Family at risk of losing home fights fallout from questionable mortgage practices

In the Harris family's Lansing neighborhood, just blocks from where U.S. Sen. Debbie Stabenow once lived, unkempt lawns and front door foreclosure notices are commonplace. (Photo by Todd A. Heywood/Michigan Messenger)

LANSING — With the state legislature and Gov. Jennifer Granholm celebrating the passage of the Home Foreclosure Prevention Act, the crisis facing struggling homeowners fighting to stay in their homes is far from over. Symptoms of the crisis can be seen across the state. And while sheriff sale announcements and bank property for sale signs might be the easy way to point to homeowners in trouble, it is far more difficult to spot those who were turned on to bad mortgages or manipulated by tactics some label fraudulent, a festering problem across Michigan that’s been hitting one family in the state capital particularly hard.

The Harris family — Tonya, Jason and their four children — says it was turned onto a bad mortgage by a less-than-truthful lender. They purchased a four bedroom ranch home on Lansing southwest side in 2006. The neighborhood, a solid working class neighborhood from which U.S. Sen. Debbie Stabenow rose to power, is now decimated by foreclosed properties. A drive though the neighborhood reveals unkempt yards, with legal notices taped to the windows — a telltale sign of foreclosure.

“It’s just been a nightmare,” Tonya Harris said in a recent interview with Michigan Messenger inside the home she is at risk of losing in just two weeks.

She claims the mortgage company she was dealing with, Bretlin Home Mortgage of East Lansing, did not disclose that the loan was a two-year fixed rate that flipped into an adjustable rate. In addition, she claims the couple was encouraged to hire a property appraiser who valued the property at $106,000 in 2006. The couple was then able to get a loan for $94,000, and they paid about $5,800 in closing costs, she said.

The problem is, the equity they thought they were buying in the home, didn’t exist. When they attempted a refinance in 2008, they were told the property was only worth $84,000, $2,000 less than what they continued to owe on the loan.

(Photo by Todd A. Heywood/Michigan Messenger)

Carrie Guzman, the Lansing-based financial justice director of the Association of Community Organizations for Reform Now — a group working with the Harris family to help them save their home — said she considers the family victims of predatory mortgage practices.

“They were first-time home buyers,” said Guzman. “They were steered to a bad product in the first place.”

Guzman said she’s seen this story play out before. “They just didn’t know what to expect, which is why I think we need more home buying programs and financial literacy education.”

Guzman, who is also a licensed Realtor in Michigan, said the industry locally had placed Bretlin Home Mortgage on an informal list of brokerages not to do business with.

“A lot of real estate brokers would not even work with them,” Guzman said of the company which was shut down by state regulators in 2007. “Deals would fall apart at the last minute, or you would see things that were just not ethical with those deals” involving Bretlin.

L. Roy Custer, president of the Greater Lansing Association of Realtors, said he had never done business with Bretlin, and did not know much about the company. He did, however, say it was not uncommon for Realtors who have had a bad experience with a mortgage company not to return to them.

Bretlin Home Mortgage, which was headquartered in East Lansing, saw its license revoked in 2007 based on an investigation of Bretlin loan orginators. In addition to losing its license to offer mortgages, the company was also fined $10,000.

According to the consent decree published by the Michigan Department of Energy, Labor and Economic Growth’s Office of Financial and Insurance Services, Bretlin was ordered to stop violating multiple laws those in the mortgage industry must follow, including engaging in “fraud, deceit, or material misrepresentation in connection with any transaction governed by” state law.

Jason Moon, a DELEG spokesman, said the department could not provide specific information about the allegations in the case which lead to the consent order.

“We do not provide investigation files to the public and the files are not subject to [Freedom of Information Act requests],” Moon said. “We took the strongest action we could by revoking the license — that is a death penalty. And in levying the fine.”

Moon said he could not confirm or deny if Bretlin Home Mortgage had been referred the office of the attorney general for criminal action.

“When we see cases where we think there are cases of fraud or the possibility of fraud, we refer those to the AG. We do not talk about specific investigations,” Moon said. “We cannot confirm is there is any [criminal] investigation” of Bretlin Home Mortgage.

Since January 2008, the OFIS has referred 15 cases of suspected criminal mortgage fraud to the attorney general. Matt Frendewey, spokesman for Attorney General Mike Cox, could not immediately comment on the case and said he would look into the matter further but did not respond to Michigan Messenger’s inquiry by press time.

Bretlin has been ordered to cease operations in at least two other states as well. Officials in Pennsylvania ordered the company stop operations in February 2008. And in March 2008, the state of Florida revoked Bretlin Home Mortgage’s license.

The company received a loan backed by the U.S. Small Business Administration. The loan total was for $1.8 million, with the SBA backing $1,275,000 of that amount, said SBA spokesman Mike Stamler, who said he could not comment on the status of the loan, other than to indicate it had not been written off, or paid off. A paid-off loan status means the entire amount was paid back as agreed, while a written-off status means that the bank and the SBA sought liquidation of the collateral put up against the loan. What ever amount is left after liquidation is then written off.

Time ticks for Harris family

ACORN’s Guzman says the Harris family was a victim of mortgage fraud. But that doesn’t do anything to change the fact that they’re staring at the prospect of a sheriff sale on June 4. What’s more troubling is that they weren’t informed about the sale until they started receiving junk solicitations in the mail for bankruptcy attorneys regarding the impending sale of their house.

About a year ago, Tonya Harris lost her job with a Lansing-area nonprofit, when the organization had to downsize because of the loss of a grant. She and her husband knew that their financial situation was going to be difficult with the loss of one of two incomes and four school-age kids, three of whom were teenagers, living at home with them. But they looked at their budget and thought everything would be OK.

That is until they got a notice from Wilshire Credit Corporation, a mortgage servicing agency based in Oregon that has been managing the Harris family’s mortgage from Bretlin. The mortgage they had signed in 2006 was about to flip from a fixed-interest rate, to an adjustable rate — something neither of them knew was going to happen, Tonya said. The cost of their monthly mortgage payment would go from $659.60 a month to $1,071.50 a month.

Jason, now the sole bread winner for the home, brought home $2,400 a month from his job working for the city of Lansing.

Tonya ticked off a list of expenses, food, utilities, mortgage, gas for transportation to and from work, which quickly add up to well over the $2,400-a-month income mark. So she and her husband contacted ACORN and began the process of seeking a loan modification with Wilshire. The couple submitted a loan modification application packet, with the assistance of ACORN on May 21, 2008. In September 2008, Tonya was told the company never received the request. So she scurried about and put together a new packet. And again the company said they never got the request. So on April 20, 2009, after she starting get “harassing phone calls” from Wilshire representatives, and the company sending people out to photograph the house, the family sent a third request to the servicer.

This time, they sent it return receipt — and they have a signed document showing the company received the loan modification package.

Earlier this month, on May 6, Tonya says she spoke with someone named Emily at the company.

“She told me they had the package — which of course she did cause we could show some one signed for it — and everything was on hold,” Tonya said. She said she was told it would take about 45 days for the company to process the request and make a determination.

Shortly thereafter, her mail started filling up with junk solicitations from bankruptcy attorneys noting the scheduled sheriff sale and impending foreclosure of their property due on June 4 — a sale the Harris family said they knew nothing about.

Under Michigan law, when a lender decides to proceed with a foreclosure through advertisement, they are required to do two things. First they must publish the sheriff sale date for four consecutive weeks and secondly they must post, within 15 days of the first publication, notice of the sale “conspicuously” on the property.

Tonya was served the foreclosure and sheriff sale notice Monday afternoon by an Ingham County Sheriff deputy.

Wilshire’s law firm, Orleans, also confirmed the sale. Officials at the Ingham County Sheriff’s Department confirmed the property was slated for a June 4 sale.

But Bill Haldin, a spokesman for Wilshire, told Michigan Messenger affirmatively that “[t]here is no sheriff sale on this property” despite the sheriff’s department confirmation of the scheduled sale.

As the Harris family nervously awaits for news about their home, Tonya has been left bitter and frustrated.

“They say there’s help available — that you need to ask for help as soon as you know you have a problem,” Tonya said. “But I don’t know if that’s words of encouragement no more.”