Mistaken Foreclosure List at Fault for Homeowners’ Woes
Last year ended in confusion and frustration for Warren and Norma Becker of Studio City.
Three days before the new year, the Beckers received a letter from a Sherman Oaks attorney, Steven A. Wolvek, which said: “I noticed that your home is involved in a foreclosure processing. . . . If you do not have an attorney, then please feel free to contact my office so you can set an appointment for a free consultation.”
The next day, another letter came in the mail--this one from Basic Mortgage Group Inc., a California mortgage lender.
The letter was written in longhand and photocopied to make it look nice and personal. It urged the Beckers to call so that they could deal with their loan default and start sleeping better at night. “I understand the pressure and stress you must be under at this time, but take 5 minutes to call me . . . “
The Beckers were certain that they couldn’t possibly be facing foreclosure on any of their residential or commercial properties, but they were nervous. “When I got the first letter, I felt a pit in my stomach,” Warren Becker recalled. “I knew that everything was paid up, but it makes you feel real low. I was worried about the experience of going through a lawyer and about having future problems with lenders. It’s really scary.”
It turns out that the Beckers are current on all their loans. A check by them with Stewart Title in Glendale confirmed that everything was OK, but the letters kept coming. After some research, the Beckers discovered that one of the state’s largest publishers of foreclosure lists had mistakenly printed a notice of default with the Beckers’ name and address.
The Beckers now know firsthand just how easy it is for a mistake to make its way through various information services and potentially cause headaches for property owners.
Trust deeds are basically three-party legal instruments which are created to secure real estate loans. In California, when a property owner (called the trustor) borrows money from a lender (called the beneficiary), they do so by signing a promissory note to repay the debt. The borrower also signs a trust deed giving a neutral third party (called the trustee) the power to foreclose and sell the property if the borrower doesn’t make good on his or her loan obligation.
After two missed payments (about 30 days late), most lenders generally report the default to credit bureaus. If nothing is done to correct the situation within about 75 days, the lender files an official notice of default (NOD)--which begins the foreclosure process. Once a notice of default has been filed, there’s a 90-day period between the notice of default and the recording of a notice of trustee’s sale. The borrower has up to five business days before the date of sale to catch up on their loan payments.
“There are several steps in the process where a mistake can happen,” said Ronald M. Frumkin, publisher of Redloc Information Services in Santa Ana, which published the Beckers’ mistaken notice of default for its own subscribers, and for readers of the Los Angeles Daily Commerce. Attorneys, lenders, property investors and some credit companies use these lists to generate new business, Frumkin explained, but there’s no way these foreclosure listings can be 100% accurate, he said.
Each month Redloc publishes about 20,000 notices of pending trustee sales and of completed sales in 13 California counties. Los Angeles County alone has 300 to 400 notices daily. Mistakes happen several times a week, Frumkin conceded. People call up surprised to find themselves on a list of defaulting borrowers. “Sometimes they’re irate and we have to calm them down,” Frumkin said.
NODs that are filed with the Los Angeles County recorder don’t have to include a legal description or property address. The NODs merely reference an original deed of trust and the name or names of the borrower, or trustor. Redloc compiles lists of NODs and then looks up the original deeds of trust on microfilm to get the legal description of the property. Then, from the county assessor, Redloc gets the street address of the property.
A clerk may look up the wrong deed of trust, the legal description may be copied wrong, the legal description may be matched with the wrong parcel or an error in entering all this information into the computer may occur, Frumkin said. When this happens, a retraction is published. “It would definitely be a better system if the trustees printed an address or legal description on the NOD,” Frumkin said. “It would eliminate a lot of errors.”
While Frumkin’s idea may be a good one, the California Trustee’s Assn. doesn’t agree with him. “If you require a legal description on NODs, it will often be wrong,” said Phillip Adleson, corporate counsel to the association. “We have a very complex system. There are so many problems,” he said. The system won’t get any better by adding more requirements, Adleson argued.
“The issue is making people who are in default aware of their situation,” he said, and that is being accomplished with NODs being sent to wayward borrowers by both regular and certified mail.
Because the Beckers were never really facing foreclosure, they never got any official notice of default. They did get plenty of other letters, though. It seemed to the Beckers that the vultures were circling.
Warren Becker said that when he tried to contact attorney Wolvek about the letter, Wolvek didn’t return his calls and his office declined to say where they had gotten the Beckers’ name and address.
And Wolvek did not return any of my calls seeking a comment.
It should be noted that attorneys are presumed to be violating the rules of their own profession if they send out a solicitation letter to a non-client, “unless the envelope bears an ‘advertising’ notation to enable the recipient to distinguish such advertising from legal correspondence,” according to the California State Bar. There was no such notation on the Beckers’ correspondence from Wolvek.
One also can’t help but wonder about attorneys who don’t return phone calls. Becker said his own attorney didn’t return his calls about the “foreclosure” letters. Warren Becker said he’s now scratched that attorney’s name off of his list.
Most of the letters the Beckers received in the mail were disturbing. A firm called Homesavers Unlimited offered for $395 to “get your home out of foreclosure today”--probably with a bankruptcy filing. Another letter offered to provide the Beckers with a new loan or, if they prefer, to offer their property for sale through the multiple listings. Yet another letter said that, “If the responsibility has fallen on your shoulders to save your family’s home, give me a call right now. I can help you get back on your feet with a loan. . . . P.S. If I’m out helping someone when you call, please leave me a message.”
“Everybody’s looking for some business. That’s the way it is,” said Jonathan Byron, a loan representative with Basic Mortgage Group Inc., which was one of the Beckers’ solicitors.
Mistakes in transcription and in the compiling of foreclosure lists occur frequently, said Claudia Queen, vice president and residential sales manager for Stewart Title in Glendale. She was recently perusing the listings of defaults and noticed one valuable property in default on a $470,000 loan. In fact, Queen said, the publisher of the listing was off by two digits--the default was a whopping $47 million. “That’s quite a mistake,” Queen said. “I have a sense that it happens very often.”
