“Zombie mortgages” are threatening to force unsuspecting Minnesotans from their homes. On a recent episode of her podcast, Liz Collin spoke with a homeowner about why a second mortgage statement showed up months ago as she shared a warning to others.
Tammie Witthuhn was joined by her attorney, Andrew Ratelle. Alpha News spoke with Tammie as her Otsego home was set for a sheriff’s sale.
“I received a letter from Statebridge stating that we had an outstanding debt of $71,000 on a second mortgage that I haven’t heard from in 14 years,” Witthuhn said.
“In 2005, we purchased the loan and we took out the first loan, which was $183,000, and then it came with the second loan that was $45,800 when we purchased the house. Then, in 2010, when the economics weren’t doing really good, we tried to modify our first mortgage loan because we were on an adjustable interest rate. I contacted our bank and went through the process of modifying our first loan as I also was working with the second loan, which was still the same bank. I contacted them after I got my first loan modified and they stated that they were still working on modifying the second. Then, I never heard anything from them in the process when my first loan got modified,” she explained.
For 14 years, Witthuhn said she never received any statements until a letter arrived a few months ago saying she owed tens of thousands of dollars in late fees to make her home loan current.
“The first conclusion is that it comes off like a scam. Statebridge sends this letter. There’s no record of Statebridge ever acquiring the loan. We had no idea who they were. They were just this random third party who was threatening Tammie with foreclosure for a loan that she thought that she was current on. The problem is that you get these third parties that come in and nobody knows who they are. There’s no record of them demanding payment well in excess of the principal of the loan because, of course, the interest has been running for 14 years. Now, what you have is you have demand for this payment with a threat of foreclosure. So, our initial reaction is that this sounds like a scam,” Ratelle said.
“Unfortunately, the mortgage servicer was not particularly responsive to us until they actually did file the foreclosure papers and then at that point we reached out to them and demanded that they establish that they owned what, in fact, they purported to own, which is the second mortgage. After that, we continued on to hopefully negotiate a serviceable deal for Tammie and that’s where things are at right now,” he explained.
Similar stories have been popping up all across the country.
“I think certainly in Minnesota, you have situations where foreclosures, banks have to, or banks and lenders have to foreclose within 15 years of the maturation date on a mortgage. So given the fact that the loan was modified back in 2010, we have a situation where the servicers have essentially been waiting, lying in wait for 14 years at which point they threatened foreclosure, which allows them to seize the equity in the house. So because of the way a lot of these modifications worked in 2009, 2010, unfortunately, I think we’re at the very beginning of what may be quite a catastrophic pattern of lenders and servicers trying to seize the equity in the house via foreclosure for people who have been in their houses for 15 years. So this is a problem that, unfortunately, has been, that we anticipate is going to get much worse before it gets any better,” Ratelle said.
Witthuhn has been able to come up with a settlement to avoid the sheriff’s sale on her home.
“Congress needs to act on this,” Ratelle said.
“Thankfully, Tammie and her husband have the ability to settle this matter. It’s not the case for many people. When you have these mortgages that are being bought, some of them, hundreds at a time by God knows who, and no law that requires the purchasers of these mortgages to record the purchase or give notice, that, at a minimum, is what is going to have to be required, probably by legislation, because there’s very little that homeowners can do short of checking their title every year, like their credit report, to prevent something like this,” he added.
“It’s essentially a type of legal extortion that’s being perpetuated against homeowners who have been in their houses for 10-plus years and who have equity and who have been current on their mortgages. They pay their bills and yet they’re being threatened with foreclosure.”
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Liz Collin
Liz Collin has been a truth-teller for 20 years as a multi-Emmy-Award-winning reporter and anchor. Liz is a Worthington, Minnesota native who lives in the suburbs with her husband, son and loyal lab.
