Zombie foreclosures terrorize ex-homeowners

Ocwen Financial Corp, the servicer of Sheafe's mortgage, foreclosed on the house in 2008, when Sheafe was hospitalized with congestive heart failure and later lost his job, forcing him into default. That was the last he heard about the house until a year and a half ago, when he received a summons to appear in Cleveland Housing Court for code infractions on the property: cracked steps, shredded siding, weeds as tall as the doors. There was also a $300 lawn-mowing bill.

A few weeks later, Sheafe appeared at the drab, brown-paneled chambers of the Cleveland Housing Court, packed, as it is every Tuesday and Thursday lately, with other people in his situation. Sheafe expected his appearance that day would clear up what he thought was a big mistake. Instead he left with the order to get the house up to code.

Sheafe started visiting the tall, crooked house every week. Looters had stripped the place bare. The "dope boys" had left their sneakers on the porch and their empty cans of sausages strewn around inside. Sheafe repaired the steps and spray-painted patches of the exterior where the vinyl siding had been ripped off. He returned every week to check on the house and mow the lawn.

While Sheafe worked on the house, Judge Pianka worked on the mortgage servicer, subpoenaing Ocwen to appear in court. In February, Ocwen released its lien on the house, which Sheafe hoped would enable him to donate it to the local land bank - one of many set up by local governments in recent years to manage abandoned properties.

But Sheafe still can't shake free of the house. The county sold his tax lien to a debt collector, which is now suing Sheafe for foreclosure. He also faces $4,185 for code violations, $185 for court costs and up to $10,000 if the city is forced to tear down the house.

"There's no end to this," Sheafe says. "I can't win."

Asked to comment, Ocwen issued a statement saying: "It is Ocwen's policy not to disclose details about specific customers. In this case, Ocwen has attempted to work with the borrower over a four-year period. Ocwen offered to settle the account with the borrower but never received a response to the offer."

Sheafe says he couldn't afford the amount Ocwen proposed in its settlement offer.

The Consumer Financial Protection Bureau, the federal agency established in the wake of the financial crisis to guard against predatory lending and other abuses, declined to comment for this article.

Joe Smith is the monitor of the National Mortgage Settlement, the agreement struck a year ago between major banks and state attorneys general to, in part, address foreclosure abuses. In a statement responding to a request for comment, he said: "To my knowledge, the servicers' behavior in the situation... is not covered by any standards in the Settlement." He added: "However, it does sound like there are problems with this type of treatment. I recommend the borrowers contact their state's attorney general and remember that the Settlement does not preclude borrowers from taking their own legal action."

Patrick Madigan, Iowa's assistant attorney general, was instrumental in crafting the National Mortgage Settlement. He said that he thought the consent decree would attempt to address the issue of foreclosure limbo, but that in the end, the language in the order was ambiguous. "It's a very difficult situation," Madigan said.

NO RESPONSIBILITY

Banks say that because they are not the legal owners of these homes, they aren't required to maintain them, pay taxes on them, or take any legal responsibility for them. Homeowners legally own their properties until the day of sale. And it's not until that day, the banks point out, that a homeowner's name vanishes from the title.

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