The following article is brought to you by Brent Husbergers at OregonLive.Com
Bela and Eva Lengyel were current on their adult foster home’s mortgage when, at the height of the financial crisis, they called JPMorgan Chase for help making payments.
What happened next is at the crux of a trial that started Tuesday in Washington County Circuit Court in Hillsboro — the first wrongful foreclosure case in Oregon to go before a jury, attorneys say.
The Lengyels contend that Chase told them to stop paying the mortgage on their Bethany area home, enrolled them in a trial modification program and then foreclosed anyway, even though they were making their payments and their home was bringing in enough cash.
Chase denies it told the Lengyels to default, contends they simply couldn’t afford their modified payments of $1,550 and suggests the Lengyels weren’t responsible with their finances.
The legal battle illustrates the type of quandary troubled homeowners found themselves in during the housing crisis. It could rekindle anger at Big Banks, often accused of unfairly and prematurely foreclosing on some homes. Also hanging in the balance: The fortunes of the Lengyels and the fate of four elderly residents of the home, who could be forced to move.
The Lengyels sued Chase Home Finance in 2010 around the time they lost their home in foreclosure to the loan’s investor, Fannie Mae. Their wrongful foreclosure claims against Fannie Mae and Northwest Trustee Services were later dismissed.
They’re asking the jury to award them about $10,000 in payments made to Chase as part of their trial modification, their attorney Terry Scannell said.
“We’re not looking for a free house,” Scannell told the 12-person jury Tuesday afternoon. “All they’re looking for is the payments they made to Chase.”
Separately, though, they’ll ask presiding Judge Don Letourneau for their home back.
The Lengyels left Romania during its 1989 revolution, arriving in the United States in 1992. They bought the home in question in unincorporated Washington County in 1996. A few years later, Bela Lengyel started Bella Plumbing, laying pipe mostly in new homes.
Their businesses did well. They started construction on a large home in Happy Valley. Chase contends the Lengyels refinanced their adult foster home in 2007 with a $405,000 mortgage to help pay for the Happy Valley home’s construction.
When the crisis hit, Bela Lengyel’s plumbing business “had all but stopped,” Scannell said. Lengyel eventually closed it in 2011, bankruptcy records show. He also let the Happy Valley home go into foreclosure after trying to sell it, Scannell said.
On Nov. 4, 2008, the Lengyels phoned Chase seeking help making the $2,200 monthly payments on their adult foster home’s mortgage.
The Lengyels say a Chase representative told them they needed to be several months late on their mortgage to qualify for a modification, while making no mention of other forms of help available at the time. Scannell said Chase repeatedly made mistakes, including sending a letter Nov. 5 stating that the Lengyels’ loan was in default when it wasn’t.
Scannell said Chase also incorrectly conducted a test to determine whether they could afford a lower $1,550 payment. A letter allowing the Lengyels 30 days to challenge the test arrived 200 days late and four months after Chase had already foreclosed on the Lengyels’ home, Scannell said.
“They didn’t even have the chance to question the inputs,” Scannell told the jury.
Chase’s attorney, Phil Rush, called it a business case in which Lengyel leveraged his adult foster home to build the home in Happy Valley, which Rush said they intended to sell for $1 million. Bela Lengyel made “an unfortunate investment at the wrong time,” Rush said. “Now he’s got obligations to pay.”
Rush said Chase has no record of instructing the Lengyels to stop paying their mortgage. The Lengyels, Rush said, failed to provide the necessary documents to support their stated income, leaving the loan servicer unable to verify more than $35,000 in annual income.
“As much as we wanted to help the Lengyels out, they simply didn’t have enough income to support the kinds of loans they were seeking,” Rush said. He said evidence in the trial would show where their income was going.
The Lengyels filed personal bankruptcy in 2012, listing nearly $40,000 in credit card debt and a $443,000 construction loan on the Happy Valley home, along with $120,000 in fees to Scannell. They also estimated the adult foster home would bring in $150,000 in revenue — and $83,000 in profit each year, bankruptcy records show.
Bela Lengyel has not yet been called to testify. But after proceedings ended for the day Tuesday, Lengyel said in the hallway outside the courtroom that he did not know what would happen to his home’s elderly residents if he loses.
One of the residents has lived in the home for 10 years, he said, before choking up and ending the interview. Testimony by a Chase home lending researching officer continues today.