California Bankruptcy Attorney Blog

Our Ontario foreclosure defense attorneys were interested to see a decision by the Ninth Circuit upholding the repayment plans of people who fell behind on their mortgages. In In re Monroy, the Ninth Circuit affirmed a 2010 decision by its Bankruptcy Panel upholding repayment plans of four debtors (who had four different lender-creditors). All had filed for Chapter 13 bankruptcy and proposed to pay back payments and fees through their repayment plans, and all four used an Addendum, an optional legal document used in the Central District of California to promote communications by secured creditors and prevent them from assessing extra fees at the end of the bankruptcy. All four mortgage companies objected to the Addendum because of the extra duties it imposed on them.

The lenders alleged that the Addendum improperly imposed extra administrative burdens on them; violated federal law; and violated their contracts with the borrowers. In three of the cases, the judges issued a joint opinion overruling all objections except for one having to do with motions for relief from stay; they struck that provision. The Monroys' judge came to the same conclusion separately. All four mortgage companies appealed and were consolidated in the Ninth Circuit.

However, they did no better on appeal. After waving off technical problems with the banks' appeals, the Ninth started by pointing out that it had no authority to do two of the things the banks wanted: ban the Addendum and direct the Central District to make a new one. It then turned to the meat of the issues. First, the court ruled that the Addendum does not conflict with the federal Real Estate Settlement Procedures Act. Though that Act requires certain disclosures from lenders, it wrote, the language of the law and Congressional intent does not indicate that courts are barred from making additional requirements. Nor did the court believe the Central District bankruptcy judges usurped the power of Congress, it said, since the Addendum is optional. Finally, the Ninth ruled that the Addendum did not violate 13 USC sec. 1322, which forbids plans that modify mortgage creditors' rights. The right at issue is the banks' security interest, the court wrote, and nothing in the Addendum violates this. Thus, the bankruptcy courts' rulings upholding the Addendum's use were confirmed.

This was great news for clients of Irvine foreclosure defense lawyers like us. The Central District of California covers almost all of the areas our clients come from, including Orange, Riverside, San Bernardino and Los Angeles Counties. Because we are active in bankruptcy and foreclosure law in those areas, we know the Central District did this explicitly to prevent mortgage lenders from surprising debtors with extra, undisclosed debt at the end of their repayment plans. Prior to the Addendum, it was much easier for mortgage companies to pile on dubious fees without disclosing them, then essentially put the debtors in redefault as soon as they emerged from bankruptcy. This violates the goals of bankruptcy even if it does not technically violate the law. As Riverside foreclosure defense attorneys, we're pleased that the Ninth continues to recognize that banks have no right to assess steep fines and push debtors back into foreclosure.

Continue reading "Ninth Circuit Upholds Repayment Plans Over Mortgage Companies' Objections - In re Monroy" »

As Corona foreclosure defense lawyers, we were interested to see an opinion from the Sixth Circuit's bankruptcy appellate panel saying that bankruptcy homestead exemptions apply when the bankruptcy is filed, even when the debtors fully intend to sell the home. That was the issue in In re Wengerd, which deals with an Ohio couple's Chapter 7 bankruptcy. The bankruptcy court for James and Cheryl Wengerd had ruled that they were not entitled to the homestead exemption under Ohio law and must turn over the proceeds from the sale of their home. They had been living off the proceeds of the sale, about $35,000.

The Wengerds filed for Chapter 7 bankruptcy in 2009. They had lived in their home since 1995 and listed $164,978 in debt on it, out of a fair market value of $205,000. Importantly, they had entered a contract to sell the home for $205,000 before filing for bankruptcy, but did not disclose that contract in their petition or in the form requiring disclosure of contracts. In fact, they said in another form that they intended to keep the home, although James Wengerd testified in a deposition that they intended to move if the sale went through. At a meeting of creditors, they testified that they had sold the home and were using some of the proceeds to move to Kansas so James Wengerd could attend divinity school.

Their trustee, Lisa Barbacci, filed an objection to the homestead exemption about three months later. In the filing, she argued that they were not entitled to it because they did not intend to stay in their Ohio home. The bankruptcy court agreed, saying debtors may not claim a homestead exemption if they plan to abandon the property directly after filing. It ordered the Wengerds to turn over the proceeds of the sale. They appealed.

The Sixth Circuit's bankruptcy appellate panel reversed. Using bankruptcy caselaw from Ohio, the Sixth Circuit and around the country, it said the right to a homestead exemption is determined according to when the bankruptcy is filed. And the language of the statute does not take into account the debtors' intent; it merely states that debtors have the right to an exemption if they live in the property on the date they file. Thus, it reversed the bankruptcy court's decision and allowed the Wengerds to keep the proceeds of their home's sale.

Our Placentia foreclosure defense attorneys are particularly interested in this decision because the Wengerds were hedging their bets -- they weren't sure whether the sale would go through. Selling a home is difficult right now -- especially in California -- and as many of our clients know, short sales can be difficult if the lender withholds its approval for many months. As a result, it's wiser to make plans for a future both with and without the sale. Filing for bankruptcy is not necessarily the right choice for everyone with a mortgage problem; it's best for people who genuinely need help controlling their debts, usually including debts other than home loans. But for people who are in that situation, our Pomona foreclosure defense lawyers believe a bankruptcy filing can be very helpful, because it gives debtors certain rights against the mortgage company and other creditors. It also gets decisions about fairness in foreclosure proceedings in front of a judge whose job is to decide cases objectively.

Continue reading "Sixth Circuit Allows Bankrupt Couple to Keep Proceeds of Home Sale - In Re Wengerd" »

Our Rancho Cucamonga foreclosure defense attorneys were interested to see a recent decision reminding mortgage companies that they cannot violate the automatic stay on debt collection provided by bankruptcy. In Laboy v. Doral Mortgage Corp., the First Circuit Court of Appeals enforced sanctions against Doral, the mortgage lender, for willful violation of the stay provided to Luis Vazquez Laboy and Carmen Garcia Calderon. The Puerto Rican couple had purchased a home in 1996 and taken out a loan from Doral, then a second loan a few months later, also secured against the home. But when they tried to register the deed, the local registry found it was defective. They therefore withdrew the deed, and Doral never moved to correct the problem. This caused paperwork problems that escalated when Laboy and Calderon filed for Chapter 13 bankruptcy in 2000.

The lack of a completed deed was a problem because Doral had never completed the steps it needed to show it had an interest in the debtors' property. However, under bankruptcy law, the debtors had an automatic stay of any debt-collection activities by creditors, and that included attempts to register the deed. Doral still had a claim against the debtors, but it was not secured by the property. So its law firm registered the deed 11 months after the bankruptcy was filed. The debtors responded by filing an adversary action against Doral, claiming damages for its violation of the automatic stay. Eventually, the bankruptcy court dismissed that action, saying Doral's actions fell within exceptions to the automatic stay. The debtors moved for reconsideration, which was granted in a reversal three years later. The court ordered Doral to withdraw the deed, but denied debtors' request for damages. After an unsuccessful appeal to the bankruptcy review panel, this appeal followed.

The First Circuit started by dismissing various jurisdictional arguments by Doral and its counsel. It was also not impressed by Doral's arguments on the merits. The bankruptcy court had clearly found Doral's violation of the stay willful, it wrote; the company and its counsel had both known of the stay months before they registered the new deed. Nor was the bankruptcy court correct to deny any hearing on damages, the First said: "The opportunity for a plaintiff to present evidence on damages after winning partial summary judgment on liability is a right so fundamental in civil proceedings that it normally goes without saying." The relevant statute requires actual damages, and the court cannot award such damages without a hearing, so it should have held a hearing. Furthermore, the First said, the record doesn't clearly show why the bankruptcy court thought damages were not appropriate. Thus, the court vacated the lower court's ruling, sent it back for a hearing on damages and assigned attorney fees to Doral and its counsel.

As Fullerton foreclosure defense lawyers, we don't work in Puerto Rico. But we do work with homeowners throughout California who have suffered the sort of after-the-fact paperwork tricks described in this case. The robo-signing scandal was in large part about sloppy paperwork; in their rush to push through foreclosures, the mortgage companies frequently didn't bother complying with state laws intended to make ownership of the properties clear. Now that courts have caught on, many lenders are trying to fix the problem by falsifying dates and names on paperwork. This has led a few courts to dismiss foreclosures altogether and delayed many others. Our Oceanside foreclosure defense attorneys help homeowners take underhanded tricks like these into court, where their rights can be preserved better than in a private, scrutiny-free loan modification process.

Continue reading "Debtors Entitled to Damages for Willful Violation of Stay - Laboy v. Doral Mortgage Corp." »

Our Perris foreclosure defense attorneys have watched the Home Affordable Modification Program from its beginning, and we've had concerns about lenders' compliance for almost as long. So we were extremely pleased to see a June 9 article from the New York Times announcing that it would withhold payments from three major banks for their failure to perform under HAMP. Wells Fargo, Bank of America and Chase will pay the penalties for a variety of failures. Ocwen Financial had a similarly poor record, but the Treasury Department declined to penalize it for reasons the newspaper did not fully explain. The penalties come 19 months after Treasury announced it would use such penalties; it did not answer questions about the lengthy delay.

The four banks earned their poor performance records through evaluations of seven specific actions, including searching for and identifying eligible participants; assessing eligibility correctly; and effective program management and reporting. Bank of America got one star out of three in four of the areas; Wells Fargo in three areas and Chase in one. Two of the banks issued press releases disagreeing with their evaluations, with Wells Fargo saying it would "formally dispute" the penalties. But critics said it didn't go far enough. Neil Barofsky, who resigned in March as the special inspector general for TARP, called the move a lost opportunity for accountability and Treasury's monitoring of the lenders' behavior "toothless." The payments being withheld totaled $24 million for the three banks in March. Treasury has spent $1.34 billion of the $50 billion earmarked for HAMP.

As Escondido foreclosure defense lawyers, we agree with Barofsky that Treasury could do more. In particular, we're surprised that this move didn't come sooner, since the threat of penalties was raised more than a year and a half ago. As law professor Katherine Porter told the newspaper's Bucks blog the next day, the move also doesn't address the underlying problems that have made HAMP less than successful. Homeowners can and do successfully sue their loan servicers for giving them the runaround under HAMP, and we've succeeded with su Congress Critical of HAMP During Testimony By Treasury and Mortgage Lenders ch claims. But HAMP does not explicitly give borrowers the right to sue or any right to fair dealing, which means those claims aren't as strong as we might like. And the fines, while they are a signal that the government is finally ready to penalize banks, don't do anything to directly help borrowers.

Continue reading "Treasury Department Announces Penalties Against Nonperforming Banks in HAMP" »

As Rancho Cucamonga foreclosure defense attorneys, we know class-action lawsuits over the Home Affordable Modification Program have fared less well in courts than individual claims. So we were interested but not surprised to see another such decision, this time from a federal court in Washington, D.C. Doreen Edwards et al. v. Aurora Loan Servicers LLC argued that borrowers should have standing to sue because they were third-party beneficiaries to the HAMP agreement between Fannie Mae and Aurora, a private loan servicer. The judge disagreed, citing decisions from numerous other federal district courts, including all districts in California. In essence, she said, there was no right to sue because they had no rights under the HAMP agreement.

All of the plaintiffs were homeowners eligible for HAMP modifications but who had not received one, and had loans serviced by Aurora. They cited a string of "endless bureaucratic incompetence coupled with a lack of effective recourse for wrongful denials" -- the end result being that they were denied loan modifications. The proposed class action alleged violation by Aurora of its agreement with Fannie Mae; breach by Aurora of an implied covenant of good faith and fair dealing; and violation of the plaintiffs' rights to due process. Aurora argued that the plaintiffs had no standing to sue because they were not a party to the agreement.

The trial court agreed. In order to have standing, the judge wrote, the homeowner plaintiffs had to show that Fannie Mae and Aurora intended to make them third-party beneficiaries to their HAMP agreement. They cannot do that merely by showing that they had an interest in the performance of the contract, she wrote; their right to enforce the contract would have to be made explicit. That was not done here, the judge wrote. She likewise dismissed the argument that Aurora owes the homeowners a duty of good faith and fair dealing. That right exists only within contracts, she wrote, and again, the homeowners had no right under this contract. Finally, she dismissed the due process claim, saying the law gives the government discretion on whether to grand a loan workout, rather than requiring it.

Our Anaheim foreclosure defense lawyers know that this follows numerous other cases that make similar arguments, so it's not surprising that this one did not succeed. But it's important to realize that much of this case is based on the argument that borrowers have rights built into the contract between the servicer and the federal government. Many other borrowers have successfully sued on grounds relating to their own rights in dealing with the servicer, including the servicer's violations of HAMP rules as well as violations of state laws. That's why we urge borrowers to continue to explore their legal options, especially if foreclosure is imminent or the legal violations are clear.

Continue reading "DC Judge Dismisses Class Action HAMP Lawsuit - Edwards v. Aurora Loan Servicers" »

As Corona foreclosure defense lawyers, we've believed for a long time that lenders aren't interested in having their loan modification practices exposed to the light of day. So we were not surprised to read that a federal inspector is accusing Bank of America of intentionally obfuscating inspections by the federal government. As the Huffington Post reported June 13, a fraud examiner for the federal Department of Housing and Urban Development told an Arizona federal court that BofA withheld information and inteviewees and slowed down the process. The inspector, William W. Nixon, eventually asked the Justice Department to compel the bank to help. He filed a declaration with this information June 8, as part of the state of Arizona's lawsuit accusing Countrywide Financial, now a unit of BofA, of violating state consumer protection laws.

Nixon was actually working for HUD at the time, to ensure that BofA was following foreclosure rules when it foreclosed on FHA-insured loans. In his statement to the court in State of Arizona v. Countrywide Financial Corp., he wrote that his work was "significantly hindered" by BofA's reluctance to provide data in a timely manner, allow employees to be interviewed and provide someone who could explain and clarify information. Attorneys for the bank refused to allow employees to answer basic questions, he said. Attorneys also reviewed all information requests his team made and slowed down the process by sending all requests through one person, even requests for information that should have been readily available. Information provided in response to subpoenas was incomplete, and when Nixon's staff requested a walkthrough of document execution, BofA argued that they didn't need one "and instead showed my staff a set of filing cabinets."

Our Los Angeles County foreclosure defense attorneys hope federal regulators are paying attention to this filing. It's a supporting document in a lawsuit that doesn't directly involve the federal government, but the information Nixon provided paints a picture of a major lender (in fact, the largest U.S. bank by assets) that appears unwilling to meet basic legal requirements or keep its promises. It's not clear whether Nixon's staff went in to this inspection believing that BofA had something to hide, but either way, the bank's behavior implies pretty strongly that it did. This ought to be unacceptable to anyone who believes that openness is an important part of democracy. If repeated in Arizona's lawsuit, the bank's behavior could also lead to sanctions.

Continue reading "HUD Inspector Says Bank Hindered Foreclosure Investigation - Arizona v. Countrywide" »

Our San Bernardino County foreclosure defense lawyers have written in the past about the Mortgage Electronic Registration System, the corporation that banks created to end-run around the need to register deeds with local land offices. So we were very interested to read about a decision out of the appellate department of the Supreme Court of New York in Bank of New York v. Stephen Silverberg et al. In the case, decided June 7, Stephen and Fredrica Silverberg moved to dismiss a foreclosure action against them by MERS for lack of standing. The trial court denied this motion, but they succeeded on appeal. The decision could set a precedent for MERS-owned mortgages in New York.

The Silverbergs borrowed $450,000 from Countrywide Home Loans to buy a home in 2006, then took out a second mortgage in 2007. Both deals gave MERS the right to hold the note, named Countrywide as the owner of the note and gave MERS the right to foreclose. The loan was later securitized, with Bank of New York acting as the trustee. The Silverbergs defaulted around the same time, and Bank of New York began the foreclosure. The couple moved to dismiss for lack of standing, saying Bank of New York didn't have their note, which showed legal ownership of the debt. The trial court denied that motion, saying MERS had assigned the note to Bank of New York.

On appeal, the Silverbergs had more luck. They argued that Countrywide never transferred or assigned the note to MERS and MERS never assigned it to Bank of New York. Thus, Bank of New York didn't own the note at the time of the foreclosure, they said, giving it no right to foreclose under New York law. The court agreed. Reading the language of the contracts between the lenders and the Silverbergs, it found that MERS never owned the debt. Because Bank of New York was merely standing in the shoes of MERS, it had no more right to the debt and could therefore not foreclose. Thus, the foreclosure lawsuit against the Silverbergs was dismissed. The court noted that the decision could have a negative effect on other foreclosures, but said its interest in protecting property rights and ensuring reliable ownership was more important.

As Moreno Valley foreclosure defense attorneys, we're interested in this decision especially because it is not the first. More and more, homeowners are challenging foreclosures on the grounds that the lender seeking to foreclose cannot actually prove ownership of the note. Along with robo-signing, MERS is part of the reason for those challenges. And while some decisions, like a recent California appeals decision, find that MERS does have the authority to foreclose, this decision shows that it cannot get around compliance with basics like actual ownership of the debt.

Continue reading "New York Appeals Court Rejects MERS Foreclosure - Bank of New York v. Silverberg" »

Our Redlands foreclosure defense attorneys have written here many times about the progress toward a settlement in the robo-signing investigation. After the story broke last fall that major lenders were pushing through foreclosures with falsified paperwork and no safeguards, the attorneys general of all 50 states joined forces to investigate whether any laws were broken and what penalties might be appropriate. One suggestion widely floated in the media for settling the case was a fine of $20 billion, but lenders countered in May that they'd refuse to pay more than $5 billion. Now, the Huffington Post reported June 6, the federal prosecutor leading the talks has told the AGs he believes banks are ready to accept the $20 billion number.

The news came from anonymous sources listening to a phone conference between the AGs' offices and Associate U.S. Attorney General Tom Perrelli. After talking with the five lenders affected -- Bank of America, Chase, Ally, Wells Fargo and Citigroup -- Perrelli said he believed the banks had accepted that the settlement will cost more than they prefer. The deal is not finalized; several issues remain, including how much liability the lenders will be released from in the settlement. However, the news was encouraging for consumer advocates concerned that the AGs' group was de-fanged by previous federal settlements. Several states, including California, are conducting their own investigations into lender misconduct in the mortgage crisis.

As Orange foreclosure defense lawyers, we're pleased to see that the lenders may pay more serious consequences for their misbehavior than we thought. The federal settlements mentioned above were generally not very painful for lenders and required them to make few policy changes. That's unfortunate, because robo-signing isn't just about whether paperwork was in order -- it's also about whether the safeguards required by the paperwork were respected. By submitting false affidavits, lenders not only lied to the courts -- they also failed to check on basics like whether they had the right to foreclose. Despite lenders' protestations that this was just a technicality, a few cases of wrongful foreclosures have surfaced in the media. Many more foreclosures may have been legitimate but pushed through so quickly that there was no reasonable chance of finding an alternative.

Continue reading "Federal Official Believes Banks Ready to Pay $20 Billion to Resolve Robo-Signing Probe" »

One issue that's gotten less attention as the housing crisis progresses is securitized loans. Our Riverside foreclosure defense lawyers heard a lot about mortgage securitization being a holdup when the market first crashed, but lately, media coverage hasn't given securitization any special attention. So we were very interested to see a June 3 post from Fortune magazine's Term Sheet blog examining the issue of whether the paperwork is in order in securities backed by Countrywide Financial mortgages. Countrywide has been implicated for robo-signing and other shoddy paperwork practices in testimony from a former employee, but new owner Bank of America has denied this. However, Fortune did a small investigation of its own -- and found that none of the Countrywide mortgages it examined had been properly endorsed.

In order to legally securitize a mortgage, lenders have to endorse the note -- essentially, sign ownership over to the trustee in control of the security. Fortune pulled public foreclosure records filed in the Bronx and Westchester County, N.Y. between 2006 and 2010. Of the 104 securitized loans it found that were originated by Countrywide, Fortune said, zero of them had been endorsed over to the securitization trust by Countrywide. Of loans originated by other lenders, two-thirds also lacked an endorsement. The findings match the testimony of the Countrywide ex-employee, who said she'd never seen an endorsement in 10 years at the lender. They also back up numerous real-life plaintiffs who have been increasingly suing over paperwork that doesn't show ownership of the loans or has clearly been fabricated after a challenge.

As Dana Point foreclosure defense attorneys, we know the sample of loans in this investigation is small -- but we suspect it's just the tip of the iceberg. In the wake of robo-signing, courts have increasingly demanded that lenders show ownership of the mortgage before permitting a foreclosure. And more borrowers are taking advantage of this heightened scrutiny to demand that lenders show a valid note. In some cases, the paperwork problems are so severe or the falsification so obvious that courts dismiss the foreclosures. This strategy increasingly works because lenders have submitted so much false paperwork, so many obvious forgeries and false testimony that judges are on alert for deception. Like everyone else, judges dislike being lied to, and they have the ultimate decision in foreclosures that go to court.

Continue reading "Fortune Magazine Investigation Finds Major Flaws in Securitized Countrywide Loans" »

Our Moreno Valley foreclosure defense attorneys were amused to see an item about a rare instance of a bank's mistakes coming back to haunt it (rather than its borrowers). According to the June 3 Naples News, a couple from Florida nearly ended up repossessing furniture from their local branch of Bank of America after the bank refused for months to pay its debt. A court ordered the bank to pay Warren and Maureen Nyerges $2,500 in attorney fees because it tried to foreclose on their home incorrectly. The bank did not own the home, but it took weeks and hiring an attorney for the Nyergeses to prove this to Bank of America's satisfaction. The bank was similarly unhelpful when they tried to collect, leading them to lead a foreclosure effort of their own.

The Nyergeses bought their house outright for cash in 2009, which means they had no mortgage to default on. So they were extremely surprised to receive a foreclosure notice in early 2010. It took Warren Nyerges two months to convince the bank it had made a mistake, working with a branch manager, over the phone and in court. Last December, judge ordered Bank of America to pay the couple's attorney fees. However, five months of calling the bank and its local counsel got no results -- again. Part of the problem, the article noted, was that the local counsel was the David Stern law firm, which has folded and is in legal trouble for shoddy and illegal foreclosure practices. However, Warren Nyerges noted that he called Bank of America employees and even sent a certified letter to the president.

After their efforts got no response, the couple hired a foreclosure defense attorney to help them collect the debt. After further warnings went unanswered, the attorney got a court's permission to seize assets and got the Sheriff's Office to help with the repossession of furniture at a Bank of America branch. The maneuver got the bank's attention, and after a call to new local counsel, it cut a check for the judgment, sheriff's fees and about $2,500 more, whose purpose wasn't clear. Their foreclosure defense lawyer said he would still seek his own attorney fees from Bank of America.

This story is getting a lot of attention because it turns the notion of foreclosure upside down. But as Gardena foreclosure defense lawyers, we're sorry to say that this behavior from a major lender is not unusual -- the only unusual thing is that this couple could hold the bank financially responsible. Since the very beginning of the housing crisis, borrowers have come to us, the media and regulators with complaints about lenders not responding to phone calls or letters, giving contradictory instructions and foreclosing while considering them for loan workouts. And while attempting to foreclose on a loan the bank doesn't own is unusual, it's also not the first case we've seen. Fortunately, in the wake of the robo-signing scandal, judges have gotten more aware of problems with banks -- so homeowners have a stronger chance of fighting back.

Continue reading "Florida Couple Who Were Nearly Wrongly Foreclosed Turns Tables on Bank of America" »

Our Ontario foreclosure defense lawyers have worked in this field since before the Home Affordable Modification Program existed, and we know all too well that it doesn't have many fans. So we were disappointed but not surprised to read that a new federal survey finds most borrowers have had negative experiences with HAMP, as reported by housing counselors who work directly with borrowers. A May 26 article from HousingWire said only about 9 percent of respondents told the Government Accountability Office that their borrowers had had a positive experience with HAMP. The counselors had numerous criticisms of the way loan servicers handle loan modifications, including their organizational skills, lag time before responses and more.

The survey was taken in October of 2010, with about 500 responses from housing counselors. One complaint from about half of those responding was that loan servicers had no single point of contact working with them, making interactions slow and inconsistent. That problem may soon be addressed by a rule the Treasury Department made in May, but counselors had more. More than 86 percent said it took four months or longer for servicers to decide whether to grant a HAMP modification, in direct violation of HAMP guidelines; nearly half said it took more than seven months. Three-quarters said servicers lost paperwork. More than half said servicers' math inflated borrowers' incomes, making them seem ineligible when they were not. To solve those and other problems, 60 percent suggested that the Treasury Department sanction servicers that aren't measuring up.

As Corona foreclosure defense attorneys, we couldn't agree more. As this article notes, the GAO itself criticized Treasury a year ago for failing to sanction servicers that break the rules. Apparently, the department has not taken any more steps toward sanctions, although it has offered new rules and new tools in the last year. This lack of accountability directly fails homeowners by giving loan servicers the opportunity to deceive them, dual-track foreclosures and draw out the process for profit. It also indirectly fails homeowners by making HAMP itself look ineffective, which has led to political attempts to end it. We still believe HAMP can be useful if it's backed up with some kind of enforcement mechanism, but we do not recommend that borrowers wait for Treasury to create it.

Continue reading "GAO Report Finds Majority of Borrowers Had Negative Experiences With HAMP" »

Our Rancho Cucamonga foreclosure defense lawyers frequently work with clients whose loans have been thrown into confusion by robo-signing, securitizations and other financial slicing and dicing they couldn't control. This has led to confusion in many courts, especially after the robo-signing scandal led courts to start scrutinizing foreclosure paperwork more closely. So we were very interested to see a June 1 article from the Wall Street Journal suggesting that homeowners are increasingly demanding in court that lenders prove their ownership before a foreclosure can go through. The cases, which are in multiple states across the country, include cases where mortgages were not properly assigned as well as cases of documentation that turns out to be false.

The Journal noted that borrowers have been making these kinds of arguments throughout the foreclosure crisis. But according to the article, judges have recently started responding favorably to those arguments more often. In the wake of robo-signing, the article said, borrowers have uncovered problems that go beyond the "clerical errors" that lenders claimed robo-signing was. One problem is incomplete mortgage assignments, when ownership of the loan was never properly transferred. Some of the companies involved have gone out of business, which means the paperwork can't be completed now. Courts have rejected attempts to fix this problem with backdated documents, especially if the documents are dated after the foreclosure attempt or after one involved company has gone out of business.

As Whittier foreclosure defense attorneys, we're pleased that courts are taking these issues more seriously, if this article is right. Paperwork problems don't necessarily mean a home will be saved, if the borrower is genuinely unable to keep paying. However, some of these paperwork problems amount to attempts to lie to the court, and judges rightly dislike and punish perjury. It's also worth noting that the paperwork involved here is not trivial -- it's required to prove that the lender owns the loan and is eligible to foreclose. Asking lenders to prove this is not only reasonable but an important part of protecting borrowers from banks' mistakes and overreaching. And borrowers who have struggled with lenders' bureaucracy for many months might wonder whether the lenders or courts would show them any mercy over technical problems.

Continue reading "Borrowers Increasingly Defend Foreclosures by Asking Lenders to Prove Ownership" »

As San Bernardino County foreclosure defense attorneys, we work every day with homeowners who have been denied loan modifications for no good reason and sometimes feel as if their loan servicer has been making decisions arbitrarily. So we were extremely interested to read about a loan servicer that really has been accused of denying loan modifications arbitrarily: Litton Loan, a division of Goldman Sachs. According to a May 26 article from HousingWire, an anonymous employee sent a letter to the Financial Times accusing Litton of simply blanket-denying loan modifications to deal with a big backlog of applications. The Financial Times turned over the letter to the New York Federal Reserve Bank, which is now investigating the allegations.

Litton Loan services $46.1 billion worth of American mortgages. According to the letter, the anonymous writer was responsible for reviewing loans for modifications under HAMP -- but the writer alleges that Litton did not give those applications fair scrutiny. Instead, the letter charged, Litton intentionally denied modifications by miscalculating the borrowers' income; or claiming paperwork was missing when Litton had it in the system. Litton was acquired by Goldman Sachs in 2007 from a subprime mortgage investor to help Goldman in its mortgage investments. That plan was shattered by the housing crisis, and Goldman announced plans to sell it in late 2010, after the "robo-signing" scandal raised questions about Litton's processes for handling foreclosures. Reports from June 3 said Ocwen Financial Corp. was in talks to buy Litton.

We will be very interested to see how this investigation progresses. The behaviors alleged by the anonymous whistle-blower match many of the complaints we hear as Costa Mesa foreclosure defense lawyers. Paperwork that's lost repeatedly, denials for no apparent reason and miscalculations of the borrower's income are all common complaints. In many cases, these are solid grounds for a lawsuit against the servicer. However, we don't just hear these complaints about Litton -- they come from borrowers who use a variety of major loan servicers. If these allegations are substantiated, it would be interesting to see if others come forward with similar allegations against major loan servicers, who include Bank of America and Chase.

Continue reading "New York Fed Investigating Whistle-Blower's Allegation on Litton Loan Modifications" »

Our Riverside County foreclosure defense attorneys work every day with clients who are looking for alternatives to a foreclosure, with its financial losses and major credit hit. One alternative is a short sale -- selling the property for less than you owe -- but these can be difficult to finish because banks tend to drag their feet before approving or rejecting short sales. So we were interested to read a June 1 article from the Contra Costa Times suggesting that short sales have started to speed up. According to the article, observers of the real estate market say the difference is not extreme, and short sale buyers still shouldn't expect approval to happen quickly. But for those who are able to wait, real estate agents said they see short sales finishing faster now than they did a year ago.

A real estate agent who handled a recent short sale in Walnut Creek told the newspaper that short sales are taking less time in early 2011 than they took in 2010. However, the agent said buyers should still expect to wait 120 days or more; a California Association of Realtors survey found that fewer than three in five short sales closed at all. The agents attributed the slight speed-up in part to the Home Affordable Foreclosure Alternatives Program, a sister of the much-maligned federal loan modification program, which requires a response from the bank within 45 days. While most short sales don't go through HAFA, realtors said, the program has forced larger lenders to streamline their processes. They also suggested that banks may have realized that short sales are more cost-effective than foreclosures.

As Pomona foreclosure defense lawyers, we hope that's true. One major issue we've grappled with throughout the housing crisis is loan servicers' refusal to grant loan modifications. By rights, lenders should be eager to modify loans in a way that allows them to continue collecting payments on inflated bubble-era loans. However, loan servicers don't own the loans -- they just administer them for the owners -- so they stand to lose no money in foreclosures, but make a lot of money from foreclosure-related fees. This news makes us cautiously optimistic that the same senseless, anti-consumer incentives are not at work in the short sale world. If true, it's also good news that the 45-day deadline handed down under HAFA is being applied more widely.

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Our Moreno Valley foreclosure defense lawyers wrote last month about a settlement between the mortgage servicing arm of JP Morgan Chase and about 6,000 active-duty military personnel who were wrongly foreclosed or otherwise overcharged on mortgages in violation of federal law. That news was closely followed by a GAO report that found almost 50 wrongful foreclosures against active-duty soldiers, sailors, airmen and Marines. So we were disappointed but not surprised to see another report from late May saying units of Bank of America and Morgan Stanley have also been accused of wrongly foreclosing under the Servicemembers Civil Relief Act. Both lenders are paying millions to affected families to settle lawsuits by the Justice Department.

The New York Times reported that the Justice Department had sued and immediately settled with Saxon Mortgage Services, a subsidiary of Morgan Stanley, and a Bank of America unit that was once Countrywide Home Loans Servicing. Both were accused of knowingly violating the provision of the Act that requires them to get a court order before they may foreclose on active-duty military personnel. Bank of America agreed to pay $20 million to settle claims by at least 160 victims; Saxon agreed to pay $2.35 million to settle at least 18 claims. The settlements may be expanded if more victims are found, and the banks have also agreed to upgrade their training and repair damage to victims' credit reports. The Justice Department said the settlements were the largest ever recovered by the department under the Act, although the private Chase settlement was larger.

As Seal Beach foreclosure defense attorneys, we're pleased to see military families getting the protection they're legally entitled to. We see firsthand how difficult it is for people to fight foreclosure -- and that's when they're physically present and healthy. It's easy to imagine how much more difficult it would be to fight foreclosure for people who are home but injured, or overseas, with limited communications and jobs that require them to literally dodge bullets. However, it's disturbing that we've seen several of these cases, because they suggest that major lenders are widely ignoring the Servicemembers Civil Relief Act. If they are willing to ignore rules set up to protect active-duty military, one of the most well-protected and politically popular groups of homeowners, we wonder what other laws these lenders feel they don't have to follow.

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