Dixie Mitchell's Lawyer Explains How to Stop a Foreclosure

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Dixie Mitchell tried for years to modify the loan on her Central District home. She pleaded with the bank repeatedly. She approached politicians. In 2008, she appeared with Gov. Chris Gregoire at a press conference on predatory lending. But none of that helped Mitchell any. This month, the 71-year-old was $100,000 behind and facing foreclosure. An activist group called Washington CAN! took up her cause, holding a press conference in her front yard last week.

Then, in the nick of time, one man fixed her problem almost instantly.

That man was an an Issaquah attorney by the name of John Long, who offered his help after watching a KOMO-TV report about Mitchell. With Long's help, Mitchell stopped the foreclosure and got the interest rate on her loan reduced from nearly 10 percent to just 2 percent.

"It was like an overnighter," Mitchell tells SW, declaring herself amazed.

Actually, it took a few days, but that's still quite a feat. So how'd he do it? And is there a game plan that others can copy?

Talking to SW by phone, Long explains that he's specialized in mortgage law for years, so he knew just who to call. He dashed off an e-mail to the attorney representing the company responsible for holding the foreclosure sale, and asked for a postponement. But he credits his aggressive argument--made both to that company and the bank, Florida-based Ocwen Financial-- with his success. His tactics offer some general lessons.

1.) Scrutinize the loan documents. Looking over the settlement papers, Long spotted excessive fees. The loan broker had gotten a $7,900 commission, amounting to 3 percent of Mitchell's $263,000 loan. Most brokers, Long says, charge only 1 or 2 percent.

"It gets even worse," Long says. The broker also received an $11,800 fee for steering Mitchell towards a loan with a high interest rate.

Once he saw those fees, Long was able to make the argument that this was a predatory loan. By itself, that may not be enough to get the bank to change its ways. But, Long says, "we're coming in like we're made as hell"--mad enough to sue.

2.) Check whether it's a "MERS" loan. MERS is an outfit that operates an electronic registration system used by banks as they sell loans back and forth. MERS acts as a kind of proxy for the lender during foreclosures, but the legality of doing so has come under fire of late. Long says there's a case pending in Washington's Supreme Court that will settle the matter locally. Because Mitchell's loan was a MERS loan, Long was able to question whether the scheduled foreclosure was legit.

3) Is all the paperwork in order? The Mitchell loan was supposed to be part of what's called a "securitized pool," essentially a group of loans that are packaged and sold to investors. But Long says his initial research didn't turn up any record of Mitchell's loan in the pool where it was supposed to be. Long would have had to do more research to prove the matter at trial, but it didn't come to that. On Monday, Ocwen coughed up its offer to Mitchell.

The Central District woman, who has raised 50 foster children in the home she almost lost, says that her new monthly payment of $1,700, including taxes and insurance, is still a stretch. That's only $600 a month shy of the $2,300 she and her husband Luster, who is paralyzed due to a stroke, receive in social security payments. Still, she thinks she can manage by taking in boarders. Yesterday afternoon, she was rushing to UPS to send off her first $1,700 payment.

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