Homeowners sue over alleged foreclosure fraud, seek state help

A letter sent Nov. 18 to Perdue says the Crawfords have not received help from Georgia's Attorney General Thurbert Baker.

In the letter, the Crawfords say they were told Baker's office was not pursuing investigations. A spokesman for Baker said Georgia is part of a national investigation, but the state’s top cop actually doesn't have jurisdiction in many of their complaints.

Attorneys for McCalla Raymer and Prommis Solutions called the suit’s charges of fraud and racketeering baseless and said they will ask for the case to be dismissed.

The homeowners allege, among other things, that McCalla Raymer and Prommis Solutions manufactured fraudulent foreclosure documents. The lawsuit, filed Nov. 12, seeks class-action status.

The suit and calls for state help come as banks and companies that process foreclosures face growing scrutiny nationally about how they do business and whether their actions have run roughshod over borrowers.

Federal bank regulators as well as all 50 state attorneys general, including Baker, have opened inquiries into the practices of the nation’s major banks and mortgage servicers.

“We’ve only begun to see the wave of challenges to the way foreclosures have been conducted, both here in Georgia and nationally,” said Frank Alexander, an Emory University real estate law professor.

Technicalities or fraud?

Industry insiders say any problems with documentation are merely technical in nature, and that borrowers are facing foreclosure because they haven’t paid their loans.

Advocates for borrowers say cases of improper foreclosures are happening in Georgia, but they have largely gone unchecked because state law does not require court intervention.

Homeowners Wendy Jenkins, of Columbus, and the Crawfords, of Marietta, allege the banks have not proven under Georgia law the banks' right to foreclose on their homes.

Jenkins was making payments on her mortgage and, in fact, had a payment returned before foreclosure proceedings started, the suit alleges. Crawford was attempting to make good on an arrearage, when the amount she was told she owed soared because of "foreclosure fees," the suit said.

Jenkins and Crawford allege that McCalla Raymer, Prommis Solutions and Mortgage Electronic Registration Services (MERS), a mortgage ownership tracking firm, were part of a scheme to craft fraudulent documents in order for mortgage owners to transact foreclosures.

Ebony Ameen, the attorney who filed the suit, said the defendants “took advantage of the nonjudicial foreclosure system in Georgia.”

Ameen said similar practices were likely used in thousands of metro Atlanta foreclosures. The scope of alleged problems goes beyond negligence or mistakes, she said.

“It has to make you wonder, ‘what’s going on here,?’” Ameen said.

Marty Stone, McCalla Raymer’s managing partner, declined to discuss specific allegations but said the firm disputes the claims.

"We dispute all the claims contained in it ([the lawsuit])," Stone told The Atlanta Journal-Constitution. Stone said the firm would defend against the lawsuit vigorously and "try to have it dismissed."

John Williamson, an attorney representing Great Hill Partners, which is an investor in Prommis Solutions, said in an e-mail: "We have reviewed the Complaint against Prommis Solutions and its employees and believe the allegations are baseless. We intend to ask the court to dismiss the case."

Numerous other co-defendants are named, among them: Wells Fargo, Bank of America and its BAC Home Loans subsidiary, Boston private equity firm Great Hill Partners, two McCalla Raymer attorneys, and several people identified as employees of the law firm or Prommis Solutions.

A Wells Fargo spokesman said the bank relies on local law firms to comply with individual state laws, and is “confident in our position and we believe we will prevail."

Representatives of Bank of America and MERS did not immediately return messages seeking comment.

The suit alleges that signatures on foreclosure documents by one of McCalla Raymer’s attorneys, C. Troy Crouse, a named co-defendant in the case, do not match those contained in the security deed for his Forsyth County home. McCalla Raymer employees are also accused of misrepresenting themselves as officers of MERS.

MERS, which tracks when banks swap mortgages, bypasses the traditional filing of ownership changes in courthouses. The company has often played the role of a creditor or mortgage servicer in foreclosures, omething borrower advocates say it can't do under Georgia law, as it never holds the loan. The company has defended its procedures.

The suit questions other practices by the defendants and claims their actions created a fraudulent chain of title.

McCalla Raymer, Prommis Solutions, Great Hill and MERS are also accused in the suit of engaging in illegal fee splitting from the proceeds of foreclosures.

The lawsuit followed an investigation earlier this month by Channel 2 Action News.

Stone defended McCalla Raymer’s record, and said the 70-attorney firm is not a so-called "foreclosure mill."

“We’re one of the most respected firms in the country in this space,” he said.

Request for state help

The Crawfords, the Marietta couple, last week sent a letter to Gov. Perdue asking him to start an investigation into Prommis Solutions.

Jeff Crawford said in the letter the attorney general’s office had “ignored” claims of lawbreaking. Crawford said Baker’s office has jurisdiction over foreclosure fraud.

Russ Willard, a spokesman for the attorney general, who will leave office in January, said that is not the case. Baker’s office has jurisdiction, explicitly given by the General Assembly, over mortgage fraud; but jurisdiction was not granted for foreclosure fraud.

Willard said the attorney general’s office is part of the 50 state probe, but none of the states involved are providing specifics about the investigation.

“We have received complaints from a number of concerned Georgia citizens involving issues in the foreclosure process,” Willard said, including “robo-signings” and questions surrounding notaries.

Many of the allegations of criminal activity, he said, would fall to district attorneys.

Other state questions

Separately, the Justice Department’s watchdog over U.S. Bankruptcy Court has recently raised issues about Georgia foreclosure actions by banks that McCalla Raymer represents in the debtors’ court.

Borrowers often choose bankruptcy to stop foreclosure proceedings and to discharge or create payment plans for certain debts.

Alexander, the Emory professor, said the U.S. Trustee's actions in bankruptcy court are a significant development.

“The actions by the U.S. Trustee are the first signs of judicial rejection of the foreclosure procedures that have been followed recently,” Alexander said.

In at least two Chapter 13 bankruptcy cases, the U.S. Trustee’s Office has intervened in a bank’s attempt to foreclose on defaulting borrowers, claiming in its opinion the banks had not yet established rights to the loan.

Mike McCormick, the managing partner of McCalla Raymer's bankruptcy practice, said the firm has not been singled out and that the U.S. Trustee has stepped in on cases conducted by other firms. He said the actions were "not unusual."

"My perception hasn’t been that we have a target on our backs," McCormick said, adding that the firm's documentation processes are sound.

The U.S. Trustee's Office declined to comment about its recent motions in bankruptcy cases.