Who woulda thunk…
Some Michigan residents have returned home to find their windows broken, houses ransacked and valuables missing.
Not from burglars, but overzealous mortgage lenders and their trash-out teams: unlicensed crews hired to clean out and secure property during foreclosures. Lawsuits filed across Michigan and the nation paint an ugly picture of impersonal foreclosures bent on speed that cut legal corners without concern for homeowners who have paid up.
“Once the foreclosure train leaves the station, it’s very difficult to stop,” said Carlin Phillips, a Boston lawyer who represents a west Michigan family that paid cash for a house. A trash-out crew mistakenly entered the property three times to shut off utilities and remove personal property, he said.
Lawyers in other suits contend that some lenders, their lawyers and property management firms are granting salvage rights to trash-out crews, who then take TVs, furniture and other personal property.
“It’s like the Wild West out there,” said attorney William Yochim, representing a Royal Oak homeowner whose residence was trashed out even after he paid it off.
Even after making good on mortgage, owners vulnerable
Martin Powelson owned several rental homes and flip houses during the boom times.
When money got tight and the property started to slip into foreclosure in 2008, Powelson turned to his mother, who helped him redeem the house by paying off the delinquent mortgage with cash.
A few weeks later, he returned to find the front window broken, the locks changed, his new Jacuzzi removed, several thousand dollars worth of power tools missing and his new $6,000 sleigh bed — still in its box — gone. All told, Powelson said he lost more than $60,000 in personal items.
His home had been trashed out — wrongly, it turns out — by an unlicensed crew sent there by his lender, who had been told by the law firm that handled the pre-foreclosure paperwork that the house had not been redeemed and had been foreclosed upon.
It had not.
Today, Powelson is suing Trott & Trott, a Farmington Hills law firm that is the third-largest debt collection firm in the country; his former lender, Colorado-based Aurora Loan Services, and several small companies involved in the actual trash-out of the Sheridan house.
“I’ve never gotten an apology,” Powelson told the Free Press during an interview outside his now mostly empty house. Nor was any of his property returned — except for some small tools and miscellaneous items. The now-bankrupt trash-out company has admitted in court records that it kept, sold and disposed of his belongings. Powelson’s suit seeks at least $180,000 in damages and reimbursement. A trial date has not been set.
Trott & Trott declined to answer questions about this case submitted by the Free Press, stating in an e-mail that the firm did not comment about ongoing litigation. But Trott attorney Charles Hahn, who has called the suit “frivolous,” admitted in court May 19 that the firm had misinformed the lender about Powelson’s status.
“We had an employee erroneously send a message” on a computerized record-tracking system “that the redemption period had expired,” Hahn told Oakland County Circuit Judge Shalina Kumar at a hearing. “It was admitted that this was a screwup.”
Hahn insists his law firm sent a corrective message to Aurora the following day, but the trash-out went forward within days. Aurora also is represented by the Trott & Trott firm. Hahn acknowledged in a recent court hearing that Powelson was wronged, but said the company that conducted the trash-out, which has since declared bankruptcy, is the responsible party.
Powelson’s attorney William Yochim, of Bingham Farms, argued that Trott & Trott were the ones that made the initial error because they started the process that ended in the trash-out of Powelson’s property. The firm never followed up with Aurora to see whether it had received the corrective measure, a process known as escalation, Yochim said.
“What they did here was wrong, and they know it,” Yochim told the Free Press in a recent interview. “And rather than correct it, they’ve tried to hide it. And if they did this to Martin, my guess is they’ve done it to other people.”
He is seeking to have the civil suit certified as a class action before Kumar, which would allow him to add additional plaintiffs.
Cutting legal corners
The Powelson case highlights a growing problem in large, foreclosure-prone urban areas such as metro Detroit. With thousands of homes in the throes of foreclosure, attorneys who represent homeowners say mistakes get made and corners cut. Although evictions require court orders — even on foreclosed homes — the Free Press found several cases in which court orders for evictions were never sought, including the Powelson case.
One legal step that could have prevented the Powelson trash-out was an eviction proceeding. Real estate law experts say it’s a necessary step before entering someone’s home.
“Just because you have a foreclosure and just because the redemption period has expired doesn’t mean that the lender has the right to go in and seize personal property,” said Lawrence Shoffner, a Detroit lawyer who specializes in real estate and has written educational materials on the matter for the Michigan Bar Association. “You still have to go to court and get an eviction order.”
Shoffner said the eviction process is straightforward. The lender seeks an eviction order from the local district court, which typically schedules a hearing within 10 days. If no one contests the order, it’s usually granted through a summary judgment. With the court order in hand, the lender can then go to the property, typically with a court officer or bailiff, to enforce it. Any personal belongings remaining in the property are supposed to be left at the curb for the owner to reclaim.
“That whole process takes maybe a month,” Shoffner said.