A family in New York is suing Citigroup. The bank’s mortgage servicing branch, CitiMortgage, is seeking a foreclosure claim against their house. The suit alleges that CitiMortgage does not own the mortgage, and can therefore not foreclose upon the property. The mortgage is owned by Fannie Mae.
The D’Amelio family has been in default on the loan, even after CitiMortgage granted mortgage modifications. They also owe more to the bank that the property is now worth. Declaring bankruptcy didn’t solve these problems, so they turned to the courts.
Fannie Mae says this is standard operating procedure; the servicer handles all collections as well as foreclosures even though CitiMortgage may have owned this mortgage for only a day before selling it to the federally guaranteed agency. The only way this case against CitiMortgage could succeed would be if a judge agrees that the mortgage documentation — none of which points to Fannie Mae as the true owner of the mortgage — is insufficient.
None of this would be a problem if the family had paid their mortgage as agreed. It’s possible that some emergency circumstance arose that would have prevented the family from doing so, but it’s more likely that like millions of other homeowners, they overestimated their ability to pay back the loan over time.
It’s interesting to see these stories of real families affected by the real estate market and their own choices. Eight or nine years ago, an acquaintance of mine, Charles, bought a house with his wife, Donna. His employment situation was iffy at the time while her career on the fast track to nowhere. They were young, newly married and did what society and their families encouraged them to do: buy a house. I don’t know exactly what they paid or their mortgage interest rate, but I do know they purchased a home in an expensive area. The husband told me off-handedly that they would be fine. House prices always go up.
A quick look at some statistics shows that their county now has the most foreclosures and bankruptcies in the state — and it’s not the most populated county. More data are hard to find, but recent average performance (value of median home prices in their town) is bad at -5% in the past few months, and I’d expect that number to be worse aver the past few years. I hope Charles and Donna are in a secure financial position now, as I try to wish only the best for people, but if we assume they’re the average family in their town, it doesn’t look good.
Embattled homeowner to bank: You don’t own my loan, Allan Chernoff, CNN, October 12, 2010
Updated November 1, 2010 and originally published October 13, 2010.