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In May 2000, a 70-year-old Philadelphia homeowner took out a $26,000 mortgage with an interest rate of 11.75%. She knew the terms of the mortgage and had paid her $262.45 mortgage payment on-time every month until 2003. That year, the mortgage servicing company—a company that manages the collection of the mortgage debt—began telemarketing personal insurance products to their customers.
Unfortunately, like many senior citizens, she felt vulnerable and fell for the sales pitch and eventually was signed up for so many policies that the premium payments for the policies, $131.38 per month, were roughly half of her mortgage payment. All three provided catastrophic accident coverage that would only pay her half of the stated benefit amount because she was over 70. The policies also provided coverage for her children and spouse—she had neither. She spent most of her time in her home and doesn’t drive so is unlikely to be a victim of any of the covered catastrophic injuries.
And she wasn’t just sold these policies but also two credit monitoring products to alert her if she was a victim of fraudulent activity, as well as an accidental death policy, a home shopping service, a health care discount policy and natural disaster insurance.
The financial burden of these policies eventually proved too much. She realized this on her own and tried to call to cancel the policies but only received the runaround. Yet, she never missed a payment. She would always send in what she could—and always more than the mortgage payment—but the servicing company applied the payment to the insurance premiums first, causing her to fall behind on the mortgage. Then, on December 17, 2008 she was served with a foreclosure lawsuit.
Threatened with losing her home after paying more than $4,700 in unneeded and unwanted insurance premiums she turned to a Philadelphia social services agency, which recognized the legal issues and referred her to the SeniorLAW Center (SLC).
A SLC attorney diligently researched the terms of the mortgage and insurance policies through countless phone calls to the mortgage servicing company. SLC promptly canceled the insurance policies after consulting with their client. SLC then submitted a mortgage foreclosure settlement proposal, asking for a refund of all the insurance premiums because they provided minimal value and were the direct cause of the client’s alleged delinquency on her mortgage payments. During the conciliation process through the Philadelphia Mortgage Foreclosure Diversion Program, a SLC attorney negotiated a $5,000 reduction in the mortgage principal and a reduction of the mortgage rate from 11.75% to 5.00%.
Without the assistance of a SLC attorney, this Philadelphia resident would have likely lost her home and would still be paying for unnecessary insurance. The SLC attorney spent many hours on research and negotiating with the mortgage servicing company and had the knowledge, discipline, and dedication to negotiate and reach a settlement that the client otherwise could not have obtained. Because outside counsel for lenders routinely use a mechanical approach in handling large volumes of foreclosure cases, it is important that vulnerable homeowners be represented by counsel given the complexities involved in mortgage foreclosure cases.
Written by Scott Molski, Law Student at the Earle Mack School of Law at Drexel University.