7/25/2011 12:44 PM ET|
Should you sue your lender?
If you believe your loan should have been modified by now (or you feel ignored by your lender), a lawsuit might help. But you might have other, better options.
Have you made your three mandatory trial loan modification payments but still have not been approved for a permanent loan mod? Do you believe your home was wrongfully foreclosed on? Have you been approved for loan modification but have still received a foreclosure notice? Do you struggle day in and day out to communicate with your servicer or mortgage lender?
Perhaps it is time to think about suing your lender or servicer.
While suing mortgage lenders and servicers over mortgage foreclosures and denied loan modifications is nothing new, it can work, but it will not be easy.
Before you decide to sue . . .
MaryLou Urrutria of The Grace Group advises that you persist with your lender before pulling the trigger on a lawsuit. "Be persistent with your bank if you really want to keep your house," she says. "Depending on your situation and value of your house in relation to your mortgage, you may want to fight for the modification."
If you have a second mortgage, your best bet may be to consolidate the loans, says Urrutria. "If you are really upside down and have a second mortgage, negotiate a settlement on the second and, if it has been sold to another servicer or collection agency, you may be able to settle for 1% to 3% of the balance of the second. Getting rid of the second mortgage may put your amount owed on your mortgage closer to the value of the house."
Help may be on the way
One settlement between some of the country's largest mortgage servicers and federal regulators has resulted in an agreement in which servicers must hire independent firms to go through loans and look for improper procedures like robo-signing.
The actions also require each servicer to establish a process for borrowers who believe they have been financially harmed by such defects to make submissions to be considered for remediation. Each servicer must also submit a plan to compensate borrowers for errors, misrepresentations or other deficiencies identified in the independent consultant's findings.
Trial payments do not guarantee a modification
Many lawsuits making their way through the courts these days claim that by denying modifications once the borrowers made three trial modification payments, lenders are breaching contracts with homeowners. The lenders have countered that trial modifications are not contracts. Treasury Department officials agree, saying homeowners in Home Affordable Modification Program trial plans are not promised permanent modifications. This claim has not paid off for anyone yet, despite the slew of law firms that have independently pursued it.
Paperwork glitch won't save your home
In foreclosure litigation, the class action big guns have turned their attention to MERS filings -- the Mortgage Electronic Registration System that keeps track of the ownership of many American mortgages. Most of these lawsuits center on the principle that the firm lacks standing to foreclose because it is not the true owner of the mortgages, or that the paperwork proving ownership has not been presented.
These suits have caused courts in some jurisdictions to require that the true owner of the mortgages do the foreclosing, not MERS. In some cases, these suits cause a delay in foreclosure proceedings -- but no one yet has gotten a house back because of a MERS issue.
Class action lawsuits have had little success
While an online search turns up plenty of class action filings, they have mostly been dismissed or are not yet resolved. Experts attribute this overall lack of big class action success in the courts thus far to the fact that the plaintiffs bring rather basic claims, such as "I made my trial payments on time, and I still have not been approved for a loan modification."
Individual cases have had more success
That said, the HAMP and foreclosure lawsuits that have been successful are exactly those kinds of claims -- brought by individual homeowners alleging bad faith by lenders in courts all across the country -- from U.S. Bank National Association v. Alejandra Padilla in New York, to the small claims case in Big Bear City, Calif., in which homeowner Dave Graham successfully sued Bank of America all by himself.
How to win a foreclosure or modification battle in court
Storm Bradford, of Mortgage Fraud Examiners, says if you are trying to get a mortgage modification or avoid foreclosure, you can make your own luck. Before going hat in hand to your lender, he advises, get a high-quality forensic evaluation of your mortgage. Irregularities in the loan-origination process are common, particularly in the appraisal. Discovering these irregularities puts you in a much better position to negotiate out of your mortgage difficulties.
"Nothing works like the lawsuit or the threat of a lawsuit" when dealing with a mortgage lender, he says. Want proof? "Check the language of a modification agreement -- they always put an indemnity clause in there that keeps you from going after them if you discover something illegal or fraudulent -- because there are things that are wrong in there, and they know it."
Beware of class-action scams
The Better Business Bureau is warning homeowners to be aware of the latest scam, designed to get you to pay upfront mortgage assistance costs of as much as $5,000. This foreclosure and modification "help" is masking itself as the nationwide mass joinder lawsuit against mortgage companies.
Homeowners receive letters promising a loan modification, foreclosure stoppage, cash settlement, lien stripping, or even free and clear title. Do not fall for this -- it is merely a way for firms to get around the laws prohibiting the collection of upfront fees for mortgage modification help.
Talk to a lawyer
"I regularly meet clients who have been repeatedly denied mortgage modification requests and are faced with foreclosure lawsuits initiated against them by their mortgage companies," says New Jersey attorney David Giller. "Most of these homeowners don't realize that a qualified attorney can help them in many ways."
Have you considered bankruptcy?
One final available weapon is a bankruptcy filing. "Although most homeowners are afraid of filing for bankruptcy, there are many solutions available through the bankruptcy laws which are not available in foreclosure defense," Giller says. "These solutions help get the clients the mortgage modification they desperately sought from their mortgage company in a far more efficient manner."
This article was reported by Gina Pogol for HSH.com.
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Always record conversations with bankers. Always take 5 days to read the contract. Always have the bank pay to have your attorney review there documents. Always have a clause added that will result in fines, legal action, and the bank to liable for these expense in the event of any improper action on part of the bank (default of contract). They do with you.
MY girl friend was 4 payments ahead. Made good money and was frugal with it too. Her mortgage company DIDN'T pay her taxes and insurance from her escrow account, the county put a lein against her home and that's when she found out when she got the letter from the tax collector. It took her 4 months to get it paid, by her lender, and now they say she is $900 behind on her escrow account again....she's not behind and has never been behind. By the way the county sent it in to the credit reporting companies and now her stupid credit scores are in the tank.....Does anyone know of a really good Contract Lawyers? If she don't have a case no one does!!!!!!
My reporting is hardly sloppy. It's a fact that the BBB has issued warnings against mass joinder filings. As has the Federal Trade Commission just last month, but I guess you, jrohner51, don't consider these agencies as reputable as a pack of hard-selling lawyers advertising on TV and hiring call centers to sign more folks up.
The FTC characterizes this activity as a fraud, period, and claims that the firms promise relief, but generally don't deliver, often leaving their clients in worse financial shape than before.
jrohner51, I think you're lawyer, with an axe to grind, and you'd rather run down my professional work than engage in something honorable yourself.
I purchased a home in 1993. The day after closure, the insurance company would not insure it because of a warped piece of plywood on the roof. It took me many months of diligent work, but eventually my mortgage company put a new roof on my house. It was well worth the effort. I'm retired now but my career taught me to document, document, document. If not documented, it didn't happen. That means, the date, time, person you spoke to and a brief summary of the conversation every time. A great thanks goes out to all of my bosses who took the time to teach me what I needed to know. I was a fast learner, went to work on time and was not a social butterfly. Those things got me promoted very quickly. I will never forget what I learned. I was in a position where things weren't so black and white. My decisions had to be made with a possible jury finding in my favor. I did win a few cases for my company and myself too. Law suits are not always the answer but I would like to know why we can no longer sue for product liability, at least in Texas?
What does it take to make companies accountable? The Deceptive and Unfair Trades Act is being ignored to it's fullest these days. I have my own issue on that but can't get any one to listen.
Those of you who don't keep receipts for purchases before the manufacture's warranty runs out, shame on you.
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