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May 23, 2012

Foreclosure lawsuit questions dog mayor

Bennett says he is working to resolve matter

Arthur Foulkes The Tribune-Star

TERRE HAUTE — Terre Haute Mayor Duke Bennett said Tuesday he is “100 percent” certain the foreclosure suit filed against him by GMAC Mortgage on his eastside home will be resolved within the next “couple of weeks.”

As reported in Saturday’s Tribune-Star, the mayor is facing a foreclosure lawsuit against his home.

GMAC Mortgage, the mortgage subsidiary of Ally Financial Inc., alleged in a complaint filed March 29 in Vigo Superior Court that it had received its last mortgage payment from Bennett on Oct. 1, 2011, and was entitled to “the outstanding unpaid principal balance, together with interest at the adjustable rate set forth in the promissory note from October 1, 2011, to the present date.”

In an interview Friday with the Tribune-Star, Bennett said he had continued to make payments after Oct. 1, although the company was not accepting them as mortgage payments. Rather, it was cashing his payments and allowing a credit to build up, he said. The mayor also said he was not being sued for missing monthly payments.

Because they were contacted late Friday evening, GMAC officials could not comment for the Saturday’s article. Reached Monday, company spokeswoman Susan Fitzpatrick said that she could not comment on Bennett’s specific case out of privacy concerns. However, when asked if she could comment on the company’s general policies, she was able to provide answers.

• When asked whether it is GMAC Mortgage’s policy to sue for foreclosure —  even if a borrower has not missed a single payment — Fitzpatrick said: “No. GMAC Mortgage would not foreclose on a current loan.”

• When asked whether GMAC Mortgage would collect mortgage payments and simply not credit them to a person’s mortgage, Fitzpatrick said: “No. If a customer believes payments have not been credited to their account, GMAC Mortgage will review the account based on the proof of payment received. If it is determined there was an error, GMAC Mortgage will correct the account.”

• When asked whether GMAC Mortgage would accept a borrower’s payments and cash the checks without applying them to the mortgage, she said: “No.”

When asked Tuesday to revisit the issue of payments, Bennett declined, saying that he did not want to address those specific points because he is working to resolve the matter with GMAC Mortgage. He did acknowledge, though, that he may not have been current in his payments when GMAC filed for foreclosure. He also repeated that GMAC stopped accepting his payments at some point.

“I was as current as I could be to the time that they stopped accepting payments, as far as I could tell,” Bennett said. The exact timing of his last payments to GMAC is part of the current dispute with the lender, he added.

GMAC Mortgage is the mortgage unit of Ally Financial Inc. It is now known as ResCap and filed for Chapter 11 bankruptcy earlier this month.

Bennett emphasizes that he has been in discussions with GMAC Mortgage and feels certain the matter will be resolved and the foreclosure suit dropped.

If GMAC Mortgage had filed for foreclosure while Bennett’s account was not behind in payments, it would have been highly unusual, said Eric Redman, an Indianapolis attorney specializing in bankruptcy and foreclosure in central Indiana.

Bennett told the Tribune-Star on Friday that one reason GMAC was demanding the balance of his loan was because of his change in job status once he was elected mayor. Bennett held a private sector job at the time he purchased his home and took out his mortgage. He was elected mayor in 2007 and won a second term last November. The company seemed to view the political job as less stable because it is subject to re-election in four years, he told the Tribune-Star last week.

That would also be unusual, Redman said.

“If they literally have all the payments … I’d be really surprised, based on a job being gone in four years, that they would” accelerate a loan, Redman said. “Typically, you don’t get foreclosed on unless you’re four months behind. That’s the minimum before they file a foreclosure lawsuit against you,” he said.

Judy Cox, clinical professor of law at the University of Notre Dame, agrees it would be very unusual for a change in job status, alone, to lead to a foreclosure suit.

“That is incredibly unusual,” she said. “I’ve never seen a loan contract where that would be legal. I’ve never seen that as a method of default. I suppose it’s possible, but GMAC is a pretty standard lender and they use the standard Fannie Mae, Freddie Mac kind of loan documents.”

GMAC Mortgage’s Fitzpatrick, while unable to comment on Bennett’s case, said her company is working directly with the mayor. She also said the company has a strong record of avoiding ultimate foreclosures.

“GMAC Mortgage strives to find a sustainable and affordable alternative to foreclosure whenever possible and keep families in their homes,” Fitzpatrick stated in an email response to Tribune-Star queries on Monday. “While we cannot comment on the specifics of this case, we are working directly with the borrower to find a solution. Since 2008, GMAC Mortgage has completed more than 784,000 default workouts for borrowers, which represents more than 29 percent of loans serviced during that period.”

Reporter Arthur Foulkes can be reached at (812) 231-4232 or arthur.foulkes@tribstar.com.

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