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MORTGAGE MELTDOWN
Payment dispute triggers nightmare
SR couple make frenzied effort to save home from auction over credit bill they say was paid
Lorae Fistor-Duncan and her husband, Scott Duncan, are trying to save their home from foreclosure and auction. Their bank foreclosed over a disputed payment on a line of credit.
KENT PORTER / PDPublished: Sunday, July 18, 2010 at 4:05 a.m.
Last Modified: Sunday, July 18, 2010 at 8:49 a.m.
Scott Duncan and Lorae Fistor-Duncan acknowledge they are more than $28,000 behind on their home mortgage. But they never expected they might lose their home over $743.88 their lender says they owe on a home equity line of credit.
Last week the Santa Rosa couple made a feverish attempt to keep their three-bedroom house near Franklin Park and avoid a foreclosure auction set for Monday.
While the Duncans haven't made a payment on their first mortgage for 16 months, it's the line of credit that triggered a default notice March 30. At issue is a payment the Duncans insist they made.
The threat of auction placed the Duncans in familiar territory to those facing foreclosure: a bureaucratic process that requires seemingly endless paperwork.
The couple spent most of Thursday and Friday trying to persuade the staff of Wachovia, a Wells Fargo company, to stop the auction and provide them a loan modification.
That meant talking to more than a dozen different people at both Wachovia and a debt collection agency working on behalf of the lender. In between phone calls, the couple tried to send from their home fax machine a stack of documents, including income tax extensions, divorce records, savings account details and a letter from Duncan's new employer.
"This isn't faxing, Scott," Fistor-Duncan said to her husband about 5 p.m. Thursday. Eventually, the faxes went through, but the Duncans later learned they ended up spread over multiple machines at Wachovia's offices. The staff there couldn't piece them together, so the couple repeated the job Friday.
It may seem unusual for a bank to allow borrowers to stay in a home for more than a year without making a single loan payment on the principal mortgage and for the lender not to eventually take back the home. But those who work with homeowners in financial distress say it happens.
"It's common that people can be in the houses that long and not be evicted," said Linda Hedstrom, who oversees a homeowner-counseling program at the California Human Development Corporation in Santa Rosa.
Some of those owners even receive loan modifications, she said. Lenders can reduce the interest rates, payments and principal of the loans.
What is uncommon, Hedstrom said, is that Wachovia scheduled a foreclosure auction based upon money owed on the line of credit rather than on the first mortgage.
"That's really odd," she said.
Fistor-Duncan, a part-time hair stylist who also sells candles and other decorative items at in-home parties, moved into her northeast Santa Rosa about 1995. The deed to the home remains in her name. She refinanced in 2007 with a first mortgage and a line of credit, both of which are now held by Wachovia/Wells Fargo.
The couple married three years ago. Scott Duncan, an inventor with more than 30 patents, said he lost key income in 2008. A company stopped paying him royalties on a stainless steel soap dispenser that covers dishwasher air gap units stationed on kitchen sinks.
The couple said for a time they used their savings and credit cards for monthly mortgage payments. Their last payment was made around March 2009.
The royalty payments still haven't renewed, but Duncan recently obtained work with a company that can help bring another of his inventions to market. He said his new employment will make it possible to resume mortgage payments slightly higher than what they had been paying, nearly $1,800 a month.
As of April, the couple owed about $419,000 on the first mortgage, more than the home is now worth, Duncan said.
On March 26, more than a year after their last mortgage payment, a notice of default was filed on the property with the Sonoma County Recorder's Office for $743.88.
On June 28, a notice of trustee's sale was filed, stating that a foreclosure was set for July 19 in Fremont Park on Fourth Street. The unpaid balance was $26,738.65, the amount owed on the home equity line plus other expenses.
The Duncans acknowledged receiving the auction notice in June but insist they never received the initial notice of default.
"This is what we were looking for the whole time," Duncan said. "We would act on this, but we never got it. And that's an absolute."
Moreover, they insist at the time of the default notice they were current on payments to the line of credit. They provided a receipt showing that on March 30 they paid $148.88, the minimum balance due for the line of credit's April statement.
"We didn't owe them any money," Fistor-Duncan said, referring to payments due on their line of credit. They are unsure how the bank came up with an unpaid balance in excess of $700.
After receiving the auction notice, the couple contacted Wachovia and the debt collection company. At first they were told they could send in the unpaid balance due.
Later they heard from other Washovia staff members that the auction couldn't be stopped, and eventually that they might be able to get a loan modification.
With the auction looming, their stress was made even worse by the death of Duncan's father on July 8.
On Friday, an investment adviser who is a family friend helped the Duncans again contact Wachovia and win a 30-day extension on the auction date. In the meantime, the bank will examine whether the couple qualifies for a loan modification.
"That was the reprieve for today," Duncan said afterward.
Wells Fargo representatives declined to answer specific questions about the Duncans' case.
But Friday, they released a statement saying they were reviewing the Fistor-Duncan loan "to determine if we can find a sustainable option for her and her family," adding, "our goal is to work with our customers to ensure that all options have been exhausted before moving to foreclosure."
Fistor-Duncan said the whole thing has been a lesson, a message that she must change her financial practices.
"We learned it as kids," she said, "that you don't live on credit."
You can reach Staff Writer Robert Digitale at 521-5285 or robert.digitale@pressdemocrat.com.
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