GOP lawmaker's 'little guy' mortgage insurance battle heads to the Wisconsin Supreme Court

On Monday, freshman state Rep. Rob Stafsholt heads not to his Assembly office in the state Capitol but instead to the Supreme Court chambers. 

There, Wisconsin's highest court will hear arguments in the New Richmond Republican's long-running lawsuit against his mortgage holder, formerly Bank of America and now Nationstar Mortgage.

Stafsholt, a farmer and landlord in St. Croix County, has already won a trial court decision that he was improperly charged duplicate home insurance and then foreclosed on by Bank of America. 

Now, the Supreme Court will decide how much Stafsholt owes in interest on the loan and what if anything Nationstar will have to pay toward Stafsholt's more than $120,000 in legal costs.

In an interview, Stafsholt acknowledged that he might have been better off to pay money he didn't owe rather than fight an enormous corporation.

"I've always kind of had the mentality and approach of making sure the little guy doesn't get run over by the big guy," he said. "The principle of the matter is it's not right."

The case, which far predates Stafsholt's November 2016 election to the Assembly, illuminates the questionable mortgage practices before and after the Great Recession. 

The home loan, which was first taken out by Stafsholt's then-wife, began to cause problems once the mortgage was transferred from a previous mortgage holder to Bank of America. 

The bank started charging Stafsholt for homeowner's insurance on the property and the farmer said he struggled to explain to Bank of America that he already had insurance and couldn't be forced to buy more. Stafsholt said he could never speak twice with the same Bank of America employee or find someone with the power to resolve his case.

"We'd send it to them and send it to them," Stafsholt said of his proof of insurance. "You'd never get anywhere."

In February 2011, Bank of America sought to foreclose on Stafsholt for not paying those costs even though he says — and a circuit court eventually agreed — that the bank's agents told him at one point not to pay them. 

In April 2014, Bank of America and an insurer reached a $228 million settlement over claims that they worked together to inflate the cost of insurance that homeowners were forced to purchase. At the time, the bank told Reuters its policies on insurance "comply fully with state and federal law" but it was paying the money to resolve the federal lawsuit.

But Stafsholt's issues don't end with getting a court to agree that he shouldn't have been charged for the insurance or had his home put into foreclosure. 

Now, the Supreme Court has to decide how much interest Stafsholt still owes on the loan — he says there was $172,000 outstanding at the start of the trouble. The seven justices on the court also have to decide whether the lawmaker is entitled to attorney's fees and, if so, how much. 

Nationstar argues that Stafsholt doesn't have any right to recover his legal costs. The company cites a doctrine known as the "American Rule," which essentially states that parties in legal cases are responsible for their attorney's fees except in certain cases. 

"Stafsholt therefore presents no reason to disturb the well-settled American Rule, and fails to demonstrate he is entitled to recover his attorney's fees," a filing from the company reads. 

Stafsholt argues that such a ruling would leave homeowners like himself with no practical recourse when wronged by their mortgage holder. 

"The ... question is whether Stafsholt, who was proven at trial to have been the victim of (Bank of America's) improper practices, should suffer financial harm as a result of having stood up to, and not succumbed to, BOA and its successors," the lawmaker's filing reads.