Daniel A. Bailey Jr. isn't your average homeowner. He hasn't paid his mortgage in more than five years, and has no plans to start now.
His stance stems from a bizarre incident that thrust Bailey into the news in 2008, when he suddenly became a public relations liability for embattled home lender Countrywide Financial of Calabasas.
Bailey had blanketed Countrywide with emails begging for a mortgage modification. The reply came from none other than Angelo Mozilo, Countrywide's chief executive, who accidentally hit "reply" instead of "forward" on a note meant for colleagues. In the misfired missive, Mozilo called Bailey's letter a "disgusting" and "unbelievable" example of the form letters then inundating the lender from borrowers saying they couldn't pay.
The email, which Bailey posted on a borrowers forum, went viral on the Internet and hit the news. A day after The Times reported Bailey's exchange with Mozilo, television reporters camped outside his Wilmington, N.C., house. Countrywide staffers then rushed to appease him and keep him quiet, Bailey now says, offering him a modification and going a step further — telling him he'd never have to pay, and the bank would never foreclose.
And that's exactly what happened since then. The mess has now landed in the lap of Bank of America, which purchased Countrywide in July of 2008 — one of the worst bank deals in history, as Countrywide would soon collapse under the weight of mass defaults on shoddily underwritten housing bubble loans. BofA has since racked up about $50 billion in loan defaults and legal costs.
BofA just caught up with Bailey's situation in August, sending him a demand for payment of $98,462 and threatening foreclosure.
BofA spokeswoman Jumana Bauwens said a search had turned up no documentation of the deal Bailey described. She said the Countrywide official who dealt with Bailey, whom she would not identify, no longer works for BofA. Bank of America confirmed that Bailey had skipped 62 straight monthly payments, and conceded in a statement that "it is unusual" for the bank to allow a loan to go unpaid that long without moving to foreclose.
The bank attributed some of the delay to "foreclosure holds," or periods when the bank halted seizures repeatedly in response to changing regulations or investigations into foreclosure abuses. But it acknowledged no special conditions on Bailey's case.
Mozilo did not respond to messages left at his home seeking comment.
Bailey insists that Bank of America is obligated to honor an agreement that Countrywide's damage-control squad struck to silence him — a verbal deal he says entitles him to live for free in the two-bedroom, 938-square-foot bungalow he's called home for 21 years.
Bailey, a struggling photographer, said he struck his deal with a Countrywide executive he knew as Ms. Morgan. She told him he could stop paying his mortgage, but only if he signed off on a loan modification within 24 hours and kept quiet about Mozilo and his errant email.
The reworked terms for his $144,000 adjustable-rate loan — which had an interest rate of more than 11% — would cut his payments nearly in half. Bailey told the executive that he still could not afford the payments.
"She said, 'Don't worry about it. Just sign the papers. We don't want your home,'" Bailey said. "I didn't think I'd get clear title to the house, and I was fine with that. But I figured I'd get to stay there until I moved — or died. That was the deal."
As evidence that Bank of America knew about the arrangement, he pointed to the five years the bank let him go without paying his loan.
Such lengthy delays are quite rare in North Carolina, even in the aftermath of the mortgage meltdown and financial crisis, said Victor Moore, director of counseling at OnTrack WNC, an Asheville, N.C., nonprofit that helps borrowers with housing and foreclosure issues.
Such a long delay generally indicates "something very unusual" about the mortgage, Moore said.
As evidence that it had not forgiven the debt, Bank of America provided The Times with a copy of a letter addressed to Bailey in January 2009, notifying him that he was in default. Another letter, addressed to Bailey in October 2010, offered to review him for another loan modification. The bank said he never responded.
Bailey said he had no clear recollection of the letters and might have thrown them away unread as junk mail. In any case, he said, he would have dismissed them as being irrelevant because of his special deal, as he did with monthly statements showing his rising unpaid balance.
Both Bank of America and Bailey reported occasional contacts with the other over the years, but nothing resulting in any changes. Since the letter in August, the parties have been in a standoff, with Bank of America offering to discuss a loan modification and Bailey insisting the bank must honor his special deal.
Bailey said he expects that some people might criticize him for getting a free ride. But he said he has lived in fear and regret since being pressured into agreeing to the deal with Countrywide at a time when he did not even know exactly who Angelo Mozilo was.
"I knew I was sucked into something big that day, but I didn't know how big," he said. "Some powerful dude is involved; they're telling me I have to sign; the newspapers are knocking on the door and you've got 24 hours.
"So you grab at the lifeline — or what they're telling you is a lifeline."