Despite foreclosure moratorium, Blackstone-owned firm advances some foreclosures in Puerto Rico

In December 2017, the New York Times looked at the role private equity firm The Blackstone Group’s mortgage firm Finance of America is playing in the growing foreclosure crisis in Puerto Rico (The Next Crisis for Puerto Rico: A Crush of Foreclosures, NY Times, Dec 16, 2017).

“Blackstone owns a company, Finance of America Reverse, that specializes in a type of home loan called a reverse mortgage, which is guaranteed by the federal government.

The loans are a way for people 62 or older to tap the equity they have built up in their homes; the principal and interest are payable when the borrower dies. The loans require borrowers to keep paying taxes and homeowner’s insurance on a property. Reverse mortgages have a history of abuse. Lenders often don’t fully explain the loans’ terms.

There are 10,000 reverse mortgages in Puerto Rico, and Finance of America controls about 40 percent of the market, according to the Department of Housing and Urban Development, which oversees the government insurance fund that guarantees a lender will be repaid on a reverse mortgage…

Court records show that the Blackstone-controlled company is aggressive in its pursuit of — and foreclosures on — borrowers.”[1]

In January, a coalition of community groups and Puerto Rican diaspora groups sent a letter to Blackstone requesting that the firm halt foreclosures in Puerto Rico for a year to give the island a chance to recover from the devastating effects of Hurricane Maria.

On a February 8 phone call the groups again asked Blackstone to publicly support a yearlong foreclosure moratorium and to take to take steps to enable homeowners to stay in their homes.

More than a month later, Blackstone still has not responded to the proposals.  Blackstone did send a letter to HUD requesting a yearlong foreclosure moratorium. Blackstone’s March 13 letter noted:

“The storm has forced seniors in Puerto Rico to navigate confusing systems in order to make insurance claims, as well as take on the additional costs of relying on expensive generators for electricity and acquiring scarce and expensive food and water in order to maintain a minimum quality of life. For these individuals already living on fixed incomes, even moderate increases in daily costs will likely result in sacrifices made in other areas – including paying required taxes and insurance. Seniors unable to pay will be found in default of their HECM loan agreements.”

Finance of America’s mortgages in Puerto Rico are insured by the Federal Housing Administration (FHA), meaning they are subject to the foreclosure moratorium that the FHA recently extended until May 18, 2018.  In extending the moratorium, the US Department of Housing and Urban Development noted that it “applies to the initiation of foreclosures and foreclosures already in process.”

Despite requests from community groups and the FHA foreclosure moratorium, Blackstone’s Finance of America has taken dozens of actions in Federal Court in Puerto Rico to advance cases since Hurricane Maria hit the island (see list below).

For example, following a request from Finance of America, in November and December 2017 US Marshalls visited Ana Wilda Valentin Rodriguez’ home multiple times to enforce an eviction order.  The eviction was ultimately stalled in late December 2017.

Federal court filings in Puerto Rico are filed in English rather than Spanish, making them inaccessible for some. “Sometimes people don’t show up in federal court because they don’t even know they have been sued,” Carmen Cosme, a housing counselor, told the New York Times in December.[2]

More than one hundred thousand Puerto Ricans have left the island since Hurricane Maria, mostly seeking refuge in Florida, New York, New Jersey, Pennsylvania and other states.  Six months after the storm, hundreds of thousands of residents and small businesses still do not have electricity.  More than 10,000 small businesses remain closed.

Yet since Hurricane Maria, Finance of America has also filed several motions for service (or summons) by publication – seeking to serve notice of the foreclosure suit to homeowners by publishing a notice in a local newspaper.

For example, Blackstone’s Finance of America filed a foreclosure suit against Carmen Santiago on September 26, 2017, just days after Hurricane Maria hit Puerto Rico, alleging (in English) that she was in default on her reverse mortgage for failure to pay property taxes and insurance.

On March 2, 2018, a day after the FHA extended its foreclosure moratorium covering Puerto Rico by sixty days, Finance of America filed a motion for summons by publication in Ms. Santiago’s case, noting that personal service was “not practicable and service by publication is necessary and appropriate.” Finance of America noted that it had attempted to service notice to Ms. Santiago via a process server, who was unable to locate her.  Finance of America included a sworn statement from its process server, Robert Diaz, who reported that he had visited Ms. Santiago’s property multiple times between January 20 and February 17, 2018 and was unable to find her.  Of his January 31 visit, he noted:

“On January 31, 2018 at 7:00 a.m. there was no one at the property and there were no neighbors around to talk to. There were two cars inside the garage. The property does not look abandoned. I spoke to a neighbor, CARMEN SANTOS, who stated that the Defendant resides in the property but in December, she went to the States and does not know where or when she will be back.  She thinks that the defendant left because there was [no] electricity in the community after the hurricane. She has no other information on the Defendant or the Defendant’s relatives.”[3]

Despite Ms. Santiago’s neighbor’s account that she had temporarily relocated because of Hurricane Maria, Finance of America on March 2, 2018 proposed that its summons be published “only once in a newspaper of general circulation in the Island of Puerto Rico.”[4]

It is not clear why Finance of America is continuing to pursue these cases, given the FHA moratorium on foreclosures that remains in place through May 18.

[1] “The Next Crisis for Puerto Rico: A Crush of Foreclosures,” New York Times, Dec 16, 2017.

[2]“The Next Crisis for Puerto Rico: A Crush of Foreclosures,” New York Times, Dec 16, 2017.

[3]Sworn statement of process server Robert Diaz, Feb 1, 2018.

[4]Proposed summons, Finance of America Reverse LLC v. Carmen Julia Santiago, 17-cv-02224-FAB