We figured this would start happening sooner or later.
So far this year we have been made aware of three (3) cases where the lenders actually “walked away.” The homeowners appear to have been left with a home without a mortgage on it (a free house).
The following is from Jacksonville.com:
Bank gives man foreclosed house for free
By Roger Bull
Perry Laspina was in the middle of foreclosure with the possibility of losing the house he owned in Jacksonville. Then the mail came one day in late January telling him that the house was his.
Despite the $72,000 mortgage that he barely paid anything on, despite the foreclosure … the house was his.
In the middle of foreclosures gone wild, of a system overloaded by sheer volume, judicial investigations and allegations of corners cut, Laspina ended up with the house.
Despite the fact that he didn’t have an attorney in the foreclosure proceedings, the mortgage holder simply gave up and walked away.
“I’ve never seen anything like this in my life,” he said.
It’s a tale populated with many of the major players in the national foreclosure drama: The law firm of David Stern, the Mortgage Electronic Registration Systems (better known as MERS) and a mortgage packaged with others and sold into a securitized trust.
Here’s how it happened.
Back in 2006, Laspina, a used-car dealer based in South Florida, had some extra money and decided to buy some real estate that he could resell quickly at a profit. It was, after all, the height of the housing boom with prices skyrocketing and mortgage money easily available.
“Since everyone else was making money flipping houses, I figured I would, too,” he said.
He wasn’t familiar with Jacksonville, but his brother owned a house in Fernandina Beach and found the house on Oakwood Street in the Panama Gardens neighborhood of Jacksonville off North Main Street.
It’s an old neighborhood where most of the houses are still well-maintained.
Laspina bought the house for $80,000, putting $8,000 down and taking out an adjustable rate mortgage with EquiFirst for the remaining $72,000 with an interest rate of 9.5 percent.
EquiFirst, based in Charlotte, N.C., was one of the nation’s leading sub-prime lenders in 2006. But it soon fell victim to the housing and mortgage industry collapse and it closed in 2009.
EquiFirst kept few of the mortgages it wrote; most were packaged and sold to securitized trusts which were owned by investors.
Laspina wasn’t worried about the interest rate.
“It didn’t matter,” he said. “I figured I’m going to flip this house within six months, maybe three months.”
He also figured he’d get about $120,000 for it after he did a bit of work on it, mostly tearing up the carpet and stripping the paint that covered the hardwood floors.
“But right after I put it on the market, the crash came,” he said. “I couldn’t sell it, I couldn’t rent it.”
By 2008, the increases on his payments kicked in, going from an initial payment of $605 to $894 and then $1,058 in less than a year. He quit making payments, and in September of that year, a foreclosure notice was filed against him. The plaintiff was the U.S. Bank National Association, which was simply acting as the trustee for an unnamed trust that now owned the mortgage.
The court file says that Laspina lost his foreclosure case in February 2009. A sale date was set, then postponed and then cancelled, all at the plaintiff’s request, later that year.
But the next year, the plaintiff requested that it all be vacated – the suit, the judgment, all of it. In October, Circuit Judge Waddell Wallace signed the order.
In December, officials for MERS, which acted as the mortgage holder, signed and filed the documents saying it “has received full payment and satisfaction … and does hereby cancel and discharge said mortgage.”
Laspina had paid less than $1,000 toward the principal on his $72,000 loan.
That’s what happened. But there are questions about why.
“This is crazy,” attorney David Goldman said as he looked over the files at the Times-Union’s request.
“They won,” he said referring to the mortgage holder. “They’re standing at the goal line, and they just need to sell the house.”
“The investor on the loan, the bondholder on the trust, decided to write off the loan balance,” said a Wells Fargo spokesman, “because of the significant decreased value of the property.”
He declined to give more details or further explanation.
Roger Bull: (904) 359-4296