Banking Mortgage Related

An Amazing Alleged Utter Failure of Ditech Mortgage Accounting

Written by Steve Rhode

A lawsuit filed by a consumer on Juanry 14, 2019 is a painful read if all the facts alleged are proven to be true. It’s the kind of battle against a large financial company that you hate to hear about.

It is said Ditech Financial made a gross accounting error to the account of Dawn Colonni. But then Ditech had to be shoved and pushed to correct their own error, while apparently not offering total compensation to the consumer who had to pay for representation to correct their error.

This is a new filing so I’ll keep an eye on the case. For now, we will have to rely on the facts as stated by the consumer. I have to applaud Colonni for now just giving up in this fight for her own money.

Below are the facts as stated in the complaint. It is a best effort to copy the complaint into HTML for you to read here. But here is the original document.

STATEMENT OF FACTS

25.    As with many other individuals throughout the country, Colonni fell under economic distress when she lost her employment as a result of the Financial Crisis, subsequently falling approximately eleven (11) months behind on the Loan.

26.    On or about April 30, 2010, Colonni filed for Chapter 7 Bankruptcy protection in the U.S. Bankruptcy Court for the District of Connecticut through Bankruptcy Petition No. 10-21420 (the “Chapter 7 BK”).

27.    Colonni received a discharge in the Chapter 7 on or about August 10, 2010.

28.    Subsequently, after recovering financially, and in an attempt to cure the arrearage on the Loan, and to work towards a fresh financial start whereby she could resume making timely mortgage payments under the Loan, Colonni filed for Chapter 13 Bankruptcy Protection on or about April 21, 2011 through Bankruptcy Petition No .11-21169 (the “Chapter 13 BK”).

29.    BAC Home Loan Servicing, LP (“BAC”), the prior servicer of the Loan, filed a proof of claim in the Chapter 13 BK on or about June 1,2011, which was subsequently transferred

to Ditech on or about June 19, 2013.

30.    On or about April 14, 2016, the Trustee for the Chapter 13 BK filed a Notice of Final Cure Payment and Completion of Plan Payments stating that the prepetition arrearage for the Loan had been fully paid and that Colonni had paid all funds necessary to cure any default under the Loan (the “Cure Notice”). A copy of the Cure Notice is attached as Plaintiff’s Exhibit 1.

31.    Ditech responded to the Cure Notice on or about May 3, 2016, expressly acknowledging that Ditech “agrees that the debtor(s) have paid in the full the amount required to cure the prepetition default” on the Loan “agrees that the debtor(s) are current with all post-petition payments” (the “Cure Response”). A copy of the Cure Response is attached as Plaintiff’s Exhibit 2.

32.    The Chapter 13 BK was subsequently closed on December 29, 2016.

33.    Following the filing of the Cure Notice and the Cure Response, Colonni continued remitting timely completely monthly periodic payments on the Loan in satisfaction of her obligations under the Loan.

34.    On numerous occasions. Ditech would claim that her Loan was current and that no monthly payment was due for the following one (1) or two (2) months, essentially stating that Colonni had paid ahead on her obligations.

35.    Colonni called Ditech multiple times to ascertain the reason as to why she did not have any funds due and owing for those months and would be informed that Ditech was still in the process of disbursing funds received from the Trustee through the Chapter 13 BK.

36.    Colonni did not make payments for the months of October 2016, November 2016, December 2016, and January 2017, as Ditech expressly informed her and confirmed with her via telephone that she did not owe any mortgage payments for those months.

37.    As of the payment received by Ditech on or about June 19, 2017, Colonni was current on the Loan through the payment due for July 1, 2017.

38.    Due to the confusion surrounding the accounting of her Loan, Colonni requested an actuarial payment history from Ditech, which Ditech provided on or about July 7, 2017 (the “July 2017 History”). A copy of the July 2017 History is attached as Plaintiffs Exhibit 3.

39.    The final entry on the July 2017 History consisted of the following transactions:

a.

Misapplication Reversal in the amount of $832.92;

b.

Misapplication Reversal in the amount of $1,310.23;

c.

Misapplication Reversal in the amount of $6,217.90;

d.

Misapplication Reversal in the amount of $ 1,310.23;

e.

Misapplication Reversal in the amount of $1,310.23;

f.

Misapplication Reversal in the amount of $1,310.23; and,

g-

Misapplication Reversal in the amount of $1,310.23.

See Exhibit 3.

40. On or about July 17, 2017, Ditech sent an “Informational Statement” for the Loan (the July 2017 Statement”) which listed the following transactions since the prior statement, each dated June 23, 2017:

a.

Misapplication Reversal in the amount of $832.92;

b.

Misapplication Reversal in the amount of $1,310.23;

c.

Misapplication Reversal in the amount of $6,217.90;

d.

Misapplication Reversal in the amount of $1,310.23;

e.

Misapplication Reversal in the amount of $1,310.23;

f.

Misapplication Reversal in the amount of $1,310.23; and,

g. Misapplication Reversal in the amount of $1,310.23.

A copy of the July 2017 Statement is attached as Plaintiff’s Exhibit 4.

41.    At no point in the July 2017 History or the July 2017 Statement did Ditech indicate where or how the funds from these misapplication reversals, which totaled $13,601.96, were applied. See Exhibits 3 and 4.

42.    Further, Colonni, despite having made all payments that Ditech had requested and claimed were due and owing, began to receive notices that her loan was delinquent and that she qualified for loss mitigation options which would cure the delinquency.

43.    On or about July 24,2017, Ditech sent correspondence to Colonni claiming that the Loan was in default and due for the April 1, 2017 payment and that she had to remit $6,622.20 to cure such default (the “Default Notice”). A copy of the Default Notice is attached as Plaintiff’s Exhibit 5.

44.    Confused and wanting to ensure that she remained current on her obligations under the Loan, Colonni contacted Ditech via telephone to ascertain what was happening with the accounting of her Loan and to determine what amount was due and owing under her Loan.

45.    On or about the evening of July 31, 2017, Colonni spoke with a representative of Ditech identified as “Marcus” “Identification No. 23110” who informed Colonni that $6,434.46 was due under the Loan, said amount consisting of $5,124.23 in past due amounts owing plus the August mortgage payment of $ 1,310.23.

46.    Marcus stated to Colonni that she had failed to remit mortgage payments for the months of October 2016, November 2016, December 2016, and January 2017, and that she needed to send $6,434.46 to bring the Loan current.

47.    On or about August 4, 2017, Colonni attempted to remit the necessary funds to Ditech electronically, as she had done for the previous five (5) years but was informed on their website that her account was “not eligible for electronic payments” any longer.

48.    On or about August 6, 2017, Colonni sent Ditech a check in the amount of $6,434.46 and Ditech cashed the same on or about August 14, 2017.

49.    Despite remitting funds in the exact amount instructed to by Ditech, through Marcus, on August 15, 2017, Ditech sent correspondence captioned “NOTICE OF RECEIPT OF PARTIAL PAYMENT” thanking Colonni for her payment of $6,434.46 but stating that the Loan was still in default unless they receive an additional $187.74.

50.    Colonni attempted to ascertain the problems with the accounting with her Loan and have the same corrected by Ditech on her own for months following the closing Chapter 13 BK.

51.    When Colonni’s individual attempts to have the accounting of her Loan corrected were unsuccessful, she sought the help of her counsel from the Chapter 7 BK and the Chapter 13 BK.

52.    On or about July 31, 2017, Colonni, through counsel, sent correspondence to Ditech via Certified U.S. Mail [Receipt No. 7017 0660 0000 1497 9007] which explicitly stated that it should be treated “as a ‘notice of error’ and ‘request for information’ pursuant to [RESPA]” (“RFI #1”). A copy of the RFI #1 is attached as Plaintiff’s Exhibit 6.

53.    Through RFI #1, Colonni requested information surrounding the errors in the accounting of her Loan, and specifically regarding the misapplication reversals from June 2017 and Ditech’s claim that the account is in default. See Exhibit 6.

54.    RFI # 1 was sent to Ditech at the address designated by Ditech for receipt of requests

for information and notices of error, which is:

Ditech Financial LLC
PO Box 6176
Rapid City, SD 57709-6176 (the “Designated Address”).

READ  Ditech Financial LLC - CFPB Complaint

See Ditech’s pertinent website at: https://myaccount.ditech.com/Info/ContactUs/ (last visited Nov. 19, 2018). A printed version of this page is attached as Plaintiff’s Exhibit 7.

55.    Ditech received RFI #1 at the Designated Address on or about August 7, 2017. A copy of the tracking information for RFI #1 from the website for the United States Postal Service (www.usps.com) is attached as Plaintiffs Exhibit 8.

56.    Ditech sent correspondence in response to RFI #1 on or about September 15, 2017 (the “Response to RFI #1”). A copy of the Response to RFI #I is attached as Plaintiff’s Exhibit 9.

57.    Through Response to RFI #1, Ditech refused to respond to the request for “any notes created by personnel of Ditech reflecting communications with me about your claim that the account is in default” as requested through RFI #1, stating that “Internal servicing notes are considered to be proprietary and confidential information and will not be provided.” See Exhibit 9.

58. Regarding Colonni’s request in RFI #1 for “the reason for ‘misass rev’ items on the July 17, 2017 mortgage statement”, Ditech stated through Response to RFI #1:

6.) Pursuant to your correspondence, a review of the account has determined that the account was recently removed from active bankruptcy status. When an account is active bankruptcy, adjustments may be made in order to bring the account in line with the court approved bankruptcy plan When the bankruptcy has been discharged a reconciliation audit is completed to ensure the account has been appropriately credited for funds received during the bankruptcy. On June 23, 2017, 6 payments were reversed from the account as part of this process and a refund of $13,601.97 was processed. The reversal of the amounts previously applied to the account is listed on the July 17, 2017 monthly informational statement as "Misapp Rev", which means misapplied/reversed.

See Exhibit 9.

59. The explanation provided as to the misapplication reversals was nonsensical to Colonni and her counsel as no refund was ever received, and as it made little to no sense as to why Ditech would “refund” funds in such a manner as to place the Loan into a default status.

60.    As a result, Colonni expended significant time and effort with her counsel attempting to correct the problems with the accounting of her loans and utilized roughly Two Thousand Dollars ($2,000.00) in personal funds to hire the services of a forensic accountant to perform an audit on her Loan’s accounting to determine where the $13,601.96 in reversed, missing funds went.

61.    On or about July 27, 2018, Colonni, through counsel, sent correspondence captioned “Request for Information Pursuant to 12 C.F.R. § 1024.36” to Ditech at the Designated Address via Certified U.S. Mail [Receipt No. 7014 2120 0003 0668 7904] (“RFI #2”). A copy of the RFI #2 is attached as Plaintiff’s Exhibit 10.

62.    Through RFI #2, Colonni requested information related to the servicing of the Loan, specifically including the servicing notes that Ditech previously failed to provide through Response to RFI #1. See Exhibit 10.

63.    Ditech received RFI #2 at the Designated Address on or about August 3, 2018. A copy of the tracking information for RFI #2 from the website for the United States Postal Service (www.usps.com) is attached as Plaintiffs Exhibit 11.

64.    Ditech sent correspondence in response to RFI #2 on or about August 9, 2018 (the “Response to RFI #2”). A copy of the Response to RFI #2 is attached as Plaintiff’s Exhibit 12.

65.    Through Response to RFI #2, Ditech refused to respond to the request for servicing notes for the Loan as requested through RFI #2, stating that “Internal servicing notes are considered to be proprietary confidential, burdensome, or immaterial to the servicing of the account.” See Exhibit 12.

66.    After the forensic accountant Colonni hired confirmed that there were no corresponding entries for the misapplication reversals and that $13,601.96 that Colonni has

remitted to the Loan was simply missing from the Loan’s accounting, on or about September 10, 2018, Colonni, through counsel, sent correspondence captioned “Notice of errors pursuant to 12 C.F.R. § 1024.35(b)(3) for failure to properly apply accepted payments to principal, interest, escrow or other charges under the terms of the mortgage loan and applicable law; Notice of error pursuant to 12 C.F.R. § 1024.35(b)(l 1) for improperly reversing payments under, and thereby unilaterally and materially breaching, the Loan; and, Notice of error pursuant to 12 C.F.R. § 1024.35(b)(l 1) for conversion of funds” to Ditech at the Designated Address via Certified U.S. Mail [Receipt No. 7014 2120 0003 0667 4638] (“NOE #1”). A copy of NOE #1 is attached as Plaintiff’s Exhibit 13.

67.    Through NOE #1, Colonni alleged that Ditech committed roughly forty-nine (49) significant errors in their servicing of the Loan in their handling of the accounting of the Loan since the Chapter 13 BK. See Exhibit 13.

68.    Ditech received NOE #1 at the Designated Address on or about September 14, 2018. A copy of the tracking information for NOE #1 from the website for the United States Postal Service (www. usys. com) is attached as Plaintiffs Exhibit 14.

69.    On or about October 16, 2018, Colonni, through counsel, sent correspondence captioned “Notice of errors pursuant to 12 C.F.R. § 1024.35(b)(l 1) for failure to properly respond to a request for information in compliance with 12 C.F.R. §1024.36” to Ditech at the Designated Address via Certified U.S. Mail [Receipt No. 7014 2120 0003 0667 04881] (“NOE #2”). A copy of NOE #2 is attached as Plaintiff’s Exhibit 15.

70.    Through NOE #2, Colonni alleged that Ditech committed an error in the servicing of the Loan by failing to provide the servicing notes for the Loan as requested previously by and through RFI #1 and RFI #2. See Exhibit 15.

71.    Ditech received NOE #2 at the Designated Address on or about October 22, 2018. A copy of the tracking information for NOE #2 from the website for the United States Postal Service (www.usps.com) is attached as Plaintiffs Exhibit 16.

72.    Ditech has not yet responded to NOE #2.

73.    On or about October 26, 2018, Ditech sent correspondence in response to NOE #1 (the “Response to NOE #1”). A copy of the Response to NOE #1 is attached as Plaintiffs Exhibit 17.

74.    Through the Response to NOE #1, Ditech admitted that “the funds reversed off the account on 6/23/17 were determined to be misapplied” and that Colonni had essentially been caused to overpay the Loan by $5,153.77. See Exhibit 17.

75.    Through the Response to NOE #1, Ditech seems to have partially corrected the errors to the extent that the payments were reapplied properly, however, Ditech has not returned the Borrower to status quo ante and will only compensate Colonni for her damages over the past year in the amount of $750.00, which is woefully insufficient to compensate her for her losses in attempting to have the errors corrected as it would not even compensate Colonni for the funds paid for the accounting work performed on her Loan, and Ditech will only do so if she signs a release agreement for all potential claims against Ditech.

About the author

Steve Rhode

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.

7 Comments

  • Can anyone suggest an Attorney to get my account with Ditech under control? They keep telling us we are short in escrow but when we look online, we are over. They change our payment constantly.

  • Just about the same thing happened to me. I was current, they started sending payments back and undoing ones from previous months. I also tried to work with my state’s Attorney General’s office, Ditech totally blew them off. Get ready for the next phase… Ditech pays the judge off, so he agrees with their lawyer. Matter fact, they actually wrote the orders and he signed them… how do I know? They accidentally sent the unsigned orders to me from their office in Ohio (I live in IN) post marked 2 days before the judge signed them… unfortunately I didn’t receive them until after they sold my house. What am I supposed to do? What attorney is going to take on a massive law firm and judge? The judge is immune, so is Ditech or so they claim because of their bankruptcy- which leaves the law firm… and unfortunately lawyers stick together… unless I make this public enough they just want to shut me up. I can tell you one thing however it will not be in the same court or county…

  • They are complete morons. I have been fighting them for 2 years. They deducted about 10k from my escrow to pay my taxes and insurance which is what your supposed to do, obviously. Then they added the same amount to my remod. I have the 3 pieces of paper work that proves it, but they are still investigating a year later. I also had over 20k in escrow during the remod and it has disappeared. I’m putting in a claim for there chapter 11, but would like to file charges of fraud, theft whatever . It’s also hard to find an attorney that is willing to help. I don’t even want to go there. Does anyone have any suggestions. Thanks

  • What a nightmare…………….and me too with Ditech. I had a year long battle with ‘ditech reps’ who lied repeatedly, changed my loan several times. I filed a case with the Attorney General, and even she was shocked at what Ditech did, lying, changing loan. OMGoodness it was a nightmare……..they tried to foreclose on my home, from THEIR mistake. I wrote and called so many times trying to get them to fix it, but no. As a widow and having no outside support, this caused me a great deal of stress and I ended up in the hospital. And it wasnt just this, they really messed up my account in several areas.

  • Ditech is the WORST! I also have a lawsuit pending against them because they fraudulently changed certain borrower’s home values in order to continue collecting PMI.

  • A few years ago, B of A dumped my loan to Greentree, which became DiTech. Both are terrible and I don’t trust their accounting accuracy at all. I hope this lady prevails.

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