Deceptive Foreclosure Practices: When Banks Treat Occupied Homes as Vacant

If a home subject to foreclosure is vacant, the foreclosing party can secure the property by changing the locks or boarding up the windows, for example. Generally, the servicer (on behalf of the foreclosing lender) will hire a property preservation company to handle these tasks.

Property preservation companies working on behalf of lenders and servicers are supposed to ensure that vacant properties in foreclosure are secure and properly maintained. But these companies are well known for committing serious abuses against homeowners, like breaking into still-occupied homes, stealing the homeowners' personal property, and damaging the place in the process.

The Lender's Right to Secure the Property if Vacant

While you can occupy the home during foreclosure, if you abandon the property, most mortgages (and deeds of trust) give the lender the right to do whatever is reasonable or appropriate to protect its interest in the property.

Generally, a lender may do the following things to secure the property if the property is vacant:

• enter the property to make repairs
• winterize the home
• change the locks or padlock the entrance
• replace or board up doors and windows
• drain water from pipes
• remove debris or trash
• have utilities turned on or off, and
• eliminate building or other code violations or dangerous conditions.

Taking these steps is called "property preservation" in the mortgage servicing industry.

Generally, the task of securing the property falls on the servicer, which typically farms out these services (called "field services") to property management firms, which are known as "field service companies" or "property preservation companies."

What Are Field Service Companies?

Field service companies enter into contracts with lenders and servicers to either:

• provide the physical inspection and property preservation services needed themselves, or
• manage a network of people that perform the work.

So, subcontractors often determine the occupancy of homes. They also take responsibility for preserving properties until they're resold after foreclosure.

How the Property Preservation Process Works

Once you become delinquent on your mortgage, the field service company or its subcontractor will inspect the property to determine its occupancy status. If the inspector deems the home vacant or insecure (usually based on a drive-by visit without any effort to contact any occupants), the company will take steps to secure the property.

Unfortunately, a field service company or its subcontractors might inaccurately designate a property as vacant. When this happens, the company might change the locks and perhaps remove the occupant's personal property—like computers, family photographs, and furniture—even though the house is legally occupied.

The occupant might not be able to get back into the home for days and might never have the personal items returned.

Common Abuses By Property Preservation Workers

Homeowners have reported that property preservation workers often break into currently occupied homes, causing damage and taking valuables. Some of the reported abuses that property preservation workers have committed are:

• changing the locks on the wrong house
• ripping out holes in walls (purportedly on a search for hazardous Chinese-made drywall), and
• removing personal property, such as laptops, clothes, paintings, electronics, and jewelry.

Some States Have Taken Against Field Service Companies

Field service companies sometimes ignore the rights of occupants in the course of securing a home. But some states (and homeowners) are starting to step up to protect the rights of homeowners.

The Attorney General of Illinois filed a lawsuit accusing the largest company in the industry of illegally breaking into occupied homes, locking the occupants out of the home, removing personal property, and shutting off utilities to the home—often when there was clear evidence that the property was occupied. The company also allegedly misrepresented to homeowners that they were no longer allowed to live in their homes and refused to allow them to re-enter the property when, in fact, the occupants were entitled to stay until the foreclosure was finished.

Also, Maine has a law that cracks down on property preservation companies. Under Maine's law, a residential real estate property preservation provider may enter into a dwelling only if authorized by the terms of a note, contract, or mortgage. And property preservation providers are prohibited from breaching the peace while doing their work. It also requires them to:

• inventory all personal property removed from the home
• keep a permanent record of all steps taken to preserve and secure the property, and
• make that record, along with the inventory of removed items, available to the homeowner upon written request. (Maine Rev. Stat. § 11017(4)).

Tips to Prevent the Servicer from Treating Your Occupied Home as Vacant

You can take steps to ensure that your lender or servicer (or the field service company it hires) doesn't treat your occupied home as vacant.

Let Your Servicer Know You Still Live in the Home

If you're behind in payments, your servicer will probably call you to discuss the delinquency. When you talk to the servicer, tell them you're still occupying the property.

All loan servicers keep communication logs that make a note of each time you call, along with information about the conversation. Communication logs typically aren't especially detailed. But if a dispute arises about occupancy, the log should contain a note that you verified that you're still living in the property.

If the Servicer Treats Your Home as Vacant, Send a Letter

If the servicer, or a field service company on the servicer's behalf, takes any steps based on an assessment that the property is empty (like illegally entering the property and taking your personal property), send a letter to the lender or servicer saying you're still occupying the property and detailing the unlawful actions.

Send the letter by certified mail, return receipt requested, so you can prove that you sent it and that the lender or servicer received it.

If the Field Service Company Leaves a Notice, Call Them

The field service company might post a notice that it has deemed your property vacant before locking you out or taking other actions. Be sure to call the company and let it know that you're still living at the property. It is also a good idea to send a letter—again, via certified mail, return receipt requested—to prove that you've notified the company of your occupancy.

When to Hire an Attorney

The abusive practices mentioned in this article, like wrongfully locking people out of their own homes, represent just a few offenses that property preservation workers have been known to commit. If you're the victim of a property preservation company and your servicer and the property preservation company aren't helpful when it comes to returning your belongings or compensating you for damage caused, speak to a qualified attorney.

An attorney can advise you on what to do, including possibly filing a lawsuit, and tell you about other options.