California Bankruptcy Attorney Blog

As Chino loan modification attorneys, we are always interested to read about help for homeowners that end-runs around banks' clear reluctance to grant loan modifications. So we enjoyed reading a March 21 article in the New York Times about a group of nonprofits in Boston who are doing just that. A nonprofit community development financer named Boston Community Capital has teamed with a real estate law clinic at Harvard Law School and a housing advocacy group called City Life/Vida Urbana. Together, they're buying foreclosed homes after the foreclosure is final, then selling or renting the home back to the original homeowner at market rate, which is usually much lower than the homeowner's previous mortgage.

The partnership has completed or almost completed about 50 deals on homes in greater Boston since last fall, when the program began. Another 20 are in the works. Boston Community Capital is the financing arm; it buys the foreclosed homes with borrowed money and also writes new mortgages when it sells the homes back to former owners. When homeowners receive a foreclosure notice, students from the Harvard Legal Aid Bureau defend them legally, using litigation and the legal process for eviction to slow down the foreclosure process. This is intended to pressure banks to sell to BCC rather than evict the homeowners. City Life puts further pressure on the banks through public demonstrations, educates homeowners and puts them in touch with Harvard and BCC. BCC typically pays market value for the home and sells it to the homeowner for slightly more, allowing it to make a small profit while dramatically lowering the homeowner's costs.

Our Los Angeles County loan modification lawyers are impressed by this innovative approach to keeping homeowners in their homes. In most ways, the plan has the effect of a loan modification that drastically drops the loan principal to market value, but without the endless waiting and runaround that most homeowners experience from their banks. The perceived or actual risks of a loan modification are transferred from lenders to BCC. Homeowners still have a foreclosure on their credit records, which is very bad for their credit -- but the BCC underwriters overlook this, eliminating a major hurdle for most foreclosed people who want to be homeowners again. The program also benefits the larger community by eliminating vacancies that attract crime and drive down property values. And unlike federal programs, it uses no tax money. We would be delighted to see similar programs appear here in hard-hit southern California.

Continue reading "Nonprofit Advocacy Groups Help Homeowners Repurchase Foreclosed Homes" »

As San Bernardino County unfair debt collection attorneys, we were not terribly surprised to read that consumer lending lawsuits skyrocketed in 2009. According to a March 16 article by the Associated Press, new data from the federal court system shows a 53 percent jump in lawsuits filed under two federal laws that protect consumers from overreaching by debt collectors and creditors. The Administrative Office of the U.S. Courts also said Truth in Lending Act lawsuits concerning foreclosures tripled in 2009, to a total of 1,517. This is likely a fraction of all foreclosure-related lawsuits, however, because most foreclosure cases are contested in state court. The office also noted that bankruptcies increased 35 percent in fiscal 2009.

The two federal consumer protection laws with the biggest jump were the Fair Debt Collection Practices Act and the Fair Credit Reporting Act. The FDCPA limits how debt collectors may deal with debtors, by placing restrictions on certain behaviors and requiring certain other behaviors. The FCRA requires credit reporting agencies and the businesses that report to them to maintain accurate records, respect certain privacy rules and respond in a timely manner to disputes. Combined, FDCPA and FCRA lawsuits increased from 4,239 in fiscal 2008 to 6,463 in fiscal 2009, the courts said. However, the debt-collection industry publication Collections and Credit Risk said this may be a drastic undercount, due in part to the way that federal databases handle cases. It said private research found 8,287 FDCPA cases alone in calendar year 2009.

Either way, the publication noted, this is a dramatic increase in consumer credit protection lawsuits. As Azusa debt collection harassment lawyers, we think the increase has everything to do with the down economy. When unemployment is high and the economy is bad, some people will inevitably not be able to pay their debts. This is a problem for debt collectors, who after all rely on consumers repaying their debts to make a living. To keep the payments coming, some debt collectors are willing to do whatever it takes, including breaking the law. Media reports throughout the last year have talked about debt collectors using lies, threats of jail or physical violence, obscene language and other tactics to scare debtors into paying. Others simply refused to believe disputes to the debt from people who are truly victims of mistaken identity.

Continue reading "Federal Court Data Show Big Jump in Consumer Lending Lawsuits in 2009" »

Residential loan modifications have been getting attention and sympathy in the media for more than a year. But as Rancho Cucamonga commercial real estate loan modification attorneys, we were interested to see an article suggesting that lenders are just as brutal about workouts for commercial loans. A March 21 article in the Las Vegas Review-Journal concerns the trend toward defaults in commercial real estate, which have risen sharply since 2008.

The owners of Flamingo Professional Courtyard in Las Vegas have had trouble finding tenants or getting them to pay agreed-on rent, which translates to not enough income. And like property owners of all kinds, they saw the value of their property sink with the economic downturn, which means they owe $1 million more on the property than its current appraised value. This spelled trouble when the loan came due in February. In a healthy economy, CRE owners can refinance, but that's not possible for underwater investors. Bank of America offered the investors an extension on the loan in exchange for payment of the $1 million difference, a year's worth of interest and agreement to an interest rate hike. The owners told the Review-Journal that they tried for a loan workout instead and emerged from the meeting with a notice of default. The building is in foreclosure proceedings.

The article quoted Nevada real estate attorney Phillip Aurbach, who said banks are not any more inclined to do modifications for commercial loans than they are for residential loans. This is despite several, including Bank of America, having taken TARP "bailout" money, which was ostensibly to keep credit available and prevent further damage to the economy. He suggested that the bank could protect its investment by allowing CRE companies an extra year or two to repay loans.

As Orange County commercial loan modification lawyers, we are concerned about predictions in this article that the CRE market is about to see the same suffering that residential owners have seen over the past year. The wave of residential foreclosures has not been good for the housing market. Thanks to the glut of discounted foreclosed properties, prices have been depressed for a year and are expected to stay that way for at least another year. This has kept prices so low that homeowners who've paid substantial parts of their original loans are still underwater and unable to refinance or sell. For residential owners, this problem can be solved by simply staying put and waiting out the market. For commercial owners, that's not an option because loans come due every few years, not in 15 to 30 years. That means commercial real estate could be the site of yet another economic crash.

Continue reading "Loan Modifications Difficult Even for Owners of Commercial Real Estate" »

Conventional wisdom in real estate circles says the commercial real estate market lags the residential real estate market slightly. If this is true, our Ontario commercial real estate loan modification attorneys are afraid there's a long way to go before the real estate market recovers. In fact, Dow Jones Newswires reported March 10 that there may be a trend toward commercial landlords walking away from their properties, echoing a similar trend in the residential real estate market. As with residential borrowers, these commercial borrowers tend to walk away when they are deep underwater and strapped for income.

Unlike residential mortgages, commercial mortgages come due every few years, when they must be refinanced. That means commercial borrowers have to demonstrate their financial health more often than their residential counterparts. Unfortunately, the commercial real estate market has been hit hard by the bad economy, particularly here in California. Not only are buildings losing their value, but business tenants are scarce and holding on to them may require concessions like rent breaks. In this context, the article said, more CRE companies are analyzing whether it makes financial sense to hold on to buildings that are deep underwater. Several major CRE investors have already walked away, including two companies who saw the value of the Stuyvesant Town/Peter Cooper Village housing complex in Manhattan go from its $5.4 million purchase price to less than $2 million today. This month, Vornado Realty Trust announced that it would default on $235 million in loans.

The article notes that CRE companies typically try to negotiate a loan workout before walking away, but may be stymied if the loan was securitized. As Long Beach commercial real estate loan modification lawyers, we hope this succeeds whenever the numbers work. Commercial real estate foreclosures may actually be worse for the economy than residential foreclosures. Because commercial loans are much larger, banks have more invested in their success -- and can be hurt more seriously by their failure. As the Congressional Oversight Panel for the bailout warned recently, this could cause failures of entire small banks with heavy real estate investments. That would certainly depress the CRE market, but is also likely to be felt across the economy, as banks fail, buildings sit empty and access to credit is reduced.

Continue reading "Commercial Real Estate Companies Increasingly Walk Away From Their Loans" »

As San Bernardino County unfair debt collection attorneys, we were very interested in the allegations made in a JP Morgan Chase executive's recent lawsuit. The San Antonio Express-News reported March 3 that Linda Almonte is suing Chase, claiming she was unfairly fired for objecting to the sale of debt that was not correctly documented. She claims Chase knowingly made false representations about 23,000 delinquent credit card accounts it was trying to sell to collection agencies, which would then turn around and try to collect the debts. Intentionally deceiving a buyer is a violation of federal law. When Almonte took her concerns to her supervisors, she said she was told to go through with the sale, then fired when she refused to do so.

Almonte worked in collections litigation support, auditing accounts to insure that their information was accurate. Of the 23,000 accounts at issue, she said 5,000 had incorrect information about balance owed, frequently reporting higher balances than actually existed. She was also missing paperwork to verify Chase's claim that it had legal judgments on 11,000 accounts -- which makes an account more attractive to debt collectors. In some cases, the judgment was against Chase rather than the debtor. A debt-collection trade group spokesman said this would be foolish behavior by Chase, because debt buyers are legally guaranteed a refund if the seller misrepresented the debt. Almonte claims colleagues wanted to sell the debt as quickly as possible to disguise heavy losses in Chase's credit card business in 2009, and that they said they'd "worry about it next year."

This kind of wrongdoing is important to our Santa Ana abusive debt collection lawyers because it hurts individuals as well as collection agencies. Most debt collectors assume that they have been sold correct information, because deliberate lying could put the seller out of business. That means that when debtors contest the debts, the debt collector is likely to assume they are lying. Instead of looking into it, they keep trying to collect, using increasingly aggressive, and sometimes illegal, methods. The problem is compounded when debtors don't formally request verification of the debt, or when debt collectors won't meet their legal obligation to verify it. This can result in long-term harassment or abuse of people who genuinely don't owe the debt. If Almonte is correct, Chase was attempting to put thousands of people in this position -- all so it could temporarily disguise losses on its balance sheet.

Continue reading "Executive Alleges Bank Fired Her for Complaining About Unethical Sale of Debt" »

Our Glendora loan modification attorneys were pleased to see that a half dozen law enforcement agencies joined forces to put a stop to alleged fraud against homeowners desperate for a loan modification. According to a March 11 article from the Orange County Register, representatives from seven different agencies shut down and combed through the offices of United Law Group in Irvine. The law firm is suspected of taking thousands of dollars from clients up front without doing anything to help them get a loan modification. Local agencies included the OC District Attorney's office and the Irvine and Newport Beach Police Departments; federal representatives included the FBI, the Postal Service, U.S. Immigration and Customs Enforcement and the Inspector General of TARP (the bailout plan).

The State of California made it illegal last year for anyone but an attorney to collect up-front fees for loan modifications, after numerous fraudsters took money from desperate homeowners and simply stopped returning their phone calls. This rule does not apply to United Law Group, a law firm, but the allegations against the firm are very similar. An affidavit submitted in support of the search warrant said United Law Group routinely collected $1,500 to $12,000 in retainers from loan modification clients before starting work. The affidavit said investigators couldn't find any cases of successfully modified loans, beyond the ones the law firm used for advertising.

The article noted that United Law Group was already in trouble with the State Bar of California, which regulates attorneys. One of the firm's two publicly acknowledged attorneys, Sean Ruteledge, was disciplined by the State Bar last July for taking $1,750 from a client and making no effort to modify her loan. Public records for the other attorney, Robert Buscho, show that he is currently an active member of the State Bar, but has been disciplined three times and once failed to pass a professional ethics exam. In his first disciplinary action, he was accused of taking a client's up-front retainer and failing to file one of the legal actions she hired him to file.

As ethical Anaheim loan modification lawyers, we are pleased by strong legal action against attorneys suspected of things that give our profession a bad name. By the time most of our loan modification clients come to us, they are under major personal and financial stress. People don't always look as closely as they should when they're under stress, and unethical people can take advantage of that. By promising things they don't intend to deliver, fraudulent loan modification companies take advantage of people's trust. They also rob literally rob troubled homeowners of money they probably cannot spare -- money they could use to get real help, make payments on a modified loan or secure rental housing.

Continue reading "Law Enforcement Raids Offices of Law Firm Suspected of Loan Modification Fraud" »

As Los Angeles County commercial real estate loan modification attorneys, we were interested to see a report that a troubled investor has sold one of its buildings. Maguire Properties Inc., one of downtown LA's biggest landlords, sold the Griffin Towers in Costa Mesa for $90 million, the Los Angeles Times reported March 17. Experts in the article said the transaction -- which is the biggest one in Southern California thus far in 2010 -- may be a sign of improvement in the CRE market. That would be good news for Maguire, which is struggling financially after a former leader overextended the company financially during the height of the market.

The article did not specify whether the property was sold at a profit or a loss. However, a previous report from the Wall Street Journal said Maguire acquired it as part of a nearly $3 billion package of buildings in 2007, when prices were much higher. The building came with a $200 million mortgage, which Maguire refinanced by paying $20 million and taking on $180 million in new debt. A month later, Maguire's founder left the company. The sale is part of the new leadership's attempts to reduce its debt and stay financially solvent, the Wall Street Journal said. An expert quoted in the Los Angeles Times echoed that analysis, saying the sale eliminated the potential headache of refinancing the lease, which will come due in May. However, he said, Maguire still owes more than $20 million on the building.

This deal interests our Irvine commercial loan modification lawyers because it looks a lot like a residential short sale. In a short sale, the homeowners take a loss on the home in order to get out of their obligation to pay back the loan, which may be more onerous in the long run. This seems similar to the strategy Maguire was using in this transaction. The company may not have been able to refinance when the debt on Griffin Towers matured later this spring, which could have forced it to take on even more debt or even foreclose. By selling the property at a loss instead (if that is what happened), Maguire may have avoided even greater losses down the road, as well as a foreclosure that could harm its credit. In cases where the company is too financially strapped for a loan workout, this may be the best alternative available.

Continue reading "Commercial 'Short Sale' Illustrates Challenges Facing Real Estate Investors" »

Like a lot of observers, our Brea loan modification attorneys have concluded that the government's Home Affordable Modification Program won't stop the new wave of unemployment-related foreclosures. These are foreclosures on borrowers who could afford to make their mortgage payments until they suffered extended unemployment. Loan modifications require the borrower to have at least some income, which means unemployed people are not likely to qualify. In part to address this issue, the Obama administration has come out with more details about a new program announced in November -- focusing on short sales, not loan modifications. As the New York Times reported March 7, the program offers cash payments to mortgage holders and homeowners as incentives to complete the sales.

In a short sale, the borrowers sell the home for less than they owe on their mortgage, but avoid an outright foreclosure. This is advantageous for the borrowers because it won't damage their credit, and for the lender because it avoids the expense and potential property damage of a foreclosure. Under the government's program, the short-sale price would have to be the value of the home -- as calculated by independent real estate agents -- or higher. The first and second mortgage holders would each get $1,000 to do the deal, and the borrower would get $1,500 in "relocation expenses." And lenders would be required to forgive the difference between the sale price and what the borrower owed.

Our Moreno Valley loan modification lawyers would like this program to work, but we are skeptical at the moment. As the article notes, one big problem with short sales is getting the agreement of second and third lien holders, who are often left with nothing when the sale goes through. Nothing in this report addresses that concern. Nor does the plan seem to address the basic problem it shares with HAMP -- that it's sometimes cheaper to foreclose than allow a short sale or loan modification. In those cases, lenders have every financial incentive not to let these deals go through, which may explain the months-long delays some short-sellers have experienced. As an executive in the article noted, investors in securitized mortgages have the right to stop short sales. And if the bank doesn't like the size of the "market value" offer, a real estate agent noted, it may choose not to participate at all.

Continue reading "Federal Government Announces Plan to Pay Homeowners to Reach Short Sales" »

As Riverside County loan modification lawyers, we have always been interested in the reports from the Congressional Oversight Panel responsible for reporting on the progress of TARP -- the "bailout" program. These reports focus on efforts to stabilize the financial system and thus the economy through TARP, and have touched on residential loan modifications in the past. But we were particularly interested in last month's report to Congress, which highlighted a new problem for the financial system: commercial real estate foreclosures. The Associated Press reported that the panel estimates banks could be stuck with as much as $300 billion in losses because of defaults on commercial loans, which could hurt the economy in many ways.

As with residential real estate, the report said, commercial real estate values have plummeted over the past three years -- by more than 40%. Defaults are likely to result, especially because commercial loans are refinanced every few years. This will have a direct negative effect on banks, said COP spokeswoman Elizabeth Warren, that could have ripple effects hurting the entire economy. Commercial foreclosures mean more empty office buildings, reduced access to credit, evictions of renters whose landlords change, more lost jobs and the failure of hundreds of banks. This is particularly true for smaller banks, because commercial loans make up a bigger share of their portfolios. It will also put a strain on the FDIC, which is already stressed by earlier bank failures. The panel said banks were to blame for basing loans on inflated "bubble" values, and on federal regulators for not keeping a closer eye on small banks. It called on the Treasury Department to address the issue.

Senator Chris Dodd, the Banking Committee chairman, asked bank regulators to continue trying to stabilize the commercial markets and report to Congress about their progress. Unfortunately, our Newport Beach loan modification attorneys don't know of any more specific steps the government has taken. If the panel's predictions are right, however, quick and sweeping action may be necessary to stop another economic meltdown from the real estate sector. The government tried to address this problem at the residential level with the Home Affordable Modification Program, only to be stymied by banks' unwillingness to truly cooperate. We believe any attempt to address the commercial real estate problem in the same way should be backed by a regulation that legally requires the lenders to tell the truth and stop dragging their feet on their obligations -- with significant consequences.

Continue reading "Panel Warns That Commercial Real Estate Failures Could Drag Down Economy" »

Our Fullerton loan modification attorneys have spent a lot of time representing (and blogging about) loan modifications for individual homeowners in financial trouble. The media has focused much of its attention on this problem as well. Less well noticed but potentially even more damaging, however, are strikingly similar problems in the commercial real estate market. As with the individual housing market, the commercial real estate market is extremely depressed because of inflated or poorly documented loans made at the height of the real estate boom, whose value is now undercut because of the market's crash. Unlike the individual housing market, however, the amounts of money involved tend to measured in multiple millions or even billions of dollars. One real estate researcher told the magazine that he didn't expect a full market recovery until 2020.

BusinessWeek produced an overview of the problem for its November 5 issue last year. The article argued that this bust is different from the usual boom-and-bust cycle, in which developers overbuild, prices fall and the market corrects itself. Rather, it said commercial real estate had many of the same problems as mortgages. These included lenders' willingness to overlook or even enable underqualified borrowers; the lure of easy money through securitization; assumptions that the market would never go down; and fraud by borrowers who were willing to take advantage of the bubble.

As an example, the article cited the loan of $375 million to Timothy Blixseth, owner of the exclusive Yellowstone Club in Montana. In 2005, Credit Suisse approached Blixseth about taking out a loan against the club's value, similar to a HELOC. He didn't want one -- so the bank kept trying, finally striking a deal for a 2% transaction fee. The deal allowed Blixseth to use up to $209 million for personal purposes. Allegations about his and his ex-wife's lavish spending became part of their contentious divorce. Meanwhile, the Yellowstone Club struggled to make ends meet and in 2008 filed for bankruptcy.

As Irvine loan modification lawyers, we believe this problem is not getting its share of attention in the press. Most articles about loan modifications focus on the plights of individual homeowners and the government programs intended to help them. Meanwhile, real estate loans are continuing to fail, with many of the same ill effects as failure in the residential housing market. Foreclosed office buildings, like foreclosed homes, are bad for their communities as well as for the market at large. Because their financing is on a grander scale, they may even be worse for the real estate market, driving down prices and ensuring that credit is very difficult to get. And as with mortgages, the blame for bad commercial real estate loans falls at least partly on lenders whose greed outpaced their common sense.

Continue reading "Bad Loans Dragging Down Commercial Real Estate Market as Well" »

Consumer bankruptcy attorneys around the United States and all of their clients scored a partial victory this week at the U.S. Supreme Court. Our San Bernardino bankruptcy lawyers wrote in December about Milavetz, Gallop & Milavetz v. United States, No. 08-1119, in which a Minnesota law firm challenged the 2005 changes to bankruptcy law. The Milavetz firm argued that a provision restricting bankruptcy attorneys from advising clients to take on more debt violates the First Amendment right to free speech. On March 8, the court ruled unanimously that it did not, but specified that advice to take on debt for a valid purpose is not a violation of the law. The National Law Journal reported March 8 that the court also said a requirement that bankruptcy law firms advertise as "debt relief agencies" was not unconstitutional compelled speech.

The 2005 bankruptcy law prohibits attorneys from advising clients to take on more debt "in contemplation" of filing for bankruptcy. This was intended to stop lawyers from telling clients to rack up debts that they can then get discharged in bankruptcy. However, the Milavetz firm was concerned that it would also stop attorneys from advising clients to take on debt for legal and positive reasons, such as to continue expensive medical treatments. The Supreme Court agreed that this advice would be legal. Interpreting the law narrowly, Justice Sonia Sotomayor said the law "is best understood to provide an additional safeguard against the practice of loading up on debt prior to filing." However, she and her colleagues stopped short of declaring this an unconstitutional restriction on lawyers' free speech. They also said the requirement to advertise as "debt relief agencies" was accurate about the lawyers' legal status and not unduly burdensome.

As Gardena individual bankruptcy attorneys, we are always pleased to have the law clarified for us by the highest court in the land. But we are disappointed that the ruling didn't go farther. The advice to take on debt "in contemplation" of bankruptcy is already illegal under state ethics laws and can get the bankruptcy petition denied. That means this is an unnecessary law, even if it doesn't rise to the level of a First Amendment violation. As for the "debt relief agency" requirement, it's clear that the law defines attorneys as "debt relief agencies," but we find this unnecessarily confusing to the consumer. Most people think of "debt relief" organizations as non-legal organizations, including some that are for profit. We are proud to be a law firm and will continue to advertise as such, along with the legally required notice that we are a "debt relief agency."

Continue reading "U.S. Supreme Court Clarifies Portion of Bankruptcy Law Affecting Advice to Clients" »

In this bad economy, it was something of a surprise to a 10% drop in individual bankruptcy filings in January. So our Costa Mesa consumer bankruptcy attorneys weren't surprised to see that bankruptcies resumed their climb in February. According to a March 3 USA Today article, there were 111,693 bankruptcies last month. That's up 9% from January, 14% from February of 2009 and an alarming 47% from February of 2008. The numbers come from the American Bankruptcy Institute, a nonpartisan organization of bankruptcy attorneys, judges, bankers, scholars and others.

Samuel Gerdano, the executive director of the ABI, said consumer debt from better years is putting more strain on households these days, thanks to high unemployment. Another expert suggested that bankruptcies have become more popular because of the housing crash, which limits or destroys homeowners' ability to use home equity lines of credit to pay down other debts. Interestingly, the increase was largely in filings for Chapter 7 bankruptcy, which is the shorter "liquidation" bankruptcy. In the other major type of consumer bankruptcy, Chapter 13, filers repay debts over time and the remainder is forgiven. Chapter 13 filings were down 3% in February. This is particularly noteworthy because, as the article noted, Chapter 13 is the type of bankruptcy recommended for homeowners who want to save their homes.

As Covina personal bankruptcy lawyers, we'd also like to note that the 2005 changes to bankruptcy law were specifically intended to push more households toward Chapter 13. In brief, the changes allowed fewer people to qualify for Chapter 7 filing by lowering the amount of income and assets that would disqualify them. This makes the movement away from Chapter 13 even more remarkable, because it shows that fewer Americans have enough income and assets to disqualify them from Chapter 7. This is a bad sign for the economy. The lower number of Chapter 13 filings is also a bad sign because it shows that not many people are finding bankruptcy useful for saving their homes. This may mean they don't have enough home equity to protect them. Finally, the spike in Chapter 7 filings suggests that one stated goal of the 2005 bankruptcy law isn't working -- there's no drop in unpaid debt, despite increased obstacles to filing for bankruptcy.

Continue reading "February Bankruptcy Filings Show Personal Bankruptcies Continue to Rise" »

Our Corona fair debt collection attorneys work every day with people who are being harassed, insulted or lied to by collection agencies. So we were pleased by a March 3 release from the Federal Trade Commission about a settlement that agency reached with an Ohio agency guilty of serious abuses. Credit Bureau Collection Services, a private company not affiliated with the major credit reporting services, agreed to pay $1.1 million to the FTC to settle the agency's claims against it. The company also agreed to sign a consent decree barring it from further violations of the law, including making untrue or unsupported statements to collect a debt, and trying to collect a debt without investigating a consumer's dispute of the debt.

CBCS and two of its officers, Larry Ebert and Brian Striker, were accused of violating both the Fair Debt Collection Practices Act and the Fair Credit Reporting Act. Specifically, the FTC alleged that they failed to investigate disputes from debtors showing that they had already paid off the debts, or were not the people who owed the debts. Furthermore, the defendants allegedly continued to try to collect on those disputed debts without any reasonable basis to do so. They were also accused of reporting information to credit agencies despite disputes or proof that it was not accurate; failing to investigate notices of disputes from credit agencies; and failing to report disputes to the credit agencies. The content decree requires CBCS, Ebert and Striker to refrain from all of these practices and other violations of the two federal laws.

All of this information may sound very dry if you're not familiar with the legal side of credit and collections. But as Fountain Valley debt collection harassment lawyers, we know these practices can ruin the credit of an otherwise responsible person. The credit reporting system relies to some extent on the honesty of those who report credit. If companies like CBCS lie to credit bureaus about a particular individual's credit, that individual will have to do a lot of work to clear his or her name. That's why the FCRA allows the FTC and individuals to sue companies for willful or negligent violations of the law. Similarly, blatant violations of the FDCPA, such as failure to investigate a dispute of a debt, allow victims to sue the violating collection agency.

Continue reading "FTC Sues Debt Collector for Trying to Collect Old Debts and Reporting False Credit Information" »

Our Ontario loan modification attorneys wrote last week about several Sacramento-area lawsuits alleging that lenders are deliberately trying to push borrowers into foreclosures. This is not a common allegation, but a March 2 article from the San Jose Mercury-News shows that lawsuits in general are an increasingly common tactic in California for homeowners desperate to keep their homes. The article said federal lawsuits over the Truth in Lending Act or wrongful foreclosure have skyrocketed in the past five years, from just 29 in 2005 to 1,395 last year. Many more may be filed in state courts. Lawsuits typically allege that the bank reneged on a loan modification deal, or made an original loan that it never should have made.

Both are claims made by Sonia Leverman, one of the plaintiffs in the article. The Sunnyvale homeowner was given English-only documents to sign for her adjustable-rate mortgage even though she doesn't speak English well. She says she was shocked when the rate shot up by nearly $2,000 a month, shortly after her husband lost his job and her sons' work hours were cut back. The family later completed a three-month trial loan modification, only to be denied a permanent loan modification because, the lender said, their third payment was late. They have a Western Union receipt showing it was on time. Finally, they hired a loan modification attorney who sued the loan servicer for breach of contract. Now, they're on track for a permanent modification, although they're still underwater.

The family's lawyer said the servicer refused to negotiate until he got involved. This is typical in our experience as Bellflower loan modification lawyers. Lenders and loan servicers believe they can make more money by foreclosing than by helping modify a loan that they don't think the borrower can pay off. Rather than say so, they find excuses to derail permanent loan modifications, allowing them to look like they're trying to help. Meanwhile, borrowers who are genuinely trying to meet their financial obligations get a "runaround." That's true even in cases like Leverman's, in which there was strong evidence of wrongdoing and thus a clear risk that the family would take legal action. In addition to the dispute over the on-time payment, providing English-only documents to Leverman may have been a violation of California's Foreign Language Contract Act.

Continue reading "Californians Increasingly Sue to Enforce Loan Modification Deals With Lenders" »

Our San Bernardino County loan modification attorneys have known for months, if not a year, that banks are letting more time go by before re-selling foreclosed homes. But a Feb. 27 article from the Los Angeles Times says borrowers are starting to notice -- and living in the homes rent-free while the lender delays a foreclosure or a sale. Reasons the article gives for the trend include large backlogs at banks; the low prices foreclosure sales can get in the housing market; the glacial loan modification process; and banks' ability to use former homeowners as unpaid maintenance workers. In fact, at least one lender, Citibank, has formalized the arrangement, allowing foreclosed homeowners to stay rent-free for six months if they hand over the lease.

One economist estimated that as many as 100,000 families could be living rent-free in the Inland Empire alone, judging by the difference between the number of loan delinquencies and the number of foreclosures. Among them are the Harrisons of Perris, one of the most foreclosed cities in California. Eugene and Patricia Harrison stopped paying their mortgage in October of 2008 because of a job loss, and went into default after Countrywide Financial, their mortgage holder, told them they needed to be in default for a loan modification. Since then, they've received several contradictory or confusing notices from the bank, including an order to vacate that was not enforced. Sixteen months after their last mortgage payment, they are still arguing with Bank of America, which bought Countrywide, for a loan modification.

If this trend holds, it could be a gift to struggling homeowners. Most people go into default on their mortgage payments because they have financial problems. Allowing these homeowners to live rent-free for months lets them save their money, so they can find a rental home or get legal help. But as Westminster loan modification lawyers, we are disappointed that stories like the Harrisons' are still so common. Countrywide Financial was one of the leading subprime lenders, which authorities believe was why it failed, and why many former Countrywide customers are entitled through legal settlements to loan modifications. The article doesn't say whether the Harrisons would qualify, but it's clear from the article that Bank of America has not given their case enough attention to resolve it properly.

Continue reading "Report Says Banks Increasingly Allow 'Squatting' by Foreclosed Homeowners" »

Our Redlands loan modification attorneys have believed for many months that mortgage lenders are not very interested in modifying loans. But according to a Feb. 22 article in the Sacramento Bee, at least 11 lawsuits in the region allege that one lender has actively tried to push its borrowers into foreclosures. The claims against OneWest Bank stem from its purchase of the failed IndyMac Bank from the FDIC. To sweeten a deal that would give OneWest a lot of troubled loans, the FDIC agreed to absorb some of the losses from those loans. The lawsuits allege that this makes it more profitable for OneWest to foreclose than to allow loan modifications, even though it is participating in the federal Home Affordable Modification Program.

Ten of the claims are in U.S. Bankruptcy Court for the Eastern District of California, and one is in state civil court. One of the attorneys for the bankruptcy cases said IndyMac bought the bad loans for 70% of their value, but can expect FDIC reimbursement for 80% or more of the losses on the loans, and can keep any proceeds from a foreclosure sale. He said this means OneWest can actually make more money on a foreclosure than it could by keeping the loan alive at a discount. He and another bankruptcy lawyer also said OneWest illegally increased mortgage payments after their clients filed for bankruptcy. In the state court case, the plaintiff claims OneWest violated the Truth in Lending Act by ceasing meaningful responses after it took over an IndyMac mortgage.

As Chino Hills loan modification lawyers, we have filed several lawsuits with similar claims about foot-dragging that violates the TILA. However, the claims about the FDIC reimbursement agreement are new to us, and disturbing. We have long since concluded that most lenders have a policy against making loan modifications, even if they claim they grant them and are participating in HAMP. Studies have repeatedly shown that lenders sometimes stand to make more money on a foreclosure. Other times, blind application of policy or balance-sheet trickery blocks loan modifications for borrowers who are willing and able to make payments. This applies to lenders without an FDIC reimbursement deal. Similarly, all creditors, no matter what their relationship with the government, are forbidden from trying to collect debts after a bankruptcy is filed.

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