On the rare nights that Chad Zeigler finally drifted off to sleep during the summer of 2010, he woke with his hands clenched. Thinking about the impending foreclosure of his Missoula County home left the seasonal firefighter feeling helpless. “I felt like a failure,” says Zeigler, now 42.
The Paintbrush Lane property just off Highway 93 was the only home that Zeigler’s young son had ever known. And that August, as Zeigler’s second child was being born, he says all he could think about was, “Holy shit, where are we going to live?”
Three years earlier, Zeigler borrowed $183,589 from Countrywide Home Loans to purchase the split-story home situated on a modest half-acre. In 2009, as the economy sputtered and foreclosure rates climbed to historic highs, Zeigler fell two months behind on his mortgage payments. In June 2009, he paid the deficiency and resolved to continue making his monthly payments of $1,188 to Countrywide’s new owner, Bank of America. One month later, however, BOA’s unsolicited offer to reduce his mortgage payment proved too enticing to resist.
The bank offered a six-month forbearance period in which Zeigler’s mortgage payment would be lowered to $655 a month. During that time, the bank said in the written offer, it would help him hammer out a long-term loan modification. As BOA stated in the correspondence, “This is not a permanent payment reduction, but it will allow you to stay in your home as we work together to find a solution.”
But Zeigler says the help never happened. In fact, he alleges in a lawsuit filed against BOA in March that the bank committed fraud when it told him his payments would be reduced during the six-month forbearance period. It’s a case not unlike many across the country.
“Nationally, there’s hundreds and thousands of cases with the exact same fact patterns,” says John Heenan, Zeigler’s Billings-based attorney.
The pattern in Zeigler’s case involves what the mortgage industry refers to as “dual tracking,” a practice in which a mortgager simultaneously tells a borrower that they are modifying their home loan, while the bank actually initiates foreclosure.
Zeigler says during the forbearance period between September 2009 and February 2010, the bank didn’t communicate with him at all. In November 2009, when he called the bank for an update about the loan modification, Zeigler says he was told to continue making the lower payment. When he called again in February 2010, he was told “to pay my forbearance,” he says, “and somebody would get ahold of me.”
He continued making payments in February, March and April. When notice came in April that he was in default, Zeigler panicked. Every time he called BOA to find out what was happening, he spoke to a different representative. He says not one of them gave him the same answer. “I’m making calls, going, ‘What is going on?’” Zeigler says. He asked BOA, “‘What do I do? I’m losing my house as I’m paying you what you want, right?”
Until last month, homeowners like Zeigler had little legal recourse to fight alleged misrepresentations made by mortgagers over the phone. Legal precedent forbade verbal loan modification agreements, such as those made to Zeigler by phone, from being presented as evidence. On May 7, however, the Montana Supreme Court ruled in Morrow v Bank of America that verbal promises could in fact be presented as evidence.
“Prior to the Supreme Court’s recent decision, the big banks’ defense to all of these claims was essentially, ‘If it’s not in writing, you can’t hold us to it,’” Heenan says. “And so we were seeing and have cases of just egregious misrepresentations and just outright lying to homeowners. And the bank’s defense would be, ‘Well, the homeowner just hears what they want to hear.’”
The Morrow lawsuit reads almost exactly like Zeigler’s. In 2003, Abraham and Betty Jean Morrow borrowed money to finance the purchase of property outside White Sulphur Springs. When the Morrows asked to modify their loan terms with BOA in 2009, a bank representative over the phone allegedly told them that in order to qualify, they’d first have to make reduced payments. Months later, the Morrows received notice from BOA that it was initiating foreclosure.
A brief filed in favor of the Morrows by the Montana Department of Justice notes that between 2010 and 2013 the state received more than 600 similar complaints.
In addition to representing Zeigler, Heenan, along with his co-council, Helena attorney David K.W. Wilson, represented the Morrows. He sees the court’s 5-2 decision in the Morrow case as a major step both locally and nationally.
“The Montana Supreme Court, to my knowledge, is the first highest state court to resolve these issues,” Heenan says. “I think that it’s going to be important not just to Montana consumers but to consumers in other states because now they can rely on the Montana Supreme Court’s decision as a road map for where other courts can go.”
As for Zeigler, he’s awaiting an October trial in Lewis and Clark County District Court to vet his complaint. He’s still living in his home, paying a modified loan amount that he agreed to with BOA. Desperate to avoid foreclosure, Zeigler in 2010 signed a loan modification agreement that committed him to paying $1,492 a month rather than the original payment of $1,188. The higher payment resulted in part from the accrual of penalties and fees tacked on by the bank during the forbearance.
Zeigler argues in the lawsuit that he’s entitled to a lowered monthly payment, in addition to the penalties and fees tacked onto his account during the forbearance period. He’s also requesting punitive damages from the bank. BOA’s behavior, he says, simply should not be able to go unpunished.
“If I went into your home and took your nail polish or something, I would go to jail,” Zeigler says. “And here, they’re allowed to come and try to steal my home from me.”
Bank of America cited pending litigation when declining to comment for this article.