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What's more, Rothbloom has noticed that the companies are fighting harder than ever – even in this housing-market meltdown – to foreclose on homes when the homeowner has filed for bankruptcy. And the courts are doing little to keep the lenders in check.
Rothbloom recalls one client who recently wrapped up a Chapter 13 bankruptcy. The client had paid back all the arrearage and was ready to move forward. Then, Rothbloom learned that the lender had added about $8,000 in fees to the mortgage while the bankruptcy was being worked out. As soon as the client emerged from bankruptcy and thought the house was saved, the lender initiated another foreclosure.
"Chapter 13s are done the same way they've always been done," Rothbloom says. "The aggressiveness of the lenders and their abuses has changed."
For the couple in the pink house, the downward financial spiral started shortly after 9/11. First, the wife -- whose name was on the mortgage -- was laid off. There simply wasn't a huge demand for travel agents in the aftermath of the terrorist attacks.
While she was collecting unemployment and looking for work, her husband made up the difference. He earned decent money as a self-employed truck driver – until the engine went out on his rig.
"The finances really, really got to us," the wife says.
"It wasn't for lack of trying," her husband piped up. "We're hardworking people. I never miss a day of work."
Their mortgage – which originally carried an astounding 18 percent interest rate – was proving too much for their income. Even after refinancing it down to 11 percent, the couple fell behind on their $1,000 monthly payments.
By then, the wife was working again – although she had to take a pay cut. A full year after she was laid off, she had found a sales job. She made cold calls in an attempt to sell computer software. Her husband also saw his earnings slashed after he went to work as a hired driver for a shipping company.
"We did our best," he says. "We weren't splurging. We were spending on what we needed to live."
But the rising costs of everything from property taxes to gas to food was killing them. "Everything's going up but your check," he says. "How do you expect people to live? It just don't make sense."
In November 2003, their mortgage company initiated foreclosure proceedings against the couple's home. A month later, the wife filed for Chapter 13. Due to what her attorney considers to be an accounting error on the lender's part, the bankruptcy took a whopping five years to resolve. But because the mortgage company has provided conflicting numbers on what the homeowner owed, they're still grappling with foreclosure.
At first, the lender claimed that the homeowner had accrued $7,100 in arrearage, and that the balance of the loan was $98,000. Rothbloom considered $7,100 to be a reasonable amount for his client to pay.
Later, however, the company came up with a different figure. According to court documents filed by the lender, the homeowner owed $22,900 instead of $7,100. The lender also claimed the homeowner was 18 months behind in payments, rather than five, as previously thought. And the company said the balance of the loan was $118,600 – arguably more than the house was worth.
Rothbloom contested the lender's calculations. The homeowner even provided copies of checks that she considers to be proof that she wasn't a year and a half in default.
"I don't trust the system," she says. "I don't trust it at all. We keep sending money down the tubes."
Because the courts weren't able to determine how much the couple truly owed, they couldn't sell their home. And they couldn't refinance it, either. Instead, they paid off the $7,100, making the last payment this year. They're now waiting for a judge to decide whether they owe the full $22,900 that the lender alleges. A trial has been set for January.
Rothbloom is confident that the couple will keep their home – but only because he aggressively fought the lender in court.
"Look at what we've been through," he says. "There are thousands of people who file cases in this district, and many of them wound up losing their houses because of mistakes by lenders. It's tragic."
If he fails to convince the judge that the couple owed just five, rather than 18, payments, then Rothbloom will advise the homeowner to reinstate bankruptcy proceedings. If that fails, the couple likely will be forced out.
The irony is that the couple is finally doing well again, financially – and are trying to make up for several payments they missed after filing for bankruptcy. The wife got a job with the travel agency arm of a major credit card company. The husband recently paid off the lease-purchase of a new rig and is working for himself again.
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