WASHINGTON (MCT) – Billions of dollars in foreclosure settlements between big banks and government regulators haven't helped Laura Biggs. The California woman is scheduled to lose her home nine days before Christmas because her mortgage company concluded that the house is no longer the primary residence of her husband, who's been dead since 2003.
Technically, though, it still is George "Kenny" Mitchell's primary residence. He resides at the home in Rialto, east of Los Angeles near San Bernardino, in an urn. His cremated remains are part of an altar that Biggs, 65, keeps in memory of the trucking-company manager. Many mementos from their marriage surround his smiling photo.
Biggs faces a Dec. 16 sale date, a holiday spoiler. It's a property in which she's built up more than $100,000 in equity and where she's lived for 13 years, making payments on time. Her issue is back taxes, but more on that later.
"I'm getting ready to get tossed out. Whoever buys the property could toss me out," she said.
The struggles of the career nurse who spent a lifetime helping others underscore this key point: Despite high-profile legal settlements in recent years that have resulted in large banks such as Bank of America, Citibank, Wells Fargo and JPMorgan Chase paying billions of dollars for past sins, the foreclosure process remains a mess.
"It's just a continuing misalignment of incentives: that a (mortgage) servicer doesn't get paid for figuring this stuff out, but they get paid for foreclosure," said Michael Calhoun, the president of the Durham, N.C.-based Center for Responsible Lending, which has fought to hold servicers accountable. "Even today, the servicers are understaffed and overwhelmed. If this were your local community bank, they of course would be working with you."
Servicers are essentially mortgage-payment collectors for investors who bought slices of complex mortgage bonds, composed of thousands of mortgages that combine to provide the investor an income stream through the monthly payments made by Biggs and millions of other American homeowners.
The company that collects Biggs' mortgage is Select Portfolio Servicing Inc., a Utah-based company that services many of the poorly underwritten subprime mortgages that helped trigger the 2008 financial crisis and a collapse in home prices. On its website, the company lists a P.O. box in Salt Lake City for an address, offers no information on corporate officers and gives only toll-free phone numbers that feed to automated call centers.
The company became a sub-servicer last year for Bank of America, which purchased disgraced subprime lender Countrywide Financial and its loan portfolio during the financial crisis.
Paperwork that McClatchy obtained shows that Select Portfolio Servicing initially worked with Biggs to find a solution, including a potential mortgage modification through the Obama administration's Home Affordable Modification Program.
But in a Nov. 13 letter addressed not to Biggs _ who's on the deed to the property, though not on the loan _ but to her late husband, who'd been dead for a decade, the servicer did an about-face.
"We are unable to offer you a HAMP modification because the property is not your primary residence," the letter said, saying there'd be no foreclosure for at least 30 days. There now is a foreclosure date that's three days after the 30-day window expires.
The problem of surviving spouses not being on loans is big enough that the Treasury Department, which devised a series of incentives for servicers to modify mortgages, has an entire section of a manual devoted to it.
"In this case, servicers should collect an Initial Package from the non-borrower who now owns the property and evaluate the request as if he or she was the borrower," the guidance says, seemingly allowing Select Portfolio Servicing to treat Biggs as the homeowner. A Treasury spokeswoman, speaking only on the condition of anonymity as a matter of policy, said the agency didn't comment on individual cases and didn't collect data on the number of surviving spouses in loan modifications.
Mitchell's loan originated with Countrywide, which underwrote it in April 2000. One reason Countrywide was so successful is it offered unsuspecting homeowners low monthly payments that didn't include taxes and insurance. Only after signing the contracts did many homeowners learn that they were on the hook for taxes and insurance, too.
Mitchell and Biggs married in 1971, and although Biggs didn't have her name on the title at the time, her name was on the check the couple sent to pay the mortgage. When he got sick with a disease that causes a cluster of veins in the brain to bleed, the couple started the process to add Biggs to the title but Mitchell, lapsing in and out of a near-comatose state, died before that could happen.
California law recognizes spouses as inheritors of property, and Biggs continued to pay the monthly mortgage with a check in her name. In 2005, Biggs had health problems, and while she kept making the mortgage payments she couldn't pay the separate taxes and insurance. Select Portfolio Servicing added an escrow account and folded those payments into her monthly mortgage payments until they were paid off.
The servicer had been renamed a year earlier from Fairbanks Capital Corp. after a $40 million settlement with the Federal Trade Commission in 2003 for illegal loan servicing practices. On its website today, Select Portfolio Servicing boasts that it handles more than 300,000 "nonprime residential mortgages." That's a more generous way of saying lower-performing subprime loans.
Biggs continued to pay her mortgage month after month but she fell behind again on the property taxes in 2011. Select Portfolio Servicing initially said in a letter on Jan. 5, 2012, that it would do the same as in 2005 and add those monthly amounts to the mortgage statement, like what's done today on most new mortgages.
But when Biggs tried to talk directly with the company, customer services representatives refused to deal with her, insisting on speaking with Mitchell, something that's impossible. The offer to roll the taxes into the loan was abruptly withdrawn, she said.
"Because my name was not on the loan, they wouldn't talk to me," Biggs said. "It always had my name on the checks. My name has been on those checks ever since we got the property. It was never an issue until last year."
Biggs tried to continue making monthly mortgage payments but the servicer refused to accept them. The mortgage became delinquent and later was placed in default, despite more than $100,000 in equity built up.
"A little common sense. ... Why wouldn't you deal with this person?" said Calhoun, who has no involvement in the Biggs case. "It is just a lack of common sense, capacity and incentives. This is not a unique case."
It wasn't until this September that Select Portfolio Servicing began talking with Biggs, as an Oct. 2 sale date loomed. By then, her name was on the deed but still not on the loan.
"It wasn't until I came to George that they realized that my husband was dead," Biggs said.
George is George Bosch, the legal administrator for the Los Angeles-area law firm of Edward Lopez, which has taken the Biggs case pro bono.
"If you have a surviving spouse, legal documents are not necessary. (Select Portfolio Servicing) didn't realize they were in California," said Bosch, who did the paperwork for Biggs to seek a mortgage modification through the Home Affordable Modification Program. "They came with a new loophole. The guy doesn't reside here."
Select Portfolio Servicing, which doesn't list a media contact on its website, didn't return calls requesting comment.
Biggs authorized a McClatchy reporter to speak to a relationship manager with the company last week, and a representative of the servicer said Biggs didn't qualify for a mortgage modification because she wasn't the executor of Mitchell's estate. When reminded that Bosch had cleared up this issue weeks ago, the representative agreed to escalate the case with an eye toward postponing the sale, which hadn't happened as of the close of business Friday. The Treasury Department, in its third-quarter 2013 servicer assessment report, said Select Portfolio Servicing "has areas requiring moderate improvement" but stopped short of discontinuing the provision of financial incentives to the company to remain in the mortgage-modification program.
And Biggs? With a bad back that's partially disabled her, she may not spend Christmas decorating her home but rather finding somewhere else to live.
"I couldn't move in with family," she said ruefully, noting that she has too many belongings and two dogs. "I'd actually have to find somewhere else to live."