Ms. Porter’s study found that questionable fees had been added to almost half of the loans she examined

Bundled Mortgages and Dubious Fees Complicate Foreclosure Cases
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The Wellmans may lose their home even though their accountant testified to the court in 2006 that the lender had levied improper charges on the borrower of about $40,000, or almost 13 percent of what the bank said the Wellmans owed at the time.

Every home foreclosure is different, of course. But the Wellmans’ case shows the uphill battle facing many troubled borrowers who believe that they are losing their homes for questionable reasons, like onerous fees.

One problem is ascertaining who actually owns the note underlying each home loan. This seemingly simple task has turned difficult as more home mortgages have been packaged by the thousands into securitization trusts.

Katherine M. Porter, an associate professor of law at the University of Iowa, conducted a recent study of 1,733 foreclosures that began in 2006. The study found that 40 percent of creditors foreclosing on borrowers did not show proof of ownership, what is often called “proper assignment” of the note or security interest in the property.

Dubious fees charged by lenders have also emerged as a rising problem. Ms. Porter’s study found that questionable fees had been added to almost half of the loans she examined. Last year, the United States Trustee, charged with overseeing the integrity of the nation’s bankruptcy courts, said it would move against lenders that file false or inaccurate claims or assess unreasonable fees.
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Homeowners naturally look to judges to stop banks and mortgage lenders from seizing troubled borrowers’ homes without supplying proof that they actually owned the note when they began foreclosure proceedings. And with foreclosures soaring, some judges are sympathetic.

Courts in Ohio have recently dismissed cases where ownership of the note underlying the mortgage has not been proved by lenders seeking foreclosure. Last October, Christopher A. Boyko, a federal judge in Cleveland, dismissed 14 such cases.
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But P. Randall Knece, the judge overseeing the Wellmans’ case in Pickaway County, has refused to stop the auction, even though ownership of the note at the time of foreclosure was not assigned to National City Mortgage, which is forcing the sale.

The lender, a unit of the National City Corporation of Cleveland, was cited for failure to comply with rules on loan origination and quality control and agreed to change some practices.
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In 2003, the Wellmans signed a forbearance agreement with National City. In it they agreed with the bank on the amount it said they owed. But in 2004, Mr. Wellman said he suspected the bank had overcharged him and he asked for an accounting of what he had paid on his loan.

Plugging the bank’s figures into a Quicken program confirmed his fears, he said. A local accountant, Steve Helwagen, scrutinized the bank’s numbers and testified to the court that National City’s accounting was off by $38,612 in its favor. Mr. Wellman stopped paying on the mortgage and hired a lawyer to try to recover those fees from the bank.

Included in the questionable charges, Mr. Helwagen said, were bank attorney fees, foreclosure fees and those covering hazard insurance. “The bank’s records were horrendous, they just jumped all over the place,” he said. “I’ve never seen anything like it in my life.” ...