Homeowner Attorney Describing Mortgage Servicers' Loan Modification Practices: "It Was Like They Had The Fax Machine Hooked Up To A Shredder"

In Los Angeles, California, the Los Angeles Times reports:

• Financially strapped homeowners struggling to obtain mortgage modifications are taking their frustrations to court, accusing banks and loan servicers of misleading them or breaking promises to help them hold on to their homes. The lawsuits go to what U.S. Housing and Urban Development Secretary Shaun Donovan has described as the heart of the government's anti-foreclosure efforts: ensuring that banks work in good faith from the start to help borrowers.

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• A theme of the lawsuits filed by homeowners is that banks have denied permanent modifications to borrowers who make their payments on time and otherwise hold up their end of the agreements. [...] "It was just 'extend and pretend,'" said [one homeowner's] lawyer, Anthony Lanza of Irvine. "And it was like they had the fax machine hooked up to a shredder."

• Anaheim lawyer Damian Nassiri said his firm had filed about 100 lawsuits against mortgage lenders since 2007. Earlier suits alleged that lenders misrepresented terms of mortgages or engaged in other shady practices to foist abusive loans on borrowers. Most of his firm's suits now accuse lenders of dealing in bad faith with borrowers(1) who have become delinquent on loans. Worse, Nassiri said, in cases where foreclosure was inevitable, banks misled borrowers into accepting trial loan modifications. The intent, he claimed, was "to get some kind of money out of them" while stalling actions to seize the homes.

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• Boston consumer lawyer Gary Klein, a longtime antagonist of mortgage lenders, has filed suits seeking class-action status against the top three loan servicers — Bank of America Corp., Wells Fargo & Co. and JPMorgan Chase & Co. — and others. A multidistrict panel of federal judges on Oct. 8 consolidated eight such suits, including two from California, for pretrial proceedings in federal court in Boston.

For more, see Lawsuits accuse lenders of sabotaging mortgage modifications (More borrowers are taking banks and loan servicers to court, alleging they were misled when they tried to renegotiate the terms of their loans).

(1) A California appeals court recently ruled that a foreclosing lender can be held to its loan modification promises in certain cases, even absent a contractual obligation to do so. See Court: "Promissory Estoppel" Could Make Lender’s Verbal Agreement To Halt F'closure Sale Enforceable, Even Absent Consideration For Promise To Stall.