Demise of lender leaves confusion in its wake - By Mary Ellen Podmolik Chicago Tribune 09-04-2009

Demise of lender leaves confusion in its wake
By Mary Ellen Podmolik
The Chicago Tribune
September 4, 2009

The last thing homeowners needed was more uncertainty about their mortgages but that's just what they got with the early August shutdown of Taylor, Bean & Whitaker Mortgage Corp.

A month later, that uncertainty hasn't ebbed much.

The Ocala, Fla.-based company was the 12th largest U.S. home loan company before it was suspended by federal agencies for possible fraud, ceased operations and subsequently sought Chapter 11 bankruptcy protection.

Its demise removed from the market one of the biggest players that funded loans for mortgage brokers and other lenders; Taylor, Bean was the third-largest provider of Federal Housing Administration loans in June, according to trade publication Inside Finance. Its exit shrinks the pool of available mortgage money in an already tight lending environment.

More immediately troubling, though, is that Taylor, Bean's downfall has created a lot of confusion for homeowners here and elsewhere whose loans were serviced by the company. In Illinois, 25,000 mortgage loans have been affected by the company's shutdown and the state's Department of Financial and Professional Regulation acknowledges that efforts to resolve homeowner concerns are a work in progress. "It's a massive undertaking," said Alan Anderson, the department's senior counsel for mortgage banking.

Some consumers don't know what company is servicing their loan and where they should direct their payments. Taylor, Bean said it hasn't processed any automatic debit loan payments from customers since Aug. 10.

Others are confused because they're receiving letters of reassignment from multiple servicers.

And because of the bankruptcy filing, there are worries that homeowner's insurance and property taxes aren't being paid from escrow accounts.

"Some of these homeowners are really caught where they may have made payments and the monies aren't available," Anderson said. "All the consumers know is they're trying to make their payments and we're getting a lot of calls about where do we send our payments."

According to information on the home page of Taylor, Bean's Web site, Ginnie Mae-backed mortgages are now being serviced by Bank of America, and Freddie Mac-backed loans are being serviced by either Cenlar FSB, Saxon Mortgage Services or Ocwen Loan Servicing, depending on whether the loans are current or not.

But just last week, the state found that Taylor, Bean is still servicing 1,783 loans in Illinois that were held under the names of different corporate entities.

The state also has been told by Taylor, Bean that it is endorsing any checks it receives over to a new servicer. What's less unclear is the status of any loan modification that was in process because, according to Anderson, a loan modification theoretically would have to be hammered out between a borrower and the new loan servicer.

The firm had been on the state's radar since last year and Illinois was one of 14 states that in June participated in a settlement with Taylor, Bean that required it to implement a loan modification program modeled on the federal government's Making Home Affordable program. Just last week, Illinois took action against the company again, including fining the company $20,000 for inaccurately informing more than 15,000 Illinois customers this spring that their loans were past due.

The state also told Taylor, Bean to provide it on a daily basis with a list of the loans being transferred to other mortgage servicing companies. The company also must ensure that the new servicers give customers a 60-day grace period, during which no late fee would be assessed, to give more time to borrowers who mistakenly send payments.

Also under the order, Taylor, Bean must not begin or proceed with any foreclosures in Illinois until further notice.

To keep updated, the state suggests that consumers keep tabs on either the company's Web site, taylorbean.com, or the state, idfpr.com, or call the state's help line at 877-793-3470.