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Hitting close to home

Real estate attorney’s own foreclosure offers case study

Walter Lamkin’s house at 650 Hickory Lane. This is a view from the street, a rather unpretentious looking house. However, the view from the back driveway is a bit different. Photo by Karen Elshout

Meet Walter Lamkin.

Lamkin is a real estate attorney with Spencer Fane Britt & Browne, one of the largest firms in Missouri. The former managing member of title and money disbursing companies, he sits on a zoning board in his upscale St. Louis suburb of Frontenac.

All in all, Lamkin is the last person you’d expect to have problems renegotiating his home loan. But he did. And now Lamkin shares a situation with hundreds of thousands of other Americans who don’t have his resources and knowledge: His home teeters on the precipice of foreclosure.

Lamkin didn’t return several phone messages left over two weeks at his home and office before press time. But a lawsuit he filed in St. Louis County Circuit Court contains a litany of complaints, including misallocated payments; numberless requests for financial documents that failed to appear in the servicer’s records after he supplied them; and a last-minute notice of a foreclosure sale originally set for June 27.

Despite his expertise in real estate deals and financing, Lamkin was stymied in his search for the answers to the basic questions that have confounded other homeowners: Who holds the loan? Who has the authority to negotiate different terms? What is the monthly payment supposed to be?

His case illustrates the extent of the foreclosure mess spawned by deflated home values, banks’ dicey recordkeeping and the practice of packaging mortgages into securities.

Lamkin’s lawsuit, filed to halt the foreclosure sale of his $800,000 home, targets loan servicers Bank of America and its former subsidiary BAC Home Loan Servicing. BAC transferred home loans to the bank this summer.

Bank of America didn’t respond to a request for comment on Lamkin’s lawsuit. A spokeswoman said the bank usually doesn’t comment on litigation.

State attorneys general and the Federal Reserve Bank have taken aim at Bank of America and other banks for allegedly shoddy foreclosure practices. In April, Bank of America signed a consent order with the Federal Reserve to improve its residential mortgage services and foreclosure processes.

The 2008 purchase of Countrywide Financial brought a slew of bad loans and poor recordkeeping to Bank of America, said Sean Westhoff, a St. Louis attorney with the Westhoff Law Firm who represents homeowners trying to fend off foreclosure.

“If I had to bet on it, [Lamkin’s] not the guy that’s in that mess,” Westhoff said. “It’s Bank of America. Too many people with Bank of America have said, ‘I’ve made all my payments and I can’t get this straightened out.’”

But the lawsuit chronicles Lamkin’s blunders as well; he “forgot” to record the  deed on the transfer of the property; professed unfamiliarity with a federal loan modification program whose name has littered the news for more than two years; and said he was “not made aware” until January that another modification request would be underwritten under a separate federal program, although the program’s name was included in letters sent to him two months earlier.

It’s also unclear from the lawsuit whether Lamkin fell behind on his payments. At one point, it says all payments were current until Jan. 1; at another, it says he has paid more than he believed he owed each month during the past two-and-a-half years.

Declining worth

Lamkin’s ranch-style brick house nestles beneath aging shade trees on a cul-de-sac in the 600 block of Hickory Lane in Frontenac. One of the trees sports a tree face; a flag bearing a picture of red and yellow tulips hangs by the front door. There’s a basketball hoop in the driveway.

The 5,700-square-foot house has five bedrooms and four bathrooms, and the property has a pool, according to St. Louis County real estate records.

A newly erected brick mansion within a few blocks of Lamkin’s house testifies to optimism about the neighborhood’s property values. But the worth of Lamkin’s less ostentatious property has sagged since he and his wife, Linda, took out a loan on it in 2003. Then, it was appraised at $1.1 million. The average of six monthly appraisals this year was $812,580, according to the lawsuit.

Lamkin’s discussions with the bank on refinancing started in fall 2008, according to the lawsuit. They were marked by irritants — he sent the same set of financial documents four times before they showed up in the bank’s computer system — but he did get an offer for a loan modification in August 2009. He had questions about the principal owed and other balances, but he got no response to his phone calls and written requests.

“Out of desperation,” Lamkin says he signed the offer and returned it. He still doesn’t know if the amounts were correct and has “no reason to believe it to be so.”

‘Non-existent’ escrow

Bigger trouble was coming.

When the Lamkins signed for the loan in 2003, the lender waived a requirement for an escrow account for real estate taxes and insurance, according to the suit. Despite that, Bank of America in fall 2009 routed payments to a “non-existent” escrow account. That put Lamkin in technical default on his loan, which hurt his credit rating. A bank employee allegedly acknowledged the mistake in a telephone conversation, but the money was reallocated incorrectly, triggering another default and notice to credit rating agencies.

Lamkin “finally convinced” the bank to straighten out the payment, but a similar problem popped up about a year later. In a November 2010 letter, BAC Tax Services wrote Lamkin that property taxes that were not due for at least another month had not been paid, so BAC Home Loans Services paid them, established an escrow account and was adding the tax amount to the loan balance.

The tax issue arose at the same time Lamkin was negotiating to reduce his monthly payment. Because BAC started the escrow account, the monthly payment instead “substantially” increased, “a fact of which Defendant BAC Home Loans Servicing was acutely aware,” the lawsuit said.

Because the amount due each month varied on invoices over the past two-and-a-half years, Lamkin didn’t know how much to pay. He usually paid $3,100, more than he believed was owed, according to the lawsuit.

Escrow requirements can trip up homeowners when payments go to “suspense” accounts, Westhoff said. A servicer receives the money for one payment but holds it back from the lender because it’s not enough when adjusted for the escrow.

“It’s like you never made a payment, then they add that on to your account — an entire payment plus a late fee and interest — and say that’s the payment they want,” Westhoff said.

The money stays in the suspense account until there’s enough money to cover all the charges, even as homeowners make monthly payments at the amount they think they owe. Soon they’re several payments overdue, and the lender “can do a bunch of nasty stuff, including calling it in,” Westhoff said.

Only the holder of the note can foreclose on property, so the question Lamkin raises in the lawsuit about who owns his loan could be key, said Gregory Leyh, an attorney with Gladstone-based Gregory Leyh PC. Leyh started a foreclosure practice last year.

“Nobody’s entitled to foreclose until they prove they own the note,” Leyh said. “If an investor owns it, then Mr. Lamkin may have a stronger argument.”

Lamkin says in his lawsuit that he hasn’t had any luck finding out who holds his note. Bank employees told him numerous times that an “investor” actually holds the deed of trust on the property. An attorney with a law firm representing the bank told Lamkin that Bank of America is the “owner of the loan.” The attorney, Gerald Morgan of Kozeny & McCubbin, didn’t return a reporter’s phone call.

Banks’ practice of bundling mortgages for sale to investors — a big contributor to the economic meltdown — can make it difficult to trace the owner of a loan.

The practice also means loan servicers’ interests and those of the investors who hold the loans are at odds, Leyh said. Servicers earn more fees as they delay or deny loan modifications, and they can collect out of foreclosure sales.

“An investor benefits from the income stream from Mr. Lamkin continuing to pay his mortgage,” Leyh said. “The servicer benefits far less.”

Expert’s mistakes

Lamkin’s biography on Spencer Fane’s website says he is “experienced in all phases of real estate including land acquisition, residential and commercial development.”

His real estate experience extends beyond legal work. In 2000, he co-founded Abstar Title Co., a title agency that provided electronic document transfers for real estate closings, according to a St. Louis Business Journal article. Lamkin was managing member when the title company wound down in 2007, according to documents on the Missouri Secretary of State’s website. Lamkin also was a partner in Abstar Disbursing Co., which routed money for real estate deals and construction projects.

Lamkin’s experience didn’t keep him from making some basic mistakes on his home loan, however. According to the lawsuit, they include:

• The Lamkins’ house, placed in a trust in 2004, shifted to a different family trust after his wife’s death. Walter Lamkin, the only trustee, obtained a deed for that change, “but forgot to record it until July 19, 2011.”

• Lamkin received two letters in November 2010 that referred to the “federal government’s Home Affordable Modification Program,” known as HAMP, but he claimed it wasn’t until the January denial of a loan modification from the bank that he learned the request “had been underwritten under the strict guidelines of a federal program.”

• Lamkin applied for a loan modification under the federal Making Home Affordable program. President Barack Obama announced the creation of the program in 2009, but Lamkin “wasn’t made aware” that it was a federal program under federal guidelines for qualification.

“Because of the nature and origin of the monthly income of Plaintiff Walter R. Lamkin, he was never going to qualify for relief” under the Making Home Affordable program, the lawsuit said. Making Home Affordable is the umbrella for HAMP and other federal modification programs.

Included in court documents is a reference to some of that income; in a response to a request for financial information, Lamkin wrote that he was attaching quarterly financials for Missouri companies including Engineered Products Industries, a plastic molding and die casting company, and merchandise display companies Presence from Innovation and Jahabow. Lamkin owns less than 25 percent of Jahabow, the letter says. Lamkin sits on the boards of the companies, according to his Spencer Fane biography.

Foreclosure notice

After Lamkin wrote a six-page letter to Bank of America Home Loans President Barbara Desoer detailing his “saga” with the loan servicer, his talks with BAC continued. But they were apparently with the wrong person. Lamkin negotiated with an employee named Rogelio Chua only to later find out that Chua didn’t have the authority to address the loan issues. A person named “Lorraine,” with whom Lamkin had never spoken, was responsible.

Lamkin responded to eight requests with “voluminous financial information,” but he was turned down for a workout plan in a June 3 letter because of this: “Customer did not return financials requested.”

Things happened fast after that. Although Missouri state law requires that notice of a foreclosure sale be mailed no later than 20 days before the sale, Lamkin got his notice five days before a scheduled June 27 sale, the lawsuit says. His lawyer, Andrew Leonard of McCarthy Leonard & Kaemmerer, on June 24 filed the lawsuit to stop the sale. (Leonard returned a phone message but said he had to consult with Lamkin before commenting. He did not call before press time.) Three days later, Judge David Vincent III issued a temporary restraining order on the sale; Lamkin had to pay a bond of $500.

In July, Bryan Cave attorneys Kevin Abel and Rhiana Luaders signed on to represent the bank. A week later, the bank agreed to extend the restraining order until this Friday. At last notice, $585,300 was due on the loan, Leonard said in an amended petition filed July 27.

Lamkin’s problem is the same as that of a lot of people who aren’t fortunate enough to be attorneys or have the money to pay one, Westhoff said.

“If you think it’s odd that Mr. Lamkin’s going through this, and you look at the machinations he’s going through to get it straightened out,” Westhoff said, “imagine being a single mother of two.”

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