Defending Consumers In Foreclosure Actions

A number of articles have recently addressed the use of the Federal Truth In Lending Act by attorneys defending homeowners facing foreclosure as a way to undo subprime mortgages where it is alleged that the loan originator failed to fully comply with Federal law when making the loan. For prior posts on this point, containing links to online media reports, see:

• Homeowners Facing Foreclosure Suing Lender To Undo Mortgage Loans,
• Homeowners Invoking "Truth In Lending" Rights To Back Out Of Bad Loans,
• Option ARMs The Target Of Homeowners' "Truth In Lending" Lawsuits

Another approach in defending homeowners facing foreclosure is addressed in a recent article in Forbes magazine. Mortgage loans get sold and resold in the open market and, if they end up in the hands of the Wall Street players who issue mortgage-backed securities, the ownership interests in those mortgages will then get "sliced and diced" among short, medium, and long term "investor pools". The focus of the Forbes article is the apparent difficulty many foreclosing mortgage lenders are having in maintaining, keeping track of, and presenting in court the required mortgage loan paperwork when they initiate a foreclosure action, given the number of times the mortgage loans are sold, resold, sliced, and diced.

Stated another way, some attorneys representing homeowners are making an issue of the sloppiness with which foreclosing mortgage lenders maintain their loan paperwork and the sloppiness with which they present their case in court. In one case in Florida, Jacksonville Area Legal Aid lawyer April Charney got a foreclosure filed against her client withdrawn after discovering that the company that filed to foreclose didn't own the mortgage loan that they were attempting to foreclose. The following excerpt from the article reflects the thinking behind this approach in defending homeowners:

• ""I buy time, then get lenders to cut interest rates and fees," says Charney, who claims she's stopped dozens of foreclosures over ownership issues. Other lawyers are making similar moves in Maryland, New York, Massachusetts, Ohio, Kansas and Washington State--often forcing sloppy lenders to offer generous terms to avoid litigation."

The article goes on to report that Charney "stumbled upon the industry's paperwork problem two years ago after noticing that nearly all lenders seeking to foreclose against clients were filing "affidavits of lost notes."" These affidavits are filed in court by foreclosing mortgage lenders in an attempt to get the judge to, in effect, waive the legal requirement that they present the required paperwork that proves that they, in fact, own the loan they are trying to foreclose.

Reference is also made in the article to prominent foreclosure filer--Mortgage Electronic Registration Systems ("MERS"), a Vienna, Virginia company whose name is reportedly on 30% of the mortgages in county clerk offices around the country, and have been known in the industry as a company that files foreclosure actions in connection with mortgage loans that they may service but do not actually own.

For more, see Paper Chase (You're in luck. Your mortgage lender has flipped, sliced and diced your loan--and now no one knows who holds it).

Postscript

The carelessness and sloppiness in which some foreclosing mortgage lenders and their attorneys often go about their business when initiating forecloure actions has been observed by at least one Federal bankruptcy judge in Massachusetts. In fact, the judge, Judge Joel B. Rosenthal, "has observed instances in which attorneys representing alleged mortgagees or their servicing agents did not know whether the client was a mortgagee or a serving agent, or how their client came to acquire its role." For more on the apparent cluelessness that some lenders and their attorneys seem to possess as it relates to their legal obligations when initiating a foreclosure action, see Judge Rosenthal's Memorandum of Decision in In re Shwartz, (Bankr. Ct., Ma. April 19, 2007).

For a comment on the significance of a foreclosing mortgage lender's failure to present in court the actual, original promissory note, signed by the borrower / homeowner when bringing a foreclosure action, see "Editorial Note" in my prior post, Dillon Continues Battle Against Alleged Predatory Mortgage Servicer.

For a copy of a court order from a Pinellas County, Florida trial court ruling that the mortgage servicer mentioned above, Mortgage Electronic Registration Systems, Inc. ("MERS") "lacked standing" to bring foreclosure actions on behalf of the actual mortgage holders whose loans MERS was servicing, (and, accordingly, dismissed twenty foreclosure actions that MERS brought on their behalf), see in re Mortgage Electronic Registration Systems, Inc. (MERS), available online courtesy of Mortgage Servicing Fraud .org, at msfraud.org.

(Please note that the Pinellas County, Florida trial court decision, the logic of which might still be found to be persuasive in courts outside Florida, has subsequently been reversed by a Florida appellate court. For more on this point, see Mortgage Servicer "Has Standing" To Bring Foreclosure Actions, Say Three Courts.)

Go here for more posts on homeowners who have refinanced into bad mortgage loans and are now using the Federal TILA to try and undo the bad loans.

For other posts that reference the failure of some mortgage lenders and their attorneys to file the required loan documents when starting foreclosures, Go Here, Go Here, Go Here and Go Here. missing mortgage foreclosure docs alpha undo mortgage loans TILA alpha

Homeowners Resorting To Litigation To Modify Loans In Default

The Memphis Daily News recently ran a story that discusses, in general terms, the approach that some consumer bankruptcy attorneys take in represnting homeowners facing foreclosure from losing their homes. Interviewed for the story was North Carolina consumer bankruptcy litigation attorney O. Max Gardner III.

In a nutshell, the approach starts by filing a bankruptcy on behalf of the homeowner in order to "stop the bleeding." The next step is to determine whether there may have been any failures to make the required consumer disclosures when the mortgage was originally made that violates the law (the Federal Truth In Lending Act is one such law). Another step is to review the mortgage servicing history to determine if the mortgage servicing company may have charged improper fees during the time it collected the loan payments from the homeowner (for example, imposing late charges, property inspections, appraisals, etc. - every single month).

If there is any indication that these violations may have taken place, the homeonwer's attorney can then file an adversary proceeding against the lender and mortgage servicer in order to pursue the matter further (An adversary proceeding is nothing more than a lawsuit filed in the context of a Federal bankruptcy proceeding).

The homeowner's negotiating leverage acquired by such litigation tends to make lenders and servicers "more cooperative" in negotiating a mortgage modification. One Mississippi attorney commented for the story that he has settled about a dozen of these cases in the last couple of months and still filing more. (Editorial Note: if the homeowner's claims have merit, the lender and servicer may find themselves being hit by the judge with an enormous legal bill for the homeowner's attorney fee - after all, the attorney is not doing this for nothing).

For more, see Attorneys Employ Creative Methods To Stem Foreclosures (if link expired, try here).

For another story on claiming violations of consumer mortgage disclosure laws in representing homeowners facing foreclosure, see Homeowners Invoking "Truth In Lending" Rights To Back Out Of Bad Loans.

Go here for more posts on homeowners who have refinanced into bad mortgage loans and are now using the Federal TILA to try and undo the bad loans.

Go here , go here , and go here for posts on questionable mortgage servicing practices. questionable mortgage servicing practices tactics zebra undo mortgage loans TILA alpha

Homeowners Invoking "Truth In Lending" Rights To Back Out Of Bad Loans

CBS5 in San Francisco, California reports:

• "This may be the life preserver for homeowners about to sink-- a way to strike back at shady loan brokers who mislead people about the true cost of their mortgage loans."
• "Federal Truth in Lending documents that are required with every refinanced loan give homeowners a greatly expanded right to cancel if the documents are not exactly right."
• "How much extended time? Try three years from the date of the loan."

In this report, attorney William Purdy from the Santa Cruz law firm of Simmons and Purdy, who reportedly with his law partner have hundreds of cases of Truth in Lending violations, is interviewed.

Also covered in the report is another case where The Fair Housing Law Project of the non-profit agency The Law Foundation, which provides free legal services to Silicon Valley individuals in need, is suing a broker and lender on behalf of a consumer borrower for Truth In Lending violations.

Purdy says the Truth in Lending Act is not a way of getting out of debt -- but it can be a way of getting out of a bad loan, and it essentially depends on whether the lenders got sloppy with the right-to-cancel document required to be given to refinancing homeowners. (The part of the law being enforced in these cases only applies to homeowners who are refinancing; it does not apply on purchase transactions.)

To watch the report, by CBS5's Tony Russomanno, see CBS5 Video - Bay Area Homeowners Backing Out Of Bad Loans, (then, click "Play") or

Go here for the text of the story - Bay Area Homeowners Backing Out.

For a related article, see Finding a legal escape clause (Attorney rescues homeowners from loans they can't afford)

For a story involving law firm Simmons & Purdy that resulted in the arrest of mortgage broker Altaf Abdulrehman Shaikh (alias Zak Kahn) for allegedly ripping off homeowners in mortgage transactions, see DA: Scammer sought to bilk homeowners.

Go here for more posts on homeowners who have refinanced into bad mortgage loans and are now using the Federal TILA to try and undo the bad loans.

Editor's Note

Using the Federal Truth In Lending Act is also being used by financially strapped homeowners to void sale leaseback, repurchase option deals entered into with foreclosure rescue operators. See, for example,

• Foreclosure Rescue Operator Violates Federal Law, State Usury Law, and
• Michigan Federal Judge Orders Return Of Home By Foreclosure Rescue Operator. undo mortgage loans TILA alpha

Foreclosing Mortgage Lenders Being Bitten By Carelessness In Securitization Process

A June, 2007 article in Forbes magazine reminds us how the carelessness in the securitization process by which mortgage loans were packaged and sold off to mortgage pools is now coming back to bite mortgage holders seeking to foreclose loans in default:

• The financial engineering (ie. mortgage securitization) helped oil the housing boom by making credit more available. But stalled housing prices and rising defaults have revealed a mess: In the rush to flip paper, lots of the new lenders or pools don't have the proper paperwork to show they even hold the mortgage.

***

• This sloppiness offers glorious reprieves for some defaulted homeowners but just headaches for lenders. One Maryland man, holding documents suggesting his loan was held simultaneously by a pool of loans and a bank, is still in his home--five years after foreclosure was filed.

Reportedly, lawyers representing homeowners facing foreclosure around the country are making moves that are "often forcing sloppy lenders to offer generous terms to avoid litigation."

For more, see Paper Chase (You're in luck. Your mortgage lender has flipped, sliced and diced your loan--and now no one knows who holds it).

For related articles, see:

• Financial Times: Contested foreclosures rise, could increase RMBS losses,
• Bloomberg News: Banks Lose to Deadbeat Homeowners as Loans Sold in Bonds Vanish,
• The Wall Street Journal Law Blog: Foreclosure Legal Work: A Shoddy, Assembly-Line Practice?

For other posts that reference the sloppiness and carelessness of some mortgage lenders and their attorneys in connection with their mortgage loan documents, Go Here , Go Here , Go Here, and Go Here. undo mortgage loans TILA alpha missing mortgage foreclosure docs alpha SloppyForeclosuresAlpha

Bankrupt Mortgage Company Proposal To Destroy 490,000 Mortgage Loan Files Draws Heavy Criticism

(originally posted 1-3-08)
In light of the recent stories about stalled mortgage foreclosure actions attributable to the foreclosing lenders' inability to produce original loan documents establishing ownership, and other stories on homeowners invoking their Truth In Lending rights to undo bad loans, a recent story reported by The Associated Press caught my eye:

• American Home Mortgage Investment Corp.'s plan to destroy 490,000 hardcopy mortgage loan files has drawn fire from federal bankruptcy monitors, who say it could hurt homeowners' ability to sue the failed lender. The company, once one of the country's largest mortgage lenders, says it can no longer afford the $45,000-per-month rental on warehouse space to preserve hard loan files. Its bid for court permission to destroy the files has been criticized by Kelly Beaudin Stapleton, the U.S. Trustee monitoring the case.

• Destruction of the paper files could mean big trouble for American Home borrowers, compromising their ability to file lawsuits against the Melville, N.Y., company, Stapleton said in papers filed with the U.S. Bankruptcy Court in Wilmington, Del. American Home, which collapsed into bankruptcy in August, is selling its assets and going out of business. "Homeowners may have claims against (American Home) and/or third parties stemming from the origination of their mortgage loans," Stapleton said in court papers filed last week. "These homeowners may need access to the original copy of the loan file to prove their claim."

• John Kalas, American Home's deputy general counsel and chief compliance officer, said Thursday that the planned destruction would not affect homeowners, because the paper copies are duplicates. "The only loan files that we are destroying or seeking to destroy have been fully imaged," Kalas said. "Anything related to consumer concerns or loan fraud or anything like that, the information would be available on American Home servers."

• Investors who own the loans also have protested the plan to destroy the files, complaining in court papers that they have had trouble getting full documentation from American Home, and don't want to see the paper files destroyed.

For more, see American Home Under Fire Over Loan Files.

For other posts that reference the failure of some mortgage lenders and their attorneys to file the required loan documents when starting foreclosures, Go Here, Go Here, Go Here and Go Here. missing mortgage foreclosure docs alpha undo mortgage loans TILA alpha

Use Of Consumer Attorneys To Unwind Predatory Loans

An article in California Progress Report by San Francisco-based civil rights attorney and journalist Michele Magar focuses on the important role played by consumer attorneys in providing legal assistance to those homeowners who find themselves under the burden of predatory loans, and the importance of increasing the ranks of consumer attorneys to take on predatory cases, as descibed in the following excerpts:

• Federal and state laws which offer statutory attorneys’ fees enable attorneys to help desperate homeowners restructure abusive loans into sustainable ones, rescind predatory mortgages altogether, and battle foreclosure rescue scams. Homeowners will have to rely on consumer attorneys in small firms because big firms often represent lenders.

• Under the federal Truth In Lending Act ["TILA"] (15 U.S.C. §§1601 et seq.), a homeowner may rescind a non-purchase loan secured by her primary residence (home equity and improvement loans and refi’s) for up to three years if her lender did not adequately disclose the terms of the loan, or the right to cancel the loan for three business days after the closing. “Ninety percent of loan documents I see have blank three-day rescission notices or contain other TILA violations,” said Dan Mulligan, a San Francisco attorney [with the firm Jenkins Mulligan & Gabriel LLP] who specializes in helping homeowners fight abusive loans. “A simple TILA rescission claim demand letter takes about four to six months to resolve, while lawsuits take 9 to 15 months, depending on the court’s backlog and how much of a fight the defense mounts.”

• “Sorting out winnable cases is not hard to do, but lawyers have to work on contingency or rely on statutory attorneys fees because typically clients have no money to pay up front to hire lawyers,” said Shirley Hochhausen. Hochhausen teaches a predatory lending clinic at the University of San Francisco School of Law and is co-counseling 36 cases with private practitioners via the Fair Lending Consortium, a Bay area group she organized to develop predatory lending expertise among private attorneys.

• “One way for attorneys to get familiar with this type of practice is to use our services for their first case or two, they can learn a lot in a short time and use it build a new practice area,” says John Van Alst, an attorney in NCLC's [the National Consumer Law Center] Washington, D.C. office.

• For attorneys who lack the resources to purchase manuals and hire consultants, Van Alst recommends co-counseling with legal aid attorneys. Most legal aid offices own the NCLC manuals, and are always in search of private attorneys to co-counsel cases both to increase the pool of attorneys available to help homeowners and also because federal regulations bar them from seeking attorneys fees. By co-counseling with private attorneys, legal aid lawyers can exert the same pressure to negotiate that private attorneys use: the persuasion of ever-increasing billable hours on statutory fee cases.

For more, see Right Now, Consumer Attorneys May Be the Best Hope for Californians Stuck in Predatory Loans.

For stories on consumer attorneys representing homeowners saddled with predatory home loans in a refinancing transaction, see Using Truth In Lending Act To Undo Bad Mortgage Loans. undo mortgage loans TILA alpha

Lenders' Subtle Screw-Ups Letting Homeowners Off The Hook On Toxic Refinancings

Reporter Amir Efrati, of The Wall Street Journal, reports:

• Having buyer's remorse about a mortgage? It can pay to scrutinize the fine print. Amid the housing-market turmoil, homeowners have been increasingly turning to a little-known process for renegotiating or exiting a loan. Even seemingly minor paperwork slip-ups can be enough to get a "rescission" (basically, a loan cancellation) based on the Truth in Lending Act, a federal law requiring disclosure of a loan's key terms. Under a rescission, while a homeowner still owes the principal, the lender won't be able to foreclose. Plus, all loan-related fees and interest that were paid are subtracted from the principal, which can mean substantial savings for the borrower. After a rescission, the borrower must pay off the loan, typically with a new mortgage, or sell the house. Other times, lenders will modify the terms of a mortgage instead of doing a rescission.

• It isn't for everyone. Borrowers have just three years after the loan is made to make a rescission claim. It is available only to people who refinanced their original mortgage on their primary residences.

• People who haven't refinanced can still use a bevy of state laws to seek damages from lenders, mortgage brokers, real-estate agents or appraisers who committed similar mistakes (or outright fraud) during loan origination.

***

• Consumer lawyers say rescissions are on the rise. Pamela Simmons of Simmons and Purdy says the Soquel [California] law firm has done more than 300 this year, up from 200 last year. Until recently, some judges were loathe to cancel loans where the only violations were paperwork mistakes, says Ira Rheingold of the National Association of Consumer Advocates, a group of consumer attorneys. Now that foreclosures are mounting, "courts have gotten more sensitive" to violations, he says.

• Many seemingly small foul-ups can qualify. If the APR, or annual percentage rate, is off by a fraction of a percent between the preliminary and final loan documents, the loan may be rescindable. Same goes if the total in fees is off by more than $100 (or $35, if the borrower is facing foreclosure).

In one case cited in the story, the lender's failure to provide the homeowner couple with two copies of a disclosure form informing them of their three day right to cancel the loan was enough to get a toxic loan canceled, saving the couple about $60,000. They were then able to refinance their way out of the bad loan with a mortgage with better terms from a different lender.

For more, see How minor mistakes can upend a mortgage (Many seemingly small discrepancies in paperwork can qualify for a loan rescission) (story appears in the Contra Costa Times - may require free registration; or try here - courtesy of the The Press Enterprise)

Go here for other posts on using the Truth In Lending Act to Undo Bad Mortgage Loans.

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For those stuck with bad loans who want to find out if their mortgage lender screwed up with the loan documents, and need a starting point for finding a consumer protection attorney to look over the paperwork, go here , or go here , or go here. (Don't hesitate to ask them if they work on a "contingency fee" basis - where they are entitled to their fee only if they succeed. In the context of consumer protection litigation, your attorney, if successful, will generally obtain a court order compelling the mortgage lender who screwed up to cough up the fee, therby costing you nothing out-of-pocket. Also ask the attorney if there is a charge for an initial consultation - don't be shy!)

These sources may also be a good place to begin a search for a consumer protection attorney if you're stuck with an unreasonable mortgage servicing company. Go here , go here , and go here for posts on questionable mortgage servicing practices and for those who think their mortgage servicing company is screwing them over. undo mortgage loans TILA alpha

Mortgage Lenders Concerned By Nearing Federal Appeals Court Decision On Homeowner Class Actions In "Truth In Lending" Cases

(original post 2-28-08)
The Washington Post reports:

• A federal appeals court is nearing a decision on a battle between Chevy Chase Bank and a Wisconsin couple that could for the first time enable homeowners across the country to band together in class-action lawsuits against mortgage firms and get their loans canceled. The case is alarming Wall Street's biggest banks, which could bear the hefty cost of reimbursing all mortgage interest, closing costs and broker fees to groups of homeowners who uncover even minor mistakes in their loan documents.

***

• [B]y allowing plaintiffs to file class-action suits, the ruling would make it much easier and more affordable for groups of homeowners to get that relief, several lawyers and mortgage analysts said. Dozens of class-action homeowner lawsuits have been filed in California and elsewhere against the nation's largest banks. The success of these claims could turn on the decision in the Chevy Chase case.

***

• The law states that even a minuscule violation by a lender can lead to a mortgage cancellation, or rescission. For example, if the annual percentage rate calculation is off by one-eighth of a percent between preliminary and final loan documents or if a monthly payment schedule does not conform precisely to federal guidelines, some borrowers could get a refund for all they have paid to live in their homes for years. They would have to pay back the entire amount of the loan, but they could then seek a new mortgage on better terms.

• According to the inspector general for the Federal Deposit Insurance Corp., 83 percent of federally supervised banks that issued loans at the height of the housing boom in 2005 have been cited for "significant compliance violations." Lending abuses were more frequent among the tens of thousands of state-regulated banks and thrifts, such as the now-bankrupt New Century Financial, industry analysts said.

• But few homeowners have been successful in getting their loans canceled. Most people are unaware they have this right, consumer advocates said. Others have found the process too arduous and expensive, often requiring long legal battles. Chevy Chase said it negotiated two mortgage cancellations all of last year. That could change if the U.S. Court of Appeals for the 7th Circuit rules in favor of allowing homeowners to join class-action suits. Plaintiff attorneys also would have far greater financial incentive to take up such cases.

• "It's preposterous to think an individual can fight the bank on a loan," said [attorney Kevin] Demet, the lawyer for the Wisconsin plaintiffs. "And any attorney who's worth his salt does not want to pursue individual action. You could spend $50,000 to $70,000 on a case where you are going up against huge law firms that want to delay and hassle you for several years."

For more, see Door Could Open To Class Actions (When Borrowers Fight Back: Banks watch closely to see if a couple's legal struggle with their lender will launch a new front in the battle over troubled mortgages).

For 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).

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

West Virginia Predatory Lending Lawyers "Never Lost a Case"

In Charleston, West Virginia, The Charleston Gazette recently ran a story on the local non-profit law firm Mountain State Justice, who has reportedly represented thousands of West Virginians in predatory lending lawsuits against major financial institutions. An excerpt from the story:

• Eight years ago, Charleston public interest attorneys Dan Hedges and Bren Pomponio started suing predatory mortgage lenders and brokers. “These companies target elderly and low-income West Virginians and talk them into signing fraudulent mortgage loans they can’t afford,” Hedges said. Their homes are at stake.

• “These are not sophisticated borrowers,” Pomponio said. Most found themselves up against the financial wall because of job loss, old age, medical bills or some other big expense, he said.

• Their law firm, Mountain State Justice, has filed about 800 cases on behalf of thousands of West Virginians facing foreclosure. Their clients have contended with bogus appraisals, kickbacks to brokers, misrepresentations and outright lies, illegal fees and other fraudulent practices. [...] Hedges and Pomponio take only mortgage cases with clear evidence of fraud. Their success rate? “We’ve never lost a case,” Hedges said. “These cases are that egregious.” He defines success as “getting the loans voided or substantially altered so people can stay in their homes.”

For more, see Recipe for foreclosure: Fraudulent mortgages devastate home-loving West Virginians and fuel national subprime crisis.

Go here for more posts on homeowners who have refinanced into bad mortgage loans and are now using the Federal TILA to try and undo the bad loans. undo mortgage loans TILA alpha

ABC News' Nightline On Alleged Mortgage Servicing Company Ripoffs

Last Friday night, ABC's Nightline ran a piece on the mortgage servicing industry and the problems some servicing companies have been accused of causing to homeowners in connection with servicing their home mortgages. Featured in the story were:

• New Hampshire homeowner Mike Dillon and the ongoing problem he's had with a mortgage company formerly known as Faorbanks Capital Corporation (now known as Select Portfolio Servicing) that serviced his home loan;

• North Carolina consumer bankruptcy attorney Max Gardner who asserts that it is not uncommon that his clients' cases involve charges tacked on by servicing companies that shouldn't have been charged (in addition to practicing law, he runs Max Gardner's Bankruptcy Boot Camp where, according to his website, trains other attorneys to use every available consumer protection statute in his system including the FDCPA, TILA, UDAP, FCRA, ECOA, the automatic stay and the discharge injunction when representing individual consumers);

• Professor Katherine M. Porter of the University of Iowa College of Law, who discusses some of her findings which have been recently published in a research paper, Misbehavior and Mistake in Bankruptcy Mortgage Claims, in which she examined mortgage servicing companies' frequent non-compliance with law in consumer bankruptcy cases.

To read the online transcript of the ABC Nightline program, see 'Playing the Odds' (Lawyer Max Gardner Says Some Mortgage Servicers May Be Taking Homeowners for a Ride).

The link to the video of the program will be posted when it becomes available.

For more on:

• Mike Dillon and his experiences with his mortgage servicing company, visit his website, www.getdshirtz.com,
• Max Gardner's Bankruptcy Boot Camp, read the BusinessWeek article, Bankruptcy Boot Camp (How one man is training an army of lawyers to fight predatory lenders) (BusinessWeek - January 15, 2007),
• Katherine Porter's research paper, see Misbehavior and Mistake in Bankruptcy Mortgage Claims, then follow downloading instructions.

Go here , go here , and go here for posts on questionable mortgage servicing practices.

Go here for more posts on homeowners and their attorneys who are using Federal & state consumer protection statutes, including the Federal TILA to try and undo the bad loans. undo mortgage loans TILA alpha questionable mortgage servicing practices tactics yak

World Savings, Wachovia Sued Again For TILA Violations; Class Action Status Sought

In Charleston, South Carolina, The Charelston Post and Courier recently reported:

• A Berkeley County homeowner is suing her mortgage lender in federal court, claiming she was sold a risky loan with a low teaser interest rate but was not told how the payments would increase over time or how the loan actually worked. Bonnie Mincey of Hanahan said in court papers that in May she refinanced her home and entered into an adjustable rate mortgage called an "Option ARM."

***

• The suit was filed Nov. 16 in U.S. District Court in Charleston and names as defendants World Savings Bank FSB of Oakland, Calif., and Golden West Financial Corp. and Wachovia Corp., both of Charlotte. [...] Her attorney, Daniel O. Myers, said Tuesday he believes his client is not alone. He is looking to expand the case to other Option ARM borrowers by seeking class-action status.

***

• The lawsuit alleges the defendants violated the federal Truth in Lending Act ["TILA"] by failing to "clearly or accurately disclose the terms of the Option ARM loan" and provided conflicting interest rates when describing the costs of the loan.

Representing the homeowner is attorney Daniel O. Myers with the law firm Richardson, Patrick, Westbrook & Brickman LLC, with offices in Mount Pleasant, Charleston, and Barnwell, South Carolina.

For more, see Mortgage lender named in lawsuit.

To read the lawsuit, see Complaint - Mincey v. World Savings Bank, et al.; or go here for direct link to the lawsuit on the PACER system (21 pages @ $.08/page; PACER registration required),

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For a story on another Federal lawsuit filed by a homeowner against Wachovia and World Savings in a California Federal Court, see Homeowner Files Suit Against Wachovia, World Savings For Deceptive "Option ARMs"; Seeks Class Action Status.

Go here for more posts on homeowners who have refinanced into bad mortgage loans and are now using the Federal TILA to try and undo bad loans. undo mortgage loans TILA alpha

Suing A Mortgage Servicer? 20 Reasons For Having Them Fork Over The PSA

In The Bankruptcy Litigation and Consumer Rights Blog, consumer bankruptcy litigation attorney Max Gardner writes:

• Every time I file a civil action against a mortgage servicer the very first document I want is a copy of the “Pooling and Servicing Agreement.” This is the legal document that creates the securitized trust of mortgage loans and also strictly provides for the duties of all entities who are assigned the responsiblity of servicing loans for the Trust.

For 20 of the reasons you need to request through formal discovery in any mortgage-related lawsuit the PSA Agreement and why it is relevant, see Max Gardner’s Top Reasons for Wanting a Pooling Servicing Agreement.

Go here for more posts on homeowners and their attorneys who are using Federal & state consumer protection statutes to try and undo bad mortgage loans. undo mortgage loans TILA alpha questionable mortgage servicing practices tactics yak

West Virginia Homeowner Facing Foreclosure In Lawsuit Involving Mortgage Refinance Dispute

In Vienna, West Virginia, the Sunday Gazette-Mail reports on another story of a homeowner who appears to have been screwed over in a mortgage refinance of the family home.

• For seven years, 78-year-old Jerry Davis made payments on a $36,700 mortgage he and his late wife took out on their home, on land that was part of his parents’ farm. Then in November 2004, he said, he received a monthly bill for $38,000. Pay this month, it said, or face further action. His mortgage contains a “balloon” clause. That means the mortgage-holder can send the borrower a lump-sum bill for the entire remaining debt, after the borrower pays for years. Balloons are illegal under state law, but federal law, which allows them, supercedes state law.

[...]

• “Usually, these lenders tell people orally that they can refinance, but they don’t write it into the contract. This time, they did. So Select Portfolio, representing Bank of America, was refusing to honor the contract,” said [attorney] Dan Hedges, who represents Davis. He has filed suit on Davis’ behalf.

Hedges is with the non-profit law firm Mountain State Justice. The financial companies mentioned in this story are Select Portfolio Services (formerly known as Fairbanks Capital Corporation), Bank of America, and EquiCredit. For more, see Their stories: ‘I was sick at my stomach’.

For related West Virginia stories from the Sunday Gazette-Mail, see:

• Fayette widow: ‘I got tricked’,
• ‘I just have to trust in the Lord’.

Go here for more posts on homeowners who have refinanced into bad mortgage loans and are now using the Federal TILA to try and undo the bad loans. undo mortgage loans TILA alpha

New Hampshire Not Immune From Subprime Crisis

The New Hampshire Union Leader reports that New Hampshire is not immune from the nationwide foreclosure crisis within the "subprime" mortgage industry. One local expert is predicting a "Nantucket sleigh ride" for the industry.

Sarah Mattson, a staff attorney with New Hampshire Legal Assistance, a non-profit law firm offering free legal services to seniors and eligible low-income persons, reports that a growing portion her organization's foreclosure practice involves people who have been ensnared by "foreclosure rescue scams."

Peter Wright, director of the Consumer and Commercial Law Clinic at Franklin Pierce Law Center in Concord, also reports seeing more clients who fell victim to predatory loans.

New Hampshire and Massacusetts bankruptcy attorney Richard Gaudreau, warns the picture is about to get even worse, referring to "deferred interest" / "negative amortization" mortgages as "the real time bomb" in this crisis. Reportedly, he is pursuing cases involving Truth in Lending Law violations by mortgage lenders on behalf of a number of New Hampshire homeowners.

For more, including a description of what is a "Nantucket sleigh ride", see NH foreclosures jump as 'exotic' loans' rates adjust.

Go here for more posts on homeowners who have refinanced into bad mortgage loans and are now using the Federal TILA to try and undo the bad loans. undo mortgage loans TILA alpha

Lender Violates NYS Predatory Lending Law; Judge Halts Foreclosure, May Void Mortgage

In New York City, the Staten Island Advance reports on a lawsuit filed by an area couple, who were first-time homebuyers, against a mortgage lender alleging a violation of a predatory lending provision in the New York State Banking Law when the loan was originated. According to the story:

• In what is likely to be a precedent-setting decision in New York, state Supreme Court Justice Joseph J. Maltese agreed with the [homeowners], recently telling the bank that it could not foreclose on the couple's [Staten Island] townhouse and that it may have to pay them damages for their troubles and void the $355,000 mortgage on their [...] home. In his 11-page decision, Maltese rips the original lenders and brokers for making the high-cost loan to the [homeowners] without checking to see if the couple could repay the mortgage -- a violation of the 2002 predatory lending provisions of New York State banking law.

• It's the first time in the state that a judge has invoked those predatory lending provisions against a lender, and it could signal a shifting tide in how foreclosures are handled, experts note. James Tierney, director of the National Attorneys General program at Columbia Law School, said trial judges across the country are beginning to question banks seeking to foreclose on homeowners in similar situations. "What I am seeing is a number of trial judges saying, 'Enough is enough, fraud is fraud.' They are kind of taking a stand," said Tierney.

***

• At a hearing Feb. 28, the judge is expected to decide whether the mortgage should be voided and damages granted to the homeowners. [...] It's unclear if [the mortgage holder] will appeal Maltese's decision. [...] Margaret Becker, director of the Homeowner Defense Project at Staten Island Legal Services in St. George who represents Islanders in cases of alleged predatory lending, said many others don't have attorneys and don't challenge foreclosures. "It's good to hear a success story," she said of Maltese's decision. "It is very encouraging that judges are clearly taking the issue of predatory lending in the subprime market seriously and are willing to enforce laws to protect people from these kinds of pernicious practices."

The homeowners were represented by Cilmi & Associates PLLC, of New York City.

For more, see Stuck with a bad loan, a Staten Island family fights back.

See also, ABC News: Fighting Back Against Foreclosure (New York Judge Denies Foreclosure Based on Alleged Predatory Lending).

To view the trial judge's decision, see LaSalle Bank, N.A. v Shearon, Supreme Court, Richmond County, 2008 NY Slip Op 28032 (January 28, 2008).

Go here for other posts on homeowners using Federal & state consumer protection statutes to try and undo bad mortgage loans. undo mortgage loans TILA alpha

Option ARMs The Target Of Homeowners' "Truth In Lending" Lawsuits

Buried in a recent column appearing in the San Francisco Chronicle is a mention of attorney Jeffrey Berns, of Tarzana, California (Los Angeles County) who is preparing to file Federal Truth In Lending Act lawsuits on behalf of hundreds of borrowers who took out option ARMs. According to the column:

• "Berns says he is going to file cases in state court alleging violations of federal truth-in-lending laws as well as deceptive practices, fraud and negligent or intentional misrepresentation."
• "Berns, who is working on a contingency basis, says many lawyers are not willing to take on these cases. They can be difficult to win because "the disclosures are there, they're just buried in more than 100 pages of documents.""

According to Tom Pool, spokesman for the California Department of Real Estate, "State courts have found that mortgage brokers are fiduciaries in these types of transactions."

Reportedly, a state judge in Wisconsin recently ruled in favor of borrowers who had taken out option ARMs offered by Chevy Chase Bank that violated three provisions of the Federal Truth in Lending Act. The case was ultimately certified as a class action lawsuit. According to Milwaukee attorney Kevin Demet, who represented the homeowners, the size of the class could reach 7,000 to 8,000 people nationwide who took out the Chevy Chase option ARM in the year leading up to April 2005.

For more, see Subprime crisis offers a chance to step up.

For 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).

Go here for more posts on homeowners who have refinanced into bad mortgage loans and are now using the Federal TILA to try and undo the bad loans. undo mortgage loans TILA alpha

California Foreclosure Rescue Operator Faces Felony Charges

The Santa Cruz Sentinel is reporting that Leonard Bernot, a man who over three years ago offered to help a local, financially strapped Santa Cruz homeowner with foreclosure rescue services and ended up owning her home, is now facing felony charges on the grounds that he induced her into entering into an unlawful "equity purchase" contract, in violation of California state law and is also charged with grand theft. Bernot was charged in May of this year and pleaded not guilty on June 13.

According to county prosecutor William Atkinson, a grant deed turning over ownership of the home to Bernot was among the paperwork he had the homeowner sign; he also refinanced the property with a loan large enough to pay off the existing mortgage and to allow him to pocket $90,000.

The criminal charges allege violations of what is long standing California law (passed in 1979) regarding equity purchasers (Section 1695 - 1695.17, Cal. Civ. Code) and foreclosure consultants (Section 2945 - 2945.11, Cal. Civ. Code).

After being victimized, the homeowner retained the assistance of Soquel attorney Bill Purdy, who filed a notice of rescission (possibly a Federal Truth In Lending claim here; the article doesn't say) on her behalf in April 2005 and is representing the homeowner in a civil lawsuit against Bernot. Reportedly, Bernot trnsferred title to the home back to the victim in March of this year. (Inasmuch as it wasn't until May of this year that Bernot was charged criminally for conduct that took place three years ago, I suspect that it may have been the civil lawsuit -- and the facts that may have come out of it -- that possibly served as the impetus for the criminal action by the local prosecutor.)

For more, see Santa Cruz resident says her home was stolen in foreclosure scam (no longer available online).

Go here for more on attorney William Purdy.

Go here for more on Leonard Bernot.

Go here for more posts on homeowners who have refinanced into bad mortgage loans and are now using the Federal TILA to try and undo the bad loans. undo mortgage loans TILA alpha

Homeowner Files Suit Against Wachovia, World Savings For Deceptive "Option ARMs"; Seeks Class Action Status

The San Francisco Business Times reports:

• A lawsuit filed against Wachovia Corp.'s mortgage unit and World Savings Bank in Oakland alleges the bank was less than honest in explaining its option-adjustable-rate mortgages to consumers, according to the Charlotte Business Journal. That "campaign of deceptive conduct and concealment" led customers to lose their homes through foreclosure, contends the suit, which seeks class-action status. It was filed Aug. 30 in federal court in San Jose.

[...]

• The suit claims the bank did not disclose the actual interest rate on its loans, which were often raised "immediately and significantly" after closing. It also says if borrowers made payments at the teaser rate, the principal on the loan would actually increase, which is called negative amortization.

For more, see Wachovia sued over option-ARM mortgages. For a copy of the lawsuit, either:

• Drop me a line at HomeEquityTheft@yahoo.com (please put "Mandrigues v. World Savings, Inc." in the "Subject" line) and I'll e-mail it to you, or
• Go here for a direct link to the lawsuit (39 pages - $2.40); on the U.S. Courts' PACER website. PACER registration required.

For another lawsuit, filed in a Charleston, South Carolina Federal Court, involving "Option ARMs," see World Savings, Wachovia Sued Again For TILA Violations; Class Action Status Sought.

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For links to media stories of other refinancing homeowners who lost equity in their homes and found themselves in or near foreclosure as a result of these or other types of exotic mortgages, see Subprime Refinancing Leaving Some Homeowners Financially Strapped.

Go here for other posts on homeowners suing lenders to undo subprime / predatory loans. undo mortgage loans TILA alpha

Suing May Be Viable Option For Some Homeowners Facing Foreclosures

An article by The Associated Press appearing in the Naples Daily News provides a list of what financially strapped homeowners can do to try and stave off a foreclosure. Of the number of options a homeowner can consider, one route is to take the offensive and bring a contingent legal fee-based lawsuit. According to the story:

• A growing number of private lawyers, with help from consumer-rights groups and legal-aid lawyers, are pursuing legal relief for borrowers who got loans they had little chance of repaying and, the lawyers argue, shouldn't have been granted.

• Taking cases on a contingency-fee basis, these lawyers are giving borrowers the chance not only to stop foreclosure and rescind the loan, but also to seek damages for abuses in some cases. The aim is to prove that lenders granted fraudulent or "unconscionable" loans with terms skewed heavily in their favor, or to fight abuses by servicers such as phony fees that cause homeowners to default.

• The number of lawyers specializing in this area is still small, and many already have packed caseloads. Melissa Huelsman, a Seattle lawyer who has focused on wrongful-foreclosure litigation since 2001, says her caseload has doubled in the past year to 50 active cases. She is mentoring several local lawyers.

• Bill Purdy, a Soquel, Calif., lawyer, first looks for violations of federal statutes such as the Truth in Lending Act, a 1968 law that requires disclosure of key terms of the loan and its costs. "There are tons of illegal loans out there, but nobody's looking," Mr. Purdy says. Most cases settle out of court. But courts in states such as West Virginia and California have been most receptive to suits against lenders and servicers, says Margot Saunders of the National Consumer Law Center, which assists attorneys in such suits.

• A possible downside to suing: in extremely rare instances, borrowers who lose a suit may get saddled with attorneys' fees for the lenders. For a list of attorneys specializing in lender/servicer abuses, check http://www.naca.net, the Web site of the National Association of Consumer Advocates, or call your local legal-aid office or bar association.

This approach is currently being used by homeowners caught up in foreclosure rescue scams. For the rest of the story, see What people can do if foreclosure looms.

For more on consumers invoking their legal rights to undo predatory transactions that violate the law, check out these posts & links. If you want more, check out these additional posts & links. undo mortgage loans TILA alpha