think there must have been a breakdown in communication where the legal counsel who sends the copy of the Order to one department does not know that the debt collection has already been outsourced to a subsidiary or other agent who continues to try to collect the debt.
Takeaway lesson for lenders – comply with court orders, as the penalties for failure to do so can be harsh. Communicate with all divisions to ensure compliance.
Takeaway lessons for borrowers – take notes and document the collection attempts.