California Bankruptcy Attorney Blog

As Riverside loan modification attorneys, we were pleased to see reports of a recent study that shatters some of the myths about foreclosures in California. As the Ventura County Star reported Aug. 17, the nonprofit Center for Responsible Lending put out a study showing that most foreclosed Californians were not people who bought more house than they could afford. Rather, the study said, the average value of the home when the loan was made was just under $400,000, and the average square footage was a modest 1,494. More commonly, the study said, people who were foreclosed on were more likely to have gotten high-interest loans, often subprime or Alt-A loans. Those people were disproportionately minorities, the study noted, which led to a disproportionately high rate of foreclosures among Latino and African-American borrowers.

The study is based on foreclosures of 877,173 homes in California between September of 2006 and November of 2009. In addition to the data on original price and size, the study noted that three-quarters were priced below median home values in their areas, and that 50.3 percent of foreclosures stemmed from refinancing rather than original loans. It also included a great deal of data about how subprime and expensive loans related to race. In 2006, it said, 53.7 percent of African-Americans and 46.5 percent of Hispanic borrowers received high-rate mortgages, while only 17.7 percent of non-Latino white borrowers did. This was true across all sizes of mortgage, it said, suggesting that income and size of home were not factors. As a result, the study said, 48.7 percent of the people foreclosed on were Latinos, even though they are 36.6 percent of the state's population and received 29.9 percent of loans. Figures were not given for other racial groups. Foreclosures were concentrated inland, in the San Joaquin and Sacramento valleys and the Inland Empire.

Our Rancho Cucamonga loan modification lawyers have known part of these conclusions for months. Several studies, including the Federal Reserve Board study cited in the article, have shown that subprime loans are more likely to lead to defaults, even after looking at factors like housing price changes and credit score. At least one other study, and several lawsuits, suggests in turn that subprime loans were far more likely to be offered to minorities during the "housing boom"; at least one "reverse redlining" lawsuit has been file alleging that a bank specifically targeted African Americans for such loans. This data does not prove that lenders made decisions purely on racial grounds -- we would prefer to see data on the borrowers' incomes and credit -- but it provides strong evidence suggesting it. If it's true, it is not just shameful, but also illegal.

Continue reading "Study of California Mortgage Defaults Finds Most Not Caused by Over-Borrowing" »

As Pomona loan modification lawyers, we were surprised and impressed by a recent article from the Los Angeles Times. The piece, dated August 5, discusses the fight by 23-year-old Zeenat Ali to help her parents avoid foreclosure on their Diamond Bar home. Ali is not an attorney and has no special legal background, but the article says she has won several victories in the family's struggle with Deutsche Bank, the holder of the mortgage. She has won procedural fights on the foreclosure itself, and is also suing the bank, alleging that it marketed the family's refinancing loan deceptively and later reneged on an offer to modify that loan. The Alis may still lose their home, the article said, but Zeenat Ali has successfully delayed the foreclosure and impressed observers with her untrained legal skills.

Her parents, Shahida and Ather Ali, had lived in the home for 24 years and raised three children there. When they came from Pakistan, they were an engineer and a doctor, but in 2005, they decided to open an adult day-care business. To do that, they took out a loan for $800,000 from the Small Business Administration, using the home as collateral. Then they refinanced the house with an option-adjustable-rate mortgage for $250,000. They kept their payments low at first to put money into the business, but that increased the loan balance, just in time for high-interest payments to start. The home was foreclosed in December and they stopped paying the loan four months ago.

In her lawsuit, Zeenat Ali argues that the refinance loan was marketed deceptively. But a large part of the suit deals with how Deutsche Bank handled the foreclosure. She alleges that the Alis' mortgage servicer rejected a $30,000 check from her parents in November, saying they had to apply for a loan modification first. So the Alis filled out the loan modification paperwork within a week and sent it back with the check. In the meantime, she alleges, Deutsche Bank was in the process of foreclosing on the house, without notifying the family as required by law. A bankruptcy attorney told the newspaper that even if the Alis win this claim, they may not collect much money and may still lose their home. Zeenat Ali successfully fought attempts by Deutsche Bank to move the lawsuit into federal court -- impressing legal observers -- but because foreclosure is still a real possibility, she has now hired a lawyer to help.

Our Orange loan modification attorneys wish the Alis well in their lawsuit and foreclosure. If the rejected $30,000 payment -- a substantial number -- was enough to keep them out of foreclosure, Ali may be able to successfully argue that the bank should never have foreclosed to begin with. However, under the Truth in Lending Act or a claim for common-law negligence, the actual damages -- that is, the financial loss to the family -- may be calculated according to the equity they had in their home. In this case, that could be little or nothing, because the home is worth less than their loan debt. "Statutory damages" awarded under the TILA have a maximum of $2,000 -- which is unlikely to make up for the loss of a home of nearly 25 years. This case exposes a flaw in consumer protection laws that gives lenders minimal consequences for abusing their borrowers.

Continue reading "Diamond Bar Medical Student Fights to Save Parents' Home From Foreclosure" »

In a case with extremely interesting implications for San Bernardino County bankruptcy attorneys like us, a federal appeals court has ruled that bankruptcies may be pursued as class actions. Class actions are lawsuits that bring together a large number of people with the same complaint against the same defendant. They are frequently used in consumer rights lawsuits, such as when many people bought the same defective product, but courts disagree on whether they can be used in bankruptcy court. As the National Law Journal reported June 22, the Fifth U.S. Circuit Court of Appeals in New Orleans has ruled that they can, establishing that right for courts in that circuit. However, the Fifth found that the class in this particular case was improperly certified.

In In the matter of Wilborn et al., the U.S. Bankruptcy Court for the Southern District of Texas sought to certify a class of 1,236 individuals or married couples who had filed for Chapter 13 bankruptcy and had mortgages that were owned or serviced by Wells Fargo Bank. They had filed an adversary action against Wells Fargo, claiming that the bank had charged unreasonable fees and costs for services related to the bankruptcy, such as title searches, ranging from $1,200 to $4,000. Wells Fargo did not disclose those fees to the court, they said, and as a result, many had debts that were not covered by their repayment plans. The Fifth Circuit found that the bankruptcy judge may properly certify a class of debtors in an adversity proceeding. However, it added that this class was inappropriate because individual issues, especially varying fees, predominated over issues common to the class.

As Villa Park personal bankruptcy lawyers, we believe this has implications for our practice in loan modification and foreclosure prevention as well as in bankruptcy. If the description of the inflated fees sounds familiar, it could be because Bank of America settled very similar claims this month brought by homeowners who had mortgages through the now-defunct Countrywide Financial Corp. Like many of the Countrywide borrowers, the Wells Fargo borrowers were already in bankruptcy, making the inflated fees particularly exploitive, greedy and inappropriate. If this turns out to be an industry-wide practice, more lawsuits or adversary claims by people in bankruptcy may be on their way -- and the bankruptcy courts may have more opportunities to certify class actions. Finding common concerns across a very large group of debtors might be hard, but a class action would certainly be more effective if thousands of borrowers truly have been exploited in this way.

Continue reading "Federal Appeals Court Rules Bankruptcy Judges May Certify Classes of Debtors" »

Our Upland predatory lending attorneys have written several times in this space about the legal actions against Countrywide Financial Corp., and after its buyout of Countrywide, Bank of America. Countrywide customers have benefited from several legal settlements, including settlements allowing them to modify their loans, thanks to legal actions brought privately and by state attorneys general alleging that Countrywide engaged in predatory lending practices. Now, Bloomberg News reported June 7, Bank of America has settled a lawsuit brought by the Federal Trade Commission alleging more wrongdoing by Countrywide -- charging inflated and illegal fees to homeowners who went into default. The FTC said the $108 million penalty is one of the largest in its history. The money will be returned to more than 200,000 borrowers.

According to the article, the illegal behavior targeted homeowners who were already behind on their mortgage payments. Countrywide allegedly charged these homeowners up to 400 percent of the normal fee for services like property inspections, and sometimes didn't give any notice of extra charges. When homeowners went into bankruptcy, Countrywide allegedly inflated the debts it entered into the bankruptcy court, essentially using the system to get extra money from bankrupt borrowers. The U.S. Trustee program, which enforces bankruptcy laws, worked with the FTC to resolve the case; an official would not confirm that it was also referred for criminal prosecution to the Justice Department. An FTC spokesman said the agency would need some time to reconstruct how much money is owed to individual borrowers, in part because "most frat houses have better record-keeping" than Countrywide did.

As Pico Rivera predatory lending lawyers, we are pleased that the FTC has been able to recover compensation for people who were taken advantage of by Countrywide. As the FTC spokesman points out, the borrowers targeted were people who were already struggling financially, so badly that they had trouble making their mortgage payments. Piling illegal and excessive fees onto the top of that is cynical and exploitive. Unfortunately, that's consistent with other cynical and exploitive behavior by Countrywide, including targeting minorities for expensive subprime loans -- regardless of their financial health -- and writing loans to people they knew couldn't make payments, knowing that the loans would quickly be securitized. The FTC spokesman mentioned that his agency could do more to prevent this kind of exploitation if Congress gives it rule-making power over the mortgage industry, and we hope Congress follows through.

Continue reading "Bank of America Settles FTC Lawsuit Over Excessive Fees for Countrywide Customers" »

As Riverside County loan modification lawyers, we have continued to follow the downfall of former mortgage lender Countrywide Financial. Based in Calabasas, Countrywide was a leading writer of subprime and exotic mortgages until the housing crash, when it nearly collapsed before Bank of America bought it. Since then, it has settled several lawsuits claiming it followed unethical lending practices related to subprime loans. On May 7, Reuters reported that Bank of America's Countrywide division has also settled a lawsuit by investors, who claimed the company deceived them about the level of risk in the loans it issued. The case, in Los Angeles federal trial court, was slated for trial in August.

The plaintiffs were led by the New York State Common Retirement Fund, one of several pension funds involved. They said they were deceived by Countrywide's public statements about its risks as a lender, including public assurances that it would survive the housing downturn. In fact, it collapsed in late 2007, setting the stage for Bank of America's takeover announcement in January of 2008. During the height of the boom, Countrywide made one out of every six housing loans, but relied heavily on subprime and option adjustable-rate mortgages that carried high risks but allowed fast growth. Countrywide admits no wrongdoing in the settlement, which would compel payments of $600 million from Countrywide and another $24 million from KPMG LLC, its auditor. This would be the thirteenth largest class-action settlement since a 1995 overhaul if it is approved.

Our Temple City loan modification attorneys don't work in securities law -- we work with homeowners who need help negotiating a fair and timely loan workout. But because we keep an eye on California real estate matters, we're not surprised that investors were successful in this case. Former Countrywide CEO Angelo Mozilo and other executives are defendants in a separate securities lawsuit brought by the SEC, which accuses them of insider trading as well as misleading statements about the company's help. In particular, Mozilo is accused of admitting in a private email that Countrywide was "flying blind" about loan safety, then unloading stock options in 2006 and 2007, while the company's stock still had value. This is the same profit-driven behavior that caused Countrywide to sell loans to people they knew couldn't pay them back, target minorities for subprime loans, misinform borrowers and engage in other illegal, unethical practices.

Continue reading "Countrywide Settles Lawsuit Saying It Misled Investors About Loans' Safety" »

As Moreno Valley loan modification lawyers, we were pleased to read that the state of California is putting fraudulent loan modification companies out of business. The Orange County Register reported March 25 that two women face at least a year in jail for defrauding 160 homeowners who came to them for help getting their home loans modified. Mary Alice Yraceburu of Riverdale, 46, and 68-year-old Marianne Curtis of Costa Mesa pleaded guilty to 71 separate counts of crimes related to loan modification fraud. The women are accused of taking money from homeowners and then failing to try to get the loans changed.

Yraceburu and Curtis are accused of running a company called Foreclosure Freedom, which sent out fliers directly to homeowners. When callers responded, they were told that Foreclosure Freedom could negotiate a lower monthly mortgage payment in exchange for an up-front fee. They were instructed not to contact their banks directly. It is illegal in California for a non-lawyer to take an up-front fee for a loan modification. Not only were Curtis and Yraceburu not attorneys, the article said, but they had no real estate licenses or experience in the mortgage business. However, they did have felony criminal records. The guilty pleas are part of a plea bargain that reduces their sentences from up to 21 years in prison to about a year in jail. In exchange, Yraceburu and Curtis must pay back their victims $38,340.

Our Anaheim loan modification attorneys compete with fraudulent loan modification companies like these, but we do not exactly regard them as competition. Rather, we think they are a public menace that should be publicly exposed and taken to court whenever the evidence supports a criminal case. Homeowners who need loan modifications are typically at the end of their ropes, financially and emotionally. They can't afford to waste $2,000 or more on a fraud, but they are often under great stress and desperate, which makes them easy prey for fraudsters. That's why the California legislature made it illegal for non-lawyers to take up-front fees for loan modifications, and why prosecutors go after loan modification fraud so vigorously. We wish prosecutors many further successes.

Continue reading "Orange County Women Plead Guilty to Loan Modification Fraud on 160 People" »

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

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

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

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

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

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

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

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

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

Our San Bernardino County loan modification attorneyshave written here before about the problem of major lenders targeting racial minorities for expensive subprime or even predatory mortgage loans. This practice, known as "reverse redlining," is the subject of lawsuits against lender Wells Fargo by several municipalities, which claim it violates federal civil rights laws and destroys city neighborhoods. Now, the New York Times reported Jan. 14, the federal Department of Justice has launched a new campaign against unfair lending practices, to be part of its Civil Rights Division. Led by special counsel Eric Halperin, head litigator for the nonprofit Center for Responsible Lending, the new unit will investigate all types of unfair lending practices and file federal civil rights lawsuits when appropriate.

Reverse redlining is the practice of targeting minority borrowers for expensive "subprime" or even predatory mortgage loans. It is illegal under the federal Fair Housing Act, which bans practices that have a "disparate impact" on minorities. This is the legal theory behind the Baltimore and Memphis lawsuits, both of which accuse Wells Fargo of explicit and intentional reverse redlining, with supporting affidavits from former loan officers. An attorney who helped both cities said he hoped the new Justice unit would consider joining the cases. The Civil Rights Division has itself opened 38 investigations into reports of lending discrimination, and more may be coming. The Justice Department plans to analyze Treasury Department data to look for disparate impacts in loan modification decisions, and is also working with state attorneys general on subprime lending issues.

As Placentia loan modification lawyers, we are extremely pleased to see the federal government paying attention to fair housing laws. In fact, as one attorney in the article puts it, the Justice Department involvement in enforcing federal law may be overdue. Because we followed the subprime lending crisis closely, we know that minority communities have been particularly hard-hit by expensive, "exotic" and adjustable-rate loans. This may be particularly true here in Southern California, where unscrupulous lenders may take advantage of our large population of non-English-proficient immigrants. With this move, the federal government has signaled that it takes this issue seriously. We hope that discourages lenders from exploiting people on the basis of race.

Continue reading "Justice Department Opens New Division to Handle Lending Civil Rights Cases" »

As Ontario predatory lending attorneys, we were pleased to see a Dec. 4 article in the New York Times announcing that the federal government is increasing the help provided to homeowners considering reverse mortgages. According to the article, the Federal Housing Administration, which insures reverse mortgages, has increased its standards for required reverse-mortgage counseling since an investigation found numerous counselors omitting important information. In fact, the Government Accountability Office found that none of the 15 counselors its agents visited covered all of the topics required, and that seven failed to discuss alternatives to reverse mortgages. In response, the FHA has required new testing, training and protocols.

In reverse mortgages, borrowers ages 62 and older put a lien on their homes to receive monthly or lump-sum payments out of existing equity. The lender is repaid after the borrower dies, sells the home or permanently moves out. This can provide important income to seniors, but it also raises predatory lending concerns. The FHA's stricter counseling rules require counselors to pass a test used by the AARP to qualify its own counselors, and attend new training sessions every two years. Counselors will also be required to follow a set procedure to determine whether a reverse mortgage would actually help the prospective borrower. If not, they may suggest alternatives such as social service programs, the Times said. And if they cannot determine with confidence that the client fully understands the information, they are required to deny the counseling certificate required for taking out a loan.

Our Fountain Valley predatory lending lawyers applaud the FHA for tightening its standards in this way. Senior citizens are an attractive target for financial fraud because they tend to have high savings and lots of home equity, but may be losing their rationality. Reverse mortgages are also used by seniors who genuinely need the money -- but they are more expensive than traditional mortgages and home equity loans, which raises exploitation concerns. The requirement to speak with an independent counselor before proceeding with a loan is intended to address these concerns, but as the article noted, counselors don't always do the job expected of them. This leaves borrowers unprotected from making a serious, sometimes irreversible financial mistake that can take away their financial security or even their homes.

Continue reading "Federal Housing Administration Sets Stricter Rules for Reverse Mortgage Counselors" »

As Riverside County loan modification attorneys, we keep a close eye on how mortgage-industry regulations -- or the lack of them -- affect ordinary people like our clients. That's why we were pleased to see an Oct. 13 article in the Los Angeles Times saying the governor has signed seven different bills intended to protect consumers when they buy, refinance, sell or pay off their homes. The bills came all at once because the legislative session is ending, prompting lawmakers to send multiple bills to the governor for approval. Among the laws, all of which were sponsored by Democrats, are:

• A bill increasing the penalty for lying on a mortgage application from a misdemeanor to a felony.
• A law requiring more and clearer information for people interested in reverse mortgages, a product allowing homeowners to draw out their equity.
• A law allowing buyers of foreclosed homes to choose their own escrow officers.
• A new registration program for appraisal firms.
• Licensing requirements for organizations that originate residential loans.
• A law requiring lenders to provide mortgage loan documents in the same language they used for verbal negotiations.

The centerpiece of the article, however, was AB 260, authored by Democrat Ted Lieu of Torrance. An important provision of the law is intended to end the practice among mortgage brokers of steering borrowers toward expensive subprime loans even though they qualify for prime loans. This is important because many brokers are actually paid a bonus for directing borrowers into more expensive loans than the cheapest they qualify for. AB 260 also bans negative amortization loans, which are loans with such low minimum payments that the loan balance can actually grow; limits prepayment penalties; and authorizes state officials to enforce federal lending laws. Gov. Schwarzenegger rejected a similar bill from Lieu last year, but changed his mind this year despite strong opposition from mortgage industry groups.

Our Placentia loan modification lawyers are particularly pleased to see the provision relating to mortgage brokers, despite the predictable outcry from the mortgage industry. Consumers without any special knowledge of the mortgage industry may believe that mortgage brokers are working in their best interests. But when brokers' compensation is tied to "upselling" more expensive loans, they are actually encouraged to work against the borrowers' interests -- which would be a conflict in any field. Worse, the upselling encourages brokers to create more subprime and exotic loans, the same loans that are widely believed responsible for the housing crash, particularly in Southern California. We are also very pleased to see the law requiring that mortgage documents' language match the language of the mortgage negotiations, an overdue measure that's nothing but common sense in a state as diverse as California.

Continue reading "Governor Signs Laws Intended to Curb Fraudulent and Unfair Practices in Mortgage Lending" »

As Fontana debt settlement attorneys, we were pleased by recent news that one of the nation's largest banks will drop its mandatory binding arbitration requirement for customers with credit card, bank accounts and certain types of loans. According to the Associated Press, Bank of America dropped its binding arbitration clause from contracts with customers. The move most likely means that the bank will face more lawsuits, because the binding arbitration requirement meant their right to sue was waived. Under it, all disputes had to be heard by arbitrators, who are a bit like private-sector judges.

A Bank of America spokeswoman said the bank made the change after hearing from customers. However, the Associated Press said, the move came after two major groups of arbitrators stopped hearing consumer credit disputes. One of those groups, the National Arbitration Forum, did so after being sued by Minnesota Attorney General Lori Swanson for its ties to credit card companies and collection agencies, which Swanson said was unfair and deceptive to consumers. Congress is also considering banning mandatory binding arbitration clauses in credit card contracts. One expert interviewed in the article said Bank of America's decision was likely caused by these developments.

Mandatory binding arbitration has long been criticized by consumer advocates as unfair and anti-consumer. Arbitrators are supposed to be neutral, but because they often have professional ties to clients, are paid by the large companies involved in their cases, or both, consumer advocates say the deck is typically stacked against consumers. Furthermore, consumers must typically agree to arbitration and sign away their right to sue in the courts as a condition of signing up for a product or service. Some courts have declared this practice "unconscionable" and invalidated the agreements. Nonetheless, Bank of America's decision is good news for consumers. As Ventura debt settlement lawyers, we strongly prefer that credit card companies have access to the courts from the beginning, rather than having to fight an expensive legal battle just for a chance at suing in a fair and open court.

Continue reading "Bank of America Drops Mandatory Arbitration Requirement for Credit Card Customers" »

Our Los Angeles County loan modification lawyers were pleased to see an Associated Press article Aug. 5 about an unusual ally for homeowners struggling with mortgage problems: a Catholic priest. According to the article, the Rev. John Lasseigne got involved in loan modifications after discovering widespread mortgage problems among his flock, a largely blue-collar and Latino population in the San Fernando Valley town of Pacoima. Lasseigne said he was stunned when he realized the extent of the foreclosure crisis, which came to his attention after multiple families in his flock faced losing their homes.

Now, Lasseigne -- a law school graduate -- organizes financial workshops, counsels homeowners and advocates for them with help from nonprofit organizations. He also meets directly with banks to negotiate loan modifications, frequently for people he says were entrapped by companies who took advantage of their limited English and lack of financial sophistication. One homeowner he helped was Juana Rodriguez, who followed bad advice to borrow $272,000, including a down payment, on a townhouse. She had an adjustable-rate mortgage whose interest reached 10.56% just before she lost her job. With help from Lasseigne and others, she was able to change the loan to a 30-year mortgage at 5% fixed interest, and now helps counsel others with similar problems. Lasseigne's work also includes lobbying for stronger laws against predatory lending.

We are delighted to see that an organization with moral authority is advocating on behalf of struggling homeowners, especially those who were misled into loans they couldn't afford. As we have recently written on this blog, the housing downturn is revealing a lot of ugly practices by mortgage industry professionals willing to exploit minorities and immigrants without the financial savvy and English skills necessary to understand their loans. That includes negotiating loans in Spanish but offering loan documents in English; offering a loan at a much higher interest rate than the borrower could qualify for; and targeting minorities with expensive and "exotic" loans. Our Chino loan modification attorneys use evidence of these predatory lending practices as leverage to get clients a fair and sustainable loan workout.

Continue reading "Catholic Priest Helps Pacoima Families Stop Foreclosure and Win Loan Modifications" »

An analysis shows that mortgage loan servicers face multiple lawsuits alleging predatory lending and collection practices, the Associated Press reported Aug. 5. The AP analysis focused on the 38 servicers participating in Making Home Affordable, the federal plan giving servicers financial incentives to approve loan modifications. Most the servicers had been sued for charging illegal fees; forcing homeowners to buy unnecessary insurance; illegal collection practices; misleading customers about the federal program; and foreclosing on homeowners with pending loan modification applications. Some servicers have promised in legal settlements to stop unfair practices, then were sued again multiple times for the same practices.

Loan servicers are go-betweens who process mortgage payments submitted by homeowners on behalf of banks or investors (in securitized mortgages). Before the housing boom, their profits came mostly from a percentage of the loans they serviced. But during the boom, servicers discovered that they could make more money servicing high-risk subprime and exotic loans, because these riskier borrowers generated more late fees, foreclosure fees and negotiation fees. Those same fees are the reason that foreclosure is now more profitable than loan modification for servicers, which critics say is one reason why loan modifications have been so hard for homeowners to obtain.

That was the reason for the federal government to offer financial incentives to servicers under Making Home Affordable. However, the AP reported, some of those servicers are taking federal money while continuing unfair practices that have resulted in multiple lawsuits. Most recently, servicers have been sued for foreclosing despite assuring homeowners that a loan modification was pending, or for misleading borrowers about eligibility for the program. But for years, many servicers have faced lawsuits alleging they charged homeowners unnecessary and illegal fees, including fees for unnecessary services. They have also faced lawsuits under the Fair Debt Collection Practices Act and other laws that protect consumers from illegal and harassing debt collectors.

As Norwalk predatory lending lawyers, we have known for quite a while that loan servicers are not on our clients' side. The loan servicing industry is not tightly regulated, which means the companies have no watchdog making sure they avoid unfair and illegal practices. That means borrowers hurt by these practices have no one to turn to for help but an Rialto predatory lending attorney like us. By that time, homeowners may already have gone into foreclosure or paid thousands of dollars unnecessarily.

Continue reading "Mortgage Servicers Face Lawsuits for Illegal Collection Practices and Loan Modification Delays" »

As loan modification lawyers in Orange County, we frequently represent clients whose first language is not English, especially Spanish-speakers. In some of these clients' cases, we discover that they were given mortgage loan documents in English, despite conducting the entire rest of the transaction, including loan negotiations, in their native language. This is illegal under California's Foreign Language Contract Act. Furthermore, in many of these cases, switching the language at contract time allows the lender to sneak in contract provisions different from what the parties agreed to, or that were not discussed, in violation of the federal Truth in Lending Act and other consumer protection laws.

Howard | Nassiri LLP has already filed several lawsuits on behalf of clients in this situation, as have many of our colleagues. One of our colleagues recently reported a victory in such a case: A judge stopped a foreclosure on a San Diego County homeowner who was a victim of these bait-and-switch tactics. That client alleged that he was given loan documents in English after Spanish-language refinancing negotiations, but also that he was granted an adjustable-rate mortgage with an interest rate above 8% -- not the 5.94% fixed-rate mortgage he agreed to. He was never given a copy of these documents in Spanish. When the interest rate on this loan adjusted upward twice, the buyer could no longer make his payments. After consulting an Escondido predatory lending lawyer, he filed a lawsuit alleging illegal practices by his mortgage lender and won a preliminary injunction stopping the foreclosure.

This may be a nationwide problem. According to a recent article in the Orlando Sentinel, Latinos in Central Florida had an above-average number of the region's subprime and adjustable-rate mortgages. Latinos also had a disproportionate share of the highest interest rates. Those findings are reflected in a recent study by the Pew Hispanic Center showing that Latinos (and African Americans) were more than twice as likely as whites to get higher-priced loans. While the study's summary did not address the role of language, common sense, anecdotal evidence and our experience as Buena Park loan modification lawyers all suggest that when borrowers don't understand English well, lenders have an opportunity to mislead and exploit them using English-only documents -- which is precisely why the Foreign Language Contract Act exists.

Continue reading "Lenders Face Lawsuits From Spanish-Speakers Illegally Provided English-Only Loan Documents" »