July 18, 2013
Adult foster home's foreclosure trial focuses on behavior of Chase, gambling homeowner
A Washington County adult foster home's wrongful foreclosure case continued Wednesday, with businessman Bela Lengyel portraying himself as the victim of a mistake-riddled big bank, and JPMorgan Chase portraying him as a big casino roller, even in financially tough times.
Bela Lengyel took the stand to explain why he and his wife, Eva, took their wrongful-foreclosure lawsuit against Chase to trial before a jury for the first time in Oregon.
"I believe I'm right," Lengyel told a Washington County Circuit Court jury. "I believe in this country. I know I didn't do anything wrong. I'm not perfect. I have my issues. I'm here to talk about them. But I felt from the bottom of my heart I was cheated out of my own business and my own house."
Under questioning by Chase's attorney Philip Rush, Lengyel acknowledged gambling at Seven Feathers Casino Resort in Oregon and at MGM Grand Hotel & Casino in Las Vegas during the time he was facing foreclosure.
"I never hid it. I am who I am," Lengyel said. "You are who you are?" Rush responded.
"I'm not an addict," Lengyel said.
And an expert witness called by Lengyel's attorney, Terry Scannell, suggested Chase made four errors in how it handled the Lengyels' case, at least one of which might have affected whether they ultimately qualified for a mortgage under the federal Home Affordable Modification Program.
The Lengyels sued Chase, their loan servicer, in 2010, shortly after losing their home in foreclosure. They want the jury to award them $10,000 in trial modification payments they made to Chase. They'll also ask presiding Judge Don Letourneau to give them their home back, which investor Freddie Mac now owns.
Scannell painted Bela Lengyel as a sympathetic immigrant who worked hard to buy a home, start two businesses and overcome setbacks.
The family paid off more than $40,000 in medical debt stemming from Eva's injuries in a 1997 accident in which their car was rear-ended, Lengyel said. Three years later, he bought his first new car, a Toyota Avalon, and paid that loan off in a year, he said.
His credit score was 750 when the 2007-08 financial crisis hit and Lengyel's plumbing business suffered. He also put his business on hold to tend to his mother in Los Angeles, who'd become terminally ill with lung cancer.
Lengyel acknowledged making a mistake borrowing money to build a $1 million home in Happy Valley. The couple refinanced the mortgage on their adult foster home in 2007 in part to pay for the Happy Valley home construction.
"Everybody was doing just wonderful in real estate," Lengyel said. When his attorney asked who was responsible, Lengyel replied, "The truth of the matter is me, because I could've gone fishing."
Lengyel said he first called Chase for help in late 2008 while at his mother's home in Los Angeles and vowed to let the Happy Valley home go in foreclosure to save their personal residence. The couple cares for four to five elderly residents in their 2,500-square-foot Bethany-area home.
Lengyel said he was told he'd have to fall behind on his mortgage to qualify for a modification. So he stopped paying in January 2009.
After receiving his first trial-modification offer, Lengyel said he called Chase to ask how it came up with the proposed payment, what the interest rate and loan principal would be, and what would happen to the term of the loan.
"Nobody explained it to me, ever," he said.
His mother died in March, and he left for Romania to hold her funeral. He returned to Romania six months later to bury his mother-in-law.
In December 2009, Chase sent a second trial payment plan offer, which left Lengyel "happy, confused." He was told to submit three payments on time plus required paperwork so Chase could determine if he would get a permanent modification.
Lengyel made all three $1,550 payments, along with four additional ones, even as paperwork requests continued. "It never stopped," he said. "We need pay stubs. We need proof of income. We need (profit & loss) statement. It was constant gimme, gimme, gimme. We did the best we could."
In May, when the Lengyels received their first notice of default , a Chase representative told them not to worry and continue paying. His case took more time because of his self-employed status, he said he was told.
He was out of town and "shocked" when he received a phone call that his home had been sold in August 2010 at a foreclosure sale. Within four weeks, he said, he received four eviction notices.
He said no one at Chase ever inquired about the nature of his business or what might happen to the home's five elderly residents.
During cross-examination, Chase's attorney, Rush, asked if Lengyel was a big gambler.
"Did you make $160,000 in gambling?" Rush later asked.
"I would not need to have a foster care business," Lengyel replied. "Based on what?"
Rush pointed to tax returns showing $10,000 in gambling losses one year and $122,455 in gambling winnings in 2011.
Lengyel told at length how the reported amounts were not actual dollars but points earned on cards at Las Vegas resorts. He said $100 might buy 12,000 points on a card, some of which he used to attend shows.
Rush also tried to draw inconsistencies between the $9,000-a-month of gross income the Lengyels reported to Chase and the net business profit of $15,000 a year reported on tax returns. He also noted that last year, the Lengyels filed for personal bankruptcy protection.
The Lengyels' attorney called as an expert witness Chris Wyatt, a former member of an executive resolution team at Litton Loan Servicing.
Wyatt said Chase appeared to have made errors in its handling of Bela Lengyel's request for help, including using the incorrect income eligibility formula for self-employed homeowners. Chase also failed to give the Lengyels a chance to challenge that so-called Net Present Value calculation before foreclosing on their home.
On questioning by Chase's attorney, Wyatt said he could not cite the guidelines or regulations Chase failed to follow. He also did not re-create the eligibility formula to see whether the Lengyels could have qualified, Wyatt said.
He said loan servicers had economic incentives to please investors and avoid homeowner loan modifications.
"Yeah, it's all about what makes sense for the investor, in my experience in the industry," Wyatt said.