California Bankruptcy Attorney Blog

Our Rancho Cucamonga foreclosure defense attorneys have watched the news on the robo-signing investigation by the attorneys general of all the states, hoping it would provide information and meaningful penalties. So we were interested to see an apparently independent investigation being launched by the attorney general of New York, Eric Schneiderman. Schneiderman's office has requested information and meetings with Bank of America, Morgan Stanley and Goldman Sachs, the New York Times reported May 17. In particular, his office appears to be looking at the way the three institutions bundled mortgages into investments. Those practices have been the focus of many private lawsuits.

Securitization is widely considered one reason for the housing crisis, under the theory that passing along the risk to investors took away lenders' incentives to make sure borrowers could pay back their loans. Some recent lawsuits allege that financial institutions bundled loans they knew were bad into securities, then misled investors about the quality of the securities. That's one possible avenue of investigation, the Times said. Others include inadequate disclosure to mortgage insurers -- which could include Fannie Mae and Freddie Mac -- or unreasonable credit risks taken by investors in mortgage lending companies known to be taking risks. Schneiderman's investigation signals that he won't be willing to agree to a settlement in the robo-signing investigation if it includes a provision forbidding further investigations.

As Santa Ana foreclosure defense lawyers, we applaud Schneiderman for opposing such a provision, and for investigating mortgage securitization. As the attorney general for the state that includes the headquarters of the nation's financial industry, he's in a unique position to investigate whether there indeed was large-scale misconduct on Wall Street. An investigation into mortgage securitization fraud would benefit investors, but it would also benefit any borrowers whose loans turned out to have been known as risky. If Schneiderman's investigation turns up fraudulent practices in lending, that knowledge could be a major benefit to homeowners who are now facing foreclosure. Homeowners who can prove their loans were predatory under certain laws can sue the lender to restructure or cancel the loan.

Continue reading "New York Attorney General Starts Solo Investigation of Mortgage Securitization Practices" »

Our Moreno Valley foreclosure defense lawyers write a lot here about borrowers suing their mortgage servicers for dragging their feet on a loan workout decision. So we were interested to see a news item about a slightly different kind of lawsuit: a suit intended to force a lender to complete its foreclosure. According to the May 17 Nashville Tennesseean, that's what Sheryl Lynn Pigg has had to do after she lost nearly all of her money and property in the floods of 2010. She is in foreclosure and declared bankruptcy in September. Nevertheless, due to a provision in the 2005 changes to the bankruptcy laws, Pigg is still legally obligated to pay homeowners' association fees on the unit until Bank of America completes the foreclosure process.

Pigg had to be rescued by boat from the second story of her building in 2010, after floodwaters engulfed the first floor. When she filed for bankruptcy, she owed $97,500 on a unit worth $55,000, in part because of the flood damage. But despite her bankruptcy, she is still legally obligated to pay HOA fees of more than $150 a month because her bank has not completed the process. The chief bankruptcy judge for the Middle District of Tennessee, speaking generally, said banks prefer not to complete foreclosures because it makes them responsible for the HOA fees, which was not true before the 2005 changes. He also noted that banks don't like having the bad debt on their books. The article said borrowers nationwide are pursuing similar claims.

As West Covina consumer bankruptcy attorneys, we're sorry to say this sounds familiar. We work every day with borrowers in default or foreclosure, some of whom are pursuing bankruptcy, so we know all too well that the 2005 bankruptcy changes stick borrowers with the cost of HOA fees for as long as lenders care to sit on the foreclosure. The article quoted RealtyTrac statistics showing that average time to foreclosure has ballooned from 151 days in 2007 to 400 days this year. In fact, as the chief bankruptcy judge noted, banks also drag their feet to avoid counting the debt against their profits for investor purposes. This practice helps banks continue to make fat profits, but it unfairly harms borrowers who are already so far past their financial limits that they're in bankruptcy in the first place.

Continue reading "Bankrupt and Foreclosed Borrower Sues Lender for Incurring Homeowners Assn Fees" »

As Riverside County foreclosure defense attorneys, we were pleased to see an announcement that the state of California is about to get serious about fighting mortgage fraud. As the Los Angeles Times reported May 23, Attorney General Kamala Harris announced that day that she was forming a Mortgage Fraud Task Force dedicated to finding and penalizing three broad categories of mortgage-related fraud. At the press conference, Harris noted that the housing downturn has sucked $640 billion in home equity out of the state, with expensive consequences for state and local government as well as individual homeowners. Her team will include 17 attorneys as well as eight special agents from the California Department of Justice.

The task force will investigate three type of fraud. One prong will look at deceptive or illegal lending practices by mortgage lenders, such as failing to fully disclose loan terms to customers before signing and approving loans for people the lender knew could not afford to repay them. Many such practices are against state or federal fair lending laws. Another prong will look at possible violations of California's False Claims Act. Like its federal counterpart, it forbids fraud against the state government -- such as concealing evidence of risk in mortgage-backed securities sold to state retirement investment funds. Finally, the task force will also go after fraud by foreclosure rescue companies and lawyers who promise help to homeowners but then disappear with their money. The initiative is separate from the multistate attorneys general effort against "robo-signing."

We support this effort, but we're particularly pleased about the efforts to root out and fight fraudulent lending practices, because those practices are at the root of many of the cases we see in our practice as Cypress foreclosure defense lawyers. Readers may remember the case of Countrywide Financial Corp., now a unit of Bank of America, which became an early casualty of the housing crisis because it handed out loans to many borrowers it knew couldn't pay, then securitized the loans to pass on the risk to investors. Countrywide and Wells Fargo have also been accused of targeting minorities for expensive subprime loans, a practice known as reverse redlining. If the state turns up evidence of widespread wrongdoing, it could even indirectly benefit borrowers not involved in its cases.

Continue reading "California Attorney General Announces Special Effort to Find and Fight Mortgage Fraud" »

Our Highland loan modification attorneys have frequently criticized the Home Affordable Modification Program, the federal loan modification effort, for not offering many enforcement mechanisms. So we were pleased to see a small step in that direction when the Treasury Department released new rules requiring loan servicers to offer a single point of contact for people applying for loan workouts through HAMP. According to a May 18 article from HousingWire, the new rule applies to the 20 largest loan servicers participating in HAMP and will take effect Sept. 1. The requirement echoes other efforts at loan modification reform, including the robo-signing settlements lenders made with the largest banks last month.

The Treasury Department said the new rules are an attempt to respond to the most common complaints it gets from borrowers: servicers losing documents and difficulty connecting with someone at the servicer that can help. Establishing a single point of contact, called a relationship manager in the article, is intended to give a specific person responsibility for each individual's case. The rules require the relationship manager to be a full employee of the bank, not a contractor, and must be assigned when the servicer first contacts the borrower about the delinquency. While the borrower is being evaluated for a modification, the relationship manager must contact the borrower with updates, keep track of documents and discuss ways to resolve the deficiency. However, borrowers will still have to call if they have changes in their financial status or questions.

As Placentia loan modification lawyers, we wish the Treasury Department would go further. A single point of contact is a great step, since it should make it more difficult for banks to lose paperwork (or claim they did). This is a major positive improvement in HAMP. While it may not stop loan modification shenanigans, it will likely force banks to think of new ones. However, HAMP's problems go deeper than a single point of contact. As we've written here repeatedly, one major problem with HAMP is its lack of any accountability mechanism. That lack makes it difficult (though not impossible) to hold servicers responsible for violating the rules that already exist, as well as this new one. For example, a rule on making timely decisions seems to be frequently ignored.

Continue reading "New HAMP Rules Require Single Point of Contact for Loan Modification Applications" »

Our Corona foreclosure defense lawyers were interested to see recent reports suggesting that the rate of foreclosures has not yet recovered from the slowdown caused by the robo-signing scandal. According to a May 17 article from the Orange County Register, foreclosure filings are down in California to lows not seen since the fall of 2008. That statistic was echoed by similar statistics from neighboring Arizona and Nevada, as well as the state of Washington. The data comes from ForeclosureRadar.com, whose CEO told the newspaper it was surprising because banks should already have finished any slowdown caused by robo-signing and the halt it put to foreclosures already in the pipeline.

ForeclosureRadar's California numbers for April showed a 25.8 percent decline in notices of default over March's numbers, and a 10.9 percent decline in notices of trustee sales. Those drops were even more dramatic measured against the numbers for April of 2010. Cancellations of trustee sales -- essentially, last-minute foreclosure reprieves -- were up 27 percent. The trend was also evident in Arizona and Nevada, both of which saw drops in foreclosure notices over March and the previous year. However, neighboring Oregon was an exception, with a significant increase in foreclosure filings coming from one particular lender. In California, the average time until foreclosure continued to increase, and is now at 312 days from start to finish, or about 10 months.

As Norwalk foreclosure defense attorneys, we're always pleased to see evidence that fewer homeowners are being kicked out of their homes. But we're not sure whether this news is a sign of a long-term recovery or just the tail end of the robo-signing crisis. After robo-signing broke, many banks put moratoria on foreclosures, or had them imposed by courts, so that the paperwork of pending foreclosures could be checked for accuracy. However, with robo-signing becoming public knowledge in early October, it has now been seven months, enough time for foreclosures to get back on track. However, it's possible that robo-signing is informing borrowers' and judges' current decisions. If more borrowers are challenging their foreclosures in non-judicial states like all of these, and judges are taking them seriously, they could slow foreclosures dramatically.

Continue reading "New Report Shows Foreclosures Down in California Despite Industry Expectations" »

When our Fontana foreclosure defense attorneys last wrote about the ongoing robo-signing settlement talks, the major banks had offered a $5 billion settlement, roughly a quarter of the fine that state governments originally suggested. However, they may soon be forced to pay much more than that, if a May 16 article from the Huffington Post is right. The report says the federal Department of Housing and Urban Development has audited five major mortgage lenders -- Bank of America, Wells Fargo, Chase, Citigroup and Ally Financial -- and concluded that all five used false paperwork to file for reimbursements with the Federal Housing Administration. This breathes new life into the robo-signing settlement because it is a violation of the federal False Claims Act.

It's not clear what the paperwork in question is or how it was false; federal officials have declined to release details. However, the article says the false documents were used by the five lenders to file for insurance payments after the lenders foreclosed on properties worth less than the balance of the defaulted loan. This is illegal under the False Claims Act, a law allowing whistleblowers and the federal government to sue for three times the value of the fraud, plus other penalties. The report said two of the five banks refused to cooperate with the audits, and at least one, Wells Fargo, employs top executives who broke the law.

The news is expected to give the attorneys general negotiating the robo-signing settlement a new bargaining chip. The Justice Department is also expected to meet with the banks soon to discuss the allegations and decide whether to pursue separate criminal or civil penalties. And individual states including California are performing their own document reviews or considering lawsuits, the article says.

As Whittier foreclosure defense lawyers, we're pleased that these audits have brought banks' wrongdoing into the light of day. When robo-signing first broke, major lenders said repeatedly that this was only a "technical" problem, because nobody was foreclosed who hadn't gone deep into default on their loans. We've already written several times about examples where that wasn't true and individual borrowers' rights were not respected. This article shows another type of fraud created by robo-signing, but against all U.S. taxpayers, not just unlucky borrowers. Technical or not, collecting insurance payouts with false paperwork is against the law. We hope this dispels any lingering doubts about the wrongs done by robo-signing and helps government officials push for meaningful reforms and fines.

Continue reading "Federal Audits Show Mortgage Lenders Defrauded Government With Robo-Signing" »

As Colton foreclosure defense lawyers, we work routinely with people who are considering bankruptcy as a way to avoid foreclosure. Consumer bankruptcy has major financial repercussions, so it's not for everyone, but it does allow a court to closely examine the foreclosure for legal and financial improprieties. In fact, national bankruptcy data is providing compelling evidence that lenders are making widespread mistakes -- usually in their own favor -- when they foreclose. According to a May 15 column from New York Times business columnist Gretchen Morgenson, the United States Trustee Program found the abuses by examining foreclosures from bankruptcies in 88 judicial districts across the country.

According to Clifford J. White III, who directs the executive office of the U.S. Trustee, the office found hundreds of obvious problems in the bankruptcies it's studied. Usually, these fall into two categories: inaccurate charges against borrowers and fees that are improper altogether. The inaccurate amounts are sometimes numbers with no basis in reality, like a demand for $52,043 that dropped to $3,156 after a trustee asked for documentation to support it. Other times, they come from "dual-track" foreclosures that don't reflect payments the borrowers are making on a loan modification. The improper fees include fees that have been inflated as well as fees that aren't related to work actually done or don't seem to have a purpose. One bankruptcy included more than $10,000 in "prior service fees" that was not backed by documentation.

To make matters worse, White said banks are actively fighting his office's attempts to collect the information. When the U.S. Bankruptcy Trustee requests information related to a foreclosure, banks often oppose it by arguing that the office shouldn't get the information because it's not a party to the dispute. No court has yet accepted this argument. Lenders also agree to provide the information, but refuse to explain their policies and procedures, so the office cannot look for flaws or fraud in the system.

Our Garden Grove foreclosure defense attorneys are not surprised by these results. Many of them repeat allegations made in lawsuits by borrowers who allege unfair or inflated fees by loan servicers. If these anticonsumer practices are as widespread as the trustee suggests, it's not surprising that some of those borrowers ended up in bankruptcy. However, it's disturbing that lenders are continuing to claim apparently unjustified fees in bankruptcy court, because claims made in bankruptcy court are the basis for the debts that bankruptcy debtors must repay. That is, the fraud can unnecessarily deepen filers' debt and keep them in bankruptcy longer than necessary. Although the Trustee's office is not done with its study, we hope bankruptcy filers and their attorneys start to closely examine servicers' filings for this kind of fraud.

Continue reading "Bankruptcy Trustee Program Finds Widespread Errors by Banks Trying to Foreclose" »

Our Chino foreclosure defense attorneys know that several "Real Housewives of Orange County" have struggled with foreclosure and bankruptcy issues, just like a lot of less famous people in southern California. Among those, apparently, is a new cast member, Irvine resident Peggy Tanous. According to a May 6 post from the OC Register's Lansner on Real Estate blog, Tanous and her husband, who have two young daughters, are suing four mortgage lending companies to stop a scheduled foreclosure, claiming the companies did not honor a repayment agreement the couple had made. The situation is complicated by falling income for the couple and back property taxes they owe.

The UK's Daily Mail says Tanous's husband, Micah, is an "Internet entrepreneur," while she's a stay-at-home mom. They bought their home for $1.379 million in 2006, taking out two mortgages. They now owe $1.31 million and have had trouble making their payments on time. The Daily Mail said the lawsuit by Tanous claims she negotiated a 10-year interest-only repayment plan, but the foreclosing lender is now violating that deal. The lawsuit also names the holder of the second mortgage, PNC Bank, as PNC Mortgage. The bank filed papers in court correcting the same and saying the lawsuit is inappropriate, because the second loan it holds is not the loan in foreclosure. The foreclosure is rescheduled for this month but likely to be rescheduled again.

As Laguna Beach foreclosure defense lawyers, we think these sound strikingly similar to the problems faced by our own clients -- although with higher dollar amounts involved. Borrowers trying to reach loan modifications frequently believe they've worked out a deal with their loan servicers -- only to have another part of the bank turn around and continue pursuing foreclosure. These "dual-track foreclosures" are popular with banks because they minimize the wait before a foreclosure, but they put homeowners at risk of being foreclosed after they've paid significant money toward keeping the home and thought they could relax. It's also not uncommon for a second mortgage to complicate loan modifications or make them harder to get.

Continue reading "OC 'Real Housewife' Sues Lender for Allegedly Reneging on Loan Modification Deal" »

Last week, our Redlands foreclosure defense lawyers wrote about the lawsuit by the city of Los Angeles alleging that Deutsche Bank made predatory loans, let foreclosed properties decay and forced renters out of their properties. In a May 12 story, Bloomberg News followed that report up with a discussion of other predatory lending cases filed by U.S. cities. In addition to the LA lawsuit, the story highlights two lawsuits by the cities of Memphis and Baltimore, both alleging that Wells Fargo Bank illegally engaged in "reverse redlining," the practice of pushing minorities toward expensive loans and loans they couldn't afford. In both cities, the lawsuits say, the practice led to high foreclosure rates and urban decay that is now causing increased costs to the cities.

Both cases specifically allege reverse redlining targeting African-Americans, in violation of federal antidiscrimination laws. A judge declined to dismiss the Memphis lawsuit May 5, and a Maryland judge made the same decision about the Baltimore lawsuit April 22. In essence, the cities allege that Wells Fargo intentionally approved borrowers of color for loans the bank knew they couldn't afford. Other African-American borrowers were allegedly steered toward more expensive subprime loans even though they could afford prime loans, setting them up for default later. After the defaults, the suits said, foreclosed properties were abandoned, costing the cities more in city services as well as lower tax revenue. The reverse redlining allegations are supported in both cases by sworn testimony from former Wells Fargo employees.

As Fullerton foreclosure defense attorneys, we're very interested to see how these lawsuits play out. Housing discrimination on the basis of race is illegal, which of course is the basis for these lawsuits. However, we very much doubt that banks would pass up the opportunity to make money by steering people of any race into a more expensive loan -- and unfortunately, that's not illegal when it's not done with race in mind. Instead, borrowers are supposed to be savvy enough to understand the market and what it can do for them. That's an unlikely proposition for most people, and we think many educated, intelligent people could have been exploited during the housing boom simply because they didn't have the tools to know when they were being exploited. And as these lawsuits allege, that kind of predatory lending has led to widespread foreclosures and blight.

Continue reading "Two Cities Sue Wells Fargo Over Reverse Redlining and Foreclosure-Related Decay" »

Our Rancho Cucamonga foreclosure defense attorneys have written here several times before about the issue of robo-signing and the proposed settlement offered by the states to the largest banks accused of illegal activity. So we were disappointed, although not entirely surprised, to read that the state attorneys general are likely to drop their request for loan modifications that reduce principal in order to come to a settlement agreement. Anonymous sources gave that information to reporters, according to a May 10 article from Bloomberg News, following a new settlement proposal sent out to banks the week before. The Wall Street Journal's Law Blog reported May 11 that the banks also offered to pay as much as $5 billion, a quarter of the $20 billion proposed by the AGs.

The AGs reportedly sent out revised term sheets last week, modifying its offer to settle their robo-signing investigation and any possible prosecution or lawsuit. The original proposal included demands for banks to stop illegal robo-signing practices and obey other laws; acknowledge receipt of documents by specific deadlines; stop dual-tracked foreclosures and more. It also included a separate demand for $20 billion in principal reductions to homeowners, which consumer advocates say are the most reliable way to avoid re-defaults after loan modifications. That provision met with predictable opposition from the banks as well as several attorneys general, all Republicans. They argued that writing down principal would encourage more people to default and was so costly for banks that the banks would prefer to foreclose.

The terms of the new proposal are not yet public. Bloomberg said no financial payment number was named, while the Journal named $5 billion as the banks' preference. Bloomberg said principal write-downs could still happen, but for smaller groups of people than originally proposed. It also said some money could go to compensate people wrongly foreclosed, a much smaller group than all of those who could benefit from principal write-downs. Anonymous sources said a final deal could take months. However, Bloomberg noted, banks have already been in touch with several individual attorneys general to lobby for their preferences, in what Bloomberg called a divide-and-conquer strategy.

As Orange foreclosure defense lawyers, we're disappointed by this news. We knew the principal reduction would be controversial, especially among the Republican attorneys general the banks are trying to woo, but it's worth keeping in mind that the banks are in these talks because they broke the law. By knowingly robo-signing and rushing foreclosures through without even bothering to check their documentation, they put all of those homeowners at risk of a wrongful foreclosure. That more than a handful of such people haven't come forward is nothing but luck. Just as importantly, every robo-signed document is perjury and a basis to challenge the foreclosure's validity. These are not behaviors that should be rewarded with friendly negotiations aimed at protecting banks' profits. If the settlement is not adequate, banks should be treated like any other entity that committed a crime and face legal action.

Continue reading "Attorneys General in Robo-Signing Case Will Likely Drop Principal Reduction Demand" »

Our Claremont foreclosure defense lawyers have kept an eye on the Home Affordable Modification Program because we work every day with people who are participating in it or would like to. In fact, one of our most active practices is suing lenders that deny HAMP modifications, or declined to make temporary modifications permanent, even though the borrower has met all of the necessary standards. So we were interested in the HAMP performance numbers for March, released in early May by the Treasury Department. The department's numbers continue to show underperformance compared to the President's original ambitions for the program. But the new statistics also show that more borrowers are getting permanent modifications.

The March 2011 numbers mark two years since HAMP was launched in March of 2009. In that time, HousingWire reported May 6, the program has seen 1.8 million trial modifications, 670,000 permanent modifications and 751,000 cancellations. This March, the Atlantic reported, the bad news is that trial modifications are at their historic lowest at just 22,000. However, permanent modifications are seeing an increase at 36,432. Even better, cancellations -- which can be triggered by borrower or lender performance issues -- are down to 12,000, the fewest in more than a year. The Atlantic observed that re-default rates seem to be dropping as HAMP ages, possibly because of the economic rebound.

As Westminster foreclosure defense attorneys, we're cautiously optimistic about this. As the Atlantic notes, an important test is coming for people who have had a modification for more than a year, because their interest rates may increase as their loans age. But it also notes that one-year re-default rates of 15 to 20 percent, which HAMP is showing, are not that dissimilar from the rates expected in private modification programs. That matters because HAMP has been widely derided as a failure, and this data suggests that it can succeed if it's given a chance. In our experience, the problems with HAMP have less to do with poor design than lack of enthusiasm from loan servicers, who are still not held accountable for their widespread and flagrant violations of HAMP rules.

Continue reading "New Numbers on Performance of HAMP Loans Show Mostly Good News for Borrowers" »

Our Riverside foreclosure defense attorneys deal every day with clients who feel betrayed and manipulated by lenders that change their stories, don't respond to phone calls and deny loan modifications for spurious reasons. So we were disappointed but not surprised to read that several homeowners and homeowner advocates were arrested in San Francisco for misdemeanor trespassing after speaking at a Wells Fargo shareholders meeting. According to the Bay Citizen, several protesters spoke at the public comments part of the meeting, sharing stories of bungling by the bank and pointing out the high pay its CEO receives. Eight protesters were later cited for trespassing and released when they refused to leave the lobby.

The article focused on the remarks by Sarah Kershnar of Berkeley during public comments. Kershnar said she has been trying for two years to modify her loan, after she was laid off from her job. She told the audience that she had sent the same paperwork many times, but the bank has somehow managed to keep losing it, which she called either "negligent or incompetent." By contrast, she said, Wells Fargo CEO John Stumpf receives an annual pay package of $30 million. (The shareholder report put it at around $17 million.) Stumpf denied that Wells Fargo has an obligation to pursue loan modifications more aggressively because it has taken "bailout" money, saying the bank never asked for it. He later told the meeting that "it's not only about making money, it's about doing things right."

That comment comes as a surprise to our Costa Mesa foreclosure defense lawyers. We work with many homeowners who have had experiences similar to Kershnar's, with their paperwork lost or judged "incomplete" even though they sent everything requested. The media has many more similar tales. At least at this level, "it" doesn't appear to be about doing things right -- either in the sense of correctly or in the sense of doing right by customers. However, this does create delays in loan modifications, which are often long enough for "dual tracked" foreclosures to go through while the borrower still pays the mortgage payment, plus any fees and fines. Thus, the bank can still make plenty of money from desperate borrowers, without committing to a loan modification it might see as a money-loser.

Continue reading "Protesters at Wells Fargo Shareholders Meeting Arrested for Refusing to Leave Building" »

Last month, federal banking regulators settled allegations of criminal conduct with the nation's largest banks. That settlement was criticized by our San Bernardino County foreclosure defense lawyers and other consumer advocates, because the settlement fell short of a parallel proposal by state attorneys general yet threatened to undermine it. Now, just a few weeks later, the Government Accountability Office has released a report criticizing the same group of regulators for failing to find and stop the gross mishandling of foreclosure paperwork at major lenders. The report called on the brand-new Consumer Financial Protection Bureau, which will have exclusive jurisdiction over mortgages, to do a better job when it opens this July.

The GAO reviewed the actions of banking and financial industry regulators including the Federal Reserve, the Office of the Comptroller of the Currency, the Office of Thrift Supervision and the SEC, as well as other federal agencies. It found that banking regulators didn't catch robo-signing because they didn't see mortgage lending practices as risky banking practices, and foreclosure is governed by state laws. Furthermore, some loan servicers are not classified as financial institutions, thus exempting them from regulation. The CFPB will oversee servicers and all other parts of the mortgage industry, but the report said it was not clear whether the bureau would have rules in place to solve these oversight problems. Among other things, the GAO recommended including paperwork standards in upcoming mortgage servicing standards.

As Long Beach foreclosure defense attorneys, we're pleased that the report advocates for stronger regulation of the mortgage industry. That regulation is frequently blocked for political reasons by members of Congress, especially but not exclusively Republicans. In fact, CFPB interim head Elizabeth Warren has had to fight Congressional attempts to limit the bureau's power, including its power to regulate loan servicers. We believe the robo-signing scandal and the housing crisis that preceded it both show a very real need for oversight of the housing industry. The financial industry, like all businesses, wants to make money -- and without oversight, it will be free to continue doing so by cutting corners and exploiting consumers with limited understanding of the process.

Continue reading "Federal Report Criticizes Federal Banking Regulators for Failing to Catch Robo-Signing" »

Recently, JP Morgan Chase paid $56 million to settle a class-action lawsuit alleging widespread misconduct in handling the mortgages of active-duty soldiers, sailors, airmen and Marines. That lawsuit alleged the bank had overcharged borrowers and in some cases foreclosed on them incorrectly in violation of the Servicemembers Civil Relief Act. The SCRA entitles people on active duty to request lower interest rates on mortgages, and forbids foreclosures and certain other civil actions against them. Chase later said it had identified just under 30 families who were foreclosed in violation of the law. So our Rubidoux foreclosure defense attorneys were very interested to see a new federal report that identified nearly 50 foreclosures made in violation of the SCRA.

The report comes from the Government Accountability Office, which looked at the SCRA as part of a larger review of federal regulators' oversight of "robo-signing." In its review of loan servicers' mistakes, the GAO mentioned finding "almost 50 instances" of foreclosures started against active-duty servicemembers who should have been protected by the SCRA. That number came from a review of about 2,800 loan files, and the GAO said the nearly 50 cases came exclusively from two lenders. It did not identify those lenders, but said the mistake raises concerns about servicers' internal controls. Five Senators, all Democrats, reacted with a letter to banking regulators asking for national loan servicing standards and calling active-duty foreclosures "egregious."

As Oceanside foreclosure defense lawyers, we hope this case brings new life to the issue of loan servicers failing to determine whether they even had the right to foreclose. When the story broke, banks claimed there were no or very few cases where the underlying foreclosure was not justified by the facts, but that assertion has been proven wrong several times now. These SCRA cases may be the most widespread type of wrongful foreclosure coming from robo-signing. If the GAO's numbers hold up nationally, about 1.7 percent of all military foreclosures were in violation of the SCRA. It's not clear how many of the nation's millions of mortgages belong to active-duty military personnel, but the number of illegal foreclosures could be in the thousands. Each one represents a family that is already struggling with the financial and emotional stresses of deployment overseas.

Continue reading "GAO Report Finds Banks Illegally Foreclosed on About 50 Servicemembers' Homes" »

As Ontario foreclosure defense lawyers, we were already interested to see a federal lawsuit accusing German banking giant Deutsche Bank of lying to the federal government about the soundness of its mortgage lending practices. That lawsuit, filed by the Justice Department in New York May 3, alleges that Deutsche Bank's home lender, MortgageIT, made loans without evaluating whether borrowers could make payments and repeatedly lied to the government about it to get government insurance. The very next day, the city of Los Angeles followed with another lawsuit against Deutsche Bank, calling it a slumlord that wrongfully evicts tenants to sell buildings and allows properties to become unlivable eyesores, sometimes when people were living in them.

The federal lawsuit concerns the cost to the Federal Housing Administration of insurance payments on MortgageIT loans, which is currently $386 million and projected to rise to $1.3 billion. The U.S. Attorney for New York accuses MortgageIT of approving loans with no effort to investigate whether borrowers could afford them; many such loans were later undled into securities and sold. This allows the original lender to avoid any financial liability when the loan goes under, but failed securitized loans eventually triggered a financial crisis. The government said one MorgageIT loan was approved on the basis of a current employer, but the borrower had never worked for that employer, and the loan went into default in four months. An outside consultant to MorgageIT raised concerns in 2004, the government says -- but the company responded by putting the consultant's reports in a closet without reading or opening them.

The Los Angeles lawsuit accuses Deutsche Bank of allowing more than 2,000 foreclosed properties to go unmaintained so long that they became eyesores, drove down property values and attracted squatters and crime. The city is arguing that Deutsche Bank let the foreclosed properties go because it could no longer make money from them. It also accused the bank of refusing to work with tenants living in properties at the time of foreclosure, but instead illegally harassing and evicting them to make room for more lucrative buyers. This is the second such claim by a U.S. city; the city of Cleveland had a similar case dismissed. Advocates from the city of Milwaukee went directly to a Deutsche Bank shareholder meeting to complain about the terrible conditions of its properties.

Our Orange County foreclosure defense attorneys work with individual homeowners, not large governments. But many of the complaints in these two lawsuits are the same complaints made by homeowners whose rights are being violated. If the federal government's allegations are true, Deutsche Bank's deliberate actions contributed to the housing crisis that is affecting all homeowners now. It may also be complicit in a form of predatory lending that convinced borrowers they could afford homes they couldn't, so the bank could securitize them for a profit later. And in the Los Angeles suit, if the allegations of illegal eviction are true, it's not hard to believe Deutsche Bank might have used the same unethical tactics to force borrowers into foreclosure in the first place. We look forward to having these issues explored in a court of law.

Continue reading "Major Lawsuits Accuse Deutsche Bank of Mortgage Fraud and Wrongful Evictions" »

Our Highland foreclosure defense attorneys were interested to see a recent item about a Federal Reserve study comparing a Pennsylvania program favorably with the much larger Home Affordable Modification Program backed by the federal government. The Wall Street Journal's MarketWatch reported April 25 on a recent study from the New York Fed that examined the performance of Pennsylvania's Homeowners Emergency Mortgage Assistance Program. The program, called HEMAP, uses direct loans to troubled borrowers, usually people who are unemployed. That approach is contrasted with HAMP, which provides financial payments to mortgage servicers at several states of the modification process, as incentives to permit loan modifications.

The Pennsylvania program was a response to housing-market problems from the early 1980s, so it has 25 years of data for the Fed to study. In this program, people who are behind on their mortgages due to unemployment or other financial problems not their fault can apply for a bridge loan to make mortgage payments or catch up on payments. In addition to living in Pennsylvania, HEMAP participants must be at least 60 days behind on their mortgages and require no more than $60,000 to make their mortgages current. They also must have a good history of making mortgage payments and reasonable prospects of repaying the loan. Repayments can be sent with participants' regular mortgage payments and can be as low as $25 a month.

The New York Fed found that this was better than HAMP at helping homeowners keep their homes. For hypothetical mortgages of the same size, the economists found that the cost to the government was lower under HEMAP -- in fact, the repayment part of the program makes it self-funding. They also found that 80 percent of HEMAP participants stay in their homes and avoid re-defaulting. They recommended the program as an alternative, and also recommended steps they said could improve the program, such as tighter lending standards. As for why HEMAP seemed to work better, the economists cited the careful screening process for applicants and the greater appropriateness for an unemployment situation.

As Westminster foreclosure defense lawyers, we noticed that lenders are also on board with HEMAP -- something HAMP does not enjoy. We agree that HEMAP sounds like a great solution for people facing medium-term unemployment -- but because it's not right for others, it's not a viable replacement for HAMP. Under HEMAP, borrowers have to pass a credit screening process just like they would for other loans, which means people in some financial situations, including no immediate prospects of re-employment, just wouldn't qualify. In fact, the Fed's recommendation to tighten standards could make that problem worse. California is pursuing a similar program on a smaller scale with Keep Your Home California, the state's use of its federal Hardest Hit Fund money. We hope our residents enjoy the same kind of success Pennsylvania has apparently seen.

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