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Bob and Cheryl Balcom thought they were putting a $95,000 down payment on their dream house. Instead, they bought the biggest nightmare of their lives. It was, as they soon learned, the mortgage from hell. When the family went to refinance their Fort Lauderdale, Fla., house in 1997 two years after buying it, they were floored to learn that their mortgage had been sold — to a parade of different lending companies. All wanted payment in full. It took more than three years for the Balcoms’ attorney, Roy Oppenheim; two judges; and a private mediator to unravel what had happened. “It was hell,” says Bob Balcom, a pilot with American Airlines. “I was held hostage by my mortgage company. The title company told me they had never seen anything like this before.” The Balcoms ultimately discovered they were among at least a dozen victims of fraud allegedly committed by an employee of the mortgage company. Their case sheds light on a loophole in the mortgage industry that can enable an unscrupulous person to assign the same mortgage to several lenders. The industry now seeks to close that loophole by setting up a central electronic database to track who holds what mortgages. The Balcoms’ saga began in 1995, when they bought the $430,000 house on Bayview Drive in Fort Lauderdale. They borrowed nearly $335,000 from SC Funding Corp., a mortgage broker with which Bob Balcom’s credit union put him in touch. (SC Funding is now defunct and has been named in a lawsuit brought by California investors who accuse it and several related companies of promoting a $23 million Ponzi scheme.) Two years later, when the Balcoms went to refinance the house, they were shocked to learn that their mortgage had been sold to two different lending institutions. The title company said it would not refinance the house until both mortgage companies were paid and the title cleared. According to Oppenheim, a bank employee used counterfeit papers to fraudulently sell the mortgage and note to at least two banks. At least 12 other homeowners around the country also were victimized. Oppenheim, whose Weston, Fla., law firm handles 500 to 600 mortgages a year, said he’d never seen anything like this. “This couple really got the shaft,” he said. To complicate matters further, the Balcoms began to receive letters from several banks, each asserting that their mortgage was the authentic one. Ultimately, their credit report showed they owed $330,000 to as many as four mortgage companies. “It seemed like every bank in the country was after us,” Balcom said. Uncertain of who truly owned their mortgage, the couple stopped payments three years ago. The Balcoms decided to move to the Florida Keys but were unable to sell the house without clear title. So they rented the house and moved anyway. In the meantime, they found their credit in tatters. Although he makes a good living as a pilot for American Airlines, Bob Balcom could not even get a credit card with which to rent a car on trips. With three teenagers and a wife to support, and his money tied up in the old house and his new one, Balcom had little money for extras. Then Cheryl Balcom became ill with Lou Gehrig’s disease, which is ultimately fatal. Unable to work, she has only months to live. Ultimately, Bob Balcom stopped paying taxes on the Fort Lauderdale house and let repairs slide. The house became unrentable and sat vacant for a year. Meanwhile, a company called Option One Mortgage Corp., which eventually proved that it held the mortgage, sued the Balcoms for nonpayment on three separate occasions. And on three separate occasions Broward County, Florida judges dismissed the cases. But finally, Option One agreed to mediation and a “quiet title action,” a process by which a mortgage holder proves it is legitimate. This lengthy process took six months. Lawyers for Option One did not return calls for comment. The title action could not trace all the whereabouts of the little piece of paper, but here’s what was found: � On June 12, 1996, SC Funding assigned the Balcoms’ note and mortgage to Cemar Investments Inc. � On June 18, 1996, the mortgage wound up in the hands of San Marino Note and Investments Inc. � On June 20, 1996, San Marino passed the note along to Federal Savings. No one knows exactly how, but the mortgage then moved through several other mortgage companies, including Chase Bank of Texas and Newport Pacific Funding Group of California. Newport Pacific is one of the companies being sued along with SC Funding for allegedly promoting a Ponzi scheme. Option One ultimately proved to all concerned that it did, indeed, hold the mortgage. The company originally demanded about $515,000 in principal, back interest, late charges and legal fees from the Balcoms. But during mediation, the company agreed to reduce the principal balance to $169,000, taking into account the taxes and maintenance for which the Balcoms were responsible plus their ruined credit and emotional distress. The Fort Lauderdale house was finally sold this month for about $430,000. But after paying back taxes, interest and legal fees, the Balcoms will net $160,000. Bob expects the check “any day.” He plans to use the funds to help make his wife’s last months comfortable.

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