When the Banks and Fannie Mae Get It Wrong, The Little Guy Loses

I was recently hired by an 89-year old man to intervene with an out-of-state debt collection agency that was harassing him.  He and his wife had sold their home in Las Vegas, back in 2013. Escrow had closed, paying off his Bank of America home loan, the title was successfully transferred, and he and his wife had made a few dollars on the transaction. Everything seemed to be in order — but that was not the case.

Apparently, Bank of America had sold the fully paid off loan to a debt collector in Oregon called Seterus, Inc.  Why anyone would sell a fully paid off loan seemed strange to me, so I began looking at the paper trail. In retrospect, it would have been comical had it not manifested as a “trail of tears” for my senior citizen client whose wife had died, leaving him to fight it alone without many resources. The one positive feature in this whole ordeal was that he had a loyal family looking after him who were smart enough to hire me.

I analyzed what happened and this is what I discovered: The escrow company, Fidelity National Title Escrow, provided a final escrow closing statement reflecting that the $150,000 loan had been paid off, and Bank of America provided proof that it had received the funds to pay off the loan.  This seemed pretty straight forward.  However, because Seterus became the loan servicer for this loan, they created a new loan number and began efforts to collect the full loan, again, in the amount of $150,000. Additionally, they were charging my client interest on the loan since it had closed. Armed with bullet-proof evidence that the loan had been paid off, I felt very confident – almost smug, as I knew that I could make all of this right for my elderly client.

My demand letter went out on April 18, 2016 to Seterus, whose business model does not permit the use of email. Additionally, there was no legal department to speak with — only a phalanx of robo-call recorded messages with few options to reach a human being.

In May, I thought I had caught a break.  Someone who identified themselves only as “Seterus” (no name), wrote to me to let me know that the loan’s owner was now Fannie Mae (Federal National Mortgage Association) in Washington D.C.  For a loan that was not a loan, it was doing some travelling, to wit: from Las Vegas to Oregon and then to Washington D.C.  The way I saw it, a lot of people were being compensated to chase a paid-off loan worth nothing except the price of harassing my elderly innocent client.

Undeterred by this letter and emboldened by my righteous cause, I pushed on writing four more letters to Seterus. I also continued to call them until I finally reached a woman on the front phone lines at Seterus.  This person took notes of the situation and read the documents I had previously sent to the company one month earlier, then she forwarded her notes and my documents to a “higher up” at Seterus.

I also reached out to the people at Fannie Mae, who were sympathetic to my cause. They said that they would speak with Seterus but it could take weeks to resolve. In the meantime, my client kept getting documents telling him that his paid-off loan was in arrears which caused his fears to skyrocket. He also received mail stating that he had to insure the house that he no longer owned.

Finally, after two months of waiting, the fair credit loan Gods smiled upon me. I received a signed letter from someone at Seterus who said that B of A had transferred the loan to Seterus in error and that it was not a valid loan. Despite this assurance, my client received another letter of demand for insurance.

In the world of loans, the borrower is a sheep looking for direction from a pack of wolves.  Although my client was not at fault, he was unjustifiably placed in the center of this controversy because debt collectors do not care about the truth.

Unless you have a bad-ass lawyer, willing to threaten elder abuse lawsuits and to initiate targeted phone offensives, the poor borrower stuck in the middle of corporate confusion and negligence doesn’t have a chance.