WASHINGTON — Will anybody out there admit to being Stan and Alice Smith's home mortgage lender? Will anybody agree to cash their monthly mortgage payment check of $678.76?
This is no joke, and Stan Smith, a retired Army master sergeant who lives in Strasburg, Va., is very upset about it.
He has consulted lawyers, visited courthouses in two states, filed complaints with the attorney general of Virginia, the Ohio Division of Financial Institutions and the federal Department of Housing and Urban Development.
But for the last four months, the Smiths haven't been able to do something that most homeowners consider utterly basic: locate a lender who'll admit to being their lender. The Smiths have a mortgage. They just don't have a lender.
Their unusual story illustrates just how mind-bogglingly fouled up a simple transaction like getting--and paying--a mortgage can become. And mortgage experts say the Smith's situation may be a precursor to more such cases in the future as more and more lenders go bankrupt.
Here's what happened with the Smiths:
Last fall, they refinanced their home with L.L. Funding Corp., a lender with offices in Annapolis, Md., and Fairfax, Va. The Smiths made their payments on time for November, December and January, and the checks were cashed by L.L. Funding, according to copies of canceled checks furnished by the Smiths.
But on Jan. 29, 1999, Stan Smith says, he received a phone call from a subsidiary of Provident Bank in Cincinnati, informing him that Provident Consumer Financial Services owned his loan. The caller asked him to send all future monthly payments to Provident.
Several days later Smith received two "welcome" brochures sent by Provident to all its new home-loan customers. Smith says he never received even a phone call from L.L. Funding about the loan transfer, and never received a formal written transfer notice from Provident.
Under federal law, lenders selling or transferring mortgages are required to provide written notice to borrowers in advance of any transfer, and acquiring lenders must send written notice to borrowers confirming the change.
When Smith tried to contact L.L. Funding for clarification, he found the company's Virginia office closed and empty; the phone of the Maryland office was disconnected. A Provident spokesman said he believed the bank provided the Smiths adequate notification.
For the next three months, the Smiths mailed in, and Provident cashed, their $678.76 checks. But in June, Smith discovered from his bank statement that Provident hadn't cashed either his May or June checks.
When he asked why, he says he was told that the bank no longer had an account number for his loan.
At that point, according to Smith, the bank told him to stop sending payments to Provident but offered no suggestions as to where to redirect them.
Provident subsequently returned the uncashed checks by mail and promised to refund the three mortgage checks it cashed. Smith says he is still owed a refund for April, but the Provident spokesman says the bank owes Smith nothing more.
Since June, Stan and Alice Smith have had no lender ask them for their mortgage payment and have been setting aside the funds just in case. And though having a payment-free home mortgage may sound ideal to most homeowners, Smith is uncomfortable.
"I'm just concerned that we're going to get this letter some day saying, hey, we're going to foreclose on you because you haven't paid for six months, or something like that," he says.
Moreover, he's visited his county real estate recordation office and discovered that a lien for the full amount of the mortgage is still recorded against his home in the name of L.L. Funding. Should he need to sell the property, he couldn't provide clear title to the buyer.
Who really owns the Smiths' home loan?
Individuals identified in court filings as officers of L.L. Funding, Dr. Patwinder Sidhu and Darius Panah, could not be located for comment.
But a lawyer who represented the firm in a bankruptcy defense, Howard A. Rubenstein of Baltimore, said the firm has ceased doing business.
Maryland financial regulators say they are interested in contacting whoever represents the firm to discuss possible violations of state licensing rules.
Bank Assumed It Owned the Mortgage
A Provident spokesman says the bank "assumed we owned the (Smiths') mortgage" when L.L. Funding went out of business. The bank had provided a credit line to L.L. Funding and held loans like the Smiths' as collateral until L.L. Funding sold the mortgages to a third party.
Subsequently, said the spokesman, L.L. Funding "provided documentation that indicated we did not own the loan."
He said he suspects that the intended buyer of the Smiths' loan was ContiMortgage Corp., a large investor based in Pennsylvania. ContiMortgage sued L.L. Funding in February over a $710,000 claim, but its lawyer said last week that it has "no litigation at this time" against L.L. Funding. The ContiMortgage lawyer declined to discuss the Smiths' case.
Where does that leave the Smiths? Still waiting for a lender.
Distributed by the Washington Post Writers Group.