Tragedy reinforces need for Homeowners’ Bill of Rights

Earlier this week the California legislative Conference Committee on SB 900 & AB 278, met to discuss California’s foreclosure crisis and consider establishing a Homeowners’ Bill of Rights. Consumer groups (including CALPIRG) and industry representatives made their case in support and opposition of the proposed changes that will provide consumers increased protections and hold mortgage service providers accountable.

Yet the fine arguments fade into insignificance after hearing the story of a California man’s suicide after years of fighting Wachovia & Wells Fargo over a mortgage mess-up. Normanand Oriane Rousseau’s ordeal began in 2000, when they purchased a home together in Southern California. They made a 30% down payment and spent the next several years making their payments to the bank on-time and in-person.  Five years ago, a bank representative convinced the couple to refinance their mortgage, promising to lower their monthly payments by more than $600. However the mortgage they were promised wasn’t exactly what they received.

In May 2009 problems began when they were told they had missed a payment the month before. The Rousseaus provided proof that they had given a cashier’s check to the teller for April, along with proof that the check had been cashed. But that didn’t matter to the bank, and Wachovia’s collections department continued to harass the Rousseaus demanding payment. 

In early August 2009, the Rousseaus received a notice of intent to foreclose, but when they contacted Wachovia they were told that their account was current and received an apology for the error. Later that month, Wachovia sent them a certified letter demanding payment of nearly $3,500. In April 2010, the bank told the Rousseau’s that they had all the needed documents, yet a month later their application was denied because of supposed missing documentation. 

The bank sold the Rousseau’s house in November 2010, and earlier this month the family was given five days vacate their house. On Mother’s Day, Norman Rousseau took his own life in the family bedroom. 

“He saw there was no more way out and there was no where to go and…he snapped,” his wife told  CBS reporters. 

The sad thing is that this tragedy could have been avoided. California needs to pass legislation that will protect homeowners from future cases of loan service malfeasance. Consumers will be protected if the servicing standards and provisions of the National Mortgage Settlement reached early this year between the California Attorney General’s office and the countries’ top five mortgage lenders are extended to include all lenders in California. 

Keeping families in their homes and communities intact is what we need to climb out of the continuing mortgage crisis. To date, the banks have been more focused on short term profits at home owners’ expense than long term recovery. 

CALPIRG recently told California legislators to end the most egregious loan practices harming consumers: 

End “robo-signing”. Regulation is needed to ensure that banks review foreclosure documents individually, as law requires. Consumers must be protected from foreclosures occurring due to the servicer’s failure to properly process paperwork or the use of incomplete paperwork.  

Prohibit “dual-track” mortgage processing. Many California homeowners negotiated in good faith with their lenders modifications to mortgages, only to find out that lenders initiated a foreclosure process in order to regain losses as quickly as possible. Dual-track process harms consumers and California’s economic recovery. 

Banks need to communicate better with borrowers and provide a single point-of-contact in order to avoid dual-track foreclosures. This will reduce delays in the loan modification process, help keep families in their homes, and ensure that the foreclosure process is only initiated after all other options are exhausted. 

Violations of mortgage rules must be monitored and if necessary prosecuted. Changes to existing California laws must include significant penalties for parties who fail to comply. Without improved rules relating to mortgage servicing, and sufficient enforcement of those rules, the mortgage servicing industry will continue to employ practices that hurt California’s housing market and economy. 

The Rousseau’s loss is further evidence that big banks and mortgage providers have failed their customers. It is time regulators step up for consumers.

Watch the full news report here.