California Bankruptcy Attorney Blog

Vincent Howard and our San Bernardino County foreclosure defense lawyers wrote recently about the president's announcement of a new refinance program. On Feb. 2, President Obama released more details of that program, as the Los Angeles Times reported. Making a political move in an election year, the president proposed to expand the Home Affordable Refinance Program to a wider group of homeowners. The program already helped people who were slightly underwater and might not otherwise qualify for a refinance, but it was limited to those whose loans are backed by Fannie Mae and Freddie Mac. Under the new proposal, homeowners whose loans are owned by any lender or investor would qualify. The plan also includes a "homeowner's bill of rights," a set of federal standards intended to fight abuses and deceit by lenders.

According to a breakdown by Time magazine, borrowers would need to have a credit score of at least 580 to qualify. Their loans could be no larger than the FHA loan limits for the area; in southern California, this is $729,750. The residence must be a single-family home occupied by its owner -- likely an attempt to exclude investment homes -- and the borrowers must owe no more than 140 percent of the loan's value. Thus, for a home now valued at $100,000, the borrowers could not owe more than $140,000. And borrowers must have missed no payments in the last six months and only one payment in the six months before. Those who are further underwater than 140 percent may still be able to qualify, but only if their lenders are willing to write off some principal. The loans would likely be shorter-term loans that allow quicker equity-building in exchange for higher monthly payments.

The Federal Housing Administration would back the refinanced loans, with funding from a "financial crisis responsibility fee" of 0.15 percent on some liabilities of larger financial institutions. This is a proposal Obama has made before, and it has already been decried by Congressional Republicans as a tax on banks that could hurt the economy. Republicans also questioned whether it's wise for the FHA to take on more risk. Some financial observers saw irony in the fact that the lending standards for these refinances would be lower than they currently are in the market; borrowers would need to have a job, but not to submit tax returns or have the house reappraised. Unemployed borrowers might even qualify after submitting more detailed information. Political observers expected that the plan wouldn't get through Congress and suggested that it was proposed more as an election issue than a serious plan.

That's unfortunate, because Vincent Howard and our Anaheim foreclosure defense attorneys would be delighted to see more help for homeowners stuck in homes they can't refinance or sell. Thanks to the housing downturn, people who bought their homes at higher points in the market now routinely find themselves underwater; roughly half of all homeowners in the Inland Empire are believed to owe more than their homes are worth. Even when they've done everything "right" by conventional standards, they have no home equity. This is disappointing when the borrowers plan to stay put, but it's devastating for people seeking to move for a job or refinance to get some relief from high interest rates. Vincent Howard and our Murrieta foreclosure defense lawyers routinely represent people put into this position by predatory or otherwise unfair lending practices.

Continue reading "President Releases Details of Refinance Plan for Underwater Homeowners Not Backed by Fannie and Freddie" »

The Corona foreclosure defense lawyers at Howard Law, P.C., have written here several times before about calls for widespread reductions in loan principal for homeowners whose homes are underwater. This solution is strongly opposed by the banking industry and its lobbyists, but economic studies have shown that it's the best, and possibly the only, way to help the housing market recover from its downturn. A Jan. 25 article in the Washington Post reinforced that call, quoting economists from Moody's and other organizations not generally considered political. They say more and more economists believe principal reductions would be most effective, echoing calls fair housing advocates have made for several years. The article contrasted this with the approaches taken by President Obama and the Republicans seeking to replace him, both of whom proposed less drastic solutions.

The president's proposal outlined in the article would allow refinances even for borrowers who are underwater. This would allow them to take advantage of the current very low interest rates, freeing many from the high interest rates they were locked into during the housing bubble. The cost savings to each homeowner is estimated at $3,000 a year, which economists say would allow more consumer spending. Republican presidential candidates are mostly calling on government to avoid interfering with the market, which they say would allow it to "hit bottom" and begin a correction. Some have also called to revoke regulations; former Sen. Rick Santorum called for a tax credit for people who sell at a loss. One expert in the article called this a choice between an Obama plan that won't do much and a Republican plan that would subject individuals to "years and years of grinding your way out."

The economists in the article agreed that neither approach will be sufficient to get the housing market corrected. Rather, they called for widespread forgiveness of principal, because being underwater is a key predictor of whether the homeowner will be forced to default or choose to walk away. Either way, this creates a foreclosure, which causes more problems for the market by creating a backlog of foreclosed homes for sale, pushing prices lower and putting more borrowers underwater. Several studies have concluded that forgiving principal is the fastest way to stop this cycle, but the proposal would be very difficult to get through Congress, as a recent Philadelphia Inquirer article noted. Congress, particularly the Republican-controlled House, has consistently opposed efforts to "cram down" loans, even in limited circumstances such as for Chapter 13 bankruptcy filers.

Led by partner Vincent Howard, our team of Tustin foreclosure defense attorneys continue to be disappointed at the lack of political will to pass this solution, even when it comes paired with concessions to bankers or self-limiting factors such as only being available in bankruptcy. We believe many of the objections raised by the banking industry are red herrings disguising the industry's fear of losing profits, even when those profits come at the expense of individuals and the overall U.S. economy. Indeed, a study by the Cleveland branch of the Federal Reserve Bank found in 2010 that doom-and-gloom predictions made about a cramdown program for family farms in the 1980s had never come true. Fewer than a third of the predicted bankruptcies were filed, and lending interest rates did not increase more than the economy of the time would merit. Vincent Howard and all of our Bellflower foreclosure defense lawyers would prefer to see facts like this used when making decisions now.

Continue reading "Economists Call for Principal Reductions to Solve Persistent Housing Market Problems" »

Vincent Howard and our team of San Bernardino foreclosure defense attorneys have followed California's progress in the "robo-signing" settlement talks with great interest. Attorney General Kamala Harris has made waves in the past months by refusing to sign on to the national settlement, calling it inadequate to compensate Californians for the many losses they incurred in the housing crash. Indeed, she has launched her own investigations, including some in cooperation with Nevada. According to a Jan. 25 article from the Los Angeles Times, Harris and her team were invited back to negotiate by further concessions from lenders, but ultimately did not receive an offer they felt was sufficient. A spokesperson for Harris told the media that the settlement would prevent her and other AGs from pursuing their current outside investigations.

No deal has officially been reached, despite nearly 16 months of investigation and negotiation and the original participation of AGs from all 50 states and Washington, D.C. The investigation has been plagued by politics, with conservative AGs arguing that the settlement is too aggressive and liberal ones countering that it doesn't go far enough. In particular, AGs in New York, Delaware, California, Nevada and elsewhere have opted out or threatened to and started their own investigations into lending practices. Harris said in late September that the settlement offer at that time did not include enough remedies from the five major lenders for the foreclosure crisis. She and the other breakaway AGs said they'd prefer to see efforts to stop foreclosures and their negative effects, going beyond addressing the fallout from robo-signing itself. The current deal still is not transparent enough or sufficient to address Californians' needs, a spokesperson said.

California's participation in the talks is considered important to any settlement because the state is so big -- and has the resources to bring large lawsuits on its own. According to the article, the latest proposal includes a $17 billion program that would reduce principal on loans that are "underwater," or larger than the value of the home. Another $5 billion would be earmarked for people directly harmed by robo-signing and other bad servicing practices, and $3 billion would help underwater homeowners refinance at a rate of 5.25%. (Current rates for a 30-year prime mortgage are 4 to 4.5%.) In return, the AGs would agree to release lenders from actions for improper servicing or origination of mortgages -- a provision that Harris and some colleagues believe would stop their existing investigations. Delaware has filed a lawsuit alleging MERS has engaged in deceptive practices; Massachusetts has sued five lenders, alleging they knowingly pursued illegal foreclosures.

At Howard Law, P.C., our Westminster foreclosure defense lawyers are pleased to see California sticking to its guns and pursuing a settlement that could provide meaningful help to people who were hurt in the housing crisis. That includes people who were directly harmed by robo-signing or other illegal and unethical behavior by lenders, as well as people who are suffering because housing prices have dropped through no fault of their own. Throughout the robo-signing scandal, lenders have downplayed their responsibility, arguing that there was likely no real harm from that particular kind of illegal behavior. This may or may not be true -- instances of wrongful foreclosures have been reported -- but there's certainly widespread harm from, for example, their refusal to give meaningful consideration to loan modifications. Vincent Howard and our team of Norwalk foreclosure defense attorneys applaud Harris for refusing to let lenders off the hook for their actions.

Continue reading "Kamala Harris Rejects Another Attempt to Include California in Robo-Signing Settlement" »

Vincent Howard and our team of Irvine foreclosure defense attorneys have been calling on this blog for years for more effective help for mortgage borrowers. So we were pleased to hear that California's Democratic delegation to the House of Representatives made the same demand to President Obama the morning after his State of the Union Speech. According to McClatchy Newspapers, 16 representatives met on Jan. 25 to make their case to the media, calling for the president to use executive power to create more aggressive, more specific relief. They want a meeting with Obama as well as principal reductions and a more sympathetic replacement for the current acting director of the Federal Housing Finance Agency. They also suggested cutting interest payments to zero for homeowners in bankruptcy, so that all of their payments would pay down principal.

Obama called for a new refinance program in his speech, which would be available to more homeowners than the previous refinance programs, but the legislators criticized it as well-meaning but inadequate. The Democrats took turns sharing stories of foreclosures in their districts and the resulting hardships to Californians. Judy Chu of El Monte noted that her district has had a foreclosure rate of 738 percent over a little more than two years; lenders own 12,000 foreclosed homes in the city of Covina. Loretta Sanchez of Anaheim said her brother needed a loan modification after his business line of credit disappeared in a bank failure and he had other business difficulties. She said he was convinced the loan modification would come through for him right up until he received a foreclosure notice.

Republican California House members dismissed the ideas, with Darrell Issa of Vista calling principal reduction "in every way wrong." Dan Lundgren of Sacramento suggested that writing down principal for those in trouble would be unfair to those who stayed out of trouble. The White House was neutral on the subject, saying the president would continue to pursue existing and proposed foreclosure prevention programs, and noting that California has received $2 billion in federal foreclosure aid. The acting FHFA director, Edward DeMarco, has said principal reduction for Fannie Mae and Freddie Mac mortgages could cost the government $100 billion to pay down the mortgages. The Democratic delegation disputed the number, but also warned that failing to intervene could prolong the crisis and the resulting political problems for Obama.

Led by Vincent Howard, our team of Santa Ana foreclosure defense lawyers agrees that principal reductions are an important part of any potential solution. However, we also agree that it will be tricky to get through Congress, given that body's historic lack of enthusiasm for principal reductions and mortgage cramdowns. A few years ago, banking industry interests shot down the idea of allowing cramdowns only for people in bankruptcy. This would of course be a limited group of people, since not everyone wants to take on the severe credit hit and emotional toll of bankruptcy -- but it failed even in a Democratic-controlled Congress. Nonetheless, the idea remains popular because economic studies (including a Fed study) show that it's key to any immediate housing recovery. That's why Vincent Howard and our Cerritos foreclosure defense attorneys continue to favor it.

Continue reading "California Democratic House Members Call on President to Do More for Struggling Homeowners" »

Led by partner Vincent Howard, our Claremont foreclosure defense lawyers have written here extensively about the Home Affordable Modification Program, HAMP, and its many problems. Less has been written about its sister program, HARP, which offers refinancing help -- possibly because eligibility is limited to people who are only slightly underwater at worst. But this may change in the coming days, since the president announced a new refinancing initiative in this week's State of the Union speech. Acknowledging that housing continues to be a thorn in the side of the economy, President Obama called for a refinancing program that expands eligibility to people who are further underwater. Details are not yet available, but the speech indicated that the program would be paid for with a tax on large financial institutions, a likely tough sell in the House.

HARP, the existing program, is available to borrowers who are current on their mortgages and owe no more than 125 percent of their homes' value. However, not everyone who is underwater met the original criteria, since there can be no recent delinquent payments and the loan must be owned by Fannie Mae or Freddie Mac. In October, the federal government announced that it would expand eligibility under the Fannie/Freddie loans. The current proposal, according to the Wall Street Journal, would build on this, in part by including people with loans owned by other institutions. Borrowers who are current on their mortgages would most likely take out FHA loans, but the article notes that Congress would have to change the current requirement for a 3.5% down payment. Like anyone taking out a new loan to refinance, they would need to apply and go through the usual closing process.

Analysts are pessimistic about the chances of the program in the House of Representatives, where Republicans control voting and generally oppose new taxes on banks. The tax in question was first proposed two years ago in January of 2010, with Obama calling for a "financial crisis responsibility fee" of 0.15% on the liabilities, other than domestic deposits, of financial institutions with at least $50 billion in assets. Analysts said it would raise $9 billion a year, but it faced strong opposition from banking interests and ultimately did not pass even when the House was controlled by Democrats. A real estate economist told the Los Angeles Times that the refinance proposal would not be as helpful as other potential interventions in the housing market, because it would likely just put more money in the pockets of people with current mortgages.

Vincent Howard and our team of Mission Viejo foreclosure defense attorneys would be pleased to see eligibility for refinancing expanded to more borrowers, even if this is not the ideal solution. Owing more than the home is worth traps borrowers in their homes, which is a serious hardship for people who are seeking to refinance loans they took out at the height of the bubble, under much higher interest rates. Indeed, many people who took out loans in that era were glibly promised that they would be able to refinance in a year or so, only to see their homes lose value or their subprime loans add to the loans faster than they could pay down principal. Ideally, however, the Temecula foreclosure defense lawyers at Howard Law, P.C., would prefer to see this initiative followed up by something that would allow principal reductions for people who are stuck in highly overvalued loans, something experts agree is the best solution to the housing downturn.

Continue reading "President Announces New Refinance Program for Underwater Homeowners Based on HARP" »

Led by Vincent Howard, our Norco foreclosure defense attorneys have avidly watched the litigation by our neighboring states against Countrywide Financial. That company (through Bank of America, its successor in interest) settled in 2009 with states charges that it had engaged in consumer fraud in its mortgage lending. In particular, it faced accusations that it steered borrowers into loans it knew they couldn't afford, and sometimes engaged in race-based "reverse redlining." Perhaps not surprisingly, two of the states participating in that settlement were hard-sit southwestern neighbors of California's, Nevada and Arizona. Arizona made a splash in late 2010 when it sued Countrywide again, alleging failure to keep to the terms of its settlement. Now, the Ninth U.S. Circuit Court of Appeals has declined to hear an appeal in that case.

Arizona's lawsuit was originally filed in December of 2010, alleging violations of Arizona law in loan servicing by Countrywide, Bank of America and related companies. It accused the companies of continuing widespread consumer fraud, in large part because of the way they handle loan modification requests. According to the complaint, the defendants misrepresented to customers whether the customers were eligible for loan modifications in the first place; when and whether they would be approved for a modification; why the lender declined to make a loan modification; and whether and when a foreclosure would take place. This violates the part of the 2009 settlement requiring an $8.4 billion commitment by Bank of America to provide loan modifications, the lawsuit said.

Bank of America sought to remove that case to federal court under the Class Action Fairness Act, arguing that the state of Arizona was seeking relief for a large group of consumers. In an opinion from March of 2011, the Arizona federal court disagreed and remanded the case to Arizona state court. The federal district judge said CAFA does not apply because the state had filed a parens patriae action, which means it was acting in the interest it has in the well-being of its people. Thus, the district court said, the state was the real party in interest, rather than a discrete group of Arizona homeowners, and CAFA does not apply. The case was not filed as a class action, it said; nor does it raise a federal question or involve bankruptcy jurisdiction. Bank of America appealed the issue to the Ninth Circuit, which declined to hear an appeal in an order dated Jan. 3. Judge Gould, dissenting from that order, argued that hearing the case, consolidated with a related appeal from Nevada, would help resolve opposing decisions in Arizona and Nevada district courts.

The Fullerton foreclosure defense lawyers at Howard Law, P.C., will look forward to reading about the Ninth Circuit's decision in the Nevada case. Though we believe there was no basis to claim CAFA is involved in this case, the Ninth Circuit's dissent suggests that at least one Nevada judge disagrees. If that's upheld, it could mean major changes for the way all states file parens patriae actions. Those actions include the original Countrywide lawsuit, which led to the 2009 settlement, as well as any other consumer protection action pursued by a state attorney general rather than an individual. (Indeed, California is one of the few states that allows "public attorney general" suits.) Vincent Howard and our team of Murrieta foreclosure defense attorneys would prefer to see attorneys general allowed to do the necessary work of protecting their states without undue roadblocks.

Continue reading "Ninth Circuit Rejects Appeal by Bank of America in Arizona Lawsuit Over Countrywide - Arizona v. Countrywide et al." »

Our Ontario foreclosure defense lawyers were pleased to see a recent announcement that California and Nevada will jointly investigate banks' fraud and wrongdoing during the foreclosure crisis. At Howard Law, P.C., we recently noted that our own state Attorney General, Kamala Harris, has broken away from the multistate negotiations with the banking industry to settle the "robo-signing" controversy of late 2010. Those talks had been focused on the revelation that banks had a widespread practice of signing legal affidavits without knowing whether they were accurate, which was at best a violation of legal procedures. At worst, the "robo-signed" documents could have allowed wrongful foreclosures to take place. Many courts responded by temporarily stopping foreclosures altogether, or putting stricter rules in place for foreclosure litigants.

Harris said in late September that she was leaving the robo-signing talks because she felt they were not offering sufficient remedies for the scope of the foreclosure crisis. The multistate group has taken several blows, including the departure of attorneys general from both liberal and conservative states and a federal settlement that critics said could undermine the AGs' talks. Harris and other more liberal AGs felt that the talks were an opportunity to discuss remedies that might curb foreclosures and the suffering they cause for both foreclosed borrowers and government agencies. Observers said the alliance between Harris and Nevada AG Catherine Cortez Mastro could further undermine those talks. However, they join AGs in several other states that have taken individual action, including New York and Massachusetts, which sued several lenders in early December for alleged irregularities in foreclosures.

The partnership between California and Nevada combines two neighboring states that were both hit hard in the foreclosure crisis. They are also both non-judicial foreclosure states, which means evidence of fraud will be less obvious than the fraudulent affidavits submitted in judicial foreclosure states. Their announcement said they will share litigation strategies, evidence and perhaps personnel between offices. Each has been busy on her own foreclosure investigations. In Nevada, Masto has widened an investigation of Lender Processing Services, a Florida foreclosure firm accused of robo-signing; Harris is also investigating the firm. Masto is suing Bank of America and its Countrywide division, accusing them of reneging on a settlement of an earlier predatory lending case, and Harris is investigating Bank of America, along with Citibank, Fannie Mae and Freddie Mac, for other reasons.

The Anaheim foreclosure defense attorneys at Howard Law, P.C., are pleased to see this partnership. California has major weight, as partner Vincent Howard has noted in earlier blog posts, because we have the most people of any state and a lot of economic importance. Adding Nevada to our independent investigations only adds more weight to any litigation that might eventually come out of the work, and Nevada is hard-hit in its own right. Unfortunately, we agree with Harris that the 50-state settlement talks were toothless; they dragged on for more than a year and were undermined from within and without. Given the actual criminal conduct at issue here -- and the grave effects on the lives and finances of ordinary borrowers -- our Pomona foreclosure defense lawyers do not feel it is unreasonable of the AGs to push for real penalties.

Continue reading "California and Nevada AGs Join Forces For Independent Investigation of Foreclosure Fraud" »

The Rancho Cucamonga foreclosure defense attorneys at Howard Law, P.C., have written many, many times about the use of shoddy paperwork during the foreclosure crisis. This includes the admitted use of "robo-signed" documents in foreclosures; foreclosing without proof of ownership; and failing to offer genuine assistance to homeowners who come to the lenders for help, even if that means violating the rules of the Home Affordable Modification Program. So we were pleased to see the Dec. 1 announcement that the state of Massachusetts has sued five major lenders and the Mortgage Electronic Registration System, the private company they use to buy and sell loans, for foreclosure fraud. Massachusetts Attorney General Martha Coakley said she took action after waiting for more than a year for a settlement with the major lenders in the "robo-signing" investigation, who she said demand too much immunity for their actions.

The complaint (PDF) accuses the lenders of foreclosing on some homes without any right to do so; using false documents in foreclosures; deceiving borrowers about their loan modification programs and practices, including foreclosures while in modification; and failing to comply with the Massachusetts law requiring property to be registered with government offices. That last allegation is a reference to MERS, which was created in the 1990s expressly to allow lenders to avoid using local land offices when they bought and sold mortgages. The foreclosure crisis has exposed many cases in which the chain of title between the original lender and the foreclosing lender is broken. In some cases, lenders have been accused of falsifying the required documents, such as assignments, in order to meet legal requirements for foreclosure. Some of the foreclosures that went through with these shoddy documents were illegal, the lawsuit alleged, citing many pages of examples.

The fourth allegation was that the banks were deceptive, though their servicing arms, in offering and implementing loan modifications. It noted that each bank defendant has claimed since the beginning of HAMP to be actively helping customers qualify for loan modifications. In reality, it said, the lenders have modified only a fraction of the eligible loans; and approved for a permanent modification less than half of those that did win a trial modification. In rejecting so many borrowers, the suit said, lenders frequently miscalculated borrowers' income by more than 5 percent, an error the commonwealth said was unacceptable "when the homeowner's ability to stay in their home hangs in the balance." They also lied to customers about the need to be delinquent before they would be considered, or the need to have a steady income, the complaint said. And some modifications were rejected after months of steady payments, it said, with foreclosure begun immediately. The commonwealth sought an injunction against the practices, a declaratory judgment forbidding the use of MERS and $5,000 for each foreclosure that violated the law.

As Garden Grove foreclosure defense lawyers, we applaud this lawsuit, which reflects many of the problems we've seen firsthand here at Howard Law, P.C. For example, at the height of media coverage of the foreclosure crisis, it was well known that lenders were incorrectly telling borrowers they had to go into default to be eligible for a HAMP loan modification. This is not just a delaying tactic; it hurts the borrower's credit and credibility in later loan modification or foreclosure defense proceedings. So do many of the other illegal practices around HAMP alleged in the lawsuit. Our lead Gardena foreclosure defense attorney, Vincent Howard, has handled numerous HAMP lawsuits accusing the banks of breaking HAMP rules in their eagerness to deny loan modifications to people who meet eligibility requirements. If Massachusetts prevails in this lawsuit, it could change national foreclosure practices for the better.

Continue reading "State of Massachusetts Sues Five Major Lenders With Allegations of Fraudulent Foreclosures" »

Our Moreno Valley foreclosure defense lawyers have written many, many posts recently about the negative consequences of the poor communications and sloppy work at major lenders. Occasionally, these mistakes come back to haunt the banks, as in one case that resulted in court sanctions -- but usually, they hurt the borrower the most. That was the case in Johnson v. Wells Fargo Home Mortgage, a Ninth U.S. Circuit Court of Appeals decision in which Wes Johnson claims Wells Fargo's mistake ruined his business of buying, upgrading and re-selling homes. Johnson's on-time payment was misapplied, and the bank failed to correct the problem before his credit was destroyed and left Johnson unable to get more home loans. As a result, Johnson sued and the case eventually went to arbitration, and a dispute arose over the disposition of that award.

Johnson had purchased 200 to 300 homes across the United States since the 1970s, and was in the business of refurbishing, renting and selling them. The homes were purchased with risky subprime mortgages, which means the quality of his credit mattered. In 2004, Johnson's wife sent payments on two mortgages, both for homes located in Oregon, but made a mistake that led Wells Fargo to apply both payments to the same mortgage. This led it to report a delinquency on the other mortgage, and this kicked off a long series of phone calls and letters from Johnson attempting to straighten the problem out. The arbitrator noted that Wells Fargo has multiple teams to deal with these issues, none of whom communicate well with one another. In the end, Wells Fargo admitted its mistake, but only after reporting the late payment and starting foreclosure proceedings on both homes. Johnson sold both homes ahead of the foreclosure, but was unable to get any new loans as a result of the negative reports. This, he said, effectively put him out of business.

Johnson sued for negligence and violations of the Fair Credit Reporting Act, the Fair Debt Collection Practices Act and the Real Estate Settlement Procedures Act. The district court eventually dismissed all claims by the FCRA claims and sent the case to arbitration, in an order giving the parties "appeal rights." The arbitrator found for Johnson on about half of his FCRA claims. Wells Fargo tried twice to move to vacate, modify or amend the award, but the district court rebuked it, explaining that the appeal rights meant Wells Fargo had the right to appeal to the Ninth Circuit. Wells Fargo appealed the procedure behind this ruling; Johnson appealed the dismissal of his negligence and RESPA claims.

On appeal, the Ninth Circuit found that the issue was not properly before it. The appeals courts have the power to review only adoption or vacation of arbitration awards, it said -- there's no jurisdiction over the underlying arbitration awards. The parties' agreement to arbitrate defaults to the Federal Arbitration Act, which gives only federal district courts the authority to review awards. The bank's arguments to the contrary were dismissed as "inventive." For similar reasons, the Ninth did not take up Wells Fargo's argument that the standard of review should go beyond the FAA; nothing in the record suggests this, it said. However, the court was no kinder to Johnson in his cross-appeals of the dismissal of his RESPA and negligence claims. RESPA does not apply to loans taken out for business purposes, it noted; Johnson's arguments to the contrary were not persuasive. Finally, it affirmed the district court's ruling that Oregon tort law bars some of Johnson's negligence claim -- but reversed the district court's decision that the FCRA barred another part, finding that the court misread FDCPA claims as FCRA claims.

This case is long, but it could have important effects on our work as Newport Beach foreclosure defense attorneys. The Ninth Circuit has made it clear in this ruling that it won't directly review arbitration awards, which should clarify things for lower courts that either order arbitration or are asked to affirm privately ordered arbitration. Unfortunately, Johnson was not able to collect on all of his claims, although the opinion does note that he collected on the FCRA claims, which pertain to the egregious credit reporting violations. However, it's pleasing to our Whittier foreclosure defense lawyers that some of Johnson's claims were only unavailable because he was a real estate investor. An ordinary homeowner in the same position would likely be able to prevail on RESPA and FDCPA claims. Given the poor records of major lenders, this right may be needed.

Continue reading "Home Refurbisher Claims Wells Fargo Ruined His Business by Misstating His Credit - Johnson v. Wells Fargo Mortgage" »

Our San Bernardino county foreclosure defense attorneys wrote recently about the decision by Attorney General Kamala Harris to pull out of robo-signing settlement talks. Harris was reportedly unhappy with the direction of the talks because it was too soft on the banks, offering what she reportedly thought was too much immunity for too little compensation for homeowners. Her move followed attorneys general in several other states, who had also thought the settlement must be more severe. The departure was analyzed thoroughly in a piece on RollingStone.com, authored by political commentator Matt Taibbi. Taibbi suggested that a too-soft settlement would be tantamount to a bailout of the banks, pointing out that limiting their liability saves them huge amounts of money in foreclosure and investor lawsuits.

Taibbi starts by dismissing the idea that the size of the settlement is the chief problem. Rather, he says, any settlement at all would be tantamount to another round of bailouts, because it wouldn't be able to cover the huge amount of liability the major mortgage lenders face. Taibbi writes that mortgage lenders conspired to create huge amounts of "junk" subprime loans, then bundle them into securities with overinflated AAA ratings. Those securities were purchased by both private and public investors, all of whom have now lost that money. To make matters worse, Taibbi cites the lenders' use of the MERS system, the private loan exchange company, to avoid registering loans with county offices and paying associated fees. Thus, they have also bypassed local taxes -- something that at least a few counties are suing over. Already, he notes several lawsuits from individuals or groups of investors in mortgage-backed securities, including a settlement for $8.5 billion between Bank of America and private investors. This is nearly half of the total proposed settlement applying to all banks, Taibbi wrote, but a tiny fraction of the liability faced by Bank of America on its Countrywide holdings alone. Thus, he thought Harris could likely get much more money for California by pursuing her own cases.

Taibbi does acknowledge that homeowners are also victims, but spends less energy on this issue than we would. As Irvine foreclosure defense lawyers, we work every week with homeowners who were misled or exploited by banks when their loans were issued, or who now are being given the runaround when they try to address financial problems. As he notes, MERS helps lenders avoid local taxes -- but it has also proven disastrous in the foreclosure crisis by making it difficult to track or prove ownership of any particular mortgage and note. Meanwhile, securitizing loans in the manner he described helped banks inflate the number of mortgages by making risk-free loans to people they knew would not be able to pay the loans back, then selling the loans to unsuspecting investors. Perhaps Taibbi is right that a true repayment for all this would bankrupt the banks, but it's hard to feel sympathy for lenders dealing with the consequences of their mistakes.

Howard Law, P.C., represents California borrowers who need legal help to stop an avoidable foreclosure or cancel a loan made under predatory circumstances. Our Los Angeles County foreclosure defense attorneys have practiced in this area of the law since the beginning of the housing crisis, so we understand very well what kinds of tricks lenders use to avoid giving a loan modification any real consideration Depending on your situation, we may be able to challenge a foreclosure started without any discussion of other options; an incorrect denial of a loan modification; or pursue a bankruptcy to help you catch up on payments. If a foreclosure is looming, we can ask the court to stop it until these legal issues have been considered. Call us today to tell us your situation and learn about how we can help.

Continue reading "Writer Characterizes Harris Pullout From Robo Signing Settlement Talks as Refusing a Bank Bailout" »

Our Claremont foreclosure defense attorneys have written here many times about the ongoing "robo-signing" settlement talks. About a year ago, it came to public attention that banks were signing off on hundreds or even thousands of foreclosure documents without knowing whether those documents were true; the signatures often were written by someone other than the named person. The practice became known as "robo-signing" and it caused a scandal because it invited the very real possibility that the home would be wrongly foreclosed. Eventually, a group of state attorneys general emerged to negotiate a settlement with mortgage lenders, which housing rights advocates saw as a chance to correct wrongful foreclosure practices. The Los Angeles Times reported Sept. 23, California Attorney General Kamala Harris had emerged as a leader in these talks -- but on Sept. 30, it broke news that Harris had broken away from the talks due to dissatisfaction with mortgage lenders' offers.

California is the most populous state in the nation and among the hardest hit by the foreclosure crisis, which the Times said gives Harris a lot of leverage. It also said her involvement in any settlement would be important, and her dropping out of the group could be a major blow to the coalition's efforts. An anonymous source told the Times Harris stopped talks with the five largest mortgage lenders because she thought they were not offering sufficient relief for the suffering Californians have experienced in the foreclosure crisis, and because they wanted too much immunity from further prosecution. She may have been responding to political pressure from liberal groups that feel the proposed settlement is toothless. However, she followed the lead of several attorneys general who have already dropped out of the negotiations, including those of New York, Minnesota, Delaware, Nevada, Massachusetts and Kentucky. Several of these, including New York Attorney General Eric Schneiderman, have launched their own investigations.

As Santa Ana foreclosure defense lawyers, we're pleased to see that Harris is willing to create a disruption in order to serve Californians' needs. We share the concerns the article notes about whether the 50-state settlement will concede too much to mortgage lenders. As we've written here in the past, mortgage lenders essentially refuse to take responsibility for any wrongdoing. They claim that robo-signing practices are a technical problem that doesn't affect whether the underlying foreclosure is valid. This may or may not be true, but it's difficult to say because, in robo-signing, the lender abdicates its legal responsibility to ensure that the things it tells the court are true. And as observers of the foreclosure crisis know by now, it's extremely common for major lenders to have major paperwork errors. Thus, the only thing preventing a wrongful foreclosure is a judge's scrutiny -- and until robo-signing broke, judges saw these cases as routine.

At Howard Law, P.C., we represent Californians who are considering legal action to stop a preventable or unfair foreclosure. Many, many clients come to us after exhausting their administrative remedies and their patience with a loan servicer. That loan servicer often has given the client contradictory or untrue information, delayed responding to requests for months and months, or even denied a loan modification despite the homeowner's qualifications. Our San Diego County foreclosure defense attorneys believe servicers can and should do better, and we are prepared to hold them legally liable for violations of your rights or their obligations. It may be more profitable to shepherd borrowers into foreclosure, but when it's a violation of the law, we can take it to court.

Continue reading "California Becomes Major Player in Foreclosure in Robo-Signing Settlement" »

As Chino foreclosure defense lawyers, we've blogged before about the use of MERS, or the Mortgage Electronic Registration System, in the mortgage industry. MERS is a private company that mortgage lenders use to track ownership of loans; it allows lenders to bypass local land office registration. Critics allege that it contributes to the disorganization that has characterized much of the bursting of the housing bubble. A proposed class of homeowners challenged MERS in Cervantes et al. v. Countrywide Home Loans et al., a Ninth U.S. Circuit Court of Appeals ruling that ultimately did not go their way. Olga Cervantes and other Arizona homeowners alleged a conspiracy by MERS and participating lenders to commit fraud, but the district court dismissed this for failure to state a claim and the Ninth Circuit upheld that ruling.

When a borrower takes out a mortgage, both the promissory note to repay the loan and the mortgage/deed of trust securing the loan must be registered with the county office; sales should also be registered. This became annoying for the mortgage industry as it began trading debt obligations, so it invented MERS to serve as the nominal holder of the note and deed. Thus, actual changes in loan ownership are not recorded with counties, but in a proprietary MERS database; county records show MERS as owner unless the new owner is not a MERS member. When a loan is foreclosed, the foreclosing lender or its agent must own both the deed and the note. The plaintiffs in this case allege that MERS-involved foreclosures are illegal because MERS splits the deed away from the note. Because MERS does not have any financial interest in the loans, the plaintiffs say, it cannot be the beneficiary of the lender. Their lawsuit against a variety of lenders alleged conspiracy to commit fraud, and the defendants moved to dismiss for failure to state a claim. The plaintiffs moved for leave to amend and filed a proposed second amended complaint, but the district court denied this and granted the defendants' motion to dismiss. This appeal followed.

Before the Ninth Circuit, plaintiffs argue that they sufficiently alleged a conspiracy based on fraud. However, the court said, their claims do not meet several elements necessary under Arizona fraud law. They did not identify any material facts about MERS that were misrepresented to them, the court said, nor did they rely on misrepresentations when they took out their home loans. Their allegations that having MERS as a beneficiary rendered them unable to modify their loans are also insufficient, the Ninth Circuit said, because they were unable to explain those assertions. Furthermore, the description of MERS in at least one deed of trust explains the role of MERS as a beneficiary, the court asserted. The Ninth said the proposed Second Amended Complaint would not solve the problem, because none of the proposed allegations cure these deficiencies. Thus, it ruled that the district court was correct to dismiss the case. It also upheld the district court's denial of leave to add a wrongful foreclosure claim. However, this request was made only orally, making it "procedurally improper" and unsupported by required filings. Finally, the Ninth said, the wrongful foreclosure argument cannot stand because MERS was not the foreclosing entity, and thus allegations that MERS is a sham beneficiary are irrelevant.

This case joins a long line of MERS cases dating back to the 1990s, although the most relevant ones are more recent. Our Anaheim foreclosure defense attorneys have written about one or two cases in which the borrower succeeded in ending the foreclosure based on the involvement of MERS or shoddy paperwork from that system. Many other borrowers have not been so lucky, however. As this case shows, the mere involvement of MERS -- however shady the borrower may find it -- is not an adequate basis for a complaint of fraud. These defendants had other seemingly valid complaints, however, including that two named plaintiffs negotiated contracts in Spanish and then were presented with papers in English. This is illegal under state and federal law, and indeed, the plaintiffs might have prevailed if they had filed suit sooner. That's why it's vital to get in touch with an experienced Murietta foreclosure defense lawyer as soon as you believe your rights were violated.

Continue reading "Ninth Circuit Throws Out Challenge to MERS for Failure to State Injury or Misinformation - Cervantes v. Countrywide" »

As Riverside personal bankruptcy lawyers, we were interested to see a rare reversal of a Chapter 13 bankruptcy plan appealed by the debtor. In Fisette v. Keller, debtor Michael Fisette of Minnesota objected to the bankruptcy plan drawn up by trustee Jasmine Keller against his will. Fisette owned a home that, like many American homes, was "underwater"; he owed more than the home was worth. This was bad news for the holders of the second and third mortgages, whose liens against the property he proposed to strip. When the bankruptcy court declined to approve such a bankruptcy plan, Keller wrote up a new plan that proposed to treat the lienholders like secured creditors. The Bankruptcy Appellate Panel of the Eighth Circuit reversed, finding the law did not prohibit lien-stripping.

Fisette owed $176,312 on the first mortgage, but the home was appraised at just $145,000. He had recently been through a Chapter 7 bankruptcy and was ineligible for discharge until more time had passed, but filed for Chapter 13 bankruptcy anyway. In his proposed Chapter 13 plan, he treated that mortgage -- the senior lien -- as secured, but the junior two liens as unsecured debt, because there was no equity for them to attach to. He proposed no payments to the junior lienholders under the plan, with discharge after he completed all payments in the plan. He also did not propose to pay them as unsecured creditors. The lienholders filed no written objections, but the bankruptcy judge said the law does not allow lien-stripping and denied the plan. Over Fisette's objection, Keller submitted a new plan that allowed junior lienholders to keep their liens and treated them as secured. This plan was approved. Fisette appealed to the Bankruptcy Appellate Panel, arguing that bankruptcy debtors should be allowed to strip unsecured junior liens.

Supreme Court precedent holds that bankruptcy plans may not modify unsecured portions of mortgage debts, but the Eighth's panel said the court did not rule on whether they may strip wholly unsecured debts. And a variety of Minnesota bankruptcy court cases have held that debtors may never strip claims secured by interest in a primary home -- that is, that any home lien is unstrippable. The panel disagreed, saying every circuit court to address the issue has held that bankruptcy plans may strip wholly unsecured junior home liens because they are modifiable under bankruptcy law. However, it said, courts are split on whether a bankruptcy debtor may do this when he is ineligible for a discharge. Noting that nothing in the bankruptcy code requires discharge eligibility for lien-stripping, the court ruled that lien-stripping is contingent only on successfully completing the bankruptcy plan payments. However, the junior lienholders should be treated like any other unsecured creditor, the court said, so they should get a share of any payments to those creditors. The panel remanded the case for modification of the Chapter 13 plan.

Our Fullerton individual bankruptcy attorneys are pleased with this ruling, which joins a similar ruling here in the Ninth Circuit. "Stripping" a junior lien has become a common practice -- which may be why Fisette's creditors did not object -- since the housing crisis began. Because so many homeowners are underwater, any second or third lien is likely to be unsecured under bankruptcy law and thus subject to stripping. This can be very advantageous to homeowners who decide to pursue bankruptcy as a strategy for fighting foreclosure. However, bankruptcy is a major financial decision that might not be appropriate for all underwater homeowners, so it's best to talk to an experienced San Diego County foreclosure defense lawyer about your options. Our firm can also help borrowers negotiate with lenders or pursue their rights through litigation.

Continue reading "Eighth Circuit Rejects Chapter 13 Bankruptcy Plan That Avoids Junior Home Liens - Fisette v. Keller" »

Our Chino foreclosure defense lawyers have written here before about the numerous accusations of wrongdoing against Countrywide Home Loans, Inc. The now-defunct lender, which was purchased by Bank of America several years ago, has been accused of fraud when originating loans, foreclosing and even charging fees and interest to borrowers. That last issue was behind the allegations against Countrywide in Washington et al. v. Countrywide Home Loans, Inc., an Eighth U.S. Circuit Court of Appeals decision. The decision allowed a proposed class-action suit to go forward against Countrywide under Missouri's Second Mortgage Loan Act. The suit alleges that Countrywide charged unauthorized fees and interest to a class of Missourians who took out second mortgages.

Lead plaintiffs Jerry and Golda Washington took out a second mortgage from Countrywide in 2005. Before that loan closed, Countrywide sent them a closing statement on a federal form, notifying them of increased fees to be included in the loan's principal: a loan discount, a settlement/closing fee, a processing fee and prepaid interest. They signed the form, but five days later, the federal government notified Countrywide that the loan discount and settlement/closing fee should not have been charged. Countrywide added the amount of those charges to the disbursement it paid the Washingtons, but never notified them of the change or sent them a new form. It also did not reduce the principal on the loan. They later sued, arguing that all four charges violated the Missouri Second Loan Act. The trial court granted summary judgment on the two repaid fees, arguing that they suffered no loss because of the repayments. It also granted summary judgment on the other two fees, ruling they were not barred by the MSMLA. The Washingtons appealed.

The Eighth Circuit reversed on all counts. It first considered the repaid fees for the loan discount and the settlement/closing fee. It conceded that the fees themselves were repaid to the Washingtons, but found that the Washingtons still were not made completely whole because they paid interest on the amount repaid in the two days before the repayment happened. That was enough to meet the burden under the MSMLA that claimants must suffer "any loss of money," the appeals court said. Furthermore, Countrywide's argument that the Washingtons voluntarily paid it by signing the HUD form was unavailable as a matter of Missouri caselaw. However, it declined to grant summary judgment on appeal because neither party moved for summary judgment on appeal.

The Eighth next looked at the fees that had not been repaid. Countrywide argued that the processing fee was permitted under Missouri laws that regulate how much lenders may charge in closing fees. However, the Eighth said, the Missouri Court of Appeals had recently rejected similar arguments in another mortgage fees case, Mitchell v. Residential Funding Corp. In that case, the appeals court decided that fees should be identified by how they were described on the HUD form, not how the lender wished to re-characterize them after being sued. Finally, the Eighth found that the prepaid interest charge was also illegal because, if the processing fee was illegal, there was nothing on which to charge interest. Thus, it reversed the district court and remanded the case for more proceedings.

As Orange foreclosure defense attorneys, we're pleased to see the federal courts applying state consumer protection laws so strongly. Consumer protections are most often found in the states, but thanks to the international nature of major mortgage lenders, more and more mortgage cases are ending up in federal court (even when they're not class actions). Of course, Missouri law applies only in Missouri, but this decision could be a guide for the Eighth Circuit or other federal appeals courts that are aasked to apply state consumer protection laws to unfair mortgage fees cases, which are a small but growing trend. In states with strong consumer protection laws, our Temecula foreclosure defense lawyers hope Countrywide borrowers and other victims of questionable loan practices are able to use those laws to recover unfair fees or even reverse unfair loans.

Continue reading "Eighth Circuit Finds Lender's Conduct Violated Missouri Mortgage Law - Washington et al. v. Countrywide Home Loans Inc." »

Our Ontario foreclosure defense attorneys frequently represent clients here in California whose homes were foreclosed on without a chance to discuss alternatives to foreclosure with the lender. This violates a California state law that requires at least a discussion of alternatives before a foreclosure, and we have had success suing lenders under that law. So we were very interested to see a recent decision from the Eighth U.S. Circuit Court of Appeals on a similar law in Minnesota. In Mayer v. Countrywide Home Loans, the law at issue was the Minnesota Farmer-Lender Mediation Act, which requires foreclosing lenders to try mediation before foreclosing. Kathleen Barbara Mayer alleged that Countrywide broke that law when foreclosing on her home, but the federal district court found that the FLMA didn't apply because Mayer's property was not principally used for farming.

Mayer had three parcels of land totaling about 62 acres near Glenwood, Minn, including a 6.21-acre homestead parcel on which she lived. All three were held in a living trust for which she was both owner and trustee. She took out a second mortgage on the homestead parcel in 2006, and the local bank assigned the mortgage to Countrywide. She defaulted on the loan in 2007, and Countrywide later sold the parcel to itself at foreclosure auction. Mayer sued six months later, alleging violation of the FLMA and requesting an injunction against Countrywide's repossession of the property. She later argued in a response that Countrywide procured the mortgage through fraud. The district court granted summary judgment to Countrywide on the grounds that the FLMA did not apply to Mayer and her property. She appealed to the Eighth Circuit.

On appeal, the issue was whether Mayer's mortgage debt was a "mortgage on agricultural property," defined in the law as real property used for producing livestock, milk and milk products, produce or agricultural products. Even in the light most favorable to Mayer, the Eighth said, it could not decide her property was agricultural. Mayer contended that the homestead parcel is a farm homestead necessary for storing tools, equipment and materials for farming. Even if so, said the court, this is just a small part of the overall parcel, most of which is used as a residence. Mayer showed that she farms grains and raises cattle on the other two parcels, the court said, but this does not affect the analysis of the homestead parcel, which is the only one encumbered by the mortgage. The court also rejected Mayer's contention that the Countrywide mortgage was fraudulent, because she failed to plead it with particularity in her original complaint. She was put on notice, the court noted, and still did not amend it before the deadline had passed. Thus, the Eighth upheld summary judgment for Countrywide.

Judge Bye dissented from this opinion, arguing that the majority was wrong to rely on Countrywide's status as a creditor to grant summary judgment. Countrywide never made this argument, nor did Mayer raise it, the judge noted; thus, Mayer never had a chance to address it. Furthermore, the dissent said, the district court made a clear error in interpreting the FLMA because it saw the homestead parcel as standing alone instead of part of the trust. This raises the possibility that Mayer may have been a debtor under the FLMA, and entitled to its protection. Because the judge felt the majority's opinion was inconsistent with the purpose of the FLMA, he dissented.

As Costa Mesa foreclosure defense lawyers, we are also disappointed in this decision. The dissent suggests that important issues were left unaddressed, and those issues could make the difference in this woman's attempt to keep her home. We don't handle a lot of farm foreclosures here in southern California, but that doesn't mean we don't see small businesses or older people using a living trust as an alternative to a will. Those are issues that can complicate a foreclosure (or a bankruptcy) if they affect the property, but ideally, those complications come from courts giving those legal structures the extra attention they need. Our Whittier foreclosure defense attorneys work hard to ensure that when our clients go to court, judges consider the full picture before deciding on important foreclosure issues.

Continue reading "Court Rules Homeowner Was Not Farmer Under Meaning of Minnesota Law - Mayer v. Countrywide Home Loans" »