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Homeowners Fighting Back, and when the Judicial System actually lets them show their Evidence…Winning

December 12, 2013 1 comment

A Judge in Florida, whom I have a tremendous amount of respect for, made quite a ruling in November.  For years now homeowners have complained of rising payments on fixed-rate notes that were not explained to them by the banks other than an “escrow shortage” that couldn’t be accounted for.  For years now homeowners have claimed they were told to stop paying, by that very bank, to get a modification to fix the “escrow shortage” problem.   A modification the bank had no intention on giving, and developed internal controls to prevent.  Homeowners who claimed they tried to make the payments they contracted for and had payments sent back, all while the banksters convinced the legislative and judicial branches that those homeowners were just wanting to live “rent free” and not paying anything.  They didn’t bother to hold their returned checks in their hands like some of us have had to. 

When your payment rises over $1,000 a month and there really is no explanation for “mystery fees” or forced place insurance policies that are completely insane price-wise, then it’s time to speak up.  I’ve even seen earthquake insurance being force-placed on a North Florida panhandle resident (the USGS disagrees with that possibility however).  Finally a Judge who seems to understand that BOA deliberately inflated payments with no explanation and that force placed insurance and “mystery” fees are deliberate.  If you are in foreclosure because your payment “mysteriously” grew to where you couldn’t afford it, and then perhaps told to stop paying so a modification that would never happen would “fix” it, maybe it wasn’t a mistake.  Maybe it was a scheme to get those overpriced loans off the books that the banks should have never made in the first place and later realized such.  It’s a different world when a court of law actually allows you to present your evidence isn’t it?  When you, as a homeowner, are actually allowed due process?  Wow.  I can only imagine how much paperwork the bank threw at the homeowner to fight that in court.  Glad to see justice prevailed.  2013-11-21-085932-3

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“We need you to show a hardship. However, we see you are current on your mortgage, and that shows you do not need a modification”

October 3, 2013 1 comment

Now in 2013, it is safe to look back and realize that when Bank of America took over Countrywide’s loans (allegedly) that they inherited a mess.  We realized that years later when we learned of Countrywide schemes that are now the subject of litigation.  Schemes such as the “hustle” would drown homeowners in a matter of years, while the bank made sure enough time had gone by to present a statute of limitations argument against homeowner claims.

Sickening.  We know there was fraud at the inception of these loans, and borrowers were not getting the deal they thought they were, and we know there is clearly fraud at the end, as over and over we see the wrong bank in court.  What about in between?  Have we stopped to think about what Bank of America did when they realized what they had purchased (allegedly)?

What did they do?  They had a systematic plan from the beginning. They knew that adjustable rate mortgages would go up to the point where the homeowner would need help and call to inquire about a modification.  They knew Countrywide had given plenty of those type of loans at the height of the market.

The conventional loans were a bigger problem however.  If the payment remained the same then this underwater loan with a high risk of default would stay on their books, and no one wanted that.  Too high of a risk.  So the conventional loans began to see an “escrow shortage”.  Now granted escrow accounts fluctuate, and payments go up if taxes go up or if insurance does.  How does Bank of America explain an escrow shortage of $12,000 in a little over a year?  Would taxes and insurance have risen to the point of an extra $900 a month?

We’ve seen forced placed insurance that is egregious.  I’ve personally seen earthquake insurance being escrowed against a homeowner in North Florida.  A check of the USGS will show you there are no fault lines here, however.  We’ve seen escrow shortages that truly don’t add up.  Is that how Bank of America and the other big four banks decided to get rid of the conventional loans that they really didn’t want?

They knew the adjustable rate borrowers would call, and a conventional borrower would too if escrow caused their payment to act like an adjustable rate.  And that is where both types of borrowers were given the same line:  “We need you to show a hardship.  However, we see you are current on your mortgage, and that shows you do not need a modification”.  And both borrowers would fall for it understandably.  The person who alleges in court they are the holder of the contract (mortgage) just changed the terms in a big way.  Fannie Mae’s new guidelines for servicers even show they are now aware of this.

Now take the Bank of America affidavits and do the math.  1) No intention of qualifying the majority of applications for HAMP; 2) giving incentives to employees for putting homes into foreclosure or “in-house” modifications because they were more profitable and “in-house” modifications had a higher interest rate than HAMP; 3) HAMP didn’t require a borrower to stop payment for a modification but ironically a borrower is required to be 60-days behind for the “in-house” modification that Bank of America preferred as stated by their employees.

Thus, the borrower is lured into default and into Bank of America’s trap.  The never-ending modification cycle with no intention of giving one.  To the homeowner, it is losing a home when they truly did nothing but follow the bank’s instructions, To the bank, it is an improved portfolio.  Which should our justice system protect?

BOA Defeats Class Certification in HAMP Case…is it Over for Homeowners? Or Just Beginning?

September 5, 2013 3 comments

It’s no secret that eyes watching the foreclosure crisis have been watching the class action against Bank of America (BOA) in Massachusetts for some time now.  Today, the Court declined to certify the class, and what that means to us is not what many may think.

It does not mean that the Court ruled the homeowners claims are without merit.  It means that the Court said the homeowners claims do not meet the class action criteria.  Long story short the claims have to contain numerosity, commonality, typicality, and adequacy.  I used to practice in class actions and I can tell you the courts have gotten extremely stringent on what they allow to become certified class-wise.  Do I agree that the HAMP class didn’t meet the criteria?  No.  But these days it would take 22 sets of identical twins, all suffering the same injury at the same time by the same person under the same weather conditions to potentially meet it.  If one-half the sets of twins are under partly cloudy skies and the others under mostly cloudy skies then forget it.  That is how bad it has gotten.  And the famous Walmart case didn’t help things.

Class actions have their pros and cons always.  The upside is usually that people who cannot afford representation can be represented, the cases are massive and we obtain lots of information that we normally would not get from the other side.  The down side is if you are just part of a class you can end up with a lot less than you think.  I’ve been the associate calling people to tell them all they were getting was a magazine subscription for a year after they sued the company.  Not pretty.

But all hope is not lost.  What BOA has been relying on is that there is no private right of action for a homeowner to sue under HAMP, that HAMP was between them and the government, and the homeowner is not a third party beneficiary entitled to sue under it.  But that isn’t what the Court said, and basically we are left with a ruling that says the claims cannot be resolved as a class but can be resolved individually.

The Judge in the HAMP stated that the “Plaintiffs have plausibly alleged that Bank of America utterly failed to administer its HAMP modifications in a timely and efficient way; that in many cases it lost documents, or pretended it had not received them, or arbitrarily denied permanent modifications…Plaintiffs’ claims may well be meritorious….”

So before BOA gets too excited, I’d think long and hard about that.  Individual cases before juries?  Some with punitive damage claims?  Ouch.  Jurors are often more than ready to teach a big corporation a lesson.  Imagine tens of thousands of those cases.  I’m seeing more and more every day.

I think it is safe to say we have all learned a lot from this case.  From the BOA whistleblower affidavits to the Court’s ruling, the information will be used in courtrooms nationwide.  We’ve already seen Judges forcing modifications.  After how much money BOA took from the government and what their own employees state they did with that money while homeowners were suffering damages as a result, there is little doubt this has only just begun.

http://finance.yahoo.com/news/bank-america-defeats-class-certification-140828605.html

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.

The “In-House” Modification – What the BOA Declarations Point to

June 26, 2013 4 comments

Back in March, I spoke at the House Justice Appropriations Committee regarding Florida House Bill 87 which has since passed and been signed into law.  Here is that video and I start at 51:27 into it. http://thefloridachannel.org/video/3613-house-justice-appropriations-subcommittee/  You will hear Representative Mayfield (Vero Beach) question me afterwards about the fact that the banks told homeowners to “stop payment” in order to show hardship and a need for help in order to get a loan modification.  You will hear her say that it wasn’t a requirement of HAMP that the homeowner stop paying.

The fact is that Bank of America frequently (along with other banks) told homeowners this.  The script of “you have to be so far behind in order for us to help you” was commonplace, and led many, many homeowners into default and into a fraudulent modification scheme as we have now seen from the BOA declarations.

Now keep in mind if the homeowner was not required to “stop payment” in order to qualify for HAMP, but they were required to “stop payment” for the “in-house” modifications that presents an entirely different issue. Some of the declarations from the BOA employees illustrate that homeowners who may have qualified for HAMP were often given “in-house” modifications instead because BOA would profit off the higher interest rate for an “in-house” modification than they would off of the lower HAMP interest rate.

And BOA, on their own site, requires a homeowner to be at least 60 days behind before they can be helped with an “in-house” modification.  http://homeloanhelp.bankofamerica.com/en/bank-of-america-home-loan-modification.html

So at the outset this proves that callers BOA spoke with were not being considered for HAMP or they would not have been asked to “stop payment”.  They were being considered for an “in-house” modification from the start.  And this lines up with their own employee declarations that “in-house” modifications and foreclosures were preferred over HAMP modifications.

But weren’t they required to consider the homeowner for HAMP first?  Is that not why they were given money by the government?

The “stop payment” script points directly to what the employees are saying.  HAMP didn’t require a homeowner to stop payment, but some of their “in-house” programs did.  And if a homeowner was told to “stop payment” then BOA wasn’t considering anyone for HAMP as they alleged.  They were already targeting the homeowner for foreclosure or a higher interest rate alternative.

The Deliberate Default…What the BOA Declarations are Missing

June 19, 2013 4 comments

Danielle Kelley, Esq.

The propaganda from the banks has been far-reaching.   Even if they devised a scheme to fraudulently throw away a homeowner’s hope at a modification, they are still pursuing the “deadbeat” homeowner argument.  The essence is that the homeowner was not paying, so it doesn’t matter what happened after the homeowner defaulted.

That “deadbeat” argument is a myth.  Whenever I interview a client, I am careful not to lead them.  I simply ask the question, “What caused you to go into default?”.  Nine times out of ten I will hear, “The bank said I had to be so many months behind to help me.”  Or in the alternative, “My payments kept increasing and I didn’t know why.  I called the bank to ask and they told me that unless I was behind in payments they couldn’t help.”  After that the homeowner is left at the mercy of bank who is pretending to consider them for a modification, but yet fraudulently thwarting that process.

The first answer is the “stop payment” answer, which I have discussed in a previous blog.  The second answer is now what I call the “bait and switch” on escrow accounts.  Homeowners who pay monthly to the bank, unless agreed otherwise, expect the bank to take part of that payment and pay the taxes and insurance on the property with it.  If the bank does not, the escrow account goes into the negative and the homeowner has to make up the difference in the payment.  It is called an “escrow shortage”.  And no one is immune, not even those who pay every month, on time, and would not dare to consider themselves as people who would fall into foreclosure.

I have seen it time and again.  In one case, BOA inflated the escrow account $12,000 which resulted in a payment of $900 more per month.  That very case would become my own, with my father on our Note.  When he called to ask “why” the payments were going up he was given the script “To get that $900 off you need help.  We can’t help you because you are current on your payments.  You need to show us you need our help by making a partial payment.”  Later when the partial payment was not applied, BOA stated that to be considered for a modification we had to stop paying altogether.  Left with four years of modification attempts in bad faith, we were requested by BOA (in order to keep the modification file open) to record a quit claim deed to myself and my husband which came with a high price for documentary stamps.  We were told to submit letters to the bank, and then told we could not mention the “stop payment” language in them.  The letters had to be all about how we were suffering a “hardship” with no blame pointed towards the bank.  The reasoning?  They had to get Freddie Mac, the loan “owner”, to approve a modification, and Freddie wouldn’t dare approve a modification if BOA had done something wrong.  To this day, BOA wants to pursue a foreclosure, yet they have absolutely no explanation for what inflated the escrow account to begin with.

In another case, unrelated to me, other than my representation of my client, the bank stopped paying the insurance in full.  The homeowner had no idea that the insurance policy had lapsed until a year later when they were asked to make up for an escrow deficiency.  At a payment climbing hundreds of dollars more than they ever agreed to pay, when they had been making their payments in full and counting on the bank, per the mortgage contract, to pay the insurance, they were now faced with payments they should have never been liable for.  They were not a “deadbeat”.  They were paying in full all along.

Then the truth is brought to light, and the deadbeat argument fails because we learn that no one, not one person, is immune from this.  If a homeowner is making monthly payments and depending on a bank to pay the taxes and insurance, they are at the mercy of the bank. And often to a bank like BOA who is seeking to foreclose loans to get them off of their books, as their own employee declarations filed in the HAMP case in Massachusetts show us.

They have no incentive not to deliberately inflate a homeowner’s escrow account and cause the payment to rise to the point where the homeowner calls them and eventually ends up in default.  Their own employees have stated that they profit from foreclosures over modifications.

So before the argument is bought that the homeowner in foreclosure is a “deadbeat”, know this much, the bank can cause you to become a “deadbeat” too, even if every payment is made in full and right on time.

The Buck Didn’t Stop There…What the BOA Declarations are Missing

June 18, 2013 15 comments

Danielle Kelley, Esq.

After the shock (or lack thereof) and horror of reading the BOA employee affidavits, we are left with the bank argument that “the homeowner was already in default.”  What has not been the subject of suit yet, and what we have not heard about, is how they got there.

For years, attorneys have heard “the last thing the bank wants is a foreclosure” or “the last thing the bank wants is another house”.  Yet, the BOA affidavits paint a different picture.  Rewards and bonuses for putting potentially eligible HAMP files into foreclosure?  Why would the bank want a foreclosure?

Simple terms – think of a mortgage as a car. If you wreck the car you call your insurance carrier and have to justify it cause your insurance will go up. Same with modifying a mortgage. The bank has to justify to the investors why they have a bad loan on the books and admit it is their fault. But if your car gets hit by someone else you get to call the insurance carrier and collect money because you’ve been damaged. When the bank can claim foreclosure they can say they have been harmed by the homeowner and get the payout from the insurance carrier.  There is much more to it, but that is the gist of how it works.

This points to a system where the banks want to foreclose.  Keep in mind that BOA allegedly bought “bad” loans from Countrywide.  What do you do with so many bad loans on the books?  Easy, you put people into default, and then devise a fraudulent modification scheme to make sure the arrears are racking up.

Many of my clients faced “escrow shortages” on fixed rate notes.  When their payment kept climbing higher, they called the bank to ask “why”.  BOA was famous for contracting out their modification work to other vendors.  What the BOA employees told those companies to say to homeowners and what BOA would tell their own employees to tell homeowners is where it all begins.

“We see you are current on your mortgage.  You don’t need a modification.”

Faced with this the homeowner again asks “why”, and the answer is always the same:

“You need a modification.  You have to be so far behind for us to help you.  You are not showing us you need our help if you are current on your payments.  You have to show a hardship or an inability to pay.  You need to stop paying”

The homeowner is led to believe they will receive a modification if they stop payment, and any payments made were sent back to them during the modification process.  Nine months to a year later the modification is declined and the homeowner has to pay back all the arrears to resume payments on the loan.  Thus, they are left in a never ending modification cycle with BOA. And the “stop payment” requirement was not part of HAMP, so BOA had to be doing it geared toward foreclosure or the higher interest rate “in-house” modifications as their own employees state they were.

It is hard for many to believe that the bank would not want payments, but the BOA affidavits tell us why – they wanted foreclosures.  Still for many, it is easier to believe that the bank would want the monthly payments.  As easy as it once was for us to believe that BOA did not get all the financial paperwork and trial payments the homeowners were sending in because they were just such a large corporation that things would get lost.  Now we know better.

Dealing with what happened to the homeowners that were in modification review is only one piece of the puzzle.  Without looking at what put them there to begin with, we are missing the bigger picture.  Homeowners, current on payments, rightfully in their homes, were lured into a trap, and had they not been, no modification review would be needed.