http://www.nbclosangeles.com/news/local/....

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The Bernstein family is packing up and preparing to move out of their Sylmar house Friday after 25 years. The mortgage was practically paid off.

“What I owed on the loan was $37,000," said Raymond Bernstein, who bought the house with his wife Diane. "I have so much equity I would be an idiot to lose the house.“

Bernstein insists a series of accidental missed payments led to foreclosure.

“My bank got bought out and my automatic payments got shut off without my knowing, then the mortgage owner then sends a notice I am behind. “

Bernstein says he worked out a repayment plan with Citibank. The bank confirms Bernstein made the first payment of $4,000 in January.

But what happened to the second payment is in dispute and the subject of a lawsuit.

Citibank says the Bernsteins missed the second payment.

Bernstein says he mailed it, “they then claimed not to get a payment and they foreclosed and sold it at auction.”

The 2,000 square-foot, 3-bedroom, 3-bath house was sold at auction in March for $255,000.

Since the Bernsteins owed just $37,000, who gets the $218,000 in profit, the equity that the Bernsteins had built up after paying into the mortgage over the last 25 years?

“The lender, not the family gets the money in a foreclosure, “ says Lori Gay, president of Neighborhood Housing Services, a nonprofit group that represents homeowners for free who are on the verge of losing their homes.

“It’s awful … when you lose your life’s savings and your equity," Gay said. "Awful. In foreclosure, no one wins.”

This would be a tough situation for any family, but Raymond and Diane Bernstein have an autistic son who needs a lot of care.

Jeremy is 11 and says he is sad about moving. “It’s been the worst, scariest thing that’s happened to me, “ says his mother Diane.


The Bernsteins have filed two lawsuits claiming illegal foreclosure. But Raymond, who sells insurance for living, can’t afford a lawyer and has chosen to do it himself. He admits it’s not going well.

Citibank would not comment on the Bernstein’s case but sent this general statement about how they deal with foreclosures:

"We work very hard to keep borrowers out of foreclosure and in their homes. We often offer borrowers who are seriously behind on their mortgage a repayment plan. If they fail to make the payments, however, the plan is cancelled.

"We attempt to contact the borrowers by mail and telephone to advise them of the plan's status. If the account becomes delinquent due to missed repayment plan payments, we are normally unable to offer another solution. We regret we were not able to offer further options to these homeowners."

The Bernstein’s case reminds us that in this economy, even if you are just a few years away from owing your home free and clear ---you could still lose it, if you miss enough payments.

If you are having trouble, or you are upside down, Neighborhood Housing Services offers free services.

25 years of payments meant a lot of equity. Perfectly ripe for the bank to pick.

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The Bernsteins have filed two lawsuits claiming illegal foreclosure. But Raymond, who sells insurance for living, can’t afford a lawyer and has chosen to do it himself. He admits it’s not going well.

This is what's sad. Banks can break the law and they know no one can stop them.

I don't think it's correct that the Lender keeps all sale proceeds in a foreclosure. They get the loan paid off and maybe some penalty money but that's about it.

You should see the "accounting" they do in foreclosure cases. They will try to steal ALL the equity.

This is why I don't like automated payments. I don't like the bank having that kind of control.

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“My bank got bought out and my automatic payments got shut off without my knowing, then the mortgage owner then sends a notice I am behind. “

Well, he should have had the extra money in the account for the payments that were missed...unless he spent it of course and had to come up with the payments again. Regardless though, the bank wanted to take this house because he had a ton of equity in it...if he had been upside down on his loan, he could have lived in it for free for a couple of years at least.

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“The lender, not the family gets the money in a foreclosure, “ says Lori Gay, president of Neighborhood Housing Services, a nonprofit group that represents homeowners for free who are on the verge of losing their homes.

This would be my personal "start shooting" moment...

Don't most people have family, friends and other ways to come up with 37k?

I'd have paid it off and let the guy owe me at a higher interest rate!

He made a payment in January and the bank sold the house in March???????
WHOA! since when do banks move that fast????

when there is equity....

why so fast? because they owed 37k on a house they were able to quick sell for 255k.

that's a 6 bagger relative to the mortgage balance.


For all the people out there that ask the question if paying off the house is a good investment....it looks like the answer is starting to be "no"

We work very hard to keep borrowers out of foreclosure and in their homes, unless they have equity.

Fixed.

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For all the people out there that ask the question if paying off the house is a good investment....it looks like the answer is starting to be "no"

Well.. unless you have equity in the house.. in which case it's "yes" as in "right the **** now"

Jeffrey-

there was an article i just read that Bank of America foreclosed on a couple that had paid CASH for the house. Never even had a mortgage.

If your money is not flowing into the system, the system will take you down.

He should blow up random bank branches. Fukkit

The moral here isn't "No Automatic Payments"

The moral is don't set up automatic payments and then pay absolutely no attention to if they are still going out.

Don't set up automatic payments for the simple reason that nobody but you ought to be initiating any transfers out of your account!

There are two kinds of automatic payments, as far as I know.

One kind allows the servicing bank to access your account at your bank to take money out. IMO, that's dumb.

The other kind is when you direct your bank to send the servicing bank an electronic payment for a set amount on a specific schedule. IMO, that's smart (so long as you verify that your bank actually does it every month).

I see no other way than hand delivering payment at branch with copy of check and receipt. All payments saved in a file. That should be good enough to keep your legal bill under 6 figures when they try to kick you out.

Pay attention to your money and this won't happen. I would notice that the money was still in my account before the payment was even late.

First the banksters fleeced us with the creative paperwork (MBSs, etc.). Now they're trying to outright steal the rest of the property they couldn't get by relatively legitimate foreclosures.

I can't recall EVER reading about somebody being foreclosed on whose house was paid off -- until recently. I'm convinced it's deliberate. And the .gov needs to put these people in prison, and for goodness' sake QUIT GIVING THE BANKSTERS MORE TAXPAYER MONEY. 'Cuz I bet that ain't over, either.

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He made a payment in January and the bank sold the house in March???????
WHOA! since when do banks move that fast????

Yep. I guess having considerable equity = out on your ass!

Lowbeyond,

You beat me to it and makes the most sense based on the information given.

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I see no other way than hand delivering payment at branch with copy of check and receipt. All payments saved in a file.

You have no idea the grief I have been spared due to paper records. More than once.

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You have no idea the grief I have been spared due to paper records. More than once.

This is why I get paper copies on everything. I know when my bills are due. But when the cost of the bill changes I know right away. Looking at a statement on a computer monitor is like sanding my balls. I just can't do it.

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“The lender, not the family gets the money in a foreclosure, “ says Lori Gay, president of Neighborhood Housing Services, a nonprofit group that represents homeowners for free who are on the verge of losing their homes.

I don't believe this is correct. The lender initially gets the proceeds. However once all the liens and expenses are paid off, and Karl is right, the expenses pile up fast, any surplus goes to the homeowner. They may have to file a claim for it however, as if they were any other subordinate creditor. I hope this family doesn't believe they are out their money.