NORTHWOOD - Bonnie and Leonard Sears were looking forward to selling the Northwood home they'd lived in since the early 1990s so they could move to be near her aging mother and grandchildren in Plymouth. But what should been a happy time of transition for the retired couple in their mid-60s has turned into a financial nightmare.
According to Bonnie, the couple has been victimized by sloppy mortgage processing. It appears that when they refinanced years ago, the original mortgage holder never filed notice with the Registry of Deeds that the mortgage had been paid off.
Even though two subsequent refinancing deals went through without a hitch, the problem surfaced when the couple applied for a home equity loan with Bellwether Community Credit Union about a month ago.
"They said the title search came up looking like we had an open mortgage with Commonwealth Mortgage Company," she said. "I have the HUD statement showing that it was paid, but apparently that's not enough."
The couple started with Commonwealth when they bought the property in 1991. The mortgage was sold to GMAC Mortgage in 1992. A year later, they refinanced with Concord Savings Bank, which no longer exists, and refinanced again in 2003 with Bank of America.
Each time they refinanced to get a better interest rate, and each time the title search came back clean - until last month.
After weeks of frustration and sleepless nights, Sears took her case to the federal Consumer Financial Protection Bureau and joined nearly 650 New Hampshire residents who've filed mortgage-related complaints since November of 2011. (See related story)
A Consumer Financial Protection Bureau caseworker told her the complaint would be filed with the last bank to handle a refinance for the couple, Bank of America, which should have turned up the title problem then.
"They were the last ones to have their hands on this mortgage, and their title search came up clean," she said. "If not, why would they take my mortgage?"
Following a paper trail
In theory, Sears should be able to contact someone at Commonwealth Mortgage to provide the paperwork confirming the mortgage was paid. But Commonwealth sold the mortgage to GMAC, and GMAC in February sold its mortgage business to Ocwen Loan Servicing.
Just finding out where the paperwork might now exist took weeks. Sears has called Ocwen, so has a lawyer at the title search company hired by Bellwether, so has her real estate agent, all with no results.
"At this stage of the game, I think we need to sue somebody," she said, "but we shouldn't have to pay for a lawyer. This wasn't our fault. We didn't do anything wrong."
Actually, the Sears did everything right. They refinanced to obtain lower interest rates but did not increase the loan balance. In recent years, they began an accelerated payment schedule, helping them to pay off their mortgage in January.
Instead of celebrating the fact that they now own the house outright, they find themselves with a faulty title that has cost them time, money and peace of mind.
Their plan was to get a $150,000 home equity loan from Bellwether, use the money to build in Plymouth, and in the meantime put the Northwood house on the market.
Bellwether ultimately agreed to a smaller equity loan, which was scheduled to close on Friday, as long as the couple agreed to pay a one-time fee of $375 for title insurance that protects the bank's interests.
"At this point, we have to move on the sale in Plymouth or I am going to lose the land," she said.
The couple is going to take a chance that the title will eventually be cleared, and they can sell the Northwood property, even as they build their new home in Plymouth.
"It has to be settled," Bonnie said. "I can't sell this house, but I can't afford to keep two."
Protecting the borrower
In hindsight, she now wishes she had purchased title insurance of her own, referred to as an owner's policy.
Borrowers are generally required to pay for a title insurance policy when they borrow from a lender for each mortgage, according to the state Insurance Department.
The lender's policy protects only the lender and does not protect the borrower. Borrowers cannot be required to obtain an owner's policy, but they are often offered an opportunity to purchase one at, or around, the time of closing.
"Everyone I've talked to - lawyers, bankers, brokers, even at the county courthouse - they all say, 'This happens more than you would think,'" she said. "Well, if this happens more than I would think, why doesn't someone do something to stop it?"
A local mortgage broker, who asked not to be identified, agreed that the problem is not uncommon. Borrowers get a lot of documents at a refinance closing, but signed confirmation by the original lender that the note has been paid is not among them.
"The money has to go to the original lender, and then they have to file the paperwork with the Registry of Deeds confirming that they were paid off," said the broker. Unfortunately, sometimes they don't.
In addition to borrower's title insurance, consumers can also check a few weeks after the closing to make sure the Registry of Deeds has been properly notified, while the matter is still current with all the players involved.
As time passes, mortgages are sold, banks go out of business, title companies come and go. The trail gets cold, as Bonnie Sears knows all too well.