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Modification Mess…and the Government’s Inaction

July 6, 2013 2 comments

It is common knowledge that now Bank of America’s own employees have stated the bank would have rather foreclosed or offered higher interest rate “in house” alternatives instead of modifying the loans under the Home Affordable Modification Program and directed them to make sure that goal was achieved.  Given that, would there be a light at the end of the tunnel?  Are the Congressional demands for investigation worth anything?

No.  The government knew that the servicers were engaged in egregious behavior.   As reported over and over again on March of 2013, before the Senate Judiciary Committee, Attorney General Holder stated “I am concerned that the size of some of these institutions becomes so large that it does become difficult to prosecute them … When we are hit with indications that if you do prosecute, if you do bring a criminal charge it will have a negative impact on the national economy, perhaps world economy, that is a function of the fact that some of these institutions have become too large. It has an inhibiting impact on our ability to bring resolutions that I think would be more appropriate.”  The Home Affordable Modification Program (HAMP)’s own page administered by Fannie Mae, acknowledges that servicers told homeowners to stop payment.

When HAMP, once sold to homeowners as a promise of help was revamped, they had procedures in place to deal with homeowners who were told to stop making mortgage payments by the banks in order to qualify for a modification.  Combine that with the BOA affidavits which say there was never an intent to modify and the end result is thousands of foreclosure cases pending, with homeowners willing to pay their mortgages, who were prevented from doing so by the banks.  And to make it worse, they have been drug through years and years of modification attempts where their payments were not accepted, and the bank now has the audacity to come to court and ask for all the back payments they would not accept and attorney’s fees for the bank bringing a foreclosure.  That is the judgment the bank is asking for.  It is extortion at an extreme that is incredible.

One would think this is so horrific – “homeowners told to stop payment for a modification?” that even given the legislative and executive stance (or lack thereof) on the issue, that the judiciary would right this wrong.

Wrong.  The judiciary has consistently held that homeowners are not “third-party beneficiaries” under any of these agreements, new legislation, consent orders, judgments, etc.  Therefore, they have no right to raise the argument, and they have no right to a loan modification (although tort and contract law are still alive and well – just make sure you aren’t suing to get a modification).  So what was HAMP passed for exactly?

Given that when the program was revamped, the government knew of bank errors that were as huge as the “stop paying” deal, it appears HAMP was passed to do absolutely nothing.  The government will shell out billions – if not trillions – to banks pretending to consider files for HAMP, but they will do nothing when a bank accepts that money and doesn’t follow the rules.  The only thing the program managed to do is lure people into default, give them false hope, and make sure the foreclosure goes through.  Why would they not correct the errors of the banks already affected when they revamped the program?  Why wouldn’t they have made it known that thousands of homeowners were sitting in limbo on their home in Court all because a bank caused a default?

Go back to Holder’s comments.  The end result is too big, the end result is too much, the end result hurts the economy.  To truly prosecute them runs way beyond the HAMP scandal.  Were the banks considering loans that they even had authority to consider?  That they had the authority to modify?  Did the loan really belong to someone else?  Why are multiple lenders suing a single homeowner for foreclosure over the same loan?  How many foreclosure mediations were successful?  Mediation rules about the person being there required to have the authority to settle?  How often is Fannie or Freddie at a mediation?

The banks cutting corners all these years has created a mess that the government will not clean up, any willingness to do so stops every time they hear the word “Wall Street”.  So for everyone who has seen “A Civil Action” that remembers the fight John Travolta (playing Jan Schlichtmann) had on his hands that was ultimately lost, until the very end when the Environmental Protection Agency packet is delivered to Robert Duvall (as the Defense attorney for the corporation) and had that “ooooooooooohhhhh” moment.  That the “the government is going to help so it is not over” moment.  Don’t hold your breath this time.

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Bank Induced Defaults….and What the Government Knew

July 3, 2013 20 comments

For so long, every time a homeowner was told “You need a modification.  However, we can’t help you get one because you are current on your payments.  You need to get behind payments to show us a hardship so we can modify your loan.” and the homeowner thought they were being considered for HAMP it was a lie.  HAMP didn’t require homeowners to miss payments.

From the HAMP page “Administrative Website for Servicers”, “Administered by Fannie Mae” there is a document called the “HAMP Resolution Matrix” apparently for servicers to follow.

In paragraph 26 it states:  “Homeowner Advised to Miss Payment (1) Confirm with homeowner (or homeowner advocate) that the property is the homeowner’s principal residence. (a) If no, explain that a homeowner can never be required to miss a payment however, under HAMP Tier 2 there is no risk of imminent default review when the mortgage loan is secured by a rental property. Explain the HAMP Tier 2 eligibility criteria and close case. (b) If yes, advise homeowner (or homeowner advocate) that they are NOT required to miss a payment. (Advise homeowner that they will be reviewed against imminent default criteria for principal residence.)(3) Obtain evidence that homeowner was advised to miss payment(s) including name and contact phone number of servicer’s representative.(4) Confirm with servicer. (a) If servicer acknowledges error, require servicer to communicate correct status to homeowner (or homeowner advocate). (b) If servicer denies allegation, communicate misunderstanding to homeowner (or homeowner advocate), discuss next required actions before closing case.”

https://www.hmpadmin.com/portal/programs/docs/hamp_servicer/escalated_case_docs/hampresolutionmatrix.pdf

How dare they?  “If servicer denies allegation communicate misunderstanding to homeowner…”?  Are you kidding?  Forcing a homeowner into default by misrepresenting the HAMP requirements and then dragging them through a fraudulent modification scheme to collect government funds and foreclose instead of modifying (as seen in the BOA affidavits) to profit.  And relying on the servicer to admit or deny it?  That is a “misunderstanding” to communicate to a homeowner?

NO – it is estoppel.  PERIOD.  And court decisions will show you that the court has the power to put homeowners in situations like this right back to where they were when the bank uttered those “stop payment” words.  If they are out arrearages and fees, it is their own doing.  Recently I encountered a case, not on “stop payment” grounds but on the grounds that the homeowner made the trial payments and the bank sent them back.  And the Judge didn’t like that so much, so the bank will answer for their own causing of arrearages and fees, along with sanctions and attorney’s fees because had it not been for their behavior the client would not have had to hire me.

Bank of America contracted out a lot of their HAMP work to third party vendors such as Urban Lending Solutions.  The problem?  They instructed the third party vendors on what to do to violate what they took government money to do.  Those vendors, along with Bank of America induced defaults, and then thwarted the modification process in a fraudulent scheme.   The employee affidavits show just as much.  Other banks did just the same, and the defaults were their own doing.

Let’s get real clear.  What this document labels a “misunderstanding” is no misunderstanding at all.  In law, we call it fraud.