CitiMortgage Inc. lost its right to collect from a Chalmette couple who defaulted after Hurricane Katrina because it lost their mortgage - and must pay them $10,000 for years of harassing phone calls, a state district judge has ruled.

Company phone logs and the testimony of David Michael Cefalu and Rebekah Anna Cantrell Cefalu "clearly establish a pattern of continued, persistent and excessive phone calls" even after they told CitiMortgage to call their lawyer, Judge Robert Buckley wrote.

He also rejected CitiMortgage's argument that, as a subsidiary of Citibank - a federally regulated national bank - it wasn't subject to Louisiana's debt collection laws.

If other courts uphold the verdict, "That would be enormous," said Marx D. Sterbcow, a real estate attorney not connected to the case.

"It makes these foreclosure mills - foreclosure law firms, but they're really foreclosure mills - it's going to make those guys do their homework more than they've been doing," Sterbcow said. "Not just those guys, but banks as well."

CitiMortgage's Louisiana attorneys did not immediately return calls for comment. Citigroup Inc. spokesman Mark Rodgers, reached Wednesday afternoon, said he probably would not be able to provide comment Wednesday.

The Cefalus got the $66,462 mortgage in August 2000 from Hibernia National Bank, which transferred servicing rights on the loan to CitiMortgage on March 1, 2005, according to a post-trial memorandum filed by CitiMortgage.

Even though the Cefalus acknowledged their debt, CitiMortgage still had to prove its case and didn't have the records needed to do that, Buckley wrote.

Its "sloppy record keeping ... seemed to eerily presage" recent allegations about sloppy paperwork and legal procedures nationwide as mortgage lenders foreclosed on millions of homes, the Cefalus' attorney, John Redmann, wrote in an e-mail.

The couple stopped making mortgage payments after Katrina destroyed the Chalmette house where they had lived for five years. Rebekah Cefalu said Wednesday that they immediately notified CitiMortgage that they couldn't afford the payments and filled out all the company's "workable solution" paperwork, but were unable to work out payments they could afford.

They applied for Road Home assistance. "But that was kind of held up, too with this lawsuit because they needed to pay off ... the mortgage company. And that was in debate - what the amount was," she said.

Among other things, that amount kept growing because of interest. The company called daily, she said.

Read more at the Sun Herald:

CitiMortgage Harassment