California Bankruptcy Attorney Blog

Our Riverside County predatory lending attorneys have written in the past about lawsuits accusing lenders of a practice called "reverse redlining." The redlining familiar to students of U.S. history made it impossible or very difficult for buyers from racial minorities to buy homes in neighborhoods considered "white." Reverse redlining, by contrast, steers minority buyers into higher-priced loans and neighborhoods considered appropriate for their racial backgrounds. In late 2009, a Los Angeles court certified a class-action lawsuit from borrowers who claim they were victims of reverse redlining by Wells Fargo Bank. On March 23, a Los Angeles jury found the bank guilty and awarded $3.5 million to be split among 880 borrowers.

In their lawsuit, the plaintiffs accused Wells Fargo of intentionally guiding borrowers toward loans that were more expensive than necessary. Starting in 2002, the bank had a computer program called Loan Economics that reportedly allowed loan officers to offer discounts to qualifying borrowers. However, they claimed branches in minority neighborhoods were not allowed to use the software, even when loan officers requested it. As a result, people in those neighborhoods paid more in interest and fees than similar buyers in whiter areas. The lawsuit is not the first accusing Wells Fargo of reverse redlining; suits have been filed in Tennessee, Maryland and Illinois, with the Tennessee suit supported by statements from former employees accusing Wells Fargo of the practice.

As Norwalk predatory lending lawyers, we're disappointed but not surprised by the allegations against Wells Fargo. During the housing boom and bubble, lenders saw easy money in a variety of places, including minority communities. In fact, studies found that subprime loans -- which are now considered one of the causes of the original housing bust -- were disproportionately made to Latino and African American borrowers. The history of discrimination against those communities is part of why we now have several state and federal laws against discrimination in lending and housing, including the federal Fair Housing Act and Community Reinvestment Act. Here in California, we also have a state law requiring loan contracts to be drafted in the same language used to negotiate them, an attempt to fight deception of people without strong English.

Continue reading "Jury Awards $3.5 Million in Lawsuit Alleging Racial Discrimination by Wells Fargo" »

Our Rubidoux predatory lending lawyers routinely sue banks for misleading and defrauding our clients by not seriously considering them for loan modifications. So we were very interested to read that the state of Arizona is making the same allegations and has already scored an early victory in court. The Arizona Republic reported March 22 that a judge has declined to move the case to federal court as Bank of America had requested. Arizona Attorney General Tom Horne, a Republican who took over the case from Democrat Terry Goddard, said the case would be heard more quickly in state court, ultimately benefiting Arizonans hurt by the alleged practices. The case parallels a similar one filed by the state of Nevada against Bank of America.

Arizona alleges the bank violated its Arizona Consumer Fraud Act with multiple deceptive acts against borrowers seeking a loan modification. These include allegations that the bank started foreclosure proceedings before deciding whether to grant a loan modification; not responding to applications and requests; and rejecting applications without a good reason. The Nevada lawsuit, which like the Arizona suit was filed in mid-December, makes similar allegations and also accuses the bank of reporting false information to credit bureaus, incorrectly telling borrowers they needed to be in default before they could get a modification, and failing to convert trial modifications to permanent ones. No trial date was reported for either suit. Bank of America said the cases were "hasty."

As Garden Grove predatory lending attorneys, we think the suits are actually coming far too late in the mortgage crisis. Homeowners have been losing their homes to preventable foreclosures for more than two years, and the kinds of behaviors Bank of America is accused of have been well reported since at least 2009. That's one of the reasons we've started filing similar lawsuits on behalf of individuals with the same kinds of problems. Under the Home Affordable Modification Program, lenders are supposed to grant modifications or convert trial modifications into permanent ones when the borrower meets the criteria -- period. When banks fail to do this for no reason or for spurious reasons, we believe it's a form of predatory lending and defend our clients vigorously.

Continue reading "Lawsuit Accusing Bank of America of Defrauding Borrowers Stays in Arizona Court" »

Our Ontario foreclosure defense attorneys have long believed banks' reluctance to grant loan modifications was bad for them and their investors as well as for homeowners. So we were very interested to see a report with the same conclusion from a team of economists at the Center for Responsible Lending, a consumer advocate group. The Center put out a study March 22 (PDF) testing whether investors in a loan (whether or not it was securitized) ended up with more money in a foreclosure or a modification, using the net present value (NPV) test used by the federal loan modification program as well as many private programs. The authors concluded that under most circumstances, it made more financial sense to modify, even if the borrower ended up re-defaulting.

When considering a loan modification, the authors explain, banks must pit the costs of a foreclosure against the costs of lowering the borrower's payments. The NPV test is a common way to evaluate this, and the authors ran that test for 1,536 test cases using different circumstances like original loan size, size of the discount, property value and so on. If the result of that test shows a lower re-default rate than the actual re-default rate, the value of modifying the loan is higher than the value that can be gotten through foreclosure -- and thus, a loan modification should be granted. The CRL's calculations found that under most real-world circumstances, this should lead to a loan workout. For example, a loan modification that creates a 10% discount on the loan would be most profitable more than 86% of the time under current real-world self-cure rates.

Thus, the authors concluded that NPV tests should be spurring a much higher number of loan modifications than the market is currently seeing. Their conclusion suggests reasons for this mismatch, including "misalignment of incentives due to the servicer compensation structure."

In plain English, this is the same idea we've been repeating in this space for months. Loan servicers don't lose money on foreclosures; the banks or investors who own the loans do. However, loan servicers can make money collecting fees for late payments and other problems that typically precede a foreclosure. One advocate told HousingWire that this is a major reason for the mortgage crisis, and we agree. Having academic proof might be cold comfort for people who are facing foreclosure right now, but as Orange foreclosure defense lawyers, we think it's a great incentive for homeowners to keep fighting. If loan servicers are intentionally sabotaging or ignoring loan modifications in order to increase their profits, they're vulnerable to lawsuits accusing them of failing to give loan modifications serious consideration -- exactly the kind of suits we file.

Continue reading "Consumer Advocates' Report Finds Loan Modifications Are in Best Interests of Investors" »

As Norco loan modification lawyers, we spend a lot of time suing loan servicers for failing to live up to their basic contractual obligations under HAMP -- the federal Home Affordable Modification Program. So we were interested to see articles suggesting that homeowners across the nation are pursuing similar lawsuits. MortgageLoan.com reported March 17 that a class-action lawsuit in New Jersey accuses CitiMortgage of reaping the rewards of being part of HAMP while denying permanent loan modifications to people who had met all of the requirements in a temporary trial. This is against HAMP rules. Another lawsuit out of Texas accuses BAC Home Loans Servicing, a division of Bank of America, of intentionally misleading, verbally abusing and delaying requests of borrowers.

The Texas article focuses on plaintiff Donna Batts, who is fighting to hold on to her home in northeast Austin. After months of phone calls that gave her confusing, misleading and contradictory information, she got a temporary loan modification. The very next month, while she thought she was still under consideration for a permanent modification, she got notice that her home was about to be sold at a foreclosure auction. That's when she called a legal aid group and eventually joined the Texas lawsuit. The lawsuit in New Jersey alleges that CitiMortgage is contractually obligated to grant permanent HAMP loan modifications to people who meet the guidelines and make payments on time, since it took TARP money. However, they say, the servicer has improperly denied permanent modifications or drawn out the process longer than the three-month trial period.

This is exactly the kind of lawsuit that our Diamond Bar predatory lending attorneys help clients pursue here in California. In fact, we suspect the Texas article is right that such lawsuits are popping up all over the United States, because the shabby way loan servicers treat borrowers is a national problem. From our clients and the media, we've read over and over again about loan servicers denying loan modifications for no reason or for reasons that aren't true. They're also notorious for the runaround and contradictory instructions Batts described, which we believe is a delaying tactic. There might be some accountability in states with judicial foreclosures, but here in California, independent oversight of banks' actions is only available when borrowers sue.

Continue reading "Growing Numbers of Lawsuits Accuse Servicers of Ignoring HAMP Obligations" »

Our Riverside foreclosure defense attorneys wrote earlier this month about a new bill in the California legislature that would make it illegal to foreclose until after the servicer has accepted or declined the homeowner's application for a loan modification. So we were interested to see reports of two other bills introduced in the state legislature that would address other aspects of the housing crisis. As the Associated Press reported March 16, the more controversial bill would require lenders to pay $20,000 for each foreclosure, to help offset foreclosure-related costs to local governments such as police services and lost property tax revenue. The other would address an underlying concern of robo-signing by requiring lenders to record mortgage documents with counties.

The first bill, AB 935, is sponsored by Assemblymember Bob Blumenfield, a Democrat from the San Fernando Valley. It authorizes county recorders to collect $20,000 per foreclosure in fees from lenders. The AP article said the fees would be applied to make up for costs to local governments of foreclosures, and the number likely derives from local government estimates of those costs. It is expected to be controversial. Less well known is AB 1321, which requires banks to record mortgage deeds, trusts and assignments within 30 days of execution. It would also require them to record a mortgage or deed of trust and any assignments 45 days before filing a notice of default. In essence, this requires banks to document their ownership of properties with local governments, possibly stopping confusion caused by banks' sloppy paperwork and missing documents.

As Buena Park foreclosure defense lawyers, we'll be interested to see how these bills do in the legislature. The banking industry is likely to lobby hard against AB 935, but if it sparks a public debate on the costs of foreclosure, that could be worthwhile in itself. The issues addressed by AB 1321 are more subtle for people who aren't following the housing market closely, but we believe they're also important. The robo-signing scandal was essentially about paperwork: banks were caught falsifying documents, and also frequently did things like file the deed with the correct local agency after starting foreclosures. That is, there are widespread and serious questions about who actually owns some properties -- and this bill would force banks to clean up their act, reducing confusion and time in court.

Continue reading "California Legislature Considers Two More Bills Addressing Foreclosure Problems" »

Our Claremont foreclosure defense lawyers were interested to see a study that estimated the costs of the foreclosure crisis to our state in dollars -- an angle that is rarely reported. According to ABC affiliate KGO, the Home Defenders League, an advocacy group that believes banks have not been dealing with borrowers fairly, put out a March 16 report on the economic consequences of foreclosures in California. Our state has one-fifth of all foreclosures by some estimates, and the League says a total of 1.2 million Californians have lost their homes since the crisis started. The report looks at the cost of lost property tax revenue, local fees and taxes and lowered home values, and concludes that costs could total $650 billion to $1 trillion.

In order to come to that conclusion, the League made assumptions about how many foreclosures we can expect into 2012, as well as estimates of average home values. The decline in value of foreclosed homes alone was estimated at $207 billion; the smaller declines in the values of neighboring homes were estimated at $424 billion. For statewide property taxes, the report said, losses could be as high as $3.8 million, with 53 percent of those losses affecting funding for K-12 schools and community colleges. County assessors have already reported losses for 2009-2010, the report said, some for the first time since the Great Depression. It estimates another $17.4 billion in losses at local government levels, for services like police, unpaid trash collection fees, inspections, court costs and more.

As Costa Mesa foreclosure defense attorneys, we believe we're already seeing some of these effects. Certainly, foreclosures have helped depress the housing market, which ensures that home values stay low and more homeowners stay underwater -- ironically contributing to further foreclosures. And as the report notes, property tax losses have already started and may get better. The report also notes a statement from Los Angeles City Councilman Richard Alarcon, who said local governments can lose as much as $34,000 per foreclosure on maintenance and lost fees. The clearest solution is to avoid foreclosures whenever possible -- but loan servicers have shown little interest in trying to help. In fact, as we've noted here many times, the economic incentives actually reward servicers for pushing borrowers into foreclosure.

Continue reading "Borrowers Advocacy Group Reports That Foreclosures Cost California Billions" »

Recently, our Fontana foreclosure defense attorneys wrote about the release of a proposed settlement between five major mortgage lenders accused of "robo-signing" and the attorneys general of all 50 states, who were investigating the practice. Since then, the plan has been praised by consumer advocates but criticized by the banking industry and Republican politicians, including three attorneys general who were part of the investigation. According to a March 17 article from the Wall Street Journal, lead AG Tom Miller of Iowa expects to start negotiating with lenders soon on a final settlement. He says the original proposal is an "opening salvo" subject to change, but acknowledged the possibility of no settlement.

The settlement is an attempt to keep prosecution for robo-signing out of courts. The five largest mortgage lenders are accused of breaking the law by falsifying legal documents used in courts to take borrowers' homes away, which raised concerns that some foreclosures may have been unjustified or avoidable. The settlement proposal would require lenders to hold off on starting foreclosure proceedings until loan modification applications have been decided; provide a single point of contact as borrowers' applications made their way through the system; bans excessive or fraudulent fees; and requires them to eliminate illegal practices including robo-signing, false documents and false notarizations. Many of these practices are already illegal or prohibited under the federal Home Affordable Modification Program. There is also a proposal to fine lenders an unspecified amount of money for their wrongdoing.

While those provisions have attracted some criticisms, the bulk of the criticism is aimed at another proposal to require loan modifications that include reductions in principal. Principal reductions are vehemently opposed by lenders, who successfully killed a proposed federal law allowing bankruptcy judges to do this for people who had already filed for bankruptcy. Opponents say principal reductions would give borrowers an incentive to go into foreclosure and would cost too much.

As Westminster foreclosure defense lawyers, we believe lenders are not being honest about their opposition. We are not well placed to say what banks can and cannot afford, but we can say that none of our clients have ever wanted to go into foreclosure voluntarily. That's particularly true because default plunges borrowers into a bureaucratic nightmare, not to mention damages their credit. Lenders are also arguing against this settlement by pointing out that no or few people were incorrectly foreclosed because of robo-signing. This may be true, but it conveniently glosses over the fact that banks broke the law. Just as drunk drivers can be convicted of DUI even if they didn't cause a crash, companies that break the law can and should be penalized even if they happened to avoid accidentally taking away the wrong people's homes.

Continue reading "Attorneys General Expect to Begin Negotiations on Proposed Robo-Signing Settlement" »

An interesting federal appeals court ruling caught the attention of our Rancho Cucamonga bankruptcy attorneys recently. According to a March 10 article in Westlaw News & Insight, the Fifth U.S. Circuit Court of Appeals in New Orleans has ruled that a job-seeker may not sue the real estate law firm that declined to hire her because she had filed for bankruptcy the year before. The ruling means Shani Burnett of Houston won't be able to pursue her case against Stewart Title unless she wins a rehearing from a full panel of the Fifth Circuit or the Supreme Court. The case turns on the interpretation of a federal law that the justices said forbade hiring discrimination by the federal government, but not by private employers.

The facts are not disputed. Burnett filed for bankruptcy in September of 2006 and interviewed for a job at Stewart Title in July of 2007. It offered her a job if she could pass a background check and drug test -- but the background check turned up the bankruptcy, and the firm declined to hire Burnett. Burnett sued under a section of the bankruptcy code, 11 USC sec. 525(b), which in relevant part says private employers may not "terminate the employment of, nor discriminate with respect to employment against," current or former debtors. However, the bankruptcy court where the lawsuit started dismissed the case, agreeing with Stewart Title that the law does not prohibit refusal to hire -- just discrimination "with respect to employment." The federal district court agreed, and in a March 4 ruling, so did the Fifth Circuit.

The ruling turned on the court's interpretation of the meaning of "employment discrimination." That particular sentence might seem to support Burnett's case, the court wrote, but the court also had to consider the context of the law. Immediately prior to section 525(b) was 525(a), which explicitly says a "government unit may not... deny employment to, terminate the employment of, or discriminate with respect to employment against" a current or former bankruptcy debtor. The court found that the choice to include "deny employment to" in subsection (a) but not in subsection (b) was a deliberate choice by Congress, not an omission. In so deciding, the Fifth sided with a 2010 ruling by the Third Circuit and against a district court decision from 2000 on the same subject. Another such case is pending before the 11th Circuit.

This ruling is disappointing to us as Yorba Linda bankruptcy lawyers. While it's true that Congress could have chosen to include the language in subsection (b), it's important to realize that that subsection was written six years after subsection (a) -- that is, not at the same time and likely not by the same people. More importantly, it's difficult to figure out why the court believes refusing to hire someone because of her bankruptcy does not constitute the "employment discrimination" that is clearly outlawed in subsection (b). And, as Burnett's attorney pointed out in the case, this decision makes bad public policy because it gives private employers permission to discriminate that public employers do not have. We believe job seekers should be evaluated according to their skills and experience -- not the past mistakes that they have taken clear steps to fix.

Continue reading "Court Rules Debtor Not Protected From Job Discrimination Based on Bankruptcy Status" »

As Redlands loan modification lawyers, we've written a lot in this space about the reasons lenders give (or don't give) homeowners for denying loan modifications. So we were very interested to see a March 8 story from Pro Publica, a nonprofit investigative journalism organization, on a variety of data related to loan modifications and the Home Affordable Modification Program, the federal government's attempt to help. Using data from the Treasury Department, Freedom of Information Act requests and data from states and the mortgage industry, Pro Publica put together a series of charts and graphs explaining some of the basics of the loan modification crisis. Some of it reinforces the general belief that HAMP has failed, but other data sets show reasons why that might surprise casual observers.

Only a tiny fraction of homeowners in default are even being considered for loan workouts, the report said -- not a surprise to frequent observers. But interestingly, the data also show that lenders aren't even in contact with a majority of borrowers who are more than two months behind with payments. That's especially disturbing here in California, where a state law actually requires lenders to contact borrowers to discuss alternatives before foreclosing. Also very interesting were the data sets on reasons why borrowers aren't getting help. Most people are denied without even being given a trial, and only about one-fifth of those who apply end up in a permanent modification. Others have trial modifications canceled -- the majority for reasons other than missing payments -- or stretched far beyond the three-month period. Those numbers don't reflect the large number of people who say they applied and never heard back from their lenders.

In a quarter of rejections from a permanent or trial modification, lenders say documents were missing -- but as Pro Publica has noted, servicers' inability to keep track of documents is a primary complaint by homeowners. That includes at least 300 complaints that servicers rejected borrowers for failing to provide documents not requested. A combined 25 percent were rejected because the servicer didn't think the loan modification was necessary; 7 percent withdrew; and another 7 percent were rejected for a reason labeled "foreclosure better for investors."

Our Newport Beach foreclosure defense attorneys suspect that if servicers were honest, "foreclosure more profitable" would actually be the main reason for loan modification rejections. As we've written repeatedly in this space, loan servicers don't usually stand to lose money on a foreclosure, because they don't own the loans. However, they do stand to gain money by drawing out a foreclosure, because they can continue collecting payments, and sometimes late fees, for longer periods. When they do foreclose, they can also collect extra fees. We believe this is why loan servicers have made their modification procedures as unhelpful and bureaucratic as they can, repeatedly losing paperwork and behaving in a disorganized manner that frustrates some homeowners into giving up.

Continue reading "Investigative Report on Loan Modifications Shows Reasons for HAMP Rejections" »

Our Corona foreclosure defense lawyers have been following the "robo-signing" issues closely since they began surfacing in late September. So we were interested to see a few articles on a Federal Reserve Bank report that is expected to say there were no wrongful foreclosures among a sampling the Fed examined. The report has not been released to the public, but the Fed's Consumer Advisory Council, which makes recommendations for how Fed policies affect consumers, criticized the report at a March 10 meeting. According to the Huffington Post, consumer advocates said the definition of wrongful foreclosure used was too narrow, and that the Fed had buried its finding that there were significant problems with how banks handled foreclosures.

Reportedly, the Fed examined 500 loan files to determine whether the sloppy practices known as "robo-signing" had led to wrongful foreclosures. The sample size itself was criticized as too small, the article said, in a nation that saw more than 3 million foreclosures last year. (This would make the 500 files 0.0167 percent of all foreclosures.) But the advisory council also criticized the Fed for defining "wrongful foreclosure" as a foreclosure on a home not significantly behind in payments. Consumer advocates wanted to expand the definition to include cases with significant mistakes in the foreclosure documents or cases in which a bank tried to foreclose on a property it didn't own. One member of the council said the dispute is not over whether the homeowners were delinquent, but whether foreclosures were avoidable.

We couldn't agree more, and we believe this report buries rather than clarifies the issue. By defining wrongful foreclosures only as foreclosures of people not far behind on their payments, the Fed neatly sidestepped the issue of whether banks are doing all they say they're doing -- never mind all they can -- to prevent foreclosures. In our experience as Costa Mesa foreclosure defense attorneys, they are not -- and the council, which is made largely of pro bono housing attorneys, appears to agree that this is the real issue. Sloppy paperwork by loan servicers also leads to foreclosures by banks that don't actually own the loan, as well as foreclosures that take place while the borrower is trying to negotiate a loan modification, often despite seeming incompetence by the servicer.

It's also worth noting, as the Supreme Judicial Court of Massachusetts recently did, that whether borrowers were truly in default is not the point. Robo-signing breaks the law regardless of whether any harm was done.

Continue reading "Expected Federal Reserve Report Finds No Wrongful Foreclosures Among 500 Files" »

As Pomona foreclosure defense attorneys, we routinely work with people who have applied for HAMP loan modifications and encountered numerous problems. So we were interested to see that the House Financial Services Committee recently voted to end the Home Affordable Modification Program, the major government program that encourages loan modifications. The 32-23 vote was largely supported by Republicans, who have repeatedly said HAMP is a failure. Democrats defend it as a useful tool even if it isn't achieving its goals. The bill is considered likely to pass the Republican-controlled full House of Representatives, but not to pass the Democrat-controlled Senate. President Obama has said publicly that he will not sign the bill.

It is not disputed that HAMP has fallen far short of its goals. Only about 500,000 borrowers have gotten full loan modifications through the program out of many millions who are eligible, and only $1 billion has been spent out of an allocated $30 billion (from the TARP fund). However, Republicans contend that the program is a waste of money and ineffective, while Democrats say it's useful as an incentive to lenders to continue making loan modifications. The committee vote was along party lines, and a political expert in the article said the move was made to satisfy the Republicans' voter base. Consumer advocates argue that the problem with HAMP is its lack of any accountability or enforcement mechanism, which allows lenders to break rules with impunity.

Our Highland foreclosure defense lawyers have been working in this field since the beginning of the housing crisis and have spoken to many, many clients who have been frustrated by their interactions with lenders. That's why we agree that HAMP's main problem is accountability -- because we've heard it over and over from borrowers. Without penalties for breaking rules, lenders are free to start parallel foreclosures and loan modifications; deny loan modifications or decline to make them permanent for arbitrary reasons or no reason; and repeatedly lose paperwork. All of these are very common complaints from borrowers, before and after the rules were made -- but to enforce them, borrowers have to sue and hope for the best.

Continue reading "House Republicans Vote to Eliminate HAMP Although Bill Unlikely to Pass" »

Our San Bernardino foreclosure defense attorneys wrote last week about an interest group's determination that most HAMP rejections can be attributed to paperwork problems. So we were interested to see a Feb. 28 Wall Street Journal article that makes a similar conclusion. The newspaper used data released by the Treasury Department; it was unclear whether this was the same data used by Public Citizen's analysis. Using that data, the newspaper confirmed that HAMP has been able to help only a small number of applicants -- about one in four. The newspaper reported numerous reasons for that, but said only a small number couldn't make payments on time -- most were disqualified for paperwork problems or because the bank decided they were not eligible.

The analysis looked at 2.7 million applications -- almost half of whom, 1.3 million, were never accepted into the program. Of those 1.3 million, 266,000 were rejected because of failure to submit paperwork or the bank losing the paperwork. Banks decided another 255,000 already had affordable mortgages and didn't need loan modifications. Other groups were turned down because they had "jumbo" mortgages, or because the banks thought they were not in danger of defaulting. Of those accepted for an initial trial modification, lenders declined to make the modification permanent for 770,000. This was largely for the same reasons described above -- eligibility determinations and paperwork. Only a handful had trouble making the monthly payments, which would disqualify them for a permanent modification.

This analysis doesn't surprise our Corona foreclosure defense lawyers at all. We've worked in this field since before HAMP, so we've watched the program unfold through the news as well as our clients' experiences. What the Wall Street Journal did not report is that lenders have no accountability when they decide things like whether a mortgage is affordable or the homeowner is in danger of default. When lenders break the rules -- for example, by turning down borrowers whose income qualifies them for HAMP -- there is no accountability. Lenders are also free to repeatedly lose paperwork and then turn down frustrated borrowers by claiming they didn't provide enough paperwork. While the federal government has established limited review of this issue, the only way to appeal a bad decision or unfair treatment is to file a predatory lending lawsuit against the lender.

Continue reading "Analysis of Treasury Data Shows Most HAMP Rejections Not Due to Payment Problems" »

Our Riverside County foreclosure defense lawyers are used to politicians being involved the foreclosure crisis through debates, not direct participation. So we were interested to see a short notice in the March 3 Huntington Beach Independent saying that Keith Bohr, a city councilman for that city, has sued Wells Fargo's mortgage arm for allegedly continuing with a foreclosure before giving him and his wife a chance to modify their loan. That filing comes on the heels of a Chapter 7 bankruptcy filed last year for the company Bohr co-owns, which owns a restaurant. That bankruptcy was finalized last year, Bohr said.

The Independent's article doesn't give many details about the mortgage-related lawsuit. On Feb. 3, Bohr and his wife, Elizabeth Propp, filed a lawsuit against Wells Fargo Home Mortgage and Fidelity National Title Insurance Company. Bohr and Propp had apparently been trying to modify their mortgage, but accused the lenders of starting foreclosure proceedings before allowing the loan modification. It wasn't clear whether any modification was ultimately granted. However, both the federal Home Affordable Modification Program and the policies of many lenders, including Wells Fargo, forbid foreclosing before a decision is made on a loan modification. The lawsuit allowed the couple to ask the court for a temporary restraining order stopping any foreclosure from proceeding before the case is decided.

This lawsuit looks very familiar to our Diamond Bar foreclosure defense attorneys because it's exactly like the kinds of suits we file every day. Most of our loan modification clients aren't politicians or other high-profile people, but all of them called us because they felt their applications for a loan workout were not given fair consideration. They frequently tell us about paperwork that was lost repeatedly; denials for permanent loan modification even though the trial modification had no problems; and seemingly arbitrary excuses or blatant mismanagement by lenders. Very often, lenders start foreclosure proceedings before making a loan modification decision, which can lead to mistaken foreclosures that are nearly impossible to correct.

Continue reading "Huntington Beach Councilman Sues Wells Fargo for Foreclosing Before Loan Mod" »

Our Redlands foreclosure defense attorneys have written here many times over the past few months about "robo-signing" and its fallout for homeowners, banks and the courts. Robo-signing is the name given to the practice, uncovered last fall, of banks pushing foreclosures through very quickly by failing to do the required vetting of paperwork before signing it and submitting it to the court. In response, a group of attorneys general in all 50 states began investigating the practice to determine what penalties or compensation for homeowners might be appropriate. As the Wall Street Journal reported March 4, that group has proposed a long list of rules that would change the way lenders service mortgages and pursue foreclosures.

The Journal said the attorneys general sent lenders a 27-page document with details about how they would like to see loans serviced in the future. It includes requirements to consider writing down principal more often; deadlines for acknowledging receipt of documents and responding to requests; and freeze all foreclosure action while the loan modification is being considered. Banks would face fines for violating that last rule, a common cause of complaints, and compliance would be monitored by an independent third party. An anonymous banking industry executive said it resembles a "wish list," and the newspaper said it is likely to be a starting point for negotiations. The proposal is separate from a proposal reported earlier that would use $20 billion in penalties to write down principal for struggling homeowners.

As Dana Point foreclosure defense lawyers, we're delighted by this proposal, even though we're sure it won't survive intact to any final settlement. In particular, we are pleased to see the attorneys general putting "teeth" in their rules by ensuring that there are penalties for noncompliance and an independent monitor to watch the lenders' behavior. This has been a major problem for the Home Affordable Modification Program, or HAMP, which has no enforcement provisions and no oversight of lenders' decisions. We believe this toothlessness has led directly to HAMP's failure to help more than a quarter of applicants. Lenders may feel that the proposal is overly detailed, but their record with HAMP and robo-signing shows that they can't be trusted to treat borrowers fairly on their own.

Continue reading "State Prosecutors Propose Broad List of New Lending Rules as Robo-Signing Settlement" »

Last year, our Moreno Valley foreclosure defense lawyers wrote about a proposed California state law that would have forbidden lenders from starting the foreclosure process while the same homeowners were still under consideration for a loan modification. Unfortunately, that bill died before it could be passed, which is why we were pleased to see that sponsors Mark Leno (D-San Francisco) and Darrell Steinberg (D-Sacramento) have proposed a new version for this year's legislative session. As HousingWire reported March 3, the California Homeowner Protection Act is just one of several steps the state legislature has taken to address the foreclosure crisis, which has hit inland California especially hard.

A press release from the Center for Responsible Lending explained the bill in more detail. Its main provision is a requirement to give the borrower a clear response to a loan modification application before starting the foreclosure process. In order to enforce that rule, the bill gives borrowers a limited right to sue the servicer for breaking it, which provisions to stop what Leno calls "gotcha litigation." Under the bill, lenders would also be required to prove they own the note, a provision likely inspired by the widespread sloppy bookkeeping processes that have inspired new court rules or denied foreclosures in other states. And the servicer would also be required to send a document outlining all of the fees and payments over the life of the loan, showing where exactly the default came from.

As Pomona foreclosure defense attorneys, we wish this bill the best of luck as it makes its way through the sharply divided California legislature. Lenders will likely try to argue otherwise, but we know from talking to our clients and reading frequently about this issue that homeowners badly need a law forbidding foreclosures while a loan workout decision is pending. Currently, many lenders have their own internal policies against the practice, and it is also against the rules for the Home Affordable Modification Program. However, the lender and HAMP rules are all routinely ignored, and there's no enforcement mechanism to appeal or penalize the servicers. This bill corrects that problem by giving borrowers the right to sue, which we hope will serve as a deterrent to starting the apparently unstoppable foreclosure process without good reason.

Continue reading "State Legislators Reintroduce Bill to Forbid Foreclosures During Loan Mod Process" »