Christopher Marconi was in the shower when he heard loud banging at his door. By the time he grabbed a towel and got to his front step, a U.S. marshal's sedan was peeling out of his driveway. Nailed to Marconi's front door was a foreclosure summons from Wells Fargo, naming him as a defendant. But the notice was for a house Marconi had never seen -- on a mortgage he never had.
Tom Williams was in his kitchen thumbing through the mail when he opened a letter from GMAC. It informed him that the bank would confiscate his house unless he immediately paid off his mortgage balance of $276,000. But Williams had never missed a mortgage payment. And his loan wasn't due to mature until 2032.
Warren Nyerges opened his front door in Naples, Fla., to find a scraggly-haired summons server standing on his stoop. He plopped a foreclosure notice from Bank of America in Nyerges' hands. But Nyerges had paid for his house in cash. And he'd never had a checking account, much less a mortgage, with Bank of America.
These homeowners paid their mortgages -- or loan modifications -- on time. Some even paid off their loans. Worse, those on the receiving end of a bad foreclosure claim tell similar stories of getting bounced from one bank official to the next with no resolution while the foreclosure process rolls on.
"This is the worst I've ever seen it," said Ira Rheingold, an attorney and executive director of the National Association of Consumer Advocates. Diane Thompson, a lawyer with the National Consumer Law Center, has defended hundreds of foreclosure cases. "In virtually every case, I believe the homeowner was not in default when you looked at the surrounding facts. It is a widespread problem throughout the country."
Homeowners in Florida, Nevada, Texas and Pennsylvania have filed lawsuits alleging that they were victims of mistaken foreclosure. In many cases, the bank went so far as to haul away belongings and change the locks on the wrong homes.
Maria and Jose Perez of Seguin sued in October after Bank of America sent them a notice that their house was scheduled for a foreclosure sale Nov. 2. The couple says they are current on their mortgage payment and have no loan with Bank of America. A trial is set for June 13.
Now the class actions are coming. In Kentucky and California, class-action lawsuits have been filed against major lenders on behalf of homeowners in loan modification programs who allege that they made all their payments but got foreclosed on anyway.
"It is mind-boggling that these large banks accepted billions and billions of TARP money from the government, and they are just committing a fraud on the American people," said Jack Gaitlin, who filed the Kentucky lawsuit Oct. 4. He was referring to the Troubled Asset Relief Program, the 2008 government bailout of the banks.
Banks long ago stopped holding mortgage loans and pooled them into securities sold to investors. The banks charged fees for servicing the mortgages, tasks such as collecting monthly payments.
Rheingold said, "They created a servicing model where they made the most money by foreclosing on people as quickly and cheaply as possible." When a foreclosed house is put back on the market and sold, the proceeds are used to pay creditors, like mortgage servicers, first.
Now it's becoming clear just how chaotic the whole system became. Depositions from employees working for the banks or their law firms depict a foreclosure process in which it was standard practice for employees with virtually no training to masquerade as vice presidents, sometimes signing documents on behalf of as many as 15 different banks.
Former employees at banks and foreclosure law firms have testified that they also knowingly pushed through foreclosures on the wrong people. The banks say that they are reviewing their mortgage and foreclosure procedures and that most of the people involved in foreclosure deals were behind on their payments. As for people wrongly caught in the foreclosure net, they say they are reviewing those cases, too.
But what emerges from court filings, depositions and interviews is that once the bank places a person on its foreclosure assembly line, it becomes nearly impossible to get off.
When Marconi ripped the foreclosure notice from his door in Garrison, N.Y., on Oct. 20, he saw that he was named as a defendant along with a woman who had run a red light and smashed into Marconi's car four years earlier. Marconi had received a payment from her insurance company. It was her house, in Rye, N.Y., that Wells Fargo was foreclosing on.
Marconi explained the bizarre mix-up to Wells Fargo's customer service department, its ethics complaint department, its law firm and the office of the CEO, John Stumpf. Marconi says they all told him that they could not help him and that he needed to get a lawyer.
Wells Fargo spokeswoman Vickee Adams says Marconi was named in the foreclosure lawsuit because he filed a judgment against the woman in the car accident. It is common for lien holders to be mentioned in foreclosure documents. But Marconi says the judgment against the woman was satisfied in April 2009. "Now I have to pay a $3,500 retainer for a lawyer to get my name pulled off some lawsuit by Wells Fargo," Marconi said.
Equally puzzling is the case of Williams, CEO of a food distribution business in Kansas City, Kan. Before his GMAC nightmare began, he says, his credit score was 794 out of 800. "I've never been any days late on anything, ever," Williams said.
But when Williams, 52, tried to pay his $2,500 monthly mortgage payment online Aug. 5, he discovered that GMAC had put a "stop" on his mortgage account.
Since then, Williams has found himself trapped in an alternate banking world worthy of The Twilight Zone. The trouble couldn't come at a worse time for Williams and his wife, Carol. She was buying the upholstery business where she has worked for 10 years. Bank of America lowered her credit limit, citing "serious delinquency on other accounts." And the couple's credit score is sinking by the day.
Finally, on Nov. 9, a GMAC employee who said she worked in the executive offices contacted Williams and told him that an audit had revealed that the bank had lost his loan paperwork. But she couldn't explain why the stop had been put on Williams' account, why the bank was rejecting his payments or why the bank was assessing him for late fees every month. She said she would send letters to his credit agencies to correct the misinformation. GMAC spokesman James Olecki says the bank is looking into Williams' situation.
Even those who have managed to clear up their misunderstanding say the fight was a full-time job.
After going to court and serving as his own lawyer, Nyerges got Bank of America to drop its foreclosure action. All along, he had been showing employees of Bank of America a copy of the $165,000 cashier's check he used to pay for his house in September 2009. "No one at Bank of America could wrap their brain around this concept that I had no mortgage," he said. In September, the court awarded Nyerges $2,500, plus 6 percent interest, for his costs.
Bank of America spokeswoman Jumana Bauwens said, "This was an unfortunate error that was corrected when it was brought to our attention."