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By Michael Hill<\/div><\/div>\n

Some homeowners with old second loans are seeing bills now as high as $100K+, even though the lenders demanding payment haven\u2019t contacted them in years.<\/span><\/span><\/p>\n<\/div>\n

NEW YORK \u2013 Rose Prophete thought the second mortgage loan on her Brooklyn home was resolved about a decade ago \u2013 until she received paperwork claiming she owed more than $130,000.<\/span><\/span><\/p>\n

\u201cI was shocked,\u201d said Prophete, who refinanced her two-family home in 2006, six years after arriving from Haiti. \u201cI don\u2019t even know these people because they never contacted me. They never called me.\u201d<\/span><\/span><\/p>\n

Prophete is part of a wave of homeowners who say they were blindsided by the start of foreclosure actions on their homes over second loans that were taken out more than a decade ago. The trusts and mortgage loan servicers behind the actions say the loans were defaulted on years ago.<\/span><\/span><\/p>\n

Some of these homeowners say they weren\u2019t even aware they had a second mortgage because of confusing loan structures. Others believed their second loans were rolled in with their first mortgage payments or forgiven. Typically, they say they had not received statements on their second loans for years as they paid down their first mortgages.<\/span><\/span><\/p>\n

Now they\u2019re being told the loans weren\u2019t dead after all. Instead, they\u2019re what critics call \u201czombie debt\u201d \u2013 old loans with new collection actions.<\/span><\/span><\/p>\n

While no federal government agency tracks the number of foreclosure actions on second mortgages, attorneys aiding homeowners say they have surged in recent years. The attorneys say many of the loans are owned by purchasers of troubled mortgages and are being pursued now because home values have increased and there\u2019s more equity in them.<\/span><\/span><\/p>\n

\u201cThey\u2019ve been holding them, having no communication with the borrowers,\u201d said Andrea Bopp Stark, an attorney with the Boston-based National Consumer Law Center. \u201cAnd then all of a sudden, they\u2019re coming out of the woodwork and are threatening to foreclose because now there is value in the property. They can foreclose on the property and actually get something after the first mortgages are paid off.\u201d<\/span><\/span><\/p>\n

Attorneys for owners of the loans and the companies that service them argue that they are pursuing legitimately owed debt, no matter what the borrower believed. And they say they are acting legally to claim it.<\/span><\/span><\/p>\n

How did this happen?<\/span><\/span><\/h3>\n
Court actions now can be traced to the tail end of the housing boom earlier this century. Some involve home equity lines of credit. Others stem from \u201c80\/20\u201d loans, in which homebuyers could take out a first loan covering about 80% of the purchase price, and a second loan covering the remaining 20%.<\/span><\/span><\/p>\n
Splitting loans allowed borrowers to avoid large down payments. But the second loans could carry interest rates of 9% or more and balloon payments. Consumer advocates say the loans \u2013 many originating with since-discredited lenders \u2013 included predatory terms and were marketed in communities of color and lower-income neighborhoods.<\/span><\/span><\/p>\n
The surge in people falling behind on mortgage payments after the Great Recession began included homeowners with second loans. They were among the people who took advantage of federal loan modification programs, refinanced or declared bankruptcy to help keep their homes.<\/span><\/span><\/p>\n
In some cases, the first loans were modified but the second ones weren\u2019t.<\/span><\/span><\/p>\n
Some second mortgages at that time were \u201ccharged off,\u201d meaning the creditor had stopped seeking payment. That doesn\u2019t mean the loan was forgiven. But that was the impression of many homeowners, some of whom apparently misunderstood the 80\/20 loan structure.<\/span><\/span><\/p>\n
Other borrowers say they had difficulty getting answers about their second loans.<\/span><\/span><\/p>\n
In the Miami<\/strong> area, Pastor Carlos Mendez and his wife, Lisset Garcia, signed a modification on their first mortgage in 2012, after financial hardships resulted in missed payments and a bankruptcy filing. The couple had bought the home in Hialeah in 2006, two years after arriving from Cuba, and raised their two daughters there.<\/span><\/span><\/p>\n
Mendez said they were unable to get answers about the status of their second mortgage from the bank and were eventually told that the debt was canceled, or would be canceled.<\/span><\/span><\/p>\n
Then in 2020, they received foreclosure paperwork from a different debt owner.<\/span><\/span><\/p>\n
Their attorney, Ricardo M. Corona, said they are being told they owe $70,000 in past due payments plus $47,000 in principal. But he said records show the loan was charged off in 2013 and that the loan holders are not entitled to interest payments stemming from the years when the couple did not receive periodic statements. The case is pending.<\/span><\/span><\/p>\n
\u201cDespite everything, we are fighting and trusting justice, keeping our faith in God, so we can solve this and keep the house,\u201d Mendez said in Spanish.<\/span><\/span><\/p>\n
Second loans were packaged and sold, some multiple times. The parties behind the court actions that have been launched to collect the money now are often investors who buy so-called distressed mortgage loans at deep discounts, advocates say. Many of the debt buyers are limited liability companies that are not regulated in the way that big banks are.<\/span><\/span><\/p>\n
The plaintiff in the action on the Mendez and Garcia home is listed as Wilmington Savings Fund Society, FSB, \u201cnot in its individual capacity but solely as a Trustee for BCMB1 Trust.\u201d<\/span><\/span><\/p>\n
A spokeswoman for Wilmington said it acts as a trustee on behalf of many trusts and has \u201cno authority with respect to the management of the real estate in the portfolio.\u201d Efforts to find someone associated with BCMB1 Trust to respond to questions were not successful.<\/span><\/span><\/p>\n
Some people facing foreclosure have filed their own lawsuits citing federal requirements related to periodic statements or other consumer protection laws. In Georgia, a woman facing foreclosure claimed in federal court that she never received periodic notices about her second mortgage or notices when it was transferred to new owners, as required by federal law. The case was settled in June under confidential terms, according to court filings.<\/span><\/span><\/p>\n
In New York, Prophete is one of 13 plaintiffs in a federal lawsuit claiming that mortgage debt is being sought beyond New York\u2019s six-year statute of limitations, resulting in violations of federal and state law.<\/span><\/span><\/p>\n
\u201cI think what makes it so pernicious is these are homeowners who worked very hard to become current on their loans,\u201d said Rachel Geballe, a deputy director at Brooklyn Legal Services, which is litigating the case with The Legal Aid Society. \u201cThey thought they were taking care of their debt.\u201d<\/span><\/span><\/p>\n
The defendants in that case are the loan servicer SN Servicing and the law firm Richland and Falkowski, which represented mortgage trusts involved in the court actions, including BCMB1 Trust, according to the complaint. In court filings, the defendants dispute the plaintiff\u2019s interpretation of the statute of limitations, say they acted properly and are seeking to dismiss the lawsuit.<\/span><\/span><\/p>\n
\u201cThe allegations in the various mortgage foreclosure actions are truthful and not misleading or deceptive,\u201d Attorney Daniel Richland wrote in a letter to the judge. \u201cPlaintiff\u2019s allegations, by contrast, are implausible and thus warrant dismissal.\u201d<\/span><\/span><\/p>\n
Copyright 2022 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission. Associated Press writer Claudia Torrens and researcher Jennifer Farrar in New York contributed to this report.<\/span><\/span><\/p>\n<\/div><\/div>\n
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\nAuthor: kerrys<\/p>\n","protected":false},"excerpt":{"rendered":"
By Michael Hill Some homeowners with old second loans are seeing bills now as high as $100K+, even though the lenders demanding payment haven\u2019t contacted them in years. NEW YORK \u2013 Rose Prophete thought the second mortgage loan on her Brooklyn home was resolved about a decade ago \u2013 until she received paperwork claiming she owed more than $130,000. \u201cI was shocked,\u201d said Prophete, who refinanced her two-family home in 2006, six years after arriving from Haiti. \u201cI don\u2019t even know these people because they never contacted me. They never called me.\u201d Prophete is part of a wave of homeowners who say they were blindsided by the start of foreclosure actions on their homes over second loans that were taken out more than a decade ago. The trusts and mortgage loan servicers behind the actions say the loans were defaulted on years ago. Some of these homeowners say they weren\u2019t even aware they had a second mortgage because of confusing loan structures. Others believed their second loans were rolled in with their first mortgage payments or forgiven. Typically, they say they had not received statements on their second loans for years as they paid down their first mortgages. Now they\u2019re being told the loans weren\u2019t dead after all. Instead, they\u2019re what critics call \u201czombie debt\u201d \u2013 old loans with new collection actions. While no federal government agency tracks the number of foreclosure actions on second mortgages, attorneys aiding homeowners say they have surged in recent years. The attorneys say many of the loans are owned by purchasers of troubled mortgages and are being pursued now because home values have increased and there\u2019s more equity in them. \u201cThey\u2019ve been holding them, having no communication with the borrowers,\u201d said Andrea Bopp Stark, an attorney with the Boston-based National Consumer Law Center. \u201cAnd then all of a sudden, they\u2019re coming out of the woodwork and are threatening to foreclose because now there is value in the property. They can foreclose on the property and actually get something after the first mortgages are paid off.\u201d Attorneys for owners of the loans and the companies that service them argue that they are pursuing legitimately owed debt, no matter what the borrower believed. And they say they are acting legally to claim it. How did this happen? Court actions now can be traced to the tail end of the housing boom earlier this century. Some involve home equity lines of credit. Others stem from \u201c80\/20\u201d loans, in which homebuyers could take out a first loan covering about 80% of the purchase price, and a second loan covering the remaining 20%. Splitting loans allowed borrowers to avoid large down payments. But the second loans could carry interest rates of 9% or more and balloon payments. Consumer advocates say the loans \u2013 many originating with since-discredited lenders \u2013 included predatory terms and were marketed in communities of color and lower-income neighborhoods. The surge in people falling behind on mortgage payments after the Great Recession began included homeowners with second loans. They were among the people who took advantage of federal loan modification programs, refinanced or declared bankruptcy to help keep their homes. In some cases, the first loans were modified but the second ones weren\u2019t. Some second mortgages at that time were \u201ccharged off,\u201d meaning the creditor had stopped seeking payment. That doesn\u2019t mean the loan was forgiven. But that was the impression of many homeowners, some of whom apparently misunderstood the 80\/20 loan structure. Other borrowers say they had difficulty getting answers about their second loans. In the Miami area, Pastor Carlos Mendez and his wife, Lisset Garcia, signed a modification on their first mortgage in 2012, after financial hardships resulted in missed payments and a bankruptcy filing. The couple had bought the home in Hialeah in 2006, two years after arriving from Cuba, and raised their two daughters there. Mendez said they were unable to get answers about the status of their second mortgage from the bank and were eventually told that the debt was canceled, or would be canceled. Then in 2020, they received foreclosure paperwork from a different debt owner. Their attorney, Ricardo M. Corona, said they are being told they owe $70,000 in past due payments plus $47,000 in principal. But he said records show the loan was charged off in 2013 and that the loan holders are not entitled to interest payments stemming from the years when the couple did not receive periodic statements. The case is pending. \u201cDespite everything, we are fighting and trusting justice, keeping our faith in God, so we can solve this and keep the house,\u201d Mendez said in Spanish. Second loans were packaged and sold, some multiple times. The parties behind the court actions that have been launched to collect the money now are often investors who buy so-called distressed mortgage loans at deep discounts, advocates say. Many of the debt buyers are limited liability companies that are not regulated in the way that big banks are. The plaintiff in the action on the Mendez and Garcia home is listed as Wilmington Savings Fund Society, FSB, \u201cnot in its individual capacity but solely as a Trustee for BCMB1 Trust.\u201d A spokeswoman for Wilmington said it acts as a trustee on behalf of many trusts and has \u201cno authority with respect to the management of the real estate in the portfolio.\u201d Efforts to find someone associated with BCMB1 Trust to respond to questions were not successful. Some people facing foreclosure have filed their own lawsuits citing federal requirements related to periodic statements or other consumer protection laws. In Georgia, a woman facing foreclosure claimed in federal court that she never received periodic notices about her second mortgage or notices when it was transferred to new owners, as required by federal law. The case was settled in June under confidential terms, according to court filings. In New York, Prophete is one of 13 plaintiffs in a federal lawsuit claiming that mortgage debt is being sought beyond New York\u2019s six-year<\/p>\n","protected":false},"author":4,"featured_media":7316,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"_links":{"self":[{"href":"https:\/\/nwfl4sale.com\/wp-json\/wp\/v2\/posts\/7315"}],"collection":[{"href":"https:\/\/nwfl4sale.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/nwfl4sale.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/nwfl4sale.com\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/nwfl4sale.com\/wp-json\/wp\/v2\/comments?post=7315"}],"version-history":[{"count":0,"href":"https:\/\/nwfl4sale.com\/wp-json\/wp\/v2\/posts\/7315\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/nwfl4sale.com\/wp-json\/wp\/v2\/media\/7316"}],"wp:attachment":[{"href":"https:\/\/nwfl4sale.com\/wp-json\/wp\/v2\/media?parent=7315"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/nwfl4sale.com\/wp-json\/wp\/v2\/categories?post=7315"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/nwfl4sale.com\/wp-json\/wp\/v2\/tags?post=7315"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}