A bankruptcy judge has ordered one of the nation’s largest mortgage servicers to pay $50,000 to a Van Horne couple for seeking permission to foreclose on their house after failing to tell them their payments had increased.
American Home Mortgage Servicing Inc. (AHMSI) of Texas, which has gotten in trouble with regulators in several states, was ordered to pay $40,000 in punitive and $10,000 in compensatory damages to Alan and Kristine Wright by U.S. Bankruptcy Judge Paul Kilburg on Dec. 28.
The couple had filed for Chapter 13 bankruptcy protection in September 2008 with the intention of catching up on their monthly mortgage payments on their Van Horne home. Chapter 13 bankruptcy is often sought as a way to resolve a mortgage delinquency, according to Janet Hong, the Cedar Rapids attorney who represented the couple.
The bankruptcy plan protected the couple from losing their home as long as they kept up with the court-approved payment plan, but in on May 13, 2010, AHMSI filed a motion to lift the bankruptcy’s protective stay, saying that they were in default.
The motion was withdrawn by AHMSI, but the mortgage servicer filed a second motion about one year later again claiming that the Wrights were in default.
Without notice, AHMSI began placing mortgage payments from the couple in a “suspense account,” drawing from the account to make up the deficiency in each monthly until it was fully expended and returning the next payment, according to the judge’s ruling. The couple didn’t know their account was in arrears until they received the returned check. Their requests for a payment coupon book from AHMSI had been rejected more than once.
The couple eventually found through the court that their payments had been increased due to higher requirements for escrow — the money set aside by the mortgage servicer to pay things like property taxes and insurance — but they had not been notified.
Copy of ORDER RE: MOTION FOR ORDER TO SHOW CA– USE below…