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Nonprofit group says 100,000 got flawed foreclosure notes Read more: Nonprofit group says 100,000 got flawed foreclosure notes
24 February 2012
Pennsylvania homeowners who weren't told they could meet face-to-face with their mortgage lender to avert a foreclosure deserve a second try at keeping their homes, members of an East Liberty nonprofit that provides mortgage counseling said on Thursday.
Foreclosure notices that lenders sent to more than 100,000 homeowners from 1999 to 2008 failed to disclose the option to meet with lenders within 30 days. The flaw ultimately could require lenders to restart the lengthy foreclosure process, said Michael Malakoff, an attorney who represented three Pittsburgh homeowners. Based on the notices, the three successfully appealed their foreclosures to the state Superior Court.
Pennsylvania law required the notification to be in the letters at the time. The state Legislature removed that requirement in September 2008, Malakoff said.
A three-judge Superior Court panel ruled late last month in favor of Malakoff's three clients and called the notice required under state Act 91 "deficient." Malakoff said more than 100,000 people facing foreclosure likely received the deficient letters over the nearly 10-year span.
"No more foreclosures should go forward," said Maryellen Deckard, Western Pennsylvania regional director of Action United, which represents "low and moderate income Pennsylvanians." The organization was created in 2010 by former members of ACORN.
ACORN -- the Association of Community Organizations for Reform Now -- once was the country's largest anti-poverty group. It shut down in 2010 after accusations of mismanagement and fraud caused it to lose much of its private and government funding.
Last week, lenders HSBC, Wells Fargo and Beneficial appealed the court's decision. They asked for a nine-judge Superior Court panel to reconsider the case. They could appeal again to the state Supreme Court.
The Pennsylvania Housing Finance Agency created the Act 91 notices and has filed a court brief that sides with the banks. The agency's mission is to provide "affordable home ownership and rental apartment options" to senior citizens and poor families.
Spokesman Scott Elliott said the agency is in compliance with state law and declined to comment on the court case.
Deckard and Pittsburgh Controller Michael Lamb, who joined Action Housing at a Downtown news conference yesterday, said authorities should suspend sheriff's sales while the court dispute is resolved.
"Since there's an appeal, we're not going to stop sheriff's sales at this time," said Allegheny County Sheriff William P. Mullen. "We'll follow the direction of the court."
The sheriff's office handled 2,279 foreclosures last year -- the fewest in more than a decade, Mullen said.
The office, though, has received 854 foreclosure orders so far this year -- an increase compared to this point last year. Mullen attributed to growth to lenders catching up with processing a glut of foreclosure-abuse claims from last year, such as "robo-signing" -- a practice in which some lender employees signed documents without reading them.
In January 2009, Mullen's office began sending notices to homeowners facing foreclosure, telling them they could meet with lenders under a plan that Judge Joseph M. James approved. He said the conciliation plan has been successful in averting some foreclosures.
Because of the ruling, Malakoff said he persuaded a lender to call off a sheriff's sale of a Lincoln Place home owned by client Kathy Todd scheduled for early March.
"It's a huge relief for me to know that I'm not going to lose the house," said Todd, who wasn't aware she could meet with her lender. "I'd like to work out a payment plan. You can't live for free."