Archive for May, 2012

The Loan Modification Game: Square Pegs, Round Holes

The Modification Game:  Square Pegs, Round Holes

          So many homeowners are in what feels like no-win situations at the moment when it comes to modifications.  In the beginning of the modification, the homeowner is forced to show “hardship” to the lender.  For some the “hardship” is over years later.  Some homeowners have found employment and merely want to make their mortgage payment, but they can’t.  Once they try they are told by the bank that they owe so much in arrears that they have to pay those before a payment can be made.  Most people today don’t have $177,000 lying around, so the bank starts the pressure for a short sale or deed in lieu of foreclosure where you basically give the house back.

          I’ve watched homeowners struggle through the process.  I’ve seen them submit documents dozens of times only to have them lost, have to resubmit, and then end up declined for a modification anyway.  If modifications were the goal of the government, then why are so few of them going through?

          If you seek a modification, you soon find out that you have a new part time job.  For years, people battled dealing with different representatives on the phone in different states only to be told one thing by one person and another by another, and to have to resubmit documents to various places.

          The Office of the Comptroller of the Currency (OCC) mandated to the servicers that they develop a “single point of contact” for people in these situations.  Taken from the following article on their page, “The enforcement actions require the servicers to ensure that foreclosures are not pursued once a mortgage has been approved for modification and to establish a single point of contact for borrowers throughout the loan modification and foreclosure processes.”

          How has that single point of contact helped?  The problem is that they cannot change the guidelines that bind loan modifications.  Many homeowners are told they do not qualify for the HAMP program (and very few will ever), but are not told that they can qualify for an “in-house” modification by the bank.  Yes, it is not over, not even with the big “No” to HAMP.

          Often the servicer you are writing to such as Bank of America or Chase has to get Freddie Mac or Fannie Mae’s approval for the loan modification.  Keep in mind the government bailed out these entities. This is the very problem with homeowners unaware of who actually holds their note.  I have seen servicers work out modifications only to have Freddie Mac file for foreclosure.  If you don’t fit, it may be the guidelines of these very entities keeping you out.  Always ask for an “in-house” modification from the servicer themselves.  The problem is resubmitting everything over and over again.

          I often have my clients send me the essential documents they will ask for and then just mail a current bank statement or tax filing to alleviate the pressure.  What people and unfortunately our government do not understand is the toll and emotional distress of submitting the same documents over the course of years.  Most of them are doing it because they were told to stop paying in order to obtain a loan modification, and feel as if they submit the documents they will be approved.

          That was the feeling from the beginning:  all homes would be modified and saved.  Years later we see the bank pursuing other “alternatives” to loan modifications with a homeowner still in disbelief because they jumped through every hoop they were told to, and no real understanding of what happened or went wrong.

          The problem was the servicer never told them that even if they jumped how narrow the hoop would be, and getting stuck in what seems a never ending process would leave them trapped.   Some tips to help:

1)   Keep asking and don’t give up.  If you are declined ask to be reconsidered again.

2)   Report any problems that you feel are unethical to your state Attorney General or the federal government.  Check out sites such as

3)   Ask for an “in-house” modification consideration if you are declined for the government programs.

4)   Keep sending in whatever they ask (watching what you admit to in letters of course).  Nine times out of ten they complain at mediation they cannot modify a loan because they do not have enough documentation.  Give them the kitchen sink so to speak.  Don’t give them an inch to come up with a reason to say “no” or they will.

5)   Watch out for insane deadlines.  Often you will get a request in the mail for documents that will be due four days later.  Do not be afraid to call and ask for an extension and tell them their deadline is unreasonable.  Have access to a fax machine and their number so you don’t waste mail-in time.  Virtual fax services online are cheap and run around $7-9 dollars a month.

6)   Consult an attorney.  An attorney can help send certain letters that will protect your rights and can attempt to find who actually holds your note and what the true basis for a loan modification denial is.


Homeowners Rights: Where is FDUTPA?

May 22, 2012 2 comments

            As an attorney who used to practice in class action litigation under the Florida Deceptive and Unfair Trade Practice Act (FDUTPA), and that now works in foreclosure defense, I find myself in awe of the similarities between these areas of law.

            More surprisingly is the lack of education on the subject and what violations homeowners are being subjected to.  I remember studying the deceptive practices of corporations through advertising, trade practices, and the like.  How are the lenders any different?

            When the states settled with the major lenders a while back, one state I noticed pulled out of the settlement and filed suit on its own.  The Massachusetts Attorney General, in her Complaint, alleges many of these deceptive trade practices.

            One would think that the amount of false advertising sent to homeowners from lenders promising if they did this or that, then they could keep their home would subject them to liability under the act as other advertisements in other contexts have done in the past, but in actuality it goes much further.

            During a seminar at the Mayor’s Summit hosted by the City of Tallahassee, I asked a room full of people how many of them were told to stop paying on their mortgage in order to obtain a loan modification.  What that means is that they were current on their payments, but when they asked the lender for a modification the lender refused unless they were behind (sometimes as much as three months) on payments or in default of their mortgage.  Over half the room raised their hand.

            And now they are in foreclosure because they did what the lender told them to do?  Ultimately the lender did not modify anything, but by that point the homeowner was so behind in payments that they could not catch up, and if they sent a payment in for less than the full amount (usually tens of thousands of dollars) then the lender sent the payment back.

            A body of caselaw is at work though that may provide some relief.  According to the First District Court of Appeal in Florida, A waiver of the right to foreclose occurs when the lender misleads the homeowner or some other legitimate misunderstanding occurs which causes the homeowner to not perform according to the terms of the contract. Parker v. Dinsmore Co., 443 So.2d 356 (Fla. 1st DCA 1983).

            What the lender does in return is run into Court and screams that the Mortgage Contract states that any modifications to it must be in writing.  Sidenote to the information provided to homeowners:  when they are told to stop paying it is almost 99.9% of the time done over the phone and never in writing.  That way the lender can go into Court with a “their word against ours” theory, and cite what lawyers call the Parol Evidence Rule meaning it must be in writing.

            Finally, a recent opinion is pointing us in a different direction.  The homeowner may be able to raise that defense or counterclaim regardless of whether there is a writing or not, at least according to Roach v. Totalbank, 4D10-3641, 2012 WL 1414275 (Fla. 4th DCA 2012)(citing Pavolini v. Williams, 915 So.2d 251, 253-254 (Fla. 5th DCA 2005)(The lender argues the parol evidence rule and statute of frauds prohibit the guarantors from obtaining an extension of time by oral agreement. However, “[t]he parol evidence rule applies to verbal agreements between the parties to a written contract which are made before or at the time of execution of the contract. It does not apply to the admission of subsequent oral agreements that alter, modify, or change the former existing agreement between the parties.” Id. at 254 (emphasis added).”

            Future, oral agreements that modify the contract?  Such as being told to stop paying to obtain a modification?  Undoubtedly that is a deceptive and unfair trade practice that the lender should be held accountable for.  So homeowners who want to back down because it is their word against the lender should think again, and remember their words are just as powerful.  Actual damages will be needed, but with what the lenders have been putting the homeowners through they wouldn’t be as hard to prove as many might think.

Lenders’ Rights: An Attack on Our Property and Due Process Rights and Dismantling the System of Checks and Balances

May 21, 2012 2 comments

Upon reading the following article, I became extremely disturbed and suspicious of all the “judicial states” will do this or that talk. It is almost as if the media is targeting judicial foreclosure states and promoting other means of ending foreclosure situations at the behest of the lenders.

My question is what happened to our desire for Due Process? Our desire for Checks and Balances? Right now many states are what are called Judicial Foreclosure States, meaning that the lender cannot foreclose without filing suit, and the homeowner is given a chance to present defenses to that suit. And in our American historical system of justice that is supposed to be a bad thing now?

Lenders are willing now to cut checks to have homeowners move and relocate. Does anyone want to know why? Could it be perhaps that they have a share of blame in the crash of the market? Sure people like to talk about the person not paying the mortgage, and purchasing a home they couldn’t afford, but who lent them the money? Let’s get serious. In 2007, my yorkie could have gotten approved for a $500,000 loan. And has anyone asked a person in foreclosure what happens if they make a mortgage payment while in the middle of the suit? The bank sends the payment back. They have to, or else they waive acceleration which is required for foreclosure.

Lately, it seems so easy for people to throw around terms like “relocating” and “short sale”. What about the homeowner that has lived in their home 20 years, raised their children there, and fallen on hard times? Is it that easy for them?  Lenders are smart, and they lure them in with talk of avoiding a deficiency judgment, only to not tell them that they are waiving their rights to sue the lender in return.  Is that justice?

Our government bailed out Fannie Mae and Freddie Mac and told them to help homeowners. The truth is that the way they are to help homeowners is to cram a multi-billion dollar crisis affecting millions through a 2% window. It won’t work. Dictation from the government rarely does.

Anyone familiar with the documents these lenders use to foreclose on people knows that if any case needs checks and balances it is these cases. Problems abound. Normally the person suing for foreclosure isn’t even holding the mortgage and note. That means they don’t have the right to sue. If they somehow pass that then they have other problems with the Note or documents that they try to cover up. It is fraud. Do we expect the government to be able to fix that? Rewrite the past?

No, what will fix that is one case at a time in a courtroom with a homeowner who is able to tell their side of the story, and with an attorney who will hold the bank accountable for the documents they have filed to take someone’s home. Not someone’s car, someone’s HOME.

If the goal was to stop or slow litigation in “judicial” states, then I have news that might be hard to take. Stopping it now will only make it worse in the future. Lenders are wrongfully telling people not to pay on their homes in order to get a loan modification. Recent caselaw is saying that this is enforceable against them. What this means is that the homeowner who did what they were told is in foreclosure because of the bank itself. Now lenders have caught on and have stopped telling people that. Instead, applying for a loan modification affects your credit. Well it affected the credit of a lot of people who stopped paying when they were told to also.

Not to mention the future surge of litigation that will arise over titles that are not clear because of wrongful foreclosures. The lenders, realtors, and everyone who participated down to the title companies (that the lenders love to pick in foreclosure cases along with appraisers) bear liability.

Wouldn’t it be easier to give the homeowner a fair shot now to present their case?

When the market crashed, we all knew there would be a price to pay. Destroying our historical principles of justice now in these types of cases in order to force the homeowner to take the entire burden, without the bank having to prove their own case, is absurd, and stands against our history of property and due process rights. Allowing someone to come into Court with documents that are false to take such a precious dream away from someone to many is akin to allowing the same to take someone’s freedom. Would we allow that in such circumstances? Would we?

The article said, “Rob Pitingolo, research assistant with the Urban Institute, emphasized that it’s not the judicial process itself that is the problem, and explained in states such as Florida, the reason why there’s a backlog of foreclosures is because of a lack of resources.”

If resources are needed to protect our system of justice, then let’s get them. If we can bail out entities that claim they will help homeowners but later refuse to do so, we can surely make sure that we have enough judicial resources to ensure fairness and justice in each case one at a time.

Now isn’t the time for a big federal government to promise everyone the moon. Now is the time to get grassroots about it all. This is affecting every neighborhood, every community. One homeowner, one courtroom, one case at a time. And the Constitution still applies to them all.