It appears the mortgage-mess lawsuit filed by an Elliston couple in March is going to be a long and drawn-out legal battle.
I first wrote about Trinity Heckman, a police officer, and his wife Jessica, a nurse, on May 10. They’re suing SunTrust Mortgage, Nationstar Mortgage and a foreclosure company alleging fraud and breach of contract.
Their lawsuit, which collectively asks for more than $1 million in compensatory and punitive damages, claims missteps in the servicing of the Heckmans’ home loan resulted in their house being sold without their knowledge at a 2008 foreclosure auction . The Heckmans are still living in it, and made monthly payments on the house for years after it had been sold at auction.
The Heckmans’ lawsuit claims SunTrust defrauded them by forcing the sale of their house after SunTrust agreed to a home-loan modification program, and by accepting their loan payments after the foreclosure sale.
The loan modification was necessary because, according to the lawsuit, SunTrust bungled automatic withdrawals from the couple’s bank account, causing them to fall six months behind on their mortgage without their knowledge.
It also charges Professional Foreclosure Corp. of Virginia with failing to notify the Heckmans of the foreclosure sale, as required by law, and failing to account for the proceeds of the sale, which is also required by Virginia law. Professional Foreclosure conducted the auction at the direction of SunTrust, according to the lawsuit.
The Heckmans also accused Nationstar Mortgage of continuing the fraud by accepting their monthly payments after it took over mortgage servicing from SunTrust — even though by then the Heckmans’ home was instead owned by the Federal National Mortgage Corp., aka Fannie Mae.
Finally, it accuses Nationstar of mishandling escrow payments and causing cancellation of the Heckman’s flood insurance policy. Reinstating that policy would raise their payments by $500 per month because the flood zone maps have changed and now their property is designated a higher risk than when they bought it in 2006.
As I noted May 10, Nationstar responded to the lawsuit by denying the allegations and arguing that if anyone did anything wrong to the Heckmans, it was not Nationstar.
Now SunTrust Mortgage and Professional Foreclosure Corp. have responded in separate filings, and somewhat curiously. Court papers filed by attorneys for each don’t deny the Heckmans’ allegations. Rather, they assert that whatever went wrong with the couple’s mortgage, it’s far too late for them to sue SunTrust and Professional Foreclosure for it.
“Basically, they’re claiming statute of limitations — anything to stop [the lawsuit] without getting the heart of the matter,” said the Heckmans’ lawyer, Floyd attorney Jonathan Rogers.
In court papers dated May 20, SunTrust attorney Robert Perrow noted that the Heckmans’ lawsuit was filed March 13, 2015, and that SunTrust sold the loan to Nationstar in December 2010.
That five-year gap means the Heckmans’ fraud complaint should be dismissed because “the statute of limitations for fraud is two years,” Perrow wrote.
The statute of limitations for breach of contract is five years. Perrow argued that claim was based on the foreclosure sale in January 2008, and thus, a 2015 lawsuit “falls well outside the five-year statute of limitations for breach of contract.”
Professional Foreclosure makes essentially the same arguments in its filing.
Rogers predicted neither argument would hold up in court because the clock on the statute of limitations starts when the Heckmans discovered, or should have discovered, the fraud. “I’d maintain that no person in their situation could have known, or should have reasonably known, that the house had been foreclosed on, until November 2014,” Rogers said.
Finally, Perrow asked the court to dismiss the Heckmans’ claim for punitive damages. That’s because they “have alleged no facts to suggest SunTrust’s actions were willful or wanton.”
But the U.S. Attorney for Western Virginia might beg to differ about that.
After the original story about the Heckmans was published, I discovered that last July, SunTrust Mortgage had agreed to pay at least $320 million to settle a federal criminal investigation against the company that had been launched by federal prosecutors in Virginia. It found that SunTrust, which cooperated with the investigation, had harmed at least 26,000 homeowners.
Here are some choice tidbits from the U.S. Department of Justice’s announcement of that settlement. The news release was issued July 3, 2014 :
• “SunTrust misled numerous mortgage servicing customers who sought mortgage relief through [the] Home Affordable Modification Program. Specifically, SunTrust made material misrepresentations and omissions to borrowers in HAMP solicitations, and failed to process HAMP applications in a timely fashion. As a result of SunTrust’s mismanagement of HAMP, thousands of homeowners who applied for a HAMP modification with SunTrust suffered serious financial harms.”
• “This criminal investigation uncovered that SunTrust so bungled its administration of the program, that many homeowners would have been exponentially better off having never applied through the bank in the first place. Unwilling to put resources into HAMP despite holding billions in TARP funds, SunTrust put piles of unopened homeowners’ HAMP applications in a room. SunTrust’s floor actually buckled under the sheer weight of unopened document packages. Documents and paperwork were lost. Homeowners were improperly foreclosed upon. [The Department of] Treasury was lied to. The negligence with which SunTrust administered its HAMP program is appalling, miserable, inexcusable, and repulsive. Real people lost their homes, and many others faced financial ruin.”
But that’s not all. In a separate civil settlement with 49 attorneys general across the United States, SunTrust Mortgage in June 2014 agreed to pay at least $540 million more in restitution, relief and penalties because the bank had wronged other homeowners in 49 states and the District of Columbia.
The agreement covered mortgages underwritten between 2006 and 2012, and cites SunTrust for “abusive” practices. In the statement announcing it, Richard Cordray, director of the Consumer Financial Protection Bureau, noted:
“Deceptive and illegal mortgage servicing practices have pushed families into foreclosure and devastated communities across the nation. Today’s action will help homeowners and consumers harmed by SunTrust’s unlawful foreclosure practices.”
At this point, it’s unclear whether the Heckmans’ mortgage modification occurred under HAMP or another government program, and whether they’d qualify for relief under either settlement.
“As it’s pending litigation, we will decline to comment,” said SunTrust Mortgage spokesman Michael McCoy.
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