Homeowner Takes on BOA for Foreclosure and Mortgage-Backed Security Fraud

Can Bank of America foreclose on a homeowner without showing any evidence that their client actually owns the promissory note?

Can a Mortgage-Backed Security sue for damages after they have already been made whole through credit default swaps and a negotiated settlement with the originator of the security?

One Georgia couple is about to find out. They’ve filed a civil action against Bank of America claiming they were “induced” to default on their loan in order to qualify for a mortgage modification program, and that the bank is attempting to foreclose on them without showing that their client has any right to the debt owed on their home.

Like so many others in their situation, they followed instructions to the letter only to have Bank of America renege and commence foreclosure proceedings.

In early 2008, Jay and Beverly Fenello contacted Bank of America, the loan servicer at the time, informing them that they were experiencing financial distress, and inquired about options available to them including a mortgage modification, a short sale, and a deed in lieu of foreclosure.

Bank of America responded that no options or relief would be available until they missed at least two monthly payments. According to the complaint, Bank of America suggested that the Fenello’s skip the next two payments, then contact them again to apply for relief under the new Home Affordable Modification Program (HAMP).

As instructed, they skipped the next two monthly payments and immediately contacted the bank. Instead of getting a prompt decision, as Bank of America asserted, and despite calling the bank multiple times per month, no decision was forthcoming.

After more than 15 months of attempting to work with Bank of America, after skipping contractual obligations on the advice of the bank, after submitting no less than 4 complete applications, after submitting many more supplementary documents, after calling the bank weekly/monthly, after being subjected to misinformation, harassment, and other forms of abuse, after coming within 24 hours of foreclosure, after asking for options including deed in lieu of foreclosure, a short sale, or a modification, they finally received a modification offer that would have more than doubled their original monthly payment.

The Fenellos turned down the bank’s “Special Forbearance Agreement,” indicating they would re-apply in 30 days. After a few more attempts to negotiate an agreement, Bank of America set a foreclosure sale date which spurred this legal action.

“We were so upset at this point, that we decided to file this lawsuit pro se (without an attorney)” said Jay Fenello. “We also decided to go public with our efforts, and in the activist tradition, set up the OccupyTheCourts.org and ProSeAction.org websites.”

By setting a foreclosure date while the debt was in dispute, BoA blatantly violated the Fair Debt Collection Practices Act, § 809 (b) which states “If the consumer notifies the debt collector in writing within the thirty-day period … that the debt, or any portion thereof, is disputed …, the debt collector shall cease collection of the debt.”

During this entire process the Fenellos discovered that bank of America knowingly and consistently misrepresented facts with the intent to defraud them. They learned that BoA was not the note holder, but was said to be still acting on behalf of the so-called note holder. And, perhaps most important, they realized that the bank cannot prove damages worthy of foreclosure.

The story of encouraging struggling homeowners to purposefully default with no genuine attempt to offer a work-out plan has become common in America’s real estate crisis, and indicates clear fraud to ruin people’s credit and obtain the physical asset of the home.

When Bank of America and the other defendants representing Wall Street banks attempted to produce the note, they showed the note created by the original local mortgage company who is not a defendant in the case. When that was disputed, the defendants provided a MERS-signed assignment of the security deed which had what appeared to be another fraudulent notary, a la robo-signature.

Furthermore, Fenello’s attorneys argue that the Wall Street firms named as defendants who packaged the fraudulently-assigned note into mortgage-backed securities have already been made whole for their bad investments by the Federal Reserve and U.S. Treasury bailout actions, a negotiated settlement between the bank and the trust, and credit default swaps which insured the performance of the debt. Consequently, they’ve already been compensated for Fenello’s loan.

Bank of America is currently asking the court to dismiss this case, and a ruling if forthcoming. This case, as well as the many others around the country, may set important precedents for the future of foreclosures.