While the case at issue is not a bankruptcy case, it involves a subject that frequently leads to bankruptcy. A West Virginia couple has sued Everhome Mortgage Company, claiming that its failure to release a deed of trust is a violation of the state’s civil code.
A deed of trust is not an actual deed, like a grant deed, guaranteeing ownership of the property. Rather, it is a security interest that is usually given in exchange for a loan. The most typical scenario involves an individual or couple arranging to take out a mortgage loan to buy a house, in exchange for the mortgage company receiving a security interest in the house. That way, if the home buyer defaults on loan payments, the mortgage company has the option of foreclosing on the house, in essence assuming ownership. The mortgage company then typically sells the house to a third-party buyer. If the home buyer makes his or her payments on a regular basis, this scenario should never occur. However, even when a home buyer is diligent, a mortgage company can lose paperwork, make computer errors, or otherwise be responsible for the home buyer appearing to be in default even when he or she is not.
In this case, the mortgage company’s error allegedly made it appear that the couple, Donna and Robert Cramer, were in default even after they had fully paid for their home. The Cramers took out a loan to pay for their house in 1993, in the amount of $53,100, which was later taken over by Everhome Mortgage Company. The couple made their last payment in August 2012, and claim that they were assured at least three times afterward that they had paid in full. However, the mortgage company allegedly refused to release the deed of trust and demanded payment from the Cramers for amounts they did not owe at least seven times. The Cramers claim that Everhome Mortgage Company acted in violation of the West Virginia code, had breached its duty of good faith and fair dealing, and acted intentionally, willfully, and/or wantonly.
The Cramers are fortunate that they can, presumably, provide evidence that they paid off the entire loan, or at least most of it. In the case of other, less fortunate, home buyers in similar situations, they are far from being able to pay the loan off, and too often must hire a West Virginia bankruptcy attorney to help them file for bankruptcy and prevent foreclosure. They may also have the option of arranging for a loan modification, but mortgage companies have a history of repeatedly ignoring modification requests and of not dealing in good faith, which was one of the reasons behind the National Mortgage Settlement. The automatic stay in bankruptcy prevents creditors from taking foreclosure action or issuing threats from the moment the case is filed. Most filers in these situations choose a Chapter 13 bankruptcy, because that allows them to rearrange the loan payments into more manageable sums to be paid over a three-to-five year period. This is helpful to many home buyers, but they also need to be careful: if they fail to make payments and have no reasonable excuse, their bankruptcy case could be dismissed and the mortgage company would be able to foreclose once more.