Fed up with the slow pace – and what many people see as unjust actions — of foreclosures, some victims of the crisis are looking to go on the offensive, opt out of the New Jersey court system, and seek justice from federal courts.
Jerome and Sandra Barnes of Paterson are one couple who hope to outrace their mortgage-holder by filing a federal suit.
Like many others, the couple bought a house at the wrong time, in May 2008, just as the housing bubble was about to burst and the Great Recession about to take jobs. Their single-family home on a quiet street was close to Jerome Barnes’ job for the Saturn car company. With housing prices inflated at the time, it was also “the only area we could afford,” Sandra Barnes said.
First, Jerome lost his job when General Motors closed Saturn, but eventually he regained stable employment. The couple had fallen behind on their mortgage payments, but negotiated a modification. Even more fortunately, they were approved for a low-cost federal loan that covered their arrears.
But the Consumer Finance Protection Bureau has identified mortgages and foreclosures, including modification attempts, as a leading source of consumer complaints. All too predictably, New Jersey, which has the highest foreclosure rate in the country, is near the top of the bureau’s complaint statistics. The bureau’s reports are available.
In describing the complaints , the CFB cited the sort of issues the Barnes cases raises: frequent “confusion and frustration” after mortgage loans are transferred among lenders; borrowers claiming lenders rejected or misapplied their payments, and lenders moving to foreclosure even while ostensibly reviewing modifications.
So it may not be surprising that the Barnes are going to court, claiming their mortgage servicer failed to properly credit a major payment and continues to charge more than agreed to in an approved modification. But their destination is uncommon among recipients of foreclosure notices in New Jersey: federal court. While widely discussed among attorneys during the surge of recession-related foreclosures, relatively few cases have left state courts. Federal jurisdiction is limited to cases that meet particular standards.
Rather than wait for foreclosure proceedings, the Barnes have decided to take the offensive and have sued the Bank of America of Charlotte, NC, the current holder of their loan, and Carrington Mortgage Services of Anaheim, CA, its hired loan servicer, accusing them of violating federal debt collection and truth-in-lending laws.
Kaplan Stewart Meloff Reiter & Stein, the Pennsylvania firm that represents Carrington and Bank of America, has moved quickly to try to dismiss part of the Barnes suit. In her motion, attorney Sandhya Feltes argues that law and precedent show the two companies are not covered by the Truth in Lending Act in this instance because they did not originate or own the original mortgage.