COLUMBIA — Mohamed Sultan turns his car in to a small Hallsville subdivision and slows to a stop outside of a one-story, light blue house with panel siding. The lights are out. He doesn’t get out of his car or turn off the engine.
Sultan, 55, has a key but hasn't been inside the house in months.
One day around the beginning of May, he came home and found new locks on the doors. The back window was broken. Inside, a drill, ladder and table saw were missing. The wallpaper had been ripped off in one room. A Centralia real estate firm left a note on the front door. "URGENT! PLEASE CONTACT US IMMEDIATELY," it read.
As the car idles, he begins to tell the story of the mess he and his family are in and how he still doesn’t completely understand what happened.
Four years after they borrowed against that home to help purchase another, they have had two homes foreclosed on, have thousands in debt, have ruined their credit and are suing Bank of America — who they say took advantage of them — in hopes of canceling a loan and holding onto whatever they can.
Bank of America is among five banks being investigated by all 50 states' attorneys general for fraudulent and sloppy foreclosure practices.
The Sultans are among the countless homeowners who overextended themselves during the era of subprime lending. The circumstances surrounding the loans they took out and the foreclosure of their Hallsville property are unusual. In court records, Bank of America denies it was at fault. Officials from the bank and their law firms did not respond to or declined interview requests from the Missourian.
In 2007, Mohamed and his wife, Wanda, owned their three-bedroom Hallsville home free and clear. But with their five children, the husband of their oldest daughter and a grandchild also living under their roof, they needed a larger home.
When the Sultans first sought to buy a new home, they had no debts or liabilities but little savings and a modest income, court records show. Wanda earned $1,685 per month as an animal caretaker at University Hospital. Mohamed didn’t work and says he received about $1,250 per month in Social Security disability checks stemming from a 1989 work-related injury that mangled his left hand.
To help them finance the purchase of a new home, their real estate agent referred them to a loan specialist at a local branch of Countrywide Financial.
In May 2007, they found a five-bedroom home in north Columbia with a price tag of $208,000. They thought they could afford the home and said the Countrywide loan specialist told them they'd be able to make the payments. They took out a $165,000 loan to buy the property, according to court records.
On the advice of the loan specialist, the Sultans also borrowed $60,000 against their home in Hallsville. Part of the money was to be used as a down payment for the new home, and the rest was to make repairs to the Hallsville property, which they wanted to rent out.
After two years of making payments, the Sultans fell behind. They say they tried to negotiate a lower payment with the bank but failed and soon stopped making payments altogether.
"We exhausted everything we had," Mohamed says. "We exhausted everything to keep the house."
On and off over the years, Mohamed has been studying petroleum engineering, first at MU, then at Moberly Area Community College and then Missouri University of Science and Technology. He expected to be graduated and working — and earning an income — soon after taking out the loans.
But a series of misfortunes forced him to repeatedly withdraw from classes. In 2004, he dropped out after his mother was diagnosed with cancer. He stayed home to take care of her until she died in 2007.
In the spring of 2008, he says, an illness forced him to drop out. Each time Mohamed withdrew, he says, he stopped receiving student loans, which the Sultans were using to help with mortgage payments.
In 2009, he was diagnosed with kidney cancer, though he continued to take classes. But after receiving a foreclosure notice for his Columbia home in March 2010, he dropped out under the stress.
On the day they received the notice, their 11-year-old son went missing. In the middle of the night, they found him in a nearby park.
"I have no home to go back to," Mohamed recalls the boy saying.
Mohamed didn’t want to file bankruptcy and hired a local consumer protection attorney to help.
All signs of his cancer disappeared in 2010, he says, but his anxiety about their financial problems was growing. In October 2010, he suffered a heart attack while sitting at his dining room table, forcing him to withdraw from school again.
In December 2010, the stress was compounded when his oldest daughter’s husband died.
Qualifying for the loans
The Sultans admit they aren't knowledgeable about the home-buying process, and say they assumed the bank was acting in their best interest.
"We don’t know about these things," Mohamed says. "We thought they were supposed to be on our side."
"We trusted Countrywide," Wanda says. "Why would they lie to people and tell them they can afford something? You put your faith in them."
And while no one forced the couple to take out two unaffordable loans, a review of their loan applications filed in court shows there’s much more to the equation than financial naivety.
Matt Wilson, the Sultans' attorney, says the Sultans should have never qualified for this loan and the bank knew that.
In May 2007, when the Sultans closed the two loans, Mohamed says Countrywide rushed him and Wanda through the process, pressuring them to sign and date numerous forms with little explanation of what they were. It was late in the afternoon, Mohamed says, and the bank told him they had to get everything signed by the end of the day for the loans to go through.
The Sultans didn't realize what they'd signed until after hiring Wilson.
Countrywide didn't want to take the chance that they’d walk away, Wilson says. "This was a cram-down."
The $165,000 loan the Sultans took out for the Columbia home was backed by the Federal Housing Administration, so if they defaulted on the loan, the government repays the bank and taxpayers pick up the tab.
To limit the risk of default, FHA loans require a certain debt-to-income ratio to qualify. During 2007, when a borrower's monthly debt divided by their monthly income was more than 0.43, they typically couldn't qualify for an FHA-backed loan.
On a Countrywide loan analysis report for the Columbia home, the Sultans' ratio is listed at 0.39. But the report understates the monthly payments for the Hallsville home: It says they have $110 per month in expenses for the property, but the actual monthly payment for the home was $463.
This difference is possibly because the Hallsville loan application says the Sultans were earning $600 in gross rental income, presumably from the Hallsville property. They weren't renting out the home, Mohamed says, and the bank knew that.
When the monthly debt for the Hallsville property is changed from the listed amount of $110 to the actual amount of $463, the Sultans' debt-to-income ratio jumps from 0.39 to 0.49 — above FHA’s threshold to qualify.
The analysis report also lists that they have $54,500 in an account — presumably the amount from the Hallsville loan— but doesn't state that the money is borrowed.
Adding another strange twist, the Hallsville loan application says the Sultans own $288,000 in real estate. The only home they owned, in Hallsville, was worth $80,000. Mohamed says he never told anyone at Countrywide that he owned any property outside of the Hallsville home.
The same application lists Wanda's address as a home in Rocheport the Sultans almost purchased but ultimately didn't.
The Columbia loan applications said they were earning $475 per month in gross rental income. It also included a $7,849 loan discount fee the Sultans didn't realize they'd paid. They say nobody at Countrywide ever mentioned the fee before or during the signing of the documents.
"I honestly feel like we're just the new rookie on the block, and they're the big bully," Mohamed said.
The Sultans' troubles with Countrywide, and now Bank of America, are not isolated incidents.
Countrywide, which was purchased by Bank of America in 2008, has been widely criticized for loose lending practices that contributed to the surge in foreclosures across the country. Boone County, which had a record of 349 foreclosures in 2010, didn't escape the reach of the housing crisis.
In 2008, to settle a lawsuit over deceptive lending, Bank of America agreed to spend $8.4 billion to modify loans for nearly 400,000 Countrywide customers.
All 50 attorneys generals are investigating the foreclosure practices of the nation's five largest banks, and on Dec. 1, Massachusetts filed a lawsuit against the banks for improperly foreclosing on borrowers by relying on fraudulent legal documentation.
The legal fight
When the Sultans closed their loans, they say Countrywide never sent them any closing documents. After Mohamed called and complained, the bank mailed them, more than a month after the closing. Countrywide hadn't even told them what their monthly payments were, he says.
One document the bank never delivered, Wilson says, was a notice of a right to cancel the Hallsville loan. This document lets borrowers know that they have three days after the issuing of a loan to cancel it. If borrowers are never notified of this right, they have three years to cancel the mortgage, according to the Truth in Lending Act.
In May 2010, just weeks before the three-year period expired, Wilson sent the bank a letter on behalf of the Sultans to cancel the $60,000 loan.
In December 2010, the Sultans sued Bank of America in federal court for its failure to notify them of their right to cancel. They also sued the bank for unjust enrichment because of the $7,849 loan discount fee.
The Truth in Lending Act says that the right to cancel applies to a borrower's "principal dwelling." At the time the Hallsville loan was originated, the home was the Sultans' only residence. Bank of America's legal response is that because the Sultans intended to make the Columbia home their permanent residence, they have no right to cancel the Hallsville loan. If the bank wins this argument, the Sultans could lose both homes.
In April 2011, while the lawsuit was pending, Kozeny & McCubbin, a law firm representing the bank, sent the Sultans a foreclosure notice for their Hallsville property.
Wilson thought the notice was a mistake. When he notified Bryan Cave LLP, the law firm representing the bank in the federal case, one of its attorneys sent an email implying that indeed, a mistake had been made: "Thank you for bringing it to our attention," the attorney wrote. "I talked to our client, and she assured me she would clear up the confusion."
When the Sultans received another collection notice from Kozeny, Wilson again notified one of Bryan Cave's attorneys, who said in an email, "I believe we have resolved the confusion that led to this issue. ... Please pass along our apologies. Again, I believe we have resolved the issue."
About two weeks later, despite their attorney’s assurances, the bank had foreclosed on them. Their home was sold for $71,427.
Wilson says the Centralia firm that left a note on the door wouldn't say who had hired it to lock up the home.
The Sultans were living in the Columbia home at the time but hadn't abandoned the Hallsville property and were arguing in court that the mortgage they'd defaulted on had been canceled.
In June, after the home had been foreclosed on and locks had been put on the doors, Bank of America filed a lawsuit in state court to obtain possession of the home.
Regardless of whether the foreclosure was legitimate, Wilson says, without a court order granting them the right to possess the property, the bank couldn't have lawfully entered the home.
"You can't go into someone's house without a court order to steal their stuff," he says.
MU law professor and property law expert Dale Whitman says that because the Sultans weren't living in the home, the bank's actions might have been legal. "On the face of it," he says, "the foreclosure transfers title to the bank."
With regards to removing possessions from the home, Whitman says it's a bit of a gray area. "You can take stuff out of a house if you store and secure them in a safe place," he says.
But the Sultans have heard nothing from the bank about where the missing items are. So far, Bank of America has refused to provide Wilson any documents disclosing details about the Hallsville foreclosure.
Bank of America and the law firm Bryan Cave didn't respond to interview requests from the Missourian. A Kozeny attorney declined to answer any questions regarding the Sultans.
The bank dropped the suit against the Sultans' Hallsville property on Dec. 9. It dropped a similar suit regarding their Columbia home in September 2010.
A trial is scheduled to determine the Sultans' fate in April, and Bank of America has filed a motion to dismiss the case. If a judge rules the Sultans didn't have the right to cancel the loan, there will be no trial, and the only remaining option for the Sultans might be bankruptcy court.
Wilson says it might be impossible to keep both homes and that they're hoping to get a new mortgage at a fair amount and interest rate for the Hallsville home.
"All we want is the status quo," he says.
The Sultans aren't contesting the foreclosure of their Columbia home. Even if a jury rules in their favor, they probably will still lose it, though they're hoping a court might give them some leniency due to what they allege was a fraudulently created loan.
But if the ruling goes against them, Wilson says, there will probably be no way to save either home. The Sultans could end up not only losing both properties, but having to pay the difference between what they owe on their mortgages — after not making payments for two years — and what the bank was able to sell the homes for during foreclosure.
If that happens, Wilson says, the Sultans would never be able to repay their debts.
If they can't even keep their Hallsville home, they're not sure what they'll do. Mohamed says they don't have friends or family with the money to help them or space to accommodate them.
"I cannot move anywhere," he says. "I've got seven kids. Cram them into what? Who would rent a house to a family of seven kids?"
After years of on-and-off schooling, Mohamed graduated from Missouri S&T on Dec. 17. He doesn't have a job lined up yet, and although he's worried about his age turning away employers, he's trying to stay optimistic.
But he can't deny "the presence of negativity." He feels cheated. He worries about his family. If they lose both homes, they have nowhere to go.
"Every dime and dollar we've saved," he says, "we have it in these two houses."