Nevada Lawsuit Alleges Lender Used Deceptive & Unfair Practices, Lacked Good Faith When Making Unsustainable Home Loans; Seeks Class Action Status

In Las Vegas, Nevada, KLAS-TV Channel 8 reports:

• The foreclosure crisis is far from over in southern Nevada. Now a group of homeowners are fighting back against one lender. They've filed a class action lawsuit to stop foreclosures and to get restitution for those who've already lost their homes. They are going after California's Indymac, one of the first banks to fail during the meltdown.

• The lawsuit claims the lender did not deal in good faith with their borrowers and used deceptive and unfair practices. "They focused in on minority groups and attempted to sell them on loans that they knew that those borrowers could never ever satisfy," said attorney Matthew Callister.(1) Callister is representing the lawsuit against Indymac, who was taken over by OneWest Bank. He says tens of thousands of valley homeowners have loans through the company and he wants to stop more from becoming victims of bad lending practices.

For more, see Las Vegas Attorney Files Class Action Against Home Lender.

For other posts on homeowners using state & federal consumer protection laws to stave off foreclosures, Go Here, Go Here, and Go Here.

(1) Last year, the Massachusetts Supreme Judicial Court ruled that the making of subprime loans that lenders either knew or should have known were unsustainable constituted unfair and deceptive business practices in violation of the applicable state consumer protection statute (M.G.L. c. 93A, §2). See:

• The National Law Journal: Mass. High Court Upholds Order Restricting Subprime Lender From Foreclosing,
• Court ruling: Commonwealth of Massachusetts v. Fremont Investment & Loan, 452 Mass. 733; 897 N.E.2d 548; 2008 Mass. LEXIS 797 (Ma. 2008) (for a possibly easier to read version, try here). UndoMortgageLoans TILAdelta

Mortgage Lending Industry Dodges Bullet As Federal Appeals Court Strips Homeowners Of Class Action Status In Truth In Lending Lawsuit

Reuters reports:

• A lawsuit brought by a Wisconsin couple who accused a bank of deceptive lending practices and wanted to cancel their home loan has been stripped of class-action status in a victory for U.S. banks. In a 2-to-1 decision, a panel of the U.S. Court of Appeals for the 7th Circuit on Wednesday overturned a lower court ruling that had allowed other borrowers to join Susan and Bryan Andrews as plaintiffs against Chevy Chase Bank FSB.

In its ruling, the 7th Circuit U.S Court of Appeals indicated that it joins two other federal appellate courts(1) in refusing to certify a class action for claims seeking the remedy of rescission under
the Truth in Lending Act, 15 U.S.C. § 1635.

For more, see U.S. court sides with bank in mortgage loan case.

For the court ruling, see Andrews v. Chevy Chase Bank (7th Cir., 9-24-08).

For earlier stories on the Chevy Chase, option ARM class action lawsuit, see:

• The Washington Post: A Fight Over the Fine Print (Chevy Chase Bank Faces Suit Over Adjustable-Rate Mortgages),
• Milwaukee Journal Sentinel: Mortgage lawsuit may have big effect (Couple's low interest rate lasted a month).

(1) see McKenna v. First Horizon Home Loan Corp., 475 F.3d 418 (1st Cir. 2007); James v. Home Constr. Co. of Mobile, Inc., 621 F.2d 727 (5th Cir. 1980). UndoMortgageLoans TILAdelta

Almost Every Loan File Reviewed Had Missing, Incomplete Documents, Says Ohio AG In Civil Suit Against Now-Defunct Mortgage Brokerage

From the Office of the Ohio Attorney General:

• A Cleveland-area mortgage broker failed to give consumers all the information they needed about their new loans, according to a lawsuit filed today in Cuyahoga County Common Pleas Court by Ohio Attorney General Richard Cordray. The suit charges Prime Option Financial Services, LLC (Prime Option) and Mark Belter, its leader, with several violations of consumer protection laws for allegedly failing to provide required information to consumers signing home mortgage loans. “This company failed to give consumers required documents about their mortgage loans, and in some cases, it gave them forms that were incomplete,” said Attorney General Cordray.

***

• An Attorney General investigation of residential mortgage loans brokered by Prime Option found that almost every loan reviewed had missing or incomplete documents. For example, the following required documents often were found to be missing or incomplete: Mortgage Loan Origination Disclosure Statements, which disclose fees paid to the broker; escrow disclosure forms, which estimate the monthly cost of a loan; and Ohio Homebuyers’ Protection Act Informational Documents, which explain consumers’ rights.

• The investigation also found that Prime Option failed to store or dispose of business records containing consumer information as required by the federal Gramm-Leach-Bliley Act, which is designed to protect personal financial information and prevent identity theft. The lawsuit charges Prime Option and Mark Belter with violating the federal Real Estate Settlement Procedures Act and the Ohio Consumer Sales Practices Act.

For more, see Mortgage Broker Sued for Loan Disclosure Violations. UndoMortgageLoans TILAdelta

Kentucky Appeals Court Affirms Lower Court "Kibosh" On Arbitartion Clause In Mortgage; Homeowners Facing Foreclosure To Have TILA Claims Heard

In Richmond, Kentucky, The Richmond Register reports:

• The Kentucky Court of Appeals has ruled in favor of a Waco couple who were the subject of a foreclosure action by Bank of New York Trust Company and Mortgage Electronic Registration Systems. The litigants, who lost their case against Donald Wayne and Roxane Abner in Madison Circuit Court, had sought to force the Abners into an arbitrated settlement over a $40,000 mortgage.

***

• The Abners, represented by Addison Parker of the Appalachian Research and Defense Fund, a legal service group, filed a counterclaim, alleging that the mortgage’s 10.125 percent interest represented a “predatory high-cost loan” that violated the federal Home Ownership Equity Protection Act. The act provides for rescinding mortgages that violate the federal Truth In Lending Act as well as awarding both statutory and enhanced damages.

• The Abner’s mortgage contract called for waiving any damages as well as for arbitration. On July 25, the appeals court affirmed the trial court’s finding that the arbitration clause was “unconscionable and unenforceable.”

***

• The Abners’ allegations of predatory lending practices may be valid the appellate judges said, but the mortgage contract’s arbitration cause was the only issue on appeal.

For more, see Couple wins foreclosure appeal against N.Y. bank.

To view the appellate decision, see Mortgage Electronic Registration Systems v. Abner (Case #2007-CA-000574, Ky. Court of Appeals; July 25, 2008).

For other posts on homeowners using Federal & state consumer protection statutes to try and undo bad mortgage loans, Go Here, Go Here, and Go Here. undo mortgage loans TILA batallion UndoMortgageLoans TILAdelta

Breathing Life Into A Stale, Time-Barred Truth In Lending Act Claim

Earlier this year, an article in the law firm Stroock, Stroock & Lavan's Subprime Task Force Special Bulletin(1) contained a discussion on the 2008 California Federal Court decision in Monaco v. Bear Stearns Residential Mortgage Corp.(2) which, it appears to me, illustrates a way how, in California and possibly other states having similar state laws, claims for damages on account of conduct that constitutes violations of the Federal Truth In Lending Act ("TILA") can be pursued even if the one-year TILA statute of limitations has expired. A few excerpts from the article:

• In Monaco, a federal court in California found that standard option-ARM loan documents are “ambiguous,” potentially subjecting the lender to liability for trying to enforce the loan’s terms. Making matters more difficult for the lender, the court further held that the lender’s alleged violation of the federal Truth In Lending Act (“TILA”) could create liability under California’s Unfair Competition Law (“UCL”), which provides for greater penalties than allowed under TILA, even though the borrower’s TILA claim was barred by the statute of limitations.

***

• Plaintiffs [Monaco & others] seek to rescind their loans by reason of alleged violations of TILA, including failure to disclose the actual interest rate and negative amortization, and, using the alleged TILA violations as a predicate, demand damages and restitution under California’s UCL.

***

• Bear Stearns moved to dismiss the TILA claims on the grounds that plaintiffs were not entitled to have their loans rescinded because the option-ARMs were refinancings of prior loans and because TILA’s one-year statute of limitations had expired. Second, defendants moved to dismiss the UCL claims on the grounds that TILA preempts California’s UCL and will not permit plaintiffs to win damages and penalties not permitted under TILA.

***

• Although the California court agreed that plaintiffs could not use TILA to rescind their loans and the TILA claim was barred by the statute of limitations, it nevertheless rejected defendants’ preemption argument:

• A State law is inconsistent with TILA if it requires a creditor to make disclosures or take actions that contradict the requirements of the Federal law. Here, Plaintiffs’ second cause of action under the UCL is based solely on Defendants’ alleged TILA violations. Nowhere do Plaintiffs suggest that Defendants failed to make certain disclosures or take certain actions not encompassed by TILA. Plaintiffs invoke the UCL solely for the additional remedies offered thereunder. Additional penalties are not inconsistent with TILA, but merely provide greater protection to consumers. (Monaco, page 7, at lines 9 through 17).

• Thus, the UCL’s longer statute of limitations enabled the Monaco plaintiffs to pursue their otherwise time-barred TILA claim and to obtain penalties that would not be permitted under TILA.(3)

For more, see Courts Act to Protect Borrowers on Option-ARM and Subprime Loans.

For the court decision, see Monaco v. Bear Stearns Residential Mortgage Corp.

For those of you who are interested, the article also contains a discussion of another pro-borrower decision referred to in this blog earlier this year, the New York decision in LaSalle Bank, N.A. v Shearon, No. 100255/2007 (Sup. Ct. Richmond County, Jan. 28, 2008).

See The Stroock Public Service Project for more on the firm's service to pro bono matters, organizations and advocacy. The Public Service Project provides a broad array of legal assistance, with a special focus on underserved and under-resourced communities in New York City.

For other posts on homeowners using Federal & state consumer protection statutes to try and undo bad mortgage loans, Go Here, Go Here, and Go Here.

(1) By Julia B. Strickland, a Partner in the Class Action/Financial Services Litigation Practice Group of Stroock & Stroock & Lavan LLP, and Curtis C. Mechling, a Partner in Stroock’s Litigation Practice Group, both of whom are members of Stroock’s Subprime Task Force.
(2) No. CV 07-05607 SJO (CTx) (U.S.D.C. Central District of California, Jan. 28, 2008).
(3) My guess is that, if TILA violations can be used as a predicate for damages under state consumer protection laws of other states, a similar result could be reached in those other states. UndoMortgageLoans TILAdelta

Mortgage Audit Services Offered To Homeowners In Financial Trouble

The Boston Herald recently ran a story on the mortgage audit industry, a group that is offering their services to homeowners in trouble with their mortgages:

• [M]ortgage auditors review customers’ loan papers for forged signatures, sham home appraisals or other illegal acts. Any wrongdoing can strengthen financially strapped homeowners’ hands in negotiations with lenders.

• Many customers are seeking “loan modifications,” where banks agree to cut homeowners’ interest rate or otherwise change mortgage terms to help homeowners avoid foreclosure. Others want lenders to OK “short sales,” where borrowers sell homes in today’s weak market for less than their unpaid mortgage balances and banks simply “eat” the difference.

***

• Common flaws include math errors on federal Truth in Lending Act forms, which by law must accurately list a mortgage’s total lifetime cost within $35. While such mistakes can seem minor, they often give homeowners just enough leverage to get out of fraudulent loans.

Reportedly, one firm featured in the story performs about 100 checks on each customer’s loan, producing five- to 15-page reports and charging about $350 to $600.

For more, see Mortgage ’auditors’ help people fight foreclosure. missing mortgage foreclosure docs gamma UndoMortgageLoans TILAdelta

Two Lenders Targeted In Mass. Class Actions Over Toxic "Payment Option, Pick-A-Payment" Loans; Could Slam Brakes On In-State Wells, BofA Foreclosures

In Boston, Massachusetts, The Boston Globe reports:

• A Boston attorney has filed lawsuits against two major lenders claiming they knew - or should have known - their mortgage loans that can grow bigger over time were unaffordable to borrowers.(1) The suits are being watched locally and nationally because, if successful, they would provide strength to advocates and litigators struggling to make lenders accountable for “toxic’’ mortgage loans that have pushed millions of Americans into foreclosure. “If this case goes forward, it will be a model throughout the country,’’ said Suffolk University law professor Kathleen C. Engel.

• Gary Klein,(2) of the law firm Roddy, Klein and Ryan, sought class-action status for his suits this summer against Bank of America Home Mortgage and Wells Fargo Home Mortgage, saying that hundreds of Massachusetts borrowers ultimately will be unable to afford their mortgages. A decision on class- action status is pending. “The lending community created these toxic products and masked their effect with complicated loan provisions that borrowers had no chance of understanding,’’ Klein said. “I find that appalling.’’ Bank of America officials said in a statement that “the lawsuit is without merit.’’

***

• The suits are grounded in a landmark 2008 state Supreme Judicial Court decision(3) that lenders were violating state law by writing loans that were almost certain to lead to default and foreclosure. The decision, Engel said, was the first in the country to hold lenders accountable for unfair practices, even when the terms of a mortgage are considered legal. The court decision upheld arguments by Attorney General Martha Coakley that the California-based lender Fremont Investment & Loan was selling risky products it knew would fail. In June, Coakley settled with the lender for $10 million to help struggling homeowners and cover legal costs [go here for Fremont Consent Judgment].

For more, see Attorney sues lenders, says they created ‘toxic’ products.

For the lawsuits, see:

• Hart v. Bank of America Home Loans Inc, et al.,
• Bettinelli v. Wells Fargo Home Mortgage, Inc.

(1) According to the story, Klein filed the lawsuits in US District Court in June and July focusing on so-called “payment option’’ mortgages, which allow borrowers to make minimum monthly payments on home loans. From the day the paperwork is signed, any unpaid interest is added to the balance. Eventually, the day of reckoning comes - usually after five years - and a borrower is required to make payments that cover the full mortgage interest and swelling principal. “Pick-a-payment’’ loans became popular in 2005 and 2006 as borrowers strained to afford skyrocketing home prices, or sought money to make investments or home improvements.

(2) Last year, Klein filed a class action lawsuit that could stop hundreds of foreclosures and reverse thousands of others where it challenged lenders' right to foreclose where they couldn't prove ownership of the promissory notes. See Thousands Of Foreclosures Are Void, Says Massachusetts Class Action Demanding Lenders & Their Lawyers Prove Note Ownership.

(3) For the Massachusetts Supreme Judicial Court decision ruling that subprime loans that lenders knew or should have known were unsustainable are illegal (ie. as unfair and deceptive business practices in violation of M.G.L. c. 93A, §2 of the Massachusetts statutes), see Commonwealth of Massachusetts v. Fremont Investment & Loan, 452 Mass. 733; 897 N.E.2d 548; 2008 Mass. LEXIS 797 (Ma. 2008) (for a possibly easier to read version, try here). UndoMortgageLoans TILAdelta

Legal Aid To File Predatory Lending, Fraud Suit On Behalf Of Foreclosed California Homeowner In Attempt To Prevent Loss Of Family Home

In Chico, California, the Chico Enterprise Record reports:

• A woman facing eviction from the home her parents left her may be able to remain there at least temporarily. Emily Fisher, a staff attorney with Legal Services of Northern California [...] said she and other lawyers are working to enable Jan Poythress to stay in her house and, they hope, to get it back.

• Poythress said her problems started after she ran up a large credit-card debt and then allowed a telemarketer to persuade her to take a loan that would pay off what she owed. Poythress is disabled and lives on a small income from Social Security.(1) Because she couldn't pay off the loan, her house was foreclosed upon.

***

• Fisher said a petition was filed in court in Chico Tuesday asking that the eviction be "stayed until some of these issues can be worked out." She said it's hoped a judge will cancel the eviction and allow a new trial to be held over whether Poythress ought to be evicted. [...] "We are planning to file an affirmative complaint on the predatory lending issues and the fraud that appears to have happened," she said.

For more, see Lawyers hope to halt woman's eviction.

For an earlier report describing how the homeowner was allegedly screwed over by the loan originator, see On the edge: Chico woman faces loss of home, uncertain future.

For other posts on homeowners using state & federal law to try and undo bad mortgage loans, Go Here, Go Here, and Go Here.

(1) Reportedly, Fisher said Poythress has an income of around $900 a month in disability payments, yet the loan documents state her income as $4,000 a month and claim that she was able to repay $2,500 a month on the loan. This wasn't a case where a borrower got greedy and tried to buy more than she could afford, Fisher said. Rather, Poythress was in a vulnerable position and was taken advantage of. UndoMortgageLoans TILAdelta

Consumers Take It On The Chin With Recent Federal Appeals Court "Truth In Lending" Rulings

1) Law.com reports:

• A provision in the Truth in Lending Act that excuses minor inaccuracies on the part of lenders is not an "affirmative defense" that must be specifically raised by the defendant, but instead is a "general defense" that cannot be waived, the 3rd U.S. Circuit Court of Appeals has ruled.

• The ruling in Sterten v. Option One Mortgage Corp. could prove to be a significant boon to banks by relaxing the rules for reaping the benefits of a TILA amendment that was designed to prevent creditors from being subject to "extraordinary liability" for small disclosure discrepancies.

For more, see 3rd Circuit: Truth in Lending Act Provides Unwaivable Defense (Panel rules 'tolerances for accuracy' provision is not an affirmative defense).

For the court ruling, see Sterten v. Option One Mortgage Corp. (3rd Cir., 11-4-08).

---------------

2) Jurist's Paper Chase (University of Pittsburgh School of Law) reports:

• The US Court of Appeals for the Ninth Circuit [recently] ruled that the federal Truth in Lending Act does not provide for statutory relief for a lender's failure to conspicuously disclose certain information about a loan to the borrower and to give the borrower certain information before offering the loan.

For more, see Ninth Circuit rules subprime borrower due no damages for lender disclosure failures.

For the court ruling, see McDonald v. Checks-N-Advance, Inc. (in re Ferrell) (9th Cir., 8-22-08).

-----------------

3) In a story posted here in October, the National Law Journal reported:

• In a boon for the mortgage lending industry, a federal appeals court has said the Truth in Lending Act does not allow for rescission of mortgages on a class action basis. The 7th U.S. Circuit Court of Appeals, in a 2-1 decision [...], averts the potential of significant damages for creditors accused of violating disclosure requirements in some of the exotic mortgage vehicles that exacerbated the mortgage market meltdown and has Congress contemplating ways to restore credit market confidence.

• The Circuit decision joins an earlier ruling by the 1st and 5th Circuits and one California state appellate court that have held that the Truth in Lending Act (TILA) does not allow claims for rescission in a class action format.

For more, see Mortgage Lenders Fight Off Rescission Class Action in 7th Circuit.

For the court ruling, see Andrews v. Chevy Chase Bank (7th Cir., 9-24-08). UndoMortgageLoans TILAdelta

Ohio Homeowner Hits Jackpot; Lender Loses Right To Foreclose On Delinquent Mortgage Due To Violation Of Procedural Rule, Says State High Court

In Canton, Ohio, The Repository reports:

• A city man took his foreclosure dispute to the state’s highest court, and according to a ruling issued today, he won. What that means for Giuseppe Gullotta is that he gets to remain in his house without a mortgage. What it means for homeowners around the state remains to be seen.

• The case involved a rule that limits plaintiffs to one re-filing after a civil lawsuit has been voluntarily withdrawn. During a two-year period, U.S. Bank filed three foreclosure actions against Gullotta, [...]. The bank voluntarily dismissed the first two complaints.

• In 2005, it filed a third. Gullotta said that broke the re-filing rule, but the trial court and 5th District Court of Appeals said the foreclosure was legal. In March, the Ohio Supreme Court heard arguments. U.S. Bank argued that the third case wasn’t the same as the first two because it didn’t try to collect payments and interest owed before April 2005, which the other cases did.

• But Gullotta’s attorney said the complaints were essentially the same. The court justices agreed in a 5-2 vote.

According to the court decision, the amount owed at the time of the start of the foreclosure action was $164,390.91, plus interest at the rate of 7.35 percent per year.

For the story, see North Canton man wins foreclosure case in Ohio Supreme Court.

For the decision of the Ohio Supreme Court, see U.S. Bank Natl. Assn. v. Gullotta (2008-Ohio-6268, slip op., December 10, 2008). UndoMortgageLoans TILAdelta SloppyForeclosuresAlpha

Wachovia Hit With Class Action Over Option ARMs; Suit Calls Mortgage A "Neutron Bomb That Will Kill All The People But Leave The Houses Standing"

In a Federal District Court somewhere in Illinois, The Madison County Record reports:

• A class action lawsuit has been filed against three financial corporations, including banking giant Wachovia, alleging Illinois homebuyers were forced into negative amortization after the banks deceived them when they issued option adjustable rate mortgages. Lead class plaintiffs Michael and Jayme Brunkhorst claim the lenders and brokers that sold them an option ARM mortgage [...], touted the minimum payment and downplayed or failed to disclose the negative amortization that could result from making such payments, according to the suit filed Feb. 17 in U.S. District Court.

***

• "Option ARM loans have been called 'the riskiest and most complicated home loan product ever created' and have been termed a 'neutron bomb' that will kill all the people but leave the houses standing' by an economist at the Ford Foundation," the suit states.

For more, see Home owners file class action against Wachovia over option ARMs.

For other posts on homeowners using state & federal law to try and undo bad mortgage loans, Go Here, Go Here, and Go Here.

(1) Among other remedies, the Brunkhorsts and the putative class are asking the court grant equitable relief to restructure their loans through rate buy downs, principal reduction and conversion into conventional fixed rate loans. UndoMortgageLoans TILAdelta

Massachusetts AG Settles Subprime Suit; Fremont To Cough Up $10M

In Boston, Massachusetts, The Associated Press reports:

• A bankrupt California-based subprime mortgage lender has agreed to pay $10 million to settle allegations of unfair practices that contributed to the current spike in Massachusetts home foreclosures. Massachusetts Attorney General Martha Coakley said Tuesday that Fremont Investment & Loan and its parent company, Fremont General Corp., will pay $8 million in consumer relief, $1 million in civil penalties and $1 million in costs, including attorney fees.

***

• The settlement also makes permanent a preliminary injunction issued by the Superior Court last year, barring the company from pursuing foreclosure of "presumptively unfair" mortgage loans without court approval.

Source: Massachusetts settles with mortgage lender.

For more from the Massachusetts Attorney General's Office, see:

• Press release: Attorney General Martha Coakley Reaches $10 Million Settlement with Subprime Lender Fremont Investment and Loan (Thousands of homeowners protected from foreclosure),
• Consent Judgment: Commonwealth of Massachusetts v. Fremont Investment & Loan, et al.

For the Massachusetts Supreme Judicial Court decision ruling that subprime loans that lenders knew or should have known were unsustainable are illegal (ie. as unfair and deceptive business practices in violation of M.G.L. c. 93A, § 4 of the Massachusetts statutes), see Commonwealth of Massachusetts v. Fremont Investment & Loan, 452 Mass. 733; 897 N.E.2d 548; 2008 Mass. LEXIS 797 (Ma. 2008) (for a possibly easier to read version with all the footnotes appearing at the end of the case, try here). UndoMortgageLoans TILAdelta

Lien Stripping Of Subordinate Home Mortgages In Bankruptcy Gaining In Popularity?

In Las Vegas, Nevada, the Las Vegas Business Press reports:

• Homeowners upside down in their mortgages and facing foreclosure may have a new recourse. The relatively new practice of "lien stripping" is becoming a popular way to get out from under double mortgage payments and sometimes save homes. Not everyone, however, is praising the practice.

• The lien removal business has increased in recent months as property values continue to sink. At least a handful of local bankruptcy attorneys are performing lien stripping for clients. One is making it a focal point of her practice.

For more, see That LIEN AND HUNGRY LOOK (Mortgage 'stripping' becomes marketing tool for bankruptcy attorneys).

For other posts on homeowners using Federal & state consumer protection statutes to try and undo bad mortgage loans, Go Here, Go Here, and Go Here. UndoMortgageLoans TILAdelta

Lenders' Failure To Comply With Bailout Bill Has Florida Attorney Seeking To Delay, Dismiss Foreclosure Actions

In Fort Lauderdale, Florida, the Daily Business Review reports:

• Lenders receiving U.S. government stimulus money are required to offer distressed homeowners reasonable loan workouts to prevent more foreclosures. But critics say that’s often not happening. Claiming lenders aren’t working with borrowers, Weston attorney Jonathan Kline is in state court trying to block the first of dozens of foreclosure cases.

• Kline has asked judges to dismiss or delay about 10 cases. He argued the lenders [...] are not complying with the Emergency Economic Stabilization Act of 2008, the bailout bill that originally authorized the Treasury Secretary to spend $700 billion to purchase distressed assets of the largest U.S. banks.

***

• The bailout bill requires lenders receiving federal money — including those servicing Fannie Mae and Freddie Mac loans — to offer “reasonable loan modification based on three areas, including reducing the interest rate, reducing the principal amount of what is due and elongating the term of the loan,” Kline said. Kline said he is planning to file similar motions in all of the approximately 200 foreclosure cases he has working.

• Last week, Kline presented the argument for the first time before Broward Circuit Judge Jack Tuter in a foreclosure case against U.S. Bank, the trustee for Homebank Mortgage Trust, which originated Fannie Mae and Freddie Mac loans. Tuter rejected Kline’s request for dismissal of the foreclosure. “He said it would have been better to present it in an evidentiary hearing, but he liked the argument,” Kline said. Kline said he may request a second hearing and will use that argument on other cases.

For more, see Weston attorney says banks fail to do required workouts.

Go here for Kline's Amended Motion To Abate Or Dismiss Foreclosure Proceedings.

For other posts on homeowners using state & federal laws to stave off foreclosures, Go Here, Go Here, and Go Here. UndoMortgageLoans TILAdelta EpsilonMissingDocsMtg SloppyForeclosuresAlpha

Mass AG Reaches Agreement w/ Servicer To Provide Affordable Loan Mods To Qualified Borrowers, Up To $7.5K Relocation Expenses To Ineligible Homeowners

From the Office of the Massachusetts Attorney General:

• [A]ttorney General Martha Coakley’s Office announced that it has entered into an agreement with Texas-based American Home Mortgage Servicing, Inc. (“AHMSI”) that will provide significant benefits to approximately 8,200 Massachusetts borrowers holding loans originated by Option One Mortgage Corp. (“Option One”) and H&R Block Mortgage Corp. (“H&R Block Mortgage”). Those mortgage loans are the subject of a lawsuit which the Attorney General’s Office filed in June 2008. The complaint alleges Option One and H&R Block Mortgage originated the risky subprime loans with reckless disregard for whether borrowers would be able to afford their loan payments – a practice that has contributed significantly to the foreclosure crisis in Massachusetts. Under the agreement, [...] AHMSI will be required to provide affordable loan modifications to certain borrowers who fall behind in their mortgage payments.(1)

***

• The agreement is designed to remedy unfair and deceptive conduct by Option One and H&R Block Mortgage that was highlighted by the Superior Court in the injunction issued in November 2008. The injunction prohibits the defendants from initiating or advancing foreclosures on loans that are “presumptively unfair,” because they predictably led to default or foreclosure. That preliminary injunction was affirmed by the Massachusetts Appeals Court on October 28, 2009. The Attorney General’s litigation with Option One, H&R Block Mortgage, Block Financial Corp., and their parent company, H&R Block, Inc., is ongoing, and is expected to go to trial in 2010.(2)

For the entire Massachusetts AG press release, see Attorney General Coakley’s Office Reaches Affordable Loan Modification and Foreclosure Prevention Agreement with Mortgage Servicer (Purchaser Will Provide Affordable Loan Modifications to 8,000 borrowers).

(1) For delinquent borrowers who do not qualify for loan modifications, relocation payments of $3,000 to $7,500 and alternatives to foreclosure, such as deeds-in-lieu of foreclosure will be offered. The Attorney General’s lawsuit did not allege loan origination misconduct by AHMSI, and the company cooperated with the Attorney General in reaching this agreement.

(2) The lawsuit is seeking redress for the damage incurred by homeowners and Massachusetts communities as a result of the unfair and deceptive lending practices of the defendants. The lawsuit also alleges civil rights violations because the defendants' policies and practices resulted in discriminatory pricing to the detriment of black and Hispanic borrowers; disparate pricing violates antidiscrimination laws. UndoMortgageLoans TILAdelta

Erie Homeowner Hurt In Mortgage Scam Settles Suit; 40%+ Cut In Loan Balance, Interest; Non-Profits Reviewing 50 Other Cases Say Class Action Possible

In Erie, Pennsylvania, the Erie Times News reports on the settlement of a predatory lending case brought in an Erie Federal Bankruptcy Court by local resident Eloise Woodsbey, who nearly lost her home to foreclosure:

• [I]n the main provision of the settlement, the principal on Woodsbey's mortgage was cut from $44,900 to $25,000, and the interest rate was set at 5 percent, over 30 years. That rate had been as high as 11.75 percent.

• Using the Woodsbey case as a guide, the statewide legal-aid organization that represented her is working with local groups to try to help hundreds of other Erie homeowners caught up in the same Erie subprime mortgage scam, which was at the center of a federal criminal probe. Among those indicted in the case were the mortgage broker and developer involved in selling Woodsbey her house.

***

• "It is a good result for her," said one of Woodsbey's lawyers, Kevin Quisenberry, of the Pittsburgh-based Community Justice Project. "I wish there was a way to get relief for the other 100 people who bought these homes." He said the nonprofit Community Justice Project has been receiving information from St. Martin Center Inc. and other Erie-based groups on other homeowners who might need assistance.

***

• Dave Pesch, the housing counseling manager at St. Martin Center Inc. [...] said that he and lawyers from the Community Justice Project are reviewing the mortgages of about 50 Erie residents who purchased houses from the defendants in the criminal case. [...] When asked if the review could result in a class-action suit involving some of those homebuyers, Pesch said, "I certainly think that is a possibility." Quisenberry said he hopes that local lawyers and other officials can provide the resources to review the cases of other homeowners to see if they merit legal action. "What would be really great is if we can get a dedicated pool of attorneys who would be available for cases that would be referred to them," Quisenberry said.

For more, see Woman settles mortgage fraud suit. UndoMortgageLoans TILAdelta

Nevada Homeowners Saddled By IndyMac With "Exploding ARMS" To Freeze Foreclosure By Joining Class Action?

In Las Vegas, Nevada, the Las Vegas Review Journal reports on homeowner Luis Armando Benito and others who allege to have been duped into unaffordable adjustable rate mortgages from IndyMac Bank that "exploded" on them shortly after obtaining the loans:

• Today, Benito and other locals with Indymac mortgages are fighting back -- and making progress. They have joined a federal class-action lawsuit against Indymac Mortgage brought by attorneys Matthew Callister and Brooke Bohlke. Their clients' homes range in value from $150,000 to more than $1 million.

• Among many allegations, the attorneys contend OneWest "breached the loan agreements/contracts by failing to disclose the following: APR, method of determining the finance charge, balance, actual finance charge, total payments, amount financed, number of payments, and due dates. OneWest breached the loan agreements/contracts by doubling Plaintiffs mortgage payments when the mortgage 'arms' came due."

• Although they come from vastly different backgrounds, the homeowners share a common story of how creatively they were qualified for their loans. Some of the loan documents contained more fiction than a Stephen King novel.

***

• The list of homeowners taking action grows as they learn about the lawsuit. "Somebody's got to bite the bullet and say, 'We're going to freeze foreclosures on single family homes,'" Callister says. "If it takes the court system's intervention, then so be it." Once a troubled Indymac borrower learns of the lawsuit, Bohlke says, "We've been able to stop foreclosures with 24 hours' notice." With about 1,000 Indymac mortgage loans heading into default in Southern Nevada alone, the phones at the law office figure to keep ringing for some time to come.

For the story, see Homeowners whose mortgages fizzled fight back with class-action lawsuit. UndoMortgageLoans TILAdelta

Chico Homeowner's Foreclosure Eviction Stopped; Files Suit Requesting Cancellation Of Alleged Predatory Loan

In Chico, California, the Chico Enterprise Record reports:

• To prevent a Chico woman from losing her home, several lawyers filed suit against three firms they accused of engaging in a "predatory lending scheme." "We're hoping this is going to help this woman out. She certainly deserves it after what she's been through," said Evanne O'Donnell, managing attorney of Legal Services of Northern California.

• Jan Poythress, 53, was within days of being evicted from her northeast Chico home last month when the attorneys intervened. The eviction was put on hold, and Poythress remains in the house while a new trial is scheduled to decide the legality of requiring her to move.

• In a separate case, the lawyers, on March 5, sued Instant Mortgage Lending Corp. of San Diego, ForeclosureLink of Fair Oaks and Expedia Home Loan of San Diego, demanding, among other things, that Poythress' loan and the foreclosure on her home be canceled. "When you read this complaint, you see how sinister this is," O'Donnell said in a phone interview.

***

• O'Donnell said she was grateful for the help of several attorneys — experts on foreclosures and evictions — who donated their time free of charge. They include Doug Jacobs of Chico, Wayne Silver of Sunnyvale and Maeve Elise Brown of Oakland.

For more, see Lawsuit filed to save disabled Chicoan's home.

For earlier Chico Enterprise Record articles on this story, see:

• Lawyers hope to halt woman's eviction.

For other posts on homeowners using state & federal law to try and undo bad mortgage loans, Go Here, Go Here, and Go Here. UndoMortgageLoans TILAdelta

More Borrowers Using Court System To Save Homes From Foreclosure

CNNMoney reports:

• During the housing boom, mortgage lenders were doling out the dough, giving loans to people who could never have qualified before. Now, homeowners and government officials are increasingly taking these institutions to court, alleging unfair and predatory practices. While many of these suits are still winding their way through the legal system, some banks have already settled for millions of dollars.

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• "Borrowers are looking to the legal system for help in keeping their houses," said Gary Klein, a partner in Boston-based Roddy Klein & Ryan, which focuses on consumer law. "There are more cases pending than I've ever seen in my 23-year career."

• Homeowners are seeking the courts' help either individually or as part of class action lawsuits. With foreclosures continuing to rise, borrowers are looking to force banks to modify unaffordable loans or to stop them from foreclosing on homes. Often, they also seek money. To be sure, banks have faced unfair lending lawsuits for years and have paid millions of dollars in settlements. But the recent housing boom was fueled by questionable and exotic loans that many borrowers had no hope of repaying.

For more, see Predatory-lending lawsuits on the rise (Homeowners and government officials are taking mortgage lenders to court for unfair lending practices). EpsilonMissingDocsMtg UndoMortgageLoans TILAdelta

Mass AG Squeezes $60M Settlement From Goldman Sachs In Connection With Subprime Mortgage Probe

In Boston, Massachusetts, The Boston Globe reports:

• More than 700 Massachusetts homeowners struggling with subprime mortgages will have their monthly payments reduced - some by as much as 35 percent - as part of a $60 million settlement Attorney General Martha Coakley reached with Goldman Sachs Group Inc.

• Goldman Sachs owns those homeowners' mortgages through subsidiaries and has agreed to rewrite the terms of their loans in order to stave off legal action by Coakley. The attorney general has been investigating the role investment banks played in promoting subprime mortgages that borrowers ultimately couldn't afford.

***

• As part of the settlement, Goldman Sachs will reduce the outstanding balances of subprime mortgages for those 714 homeowners, most of whom live in Boston, Brockton, Lawrence, Springfield, and Worcester. Homeowners seeking to refinance or sell their properties could see a reduction in their first mortgages of up to 35 percent as well as much as a 100 percent cut in second mortgages.

• Reducing those loan amounts will cost Goldman Sachs $50 million. It has also agreed to have its subsidiary, Litton Loan Servicing LP, help qualified borrowers who are in trouble on their loans to avoid foreclosure. Goldman will also pay the state $10 million.

For more, see State reaches $60m subprime deal with Goldman Sachs.

For the Massachusetts Attorney general press release, see AG Coakley and Goldman Sachs Reach Settlement Regarding Subprime Lending Issues.

Go here for:

• Settlement Agreement between AG & Goldman Sachs,
• Goldman Sachs Remedy Chart. UndoMortgageLoans TILAdelta