We have finally seen our first few loan modifications under the National Mortgage Settlement entered into between the Attorney Generals of the various states and the “Big Five”: Chase, Citi, Bank of America, Wells Fargo, and Ally. So far we have only seen Bank of America modifications emanating from their acquisition of Countrywide. The ones that we have seen are good, very good. We are talking about principal reductions in excess of 50%.
We are trying to do some detective work and, apparently, Bank of America has outsourced these particular modifications to a company in Houston, Texas called Home Retention Group, Inc. That is all that we found out so far. We are also trying to figure out how one qualifies for one of these “unicorns.” In a press release put out a couple of weeks ago, Bank of America outlined the following criteria:
1. The loan has to be upside-down.
2. As of January 31, 2012, it must be in default for at least 2 months.
3. Monthly housing payments, which would include principal and interest on the existing loan, property taxes, hazard insurance, and homeowner’s or condo fees must total more than 25% of the gross household income.
4. Owned by Bank of America, or if not owned by Bank of America, serviced by them under contractual terms which would permit “modification.”
No Fannie Mae, Freddie Mac, FHA or VA loans are authorized to participate in this principal reduction program. What else is new?
We are looking into when the other members of the “Big Five” will be offering modifications and what type of criteria they will use. We will report on that when we have information that is reliable.
In the interim, if you have a loan serviced by Bank of America, which meets the above criteria, we strongly suggest that you contact Bank of America and specifically request to apply for a “Modification Under the U.S. Department of Justice and State Attorney General Global Settlement Agreement.” Put it in writing. I would even try sending it via certified mail so that you can prove you requested it for whatever that might be worth in the future. I would also try calling Bank of America’s toll free number 1-(800)-669-6650, but I would still put the request in writing and very specifically ask for that modification and a principal reduction.
How can you tell if your loan is upside-down? We use the national database operated by Zillow; http://www.zillow.com/. It's free and should give you a pretty good idea of what the actual current value of the property is.
I would also use the same technique and make a written request to the other four servicers; Chase, Citi, Wells Fargo, and Ally. Seems to me that you have nothing to lose.
According to the information on the Settlement, there are billions of dollars available for these types of modifications, but billions of dollars will be used up quickly. I strongly suggest that you get in line as soon as possible. We will report further in this Blog once we get additional information, however there is no excuse for not asking for something that you may be entitled to. Do it early and do it in writing.
Wednesday, August 15, 2012
Wednesday, August 1, 2012
WHAT THE LORD GIVETH, THE LORD TAKETH AWAY. HURRY UP AND TRY FOR A LOAN MODIFICATION!
The often repeated Bible passage from Job 1:21 of the King James version is particularly applicable to the situation that is now facing distressed homeowners, severely underwater with mortgage balances far exceeding the property’s value and trying to get relief. After 4 years of dealing with the freefall in the value of people’s homes, at first it would appear as if we have finally gotten to the point where the various actions of governmental agencies and the mortgage industry are beginning to come together and generate a climate where relief for these underwater homeowners may be readily at hand.
First, we had the Obama Plan Tier I (HAMP), a realization by the various mortgage companies and servicers that they are better off modifying loans to keep people in their homes and making payments. Then there was the $25 billion massive Attorney General’s settlement ironed out between the individual State’s Attorney General and the big mortgage servicers, which supposedly made $10 billion available to go to assisting homeowners with principal reductions in their loan modifications. The way ahead seemed to be rational loan modifications with significant principal reductions to make those who are suffering from the economic downturn able to keep their homes and make their mortgage payments. Finally, there was the recent (June 1, 2012) HAMP Tier II Program which radically increased actual cash incentives for lenders to give principal reductions.
But, just like the game of chicken that the two political parties played with their refusal to increase the national debt ceiling until the very last moment, threatening default, and singlehandedly causing a reduction in America’s credit rating; on a smaller scale, the political deadlock between the donkeys and elephants now threatens to derail the progress of homeowners seeking rational loan modifications.
Specifically, in 2007, the Congress passed The Mortgage Forgiveness Debt Relief Act, which simply stated, authorizes an individual taxpayer to ignore the tax consequences of debt forgiveness when there is a principal reduction in their home mortgage. Normally, under our tax code, if a lawful debt is forgiven, such as in the case where the principal balance on an outstanding mortgage is reduced, the reduction constitutes income within the year that the debt is forgiven. Under the Act, as long as the amount forgiven is on a mortgage on their principal residence, there is no tax consequence. (The mortgage cannot exceed $2 million or $1 million for a married person filing a separate return.) This provision of the Internal Revenue Code is due to expire December 31, 2012. It was anticipated that the extension of this benefit would be readily approved, however, the handicappers are no longer sanguine regarding its extension. (This means that the experts are not sure that Congress can get itself together to agree on this provision which has universal support among 99% of the population.) Thus, there is a very real prospect that, once again, democracy in action will shoot itself in the foot.
Don't get me wrong, I like democracy. In fact, I like it better than any other system of government (other than that system which allows me to make all the decisions). Be that as it may, if you can read, or if you can understand what is broadcast over and over again within the last 4 years on what we euphemistically call the news, and you have not been living underground, one must realize that the likelihood of our national legislature agreeing upon anything, no matter how popular, is these days, certainly less than 50%.
All this means is: now is the time to pursue a loan modification. The banks are inclined; they have supposedly $10 billion to utilize under the Attorney General’s Settlement for a reduction of principal balances. Mortgage interest rates are at an all time low. Real estate values are scraping the bottom. The banks have been further incentivized by the Obama HAMP Tier II Program to propose principal reductions and to tax free consequences of any debt forgiveness would still be effective, at least until the end of the year. The process is not smooth, and it's often lengthy. The lesson to be learned here is that anyone thinking about trying to get a loan modification should stop thinking and start doing. Go to your mortgage servicer’s website, download the materials, hire a lawyer if you like, or proceed on your own. But whatever you do, if you think you are qualified for a principal reduction on your mortgage due to significant reduced value and financial hardship, you would be a fool not to try.
First, we had the Obama Plan Tier I (HAMP), a realization by the various mortgage companies and servicers that they are better off modifying loans to keep people in their homes and making payments. Then there was the $25 billion massive Attorney General’s settlement ironed out between the individual State’s Attorney General and the big mortgage servicers, which supposedly made $10 billion available to go to assisting homeowners with principal reductions in their loan modifications. The way ahead seemed to be rational loan modifications with significant principal reductions to make those who are suffering from the economic downturn able to keep their homes and make their mortgage payments. Finally, there was the recent (June 1, 2012) HAMP Tier II Program which radically increased actual cash incentives for lenders to give principal reductions.
But, just like the game of chicken that the two political parties played with their refusal to increase the national debt ceiling until the very last moment, threatening default, and singlehandedly causing a reduction in America’s credit rating; on a smaller scale, the political deadlock between the donkeys and elephants now threatens to derail the progress of homeowners seeking rational loan modifications.
Specifically, in 2007, the Congress passed The Mortgage Forgiveness Debt Relief Act, which simply stated, authorizes an individual taxpayer to ignore the tax consequences of debt forgiveness when there is a principal reduction in their home mortgage. Normally, under our tax code, if a lawful debt is forgiven, such as in the case where the principal balance on an outstanding mortgage is reduced, the reduction constitutes income within the year that the debt is forgiven. Under the Act, as long as the amount forgiven is on a mortgage on their principal residence, there is no tax consequence. (The mortgage cannot exceed $2 million or $1 million for a married person filing a separate return.) This provision of the Internal Revenue Code is due to expire December 31, 2012. It was anticipated that the extension of this benefit would be readily approved, however, the handicappers are no longer sanguine regarding its extension. (This means that the experts are not sure that Congress can get itself together to agree on this provision which has universal support among 99% of the population.) Thus, there is a very real prospect that, once again, democracy in action will shoot itself in the foot.
Don't get me wrong, I like democracy. In fact, I like it better than any other system of government (other than that system which allows me to make all the decisions). Be that as it may, if you can read, or if you can understand what is broadcast over and over again within the last 4 years on what we euphemistically call the news, and you have not been living underground, one must realize that the likelihood of our national legislature agreeing upon anything, no matter how popular, is these days, certainly less than 50%.
All this means is: now is the time to pursue a loan modification. The banks are inclined; they have supposedly $10 billion to utilize under the Attorney General’s Settlement for a reduction of principal balances. Mortgage interest rates are at an all time low. Real estate values are scraping the bottom. The banks have been further incentivized by the Obama HAMP Tier II Program to propose principal reductions and to tax free consequences of any debt forgiveness would still be effective, at least until the end of the year. The process is not smooth, and it's often lengthy. The lesson to be learned here is that anyone thinking about trying to get a loan modification should stop thinking and start doing. Go to your mortgage servicer’s website, download the materials, hire a lawyer if you like, or proceed on your own. But whatever you do, if you think you are qualified for a principal reduction on your mortgage due to significant reduced value and financial hardship, you would be a fool not to try.
Thursday, July 26, 2012
LIBOR-MORTGAGES-MORE BAD BEHAVIOR BY BANKS-YOU THINK YOU ARE GOING TO GET A FREE HOUSE?
Libor: London Interstate Offer Rate. Libor is supposed to represent the rate that banks in London charge each other for interbank loans. Actually, there are different durational periods that are used; the Libor rate overnight, one week, one month, two months, and six months, etc. with different rates for each. The compilation of these rates is published daily after 11:00 p.m. by the British Banker’s Association, based upon empirical information provided by various London Banks regarding what the actual rates they are paying to borrow money from other banks. (Significantly, the actual rate is then calculated by a company called Thomson Reuters, a company which has a monopoly on various information databases including a complete lock on the databases used by lawyers that will no doubt be the subject of a future rant by yours truly.)
Reuters, on behalf of this esteemed organization; known as the British Banker’s Association, collects the raw data from the various London banks and using some predetermined algebraic formula, comes up with an average rate which is published daily. Like everything else British, it is published on a regular basis, consistent and in reality, usually daily at about 11:45 a.m. London time. It is what bankers call a “benchmark” interest rate, not dissimilar to the “prime” rate which is supposed to be the lowest interest rate that banks charge its very best customers. This benchmark rate is widely used as the basis upon which interest rates are calculated and according to various sources, literally trillions of dollars of loans including everything from adjustable rate mortgages, student loans, adjustable rate credit cards are often directly linked to the Libor rate, and even non-adjustable loans are affected by the current Libor rate at a time when interest rates are set. Significantly, adjustable interest rate mortgage loans, which we refer to as ARMS, saw their interest rates dramatically increase in October 2008 because the Libor rate increased, and these interest rates were directly pegged to Libor. October 2008...does anyone remember that far back? So what? The “so” is that apparently Barclay’s Bank, one of the biggest and oldest English banks, who issues wonderfully engraved traveler’s checks, just got busted in a scandal where apparently they were manipulating this interest rate.
That is the “so,” here’s the “what.” The “what” is that, once again, when we get a little glimpse of the “free market system” in operation, we see that it ain’t much of a market, and it sure as hell ain’t free. How long would a casino in Las Vegas or Jersey City last if the word got out that the games were rigged? That the roulette table had one of those brakes on it like they had in all of those old 20's movies? That the blackjack dealer was pulling cards out of his sleeve? That the lotto drawings were fixed, whatever? Does anyone remember the Black Sox scandal? The Chicago White Sox lost most of their players because they got caught rigging the 1919 World Series. There was a major reform of Major League Baseball, and the offending players were banned from baseball for life. There are some pretty cool movies about this scandal.
The hero of the scandal was a federal judge by the name of Kenesaw Mountain Landis, who became the first commissioner of Baseball, and he kicked butt. The takeaway is that after this there has never been a real scandal in baseball regarding the throwing of games. Pete Rose was banned from baseball for life, not for throwing games, but for gambling on baseball.
Back to the topic at hand; so far, the result of this most recent scandal, which appears to be interest rate fixing, is that the head of Barclay’s resigned. Mr. Bob Diamond, in his exit as the head of Barclay’s, whined that his bank was being singled out, and that many of the world’s other largest lenders were involved in this activity. He also recanted his offer to host a high dollar fundraiser for Mitt Romney; I guess he thought it might be bad politics. Mr. Diamond, another American boy that made good. I guess we shouldn't feel that sorry for him. According to some accounts, in 2008, he earned $70 million through his employment at Barclay’s, and the Sunday Times of London estimates that he has a net worth of $165 million.
Apparently this investigation will continue. According to Mr. Diamond, others are involved. Barclay’s Bank got fined although it doesn't appear that other than being forced to resign, any other individuals have been punished. We shall see.
And now to the title of this blog, the part about getting a “free house.” This is the favorite refrain of many Judges in South Florida when confronted by abuses and defects in foreclosure cases presented on behalf of the defending homeowners. So what they say: “Mr. Keegan, your client borrowed the money, are you asking the Court to give him a free house? Not going to happen in my Court.”
Somehow, in some way, this is all connected. There is President Reagan and his trickle down “voodoo” economics. There is a notion that what is good for business is good for America. There is the idea that there is “no free lunch,” and the origins of the po-boy sandwich in New Orleans doing a transit strike (some left wing pinko restaurant made free hoagies for the striking transit workers). Can you imagine pinko leftists in Louisiana? I am not advocating free houses, or maybe I am. If the bank cannot prove or meet the requirements of the law, or if it becomes apparent that they have contributed to the default situation, or they have violated the law and morality in trying to foreclose, maybe the courts should give away some free houses... What’s wrong with a little good old fashioned American justice? As a permanent solution, however, to the dilemma that faces us all, something else is needed.
I submit the following as a solution, or as a significant step in the right direction to combat the economic woes of the world: the 1946 Frank Capra movie called “It’s a Wonderful Life” starring Jimmy Stewart and Donna Reed. Certainly you remember the movie. It is about a run on a local savings and loan. It is considered to be one of the greatest American movies of all times. Ironically, the company that produced the movie forgot to renew their copyrights, so the movie is actually in the public domain, and you should be able to get a copy on DVD pretty easily. Watch it. The model of the savings and loans that were presented in that movie, I believe, is a significant step in solving the economic problems of this country and the rest of western civilization. It's a pretty cool movie too.
Reuters, on behalf of this esteemed organization; known as the British Banker’s Association, collects the raw data from the various London banks and using some predetermined algebraic formula, comes up with an average rate which is published daily. Like everything else British, it is published on a regular basis, consistent and in reality, usually daily at about 11:45 a.m. London time. It is what bankers call a “benchmark” interest rate, not dissimilar to the “prime” rate which is supposed to be the lowest interest rate that banks charge its very best customers. This benchmark rate is widely used as the basis upon which interest rates are calculated and according to various sources, literally trillions of dollars of loans including everything from adjustable rate mortgages, student loans, adjustable rate credit cards are often directly linked to the Libor rate, and even non-adjustable loans are affected by the current Libor rate at a time when interest rates are set. Significantly, adjustable interest rate mortgage loans, which we refer to as ARMS, saw their interest rates dramatically increase in October 2008 because the Libor rate increased, and these interest rates were directly pegged to Libor. October 2008...does anyone remember that far back? So what? The “so” is that apparently Barclay’s Bank, one of the biggest and oldest English banks, who issues wonderfully engraved traveler’s checks, just got busted in a scandal where apparently they were manipulating this interest rate.
That is the “so,” here’s the “what.” The “what” is that, once again, when we get a little glimpse of the “free market system” in operation, we see that it ain’t much of a market, and it sure as hell ain’t free. How long would a casino in Las Vegas or Jersey City last if the word got out that the games were rigged? That the roulette table had one of those brakes on it like they had in all of those old 20's movies? That the blackjack dealer was pulling cards out of his sleeve? That the lotto drawings were fixed, whatever? Does anyone remember the Black Sox scandal? The Chicago White Sox lost most of their players because they got caught rigging the 1919 World Series. There was a major reform of Major League Baseball, and the offending players were banned from baseball for life. There are some pretty cool movies about this scandal.
The hero of the scandal was a federal judge by the name of Kenesaw Mountain Landis, who became the first commissioner of Baseball, and he kicked butt. The takeaway is that after this there has never been a real scandal in baseball regarding the throwing of games. Pete Rose was banned from baseball for life, not for throwing games, but for gambling on baseball.
Back to the topic at hand; so far, the result of this most recent scandal, which appears to be interest rate fixing, is that the head of Barclay’s resigned. Mr. Bob Diamond, in his exit as the head of Barclay’s, whined that his bank was being singled out, and that many of the world’s other largest lenders were involved in this activity. He also recanted his offer to host a high dollar fundraiser for Mitt Romney; I guess he thought it might be bad politics. Mr. Diamond, another American boy that made good. I guess we shouldn't feel that sorry for him. According to some accounts, in 2008, he earned $70 million through his employment at Barclay’s, and the Sunday Times of London estimates that he has a net worth of $165 million.
Apparently this investigation will continue. According to Mr. Diamond, others are involved. Barclay’s Bank got fined although it doesn't appear that other than being forced to resign, any other individuals have been punished. We shall see.
And now to the title of this blog, the part about getting a “free house.” This is the favorite refrain of many Judges in South Florida when confronted by abuses and defects in foreclosure cases presented on behalf of the defending homeowners. So what they say: “Mr. Keegan, your client borrowed the money, are you asking the Court to give him a free house? Not going to happen in my Court.”
Somehow, in some way, this is all connected. There is President Reagan and his trickle down “voodoo” economics. There is a notion that what is good for business is good for America. There is the idea that there is “no free lunch,” and the origins of the po-boy sandwich in New Orleans doing a transit strike (some left wing pinko restaurant made free hoagies for the striking transit workers). Can you imagine pinko leftists in Louisiana? I am not advocating free houses, or maybe I am. If the bank cannot prove or meet the requirements of the law, or if it becomes apparent that they have contributed to the default situation, or they have violated the law and morality in trying to foreclose, maybe the courts should give away some free houses... What’s wrong with a little good old fashioned American justice? As a permanent solution, however, to the dilemma that faces us all, something else is needed.
I submit the following as a solution, or as a significant step in the right direction to combat the economic woes of the world: the 1946 Frank Capra movie called “It’s a Wonderful Life” starring Jimmy Stewart and Donna Reed. Certainly you remember the movie. It is about a run on a local savings and loan. It is considered to be one of the greatest American movies of all times. Ironically, the company that produced the movie forgot to renew their copyrights, so the movie is actually in the public domain, and you should be able to get a copy on DVD pretty easily. Watch it. The model of the savings and loans that were presented in that movie, I believe, is a significant step in solving the economic problems of this country and the rest of western civilization. It's a pretty cool movie too.
Thursday, July 19, 2012
ROBO SIGNING AND BAD BEHAVIOR BY PLAINTIFFS AND THEIR ATTORNEYS IN FORECLOSING RESIDENTIAL MORTGAGES REDUX
Like the “bad seed” or the “very spicy taco,” the ROBO signing scandal keeps raising its ugly head or, for the mortgage servicers and their attorneys, keeps producing news headlines and stories, and queasy stomachs. The latest is the story of the two crusading lawyers who were working at Florida Attorney General, Pam Bondi’s office, who undertook an investigation of the company, Lender Processing Services (LPS) where mortgage servicers outsource default activities to, and apparently were up to their necks in ROBO signing issues.
June Clarkson and Teresa Edwards were Assistant Attorney Generals in Florida conducting an investigation of LPS and had apparently progressed in their investigation to the point where it appeared to them that LPS was involved in the practice of signing, improperly, “thousands of mortgage documents.”
The problem documents and the questionable signings were the subject of an oral presentation given in December of 2010 by Ms. Clarkson to the Association of Court Clerks in Florida. Apparently, LPS took umbrage, and an attorney for the company sent a nasty letter castigating Ms. Clarkson and Ms. Edwards’ characterization of LPS practices regarding signatures as forgeries. This occurred in January of 2011, and these two women received further criticism from within the Attorney General’s Office. Then on May 20, 2011, Ms. Clarkson and Ms. Edwards were forced to resign as Assistant Attorney Generals. Significantly, on January 6, 2012, the Office of the Inspector General of the Florida Department of Financial Services issued its “Report of Inquiry Number 12312,” in which it recounted its investigation of this forced termination. Their conclusion was that nothing wrong occurred. The 85-page report, however, makes a very interesting read. I read it, and my understanding is that their conclusion was based upon the fact that since these two were “at-will” employees who could be terminated without cause and that Ms. Bondi’s office is continuing to investigate the “foreclosure mill cases.” I guess we can expect to see some of these investigations brought to fruition and action taken; we are waiting.
If you want to read more about this, there is an interesting article published in the Miami New Times by Stefan Kamph, “Florida Protects Banking Giant Lender Processing Services, Ignores Hurting Homeowners” published on June 21, 2012 (www.miaminewtimes.com) and a much earlier article in the Palm Beach Post with the interesting title “Is Signing Foreclosure Documents for Others Forgery?” published on January 14, 2012 (www.palmbeachpost.com). Or you could just go on the internet and type in “Clarkson and Edwards Law Firm” on Google and you will get enough reading for a rainy Sunday afternoon.
My takeaway from this, in my capacity as a lawyer representing homeowners in mortgage foreclosure cases, is that one should scrutinize and challenge, at every opportunity, the bona fides of every document signed by a bank representative including; Affidavits in Support of Summary Judgment, Mortgage Assignments, Assignments of Notes, or any other document which appears to have been prepared in connection with a mortgage foreclosure. I would also, if the opportunity presents itself, point out to a court, which might not share my cynicism, that it can take judicial notice when it happens, (and it happens a lot) and the court cannot rely upon law enforcement, or the regulators, to put a stop to it or to bring the bad actors to justice.
June Clarkson and Teresa Edwards were Assistant Attorney Generals in Florida conducting an investigation of LPS and had apparently progressed in their investigation to the point where it appeared to them that LPS was involved in the practice of signing, improperly, “thousands of mortgage documents.”
The problem documents and the questionable signings were the subject of an oral presentation given in December of 2010 by Ms. Clarkson to the Association of Court Clerks in Florida. Apparently, LPS took umbrage, and an attorney for the company sent a nasty letter castigating Ms. Clarkson and Ms. Edwards’ characterization of LPS practices regarding signatures as forgeries. This occurred in January of 2011, and these two women received further criticism from within the Attorney General’s Office. Then on May 20, 2011, Ms. Clarkson and Ms. Edwards were forced to resign as Assistant Attorney Generals. Significantly, on January 6, 2012, the Office of the Inspector General of the Florida Department of Financial Services issued its “Report of Inquiry Number 12312,” in which it recounted its investigation of this forced termination. Their conclusion was that nothing wrong occurred. The 85-page report, however, makes a very interesting read. I read it, and my understanding is that their conclusion was based upon the fact that since these two were “at-will” employees who could be terminated without cause and that Ms. Bondi’s office is continuing to investigate the “foreclosure mill cases.” I guess we can expect to see some of these investigations brought to fruition and action taken; we are waiting.
If you want to read more about this, there is an interesting article published in the Miami New Times by Stefan Kamph, “Florida Protects Banking Giant Lender Processing Services, Ignores Hurting Homeowners” published on June 21, 2012 (www.miaminewtimes.com) and a much earlier article in the Palm Beach Post with the interesting title “Is Signing Foreclosure Documents for Others Forgery?” published on January 14, 2012 (www.palmbeachpost.com). Or you could just go on the internet and type in “Clarkson and Edwards Law Firm” on Google and you will get enough reading for a rainy Sunday afternoon.
My takeaway from this, in my capacity as a lawyer representing homeowners in mortgage foreclosure cases, is that one should scrutinize and challenge, at every opportunity, the bona fides of every document signed by a bank representative including; Affidavits in Support of Summary Judgment, Mortgage Assignments, Assignments of Notes, or any other document which appears to have been prepared in connection with a mortgage foreclosure. I would also, if the opportunity presents itself, point out to a court, which might not share my cynicism, that it can take judicial notice when it happens, (and it happens a lot) and the court cannot rely upon law enforcement, or the regulators, to put a stop to it or to bring the bad actors to justice.
Friday, July 13, 2012
HAS THE REAL ESTATE TIDE TURNED? WHY I AM OPTIMISTIC AND MORE ON THE OBAMA PLAN LOAN MODIFICATION CHANGES
In our last blog entitled OBAMA’S LOAN MODIFICATION PLAN, MAKING HOMES AFFORDABLE PROGRAM, (HAMP), HALLELUJAH THE RULES HAVE CHANGED, we talked about the HAMP Tier II program, which was supposed to go into effect on June 1, 2012. Obviously, the implementation will be based upon particular servicers and how quickly they can adapt.
The big change of course was the reduction in income requirements to qualify for one of these modifications, the exact extent of which is still not clear, but we do know that people who have been turned down initially for HAMP because of inadequate income can reapply, and the amount in income needed will be significantly less. The other significant change was the encouragement of principal reductions. The incentives now available to mortgage servicers and lenders with existing loans are so significant that the prognosticators are universally suggesting that these incentives will substantially increase principal reductions.
Pricewaterhouse, in its April 2012 analysis of Obama’s “PLAN TO HELP RESPONSIBLE HOMEOWNERS AND HEAL THE HOUSING MARKET,” predicted a high likelihood that loan servicers and their investors will expand principal reductions significantly because of these new incentives. See Consumer Finance Point of View at www.pwc.com/consumerfinance.
This change and my own “on the ground” observations of the real estate market in South Florida suggest to me that, at least as far as my corner of paradise is concerned, there are significant objective reasons for optimism. The inventory of high rise condominiums in the Miami Downtown area is rapidly shrinking, due primarily to foreign investors who, despite the gloom and doom of the credit rating agencies, have concluded that the good old U.S.A. is the safest place to stash their money. The single family housing market has also significantly improved, at least in the upscale portions of Miami such as Pine Crest and Doral. This is probably due to the fact that rich people are still rich, and there is an influx of foreigners and money; (these are foreigners coming through the front door, not stuffed into the back of a trailer truck coming across the Arizona border), and despite the curious fact that while the human race keeps reproducing and expanding, there has not been a lot of construction of shelter in the last few years.
The only thing that seems to be missing is the ability of people to get mortgages. All of this brings me to conclude that, it is in the best interest of most individuals who are homeowners to try, as hard as they can, to remain in their homes and to do so by aggressively seeking a loan modification. Their goal should be to reduce mortgage payments to something that they can afford for the foreseeable future; principal reduction is the frosting on the cake.
Most of us, who have taken a hit during this economic downturn, are not going to be able to qualify for new mortgages in the foreseeable future and yet, most of us would prefer to live in a structure as opposed to a tent or to move back in with our parents. (Some of us are already there.)
So the takeaway is modify, modify, modify, and modify. Go to the internet; download whatever forms you can find from your mortgage servicer and print them and send them in. Give them everything they want, call them up, be the squeaky wheel, and keep track of your efforts.
The big change of course was the reduction in income requirements to qualify for one of these modifications, the exact extent of which is still not clear, but we do know that people who have been turned down initially for HAMP because of inadequate income can reapply, and the amount in income needed will be significantly less. The other significant change was the encouragement of principal reductions. The incentives now available to mortgage servicers and lenders with existing loans are so significant that the prognosticators are universally suggesting that these incentives will substantially increase principal reductions.
Pricewaterhouse, in its April 2012 analysis of Obama’s “PLAN TO HELP RESPONSIBLE HOMEOWNERS AND HEAL THE HOUSING MARKET,” predicted a high likelihood that loan servicers and their investors will expand principal reductions significantly because of these new incentives. See Consumer Finance Point of View at www.pwc.com/consumerfinance.
This change and my own “on the ground” observations of the real estate market in South Florida suggest to me that, at least as far as my corner of paradise is concerned, there are significant objective reasons for optimism. The inventory of high rise condominiums in the Miami Downtown area is rapidly shrinking, due primarily to foreign investors who, despite the gloom and doom of the credit rating agencies, have concluded that the good old U.S.A. is the safest place to stash their money. The single family housing market has also significantly improved, at least in the upscale portions of Miami such as Pine Crest and Doral. This is probably due to the fact that rich people are still rich, and there is an influx of foreigners and money; (these are foreigners coming through the front door, not stuffed into the back of a trailer truck coming across the Arizona border), and despite the curious fact that while the human race keeps reproducing and expanding, there has not been a lot of construction of shelter in the last few years.
The only thing that seems to be missing is the ability of people to get mortgages. All of this brings me to conclude that, it is in the best interest of most individuals who are homeowners to try, as hard as they can, to remain in their homes and to do so by aggressively seeking a loan modification. Their goal should be to reduce mortgage payments to something that they can afford for the foreseeable future; principal reduction is the frosting on the cake.
Most of us, who have taken a hit during this economic downturn, are not going to be able to qualify for new mortgages in the foreseeable future and yet, most of us would prefer to live in a structure as opposed to a tent or to move back in with our parents. (Some of us are already there.)
So the takeaway is modify, modify, modify, and modify. Go to the internet; download whatever forms you can find from your mortgage servicer and print them and send them in. Give them everything they want, call them up, be the squeaky wheel, and keep track of your efforts.
Monday, July 9, 2012
OBAMA’S LOAN MODIFICATION PLAN, MAKING HOMES AFFORDABLE PROGRAM, (HAMP), HALLELUJAH THE RULES HAVE CHANGED
Since early 2009, the Obama Administration has put into effect, through the Treasury Department, a plan for people to obtain a loan modification of their home mortgage, which reduces the monthly payments. Participating lenders are incentivized by government subsidies.
Like everything else that the Obama administration has done, this program has been criticized, endlessly. Criticism from the right and criticism from the left. Of course, for the right, this is just more evidence of socialism creeping into our government; taking money from the rich and giving it to the poor. From my perspective, the most interesting criticism is that from the left. My favorite, most illustrative of the tendency of the left to whine about everything, is an article in the Huffington Post about how, after people got their loans modified, 75% of them were still upside down; still owed more money than their house was worth. (See Huffington Post Article originally published on June 14, 2010 and updated on May 25, 2011). Like this result was Obama’s fault, and how dare he fail to rectify, with this program, the universal deflation in real estate values throughout the world. Where is Lenin when we need him? (I mean Nikolai not John).
The almost universal criticism of the program, a criticism in which I concur with, is the bureaucracy; OH THE BUREAUCRACY. The paperwork, the repeated demands after the paperwork is submitted for more paperwork. The demands for updated financial information or “fresh” financials, demanded because the processing time is so long that by the time your modification request is up for review, the financial information is “stale.” Oh well, in our office we look at the process as a test of wills. A combination of anal-compulsive stubbornness coupled with modern technology, including word processing and scanning, has enabled our firm to meet this challenge head on. We have an informal lottery in our office in which we guess how many packages we will have to submit to get to the end of the line. It's really quite random actually. The bottom line is that we have been remarkably successful, which has led us to the conclusion that the single most important thing in successfully pursuing residential mortgage loan modifications is persistence, good record keeping and infinite patience.
In any event, effective June 1, 2012 the rules have changed and it has, theoretically anyway, gotten easier to qualify for an Obama plan loan modification.
The changes are embodied in a directive that was issued on March 9, 2012; however, how this will work out in practice remains to be seen and will be the subject of future blogs. The important changes, however, at this point, are the following:
1. The fact that you have been turned out once for a HAMP does not mean that you cannot reapply. Under the old system, if your situation changed, i.e.: if your income increased, it would be justification for reapplication. Under the new rules, there is now a second type HAMP called HAMP Tier II, where the criteria for eligibility has changed. It would now appear that the changes would allow someone who had been turned down appropriately under the HAMP Tier I to now qualify under the Tier II criteria.
2. Assistance is no longer limited to owner occupied homes. Investment property is now eligible, can you imagine?
3. The homeowner received a HAMP modification and defaulted either on the trial plan payments or on a permanent modification. They are now eligible to apply for a HAMP Tier II modification; this is a really big deal actually from my perspective.
4. What appears to be enhancement of not only principal forbearance but apparently encouragement of the “unicorn;” ACTUAL PRINCIPAL REDUCTIONS! The application of this, of course, is contingent upon agreement of the lender; however, my guess here is that we will see more principal reductions in the offing. A CNN article in January of 2012, written just after the changes were announced, and before any supplemental written directives were issued, quantified the lender incentives provided by the changes for banks to reduce principal balance as between 18 and 63 cents for every dollar of principal reduction. This, according to the article, was an increase over the existing 6 to 21 cent incentive. If this is accurate, the increase in incentives payable to lenders should produce significant results.
It should be noted that Fannie Mae and Freddie Mac loans do not qualify for any principal reduction under their special HAMP programs at this time. The Treasury Department, however, has announced that it is going to attempt to convince them to take part in a principal reduction program by providing the same incentives. We will keep you posted if that happens.
The takeaway of all of this is quite simple. A homeowner in trouble has nothing to lose, except for hours of time and postage, and the inevitable frustration and anxiety in applying for and pursuing a loan modification. The process of applying for a loan modification is kind of like preparing for an ironman triathlon. It teaches discipline. And if successful, it is like, I don’t know, qualifying for the Olympics. Or a better analogy, it is like winning $1,000 in a scratch off lottery game. The benefits, however, if successful, are significantly greater than that lottery win; however, the effort is also significantly larger.
Like everything else that the Obama administration has done, this program has been criticized, endlessly. Criticism from the right and criticism from the left. Of course, for the right, this is just more evidence of socialism creeping into our government; taking money from the rich and giving it to the poor. From my perspective, the most interesting criticism is that from the left. My favorite, most illustrative of the tendency of the left to whine about everything, is an article in the Huffington Post about how, after people got their loans modified, 75% of them were still upside down; still owed more money than their house was worth. (See Huffington Post Article originally published on June 14, 2010 and updated on May 25, 2011). Like this result was Obama’s fault, and how dare he fail to rectify, with this program, the universal deflation in real estate values throughout the world. Where is Lenin when we need him? (I mean Nikolai not John).
The almost universal criticism of the program, a criticism in which I concur with, is the bureaucracy; OH THE BUREAUCRACY. The paperwork, the repeated demands after the paperwork is submitted for more paperwork. The demands for updated financial information or “fresh” financials, demanded because the processing time is so long that by the time your modification request is up for review, the financial information is “stale.” Oh well, in our office we look at the process as a test of wills. A combination of anal-compulsive stubbornness coupled with modern technology, including word processing and scanning, has enabled our firm to meet this challenge head on. We have an informal lottery in our office in which we guess how many packages we will have to submit to get to the end of the line. It's really quite random actually. The bottom line is that we have been remarkably successful, which has led us to the conclusion that the single most important thing in successfully pursuing residential mortgage loan modifications is persistence, good record keeping and infinite patience.
In any event, effective June 1, 2012 the rules have changed and it has, theoretically anyway, gotten easier to qualify for an Obama plan loan modification.
The changes are embodied in a directive that was issued on March 9, 2012; however, how this will work out in practice remains to be seen and will be the subject of future blogs. The important changes, however, at this point, are the following:
1. The fact that you have been turned out once for a HAMP does not mean that you cannot reapply. Under the old system, if your situation changed, i.e.: if your income increased, it would be justification for reapplication. Under the new rules, there is now a second type HAMP called HAMP Tier II, where the criteria for eligibility has changed. It would now appear that the changes would allow someone who had been turned down appropriately under the HAMP Tier I to now qualify under the Tier II criteria.
2. Assistance is no longer limited to owner occupied homes. Investment property is now eligible, can you imagine?
3. The homeowner received a HAMP modification and defaulted either on the trial plan payments or on a permanent modification. They are now eligible to apply for a HAMP Tier II modification; this is a really big deal actually from my perspective.
4. What appears to be enhancement of not only principal forbearance but apparently encouragement of the “unicorn;” ACTUAL PRINCIPAL REDUCTIONS! The application of this, of course, is contingent upon agreement of the lender; however, my guess here is that we will see more principal reductions in the offing. A CNN article in January of 2012, written just after the changes were announced, and before any supplemental written directives were issued, quantified the lender incentives provided by the changes for banks to reduce principal balance as between 18 and 63 cents for every dollar of principal reduction. This, according to the article, was an increase over the existing 6 to 21 cent incentive. If this is accurate, the increase in incentives payable to lenders should produce significant results.
It should be noted that Fannie Mae and Freddie Mac loans do not qualify for any principal reduction under their special HAMP programs at this time. The Treasury Department, however, has announced that it is going to attempt to convince them to take part in a principal reduction program by providing the same incentives. We will keep you posted if that happens.
The takeaway of all of this is quite simple. A homeowner in trouble has nothing to lose, except for hours of time and postage, and the inevitable frustration and anxiety in applying for and pursuing a loan modification. The process of applying for a loan modification is kind of like preparing for an ironman triathlon. It teaches discipline. And if successful, it is like, I don’t know, qualifying for the Olympics. Or a better analogy, it is like winning $1,000 in a scratch off lottery game. The benefits, however, if successful, are significantly greater than that lottery win; however, the effort is also significantly larger.
Tuesday, July 3, 2012
MORE BAD BEHAVIOR BY PLAINTIFFS FORECLOSING MORTGAGES AND PLAINTIFF’S LAWYERS
The last post was about the robots with pens signing “funny affidavits.” A recent case in
Florida, which is now before the Florida Supreme Court and is the subject of the front page
article in the June 1, 2012 Florida Bar News (a newspaper put out by the Florida Bar for its
members; lawyers), draws attention to another example of bad conduct by mortgage
companies and their lawyers in connection with foreclosures and the dilemma or conundrum
facing the courts when they are presented with such conduct.
The facts are contained in the District Court of Appeals, 4th District, Opinion in Pino v. Bank of New York Mellon found at 57 So. 3d 950 (Fla. 4th DCA 2011). BNY Mellon filed a residential foreclosure action in which they alleged that they owned the mortgage and note sought to be foreclosed pursuant to an assignment, but they didn’t file the assignment. When challenged, the Bank filed an amended complaint and attached an assignment which had been unrecorded. The assignment, which was dated shortly before the foreclosure action had been filed, was challenged by the homeowner who claimed it was fraudulent. The homeowner noted that the person who had signed the assignment was employed by the attorney representing the mortgage company, and the commission date on the notary stamp showed that the document could not have been notarized on the date set forth on the document. The homeowner's argument was that this assignment was filed to perpetrate a fraud upon the Court. Depositions were set so that the homeowner could prove his allegations; however, using the time honored rule which allows a plaintiff to dismiss a case, the Bank took a voluntary dismissal. The homeowner’s argument was that he was entitled to sanctions against the Bank and/or its lawyers. However, the District Court of Appeals in Florida ruled that once a case is dismissed, a court has no power (jurisdiction), and that the authority to dismiss a case under these rules is solely that of the plaintiff.
According to the article in the Florida Bar News, the matter was ultimately settled; however, the Florida Supreme Court, to its great credit, has declined to dismiss the appeal and presumably will ultimately address the issue of whether banks, or other plaintiffs, who seek affirmative relief from a court, can avoid punishment through sanctions when they are caught in a lie by utilizing the voluntary dismissal rule. I wait with great interest to see how the Florida Supreme Court is going to deal with this.
The immediate practical lesson here is that preferably a trained person should scrupulously examine everything that a plaintiff files in the foreclosure because sometimes, on the face of their filings, contradictions or suspicious circumstances appear.
The deeper question is whether the courts, in administering the foreclosure process, are going to hold the banks and the lawyers representing the banks accountable.
The thing that interests me the most are the implications regarding the justice system and their concept of justice itself, when confronted with the notion of expediency, productivity, and what is good for the economy and business.
Its application to this Pino case now, before the Florida Supreme Court, is illustrated by a perusal of the “Friend of the Court Brief” filed by the Mortgage Banker’s Association and the Florida Banker’s Association, which of course supports the notion that the banks should be allowed to just voluntarily dismiss the case without being held to account for what appears to be bad conduct. Their argument, according to the Florida Bar News article, is that if we don’t allow these types of voluntary dismissals, it will adversely affect lending practices in Florida; that is, it will discourage moneylenders from lending in Florida because, I guess, they would be worried about being mistreated by the courts.
Economics, what’s right for business, what’s good for the “economy,” is nothing new. In fact, the idea of an independent fair justice system where the outcome of commercial disputes is both predictable and fair and based upon predetermined rules has long been, and continues to be, one of the principle advantages of doing business in America, and is one of the main reasons why, despite the B.S., the national government is able to borrow money from credit rating agencies throughout the world at extremely low interest rates. I unhesitatingly acknowledge that this is a good thing.
But the argument that banks should get away with murder is the same argument that they are too big to fail or, on a more personal label, if you don’t play the game the way we want to, we will take our ball and play elsewhere.
Like everything else in life, the legal system and its functioning, is a question of balance. If “might makes right,” and large and powerful business interests are permitted to dominate, another greater problem is created. Innovation is squelched. Vested interests prevent new technologies from competing. Monopolies exploit both their workers and their customers. Progress is halted.
There has been a well documented movement in the legal system, little noticed by most people, which is generally known as the “Chicago School” fostered by the University of Chicago Economics Department in the 60s, 70s, and 80s, associated with economists such as the famous (some call him infamous) Milton Friedman, and adopted politically by the great communicator, Ronald Reagan, and his British counterpart, Prime Minister Thatcher. The influence of this school of economics spread to the legal system through the legal scholars at the University of Chicago Law School, which promoted and developed what they called the discipline of “Law and Economics.” There was a general reevaluation of the efficacy of antitrust law, a rejection of the “big is bad” notions underpinning our then antitrust law, an attack on punitive damages, which would be “bad for business,” and the notion that the free market and its promotion should be the basic policy upon which legal decisions should be predicated.
Ouch. Big may not be so beautiful. It’s funny how the big banks, when left to their own devices, functioning almost completely unregulated, have brought western society to the brink of the abyss while the resulting “tea party” movement somehow seems to equate that problem with big government and regulation when, from my perspective, it would appear that it was a lack of regulation that was the problem.
The other irony is that Obama actually taught at the University of Chicago Law School, the same place where Supreme Court Justice Scalia taught. Different times. Scalia 1977-1982, Obama 1992-2004. Interesting. There is an in-depth article on this subject in the June 11, 2012 Bloomberg Businessweek which puts things into perspective.
The lesson here is that if you do battle in the court system and try to save your home, our court system, although far from perfect, may very well be the last battlefront ground for David to stand up to Goliath. It’s certainly what gets me out of bed in the morning.
The facts are contained in the District Court of Appeals, 4th District, Opinion in Pino v. Bank of New York Mellon found at 57 So. 3d 950 (Fla. 4th DCA 2011). BNY Mellon filed a residential foreclosure action in which they alleged that they owned the mortgage and note sought to be foreclosed pursuant to an assignment, but they didn’t file the assignment. When challenged, the Bank filed an amended complaint and attached an assignment which had been unrecorded. The assignment, which was dated shortly before the foreclosure action had been filed, was challenged by the homeowner who claimed it was fraudulent. The homeowner noted that the person who had signed the assignment was employed by the attorney representing the mortgage company, and the commission date on the notary stamp showed that the document could not have been notarized on the date set forth on the document. The homeowner's argument was that this assignment was filed to perpetrate a fraud upon the Court. Depositions were set so that the homeowner could prove his allegations; however, using the time honored rule which allows a plaintiff to dismiss a case, the Bank took a voluntary dismissal. The homeowner’s argument was that he was entitled to sanctions against the Bank and/or its lawyers. However, the District Court of Appeals in Florida ruled that once a case is dismissed, a court has no power (jurisdiction), and that the authority to dismiss a case under these rules is solely that of the plaintiff.
According to the article in the Florida Bar News, the matter was ultimately settled; however, the Florida Supreme Court, to its great credit, has declined to dismiss the appeal and presumably will ultimately address the issue of whether banks, or other plaintiffs, who seek affirmative relief from a court, can avoid punishment through sanctions when they are caught in a lie by utilizing the voluntary dismissal rule. I wait with great interest to see how the Florida Supreme Court is going to deal with this.
The immediate practical lesson here is that preferably a trained person should scrupulously examine everything that a plaintiff files in the foreclosure because sometimes, on the face of their filings, contradictions or suspicious circumstances appear.
The deeper question is whether the courts, in administering the foreclosure process, are going to hold the banks and the lawyers representing the banks accountable.
The thing that interests me the most are the implications regarding the justice system and their concept of justice itself, when confronted with the notion of expediency, productivity, and what is good for the economy and business.
Its application to this Pino case now, before the Florida Supreme Court, is illustrated by a perusal of the “Friend of the Court Brief” filed by the Mortgage Banker’s Association and the Florida Banker’s Association, which of course supports the notion that the banks should be allowed to just voluntarily dismiss the case without being held to account for what appears to be bad conduct. Their argument, according to the Florida Bar News article, is that if we don’t allow these types of voluntary dismissals, it will adversely affect lending practices in Florida; that is, it will discourage moneylenders from lending in Florida because, I guess, they would be worried about being mistreated by the courts.
Economics, what’s right for business, what’s good for the “economy,” is nothing new. In fact, the idea of an independent fair justice system where the outcome of commercial disputes is both predictable and fair and based upon predetermined rules has long been, and continues to be, one of the principle advantages of doing business in America, and is one of the main reasons why, despite the B.S., the national government is able to borrow money from credit rating agencies throughout the world at extremely low interest rates. I unhesitatingly acknowledge that this is a good thing.
But the argument that banks should get away with murder is the same argument that they are too big to fail or, on a more personal label, if you don’t play the game the way we want to, we will take our ball and play elsewhere.
Like everything else in life, the legal system and its functioning, is a question of balance. If “might makes right,” and large and powerful business interests are permitted to dominate, another greater problem is created. Innovation is squelched. Vested interests prevent new technologies from competing. Monopolies exploit both their workers and their customers. Progress is halted.
There has been a well documented movement in the legal system, little noticed by most people, which is generally known as the “Chicago School” fostered by the University of Chicago Economics Department in the 60s, 70s, and 80s, associated with economists such as the famous (some call him infamous) Milton Friedman, and adopted politically by the great communicator, Ronald Reagan, and his British counterpart, Prime Minister Thatcher. The influence of this school of economics spread to the legal system through the legal scholars at the University of Chicago Law School, which promoted and developed what they called the discipline of “Law and Economics.” There was a general reevaluation of the efficacy of antitrust law, a rejection of the “big is bad” notions underpinning our then antitrust law, an attack on punitive damages, which would be “bad for business,” and the notion that the free market and its promotion should be the basic policy upon which legal decisions should be predicated.
Ouch. Big may not be so beautiful. It’s funny how the big banks, when left to their own devices, functioning almost completely unregulated, have brought western society to the brink of the abyss while the resulting “tea party” movement somehow seems to equate that problem with big government and regulation when, from my perspective, it would appear that it was a lack of regulation that was the problem.
The other irony is that Obama actually taught at the University of Chicago Law School, the same place where Supreme Court Justice Scalia taught. Different times. Scalia 1977-1982, Obama 1992-2004. Interesting. There is an in-depth article on this subject in the June 11, 2012 Bloomberg Businessweek which puts things into perspective.
The lesson here is that if you do battle in the court system and try to save your home, our court system, although far from perfect, may very well be the last battlefront ground for David to stand up to Goliath. It’s certainly what gets me out of bed in the morning.
Tuesday, June 26, 2012
ROBO SIGNING AND OTHER BAD BEHAVIOR BY PLAINTIFFS FORECLOSING RESIDENTIAL MORTGAGES
What happens when you run a fast food restaurant; let’s say an ice cream stand that makes a wonderful sundae; with handmade ice cream, carefully and lovingly crafted with the finest ingredients, local fruits and nuts, interspersed with handmade cookies, meticulously assembled, beautifully presented and sold for a very fair price. You are reviewed by a food critic, or better yet, your ice cream stand is featured in one of the ubiquitous national television food programs where it receives justifiable loving praise and exposure.
Result?... instant riches? More likely, the sundae, the product, suffers and may in fact lose its uniqueness under the crush of relentless demand. Here is the foreclosure analogy; law firms, or as we call them on the foreclosure defense side, “foreclosure mills,” consisting of lawyers and paralegals who do nothing but represent lenders in foreclosures, (usually on residential properties) are able to churn them out (in the old days) on a consistent basis for a very reasonable fee; but then something terrible and unusual happened.
Mortgage loans, thousands of them, went into default, primarily because they were made to people who could not afford them from the beginning. This combined with the real estate market, where year after year, prices increased completely disproportionate to any type of inflation; and suddenly, the proverbial bubble burst, real estate values plummeted, and the number of foreclosures doubled, and continued to increase tenfold, twentyfold. The result: these law firms (even if they hire more people and the foreclosure departments within the mortgage companies hire more people) must increase productivity geometrically. The only way to keep up is, like in the ice cream business, to employ short cuts.
Now, we have law firms (lawyers) doing bad things and/or knowingly letting their clients do bad things…like lying to a court. The ROBO signing scandal manifested itself by the filing of false affidavits. The mortgage foreclosure business uses a lot of affidavits. These are sworn statements that are made under oath and are used to prove the facts in a foreclosure case. There is no way that it would be economically feasible to have trials with live witnesses in every foreclosure case. It would use too much attorney time, too much bank employee time, and most of all, it would literally bury the court system. The nature of what has to be proven in a foreclosure lends itself to the use of affidavits. These sworn statements establish the ownership of the mortgage and note, the status of payment or non-payment, and the amount of the principal, interest, and other monies that are due. Simple enough and normally not a problem because there is an old rule of evidence that business records, exactly the kind of records that mortgage servicing companies maintain, can be used to establish these facts.
Here is the rub. In order for these affidavits or sworn statements to be admissible in evidence and useable by a court, they must be sworn by a person who has actual personal knowledge of the information contained in the affidavit. In order, however, to process literally tens of thousands of these affidavits, the mortgage servicers and their lawyers decided that they would use Henry Ford’s invention of the assembly line and assign a “specialized” person to sign all of these affidavits. The problem is that the people who sign the affidavits prepared by others, and would swear that they have actual and personal knowledge of the facts asserted in the affidavits actually don't. In fact, the only personal knowledge they have is what they ate for breakfast.
There are various other deficiencies in these affidavits, but the bottom line is that the term ROBO comes from the word “robot,” and literally there was a person, sometimes even employed by the law firm, that would take the information generated internally by the mortgage companies, through mysterious and unknown processes and procedures, and fill in the blanks in a form affidavit when, if they had been a live witness, any first year lawyer would be able to establish that they lacked personal knowledge of the facts they were putting down on paper. Sometimes the paperwork that they would attach to the affidavit (if they bothered to attach any paperwork) would be documents generated specifically for a mortgage foreclosure affidavit which, at least in Florida, does not constitute a business record admissible in court.
From the beginning, defense lawyers would complain but mostly be ignored until we were able to establish that some of these affidavits were actually false or inaccurate. Initially, most of the errors concerned assertions regarding who the true owner of the mortgage or note was, which is a minor detail that has to be established because it is only the owner of the mortgage or note that is entitled to be a plaintiff in a mortgage foreclosure; one of those legal technicalities. One of the other abuses was that the mortgage companies would routinely claim that they lost the original note, and include it in their foreclosure complaint as a separate count asking the Court to reestablish the missing note. It turned out that the note wast missing at all, but that in many cases the plaintiff didn't even bother to look for it. The problem was of course that, at least in Florida, and practically every other “judicial foreclosure” state, the existence and tendering of the note, or if it’s really lost, the reestablishment of the note, is a requirement to foreclose. In order to reestablish, the mortgage company had to file an affidavit saying they looked for the note and could not find it.
The problem was that they were being disingenuous when they filed these affidavits. Sometimes they lied when they stated in the affidavits what they did to look for them. Sometimes the affidavits were disingenuous when they stated who owned the note, and every once in a while, an attorney defending the homeowner was able to prove these affidavits were inaccurate. When it was disclosed that the lawyers who were representing the banks were part and parcel of this process, some judges got upset, and when it became clear that these affidavits routinely contained falsehoods, even with respect to actual facts, or, in most cases, that the person signing these affidavits did not have personal knowledge of the contents, a great hue and cry was heard throughout the land.
To the best of my knowledge, I do not know of any lawyers or bank representatives who have been arrested or charged with perjury like Mr. Zimmerman’s wife, but I do know that congressmen, senators, judges and other very important people demanded an end to this. Low and behold the “ROBO signing” scandal. Moral of the story? I don’t know if there is one. But I do know, that any time in the mortgage foreclosure process, when a defendant encounters a sworn statement, it would behoove that person to scrutinize the statement with a skeptical eye and make sure that every fact asserted therein is true, accurate, complete, and made by someone who has actual and personal knowledge of the statement that he or she is making. This is something that is easier said than done, which is why sometimes having a lawyer or consulting one is useful.
As that insightful observer of the American scene, Jerry Seinfeld said, “…a lawyer is basically the person that knows the rules of the country. We’re all throwing the dice, playing the game, moving our pieces around the board, but if there is a problem, the lawyer is the only person that has read the inside of the top of the box.”
Result?... instant riches? More likely, the sundae, the product, suffers and may in fact lose its uniqueness under the crush of relentless demand. Here is the foreclosure analogy; law firms, or as we call them on the foreclosure defense side, “foreclosure mills,” consisting of lawyers and paralegals who do nothing but represent lenders in foreclosures, (usually on residential properties) are able to churn them out (in the old days) on a consistent basis for a very reasonable fee; but then something terrible and unusual happened.
Mortgage loans, thousands of them, went into default, primarily because they were made to people who could not afford them from the beginning. This combined with the real estate market, where year after year, prices increased completely disproportionate to any type of inflation; and suddenly, the proverbial bubble burst, real estate values plummeted, and the number of foreclosures doubled, and continued to increase tenfold, twentyfold. The result: these law firms (even if they hire more people and the foreclosure departments within the mortgage companies hire more people) must increase productivity geometrically. The only way to keep up is, like in the ice cream business, to employ short cuts.
Now, we have law firms (lawyers) doing bad things and/or knowingly letting their clients do bad things…like lying to a court. The ROBO signing scandal manifested itself by the filing of false affidavits. The mortgage foreclosure business uses a lot of affidavits. These are sworn statements that are made under oath and are used to prove the facts in a foreclosure case. There is no way that it would be economically feasible to have trials with live witnesses in every foreclosure case. It would use too much attorney time, too much bank employee time, and most of all, it would literally bury the court system. The nature of what has to be proven in a foreclosure lends itself to the use of affidavits. These sworn statements establish the ownership of the mortgage and note, the status of payment or non-payment, and the amount of the principal, interest, and other monies that are due. Simple enough and normally not a problem because there is an old rule of evidence that business records, exactly the kind of records that mortgage servicing companies maintain, can be used to establish these facts.
Here is the rub. In order for these affidavits or sworn statements to be admissible in evidence and useable by a court, they must be sworn by a person who has actual personal knowledge of the information contained in the affidavit. In order, however, to process literally tens of thousands of these affidavits, the mortgage servicers and their lawyers decided that they would use Henry Ford’s invention of the assembly line and assign a “specialized” person to sign all of these affidavits. The problem is that the people who sign the affidavits prepared by others, and would swear that they have actual and personal knowledge of the facts asserted in the affidavits actually don't. In fact, the only personal knowledge they have is what they ate for breakfast.
There are various other deficiencies in these affidavits, but the bottom line is that the term ROBO comes from the word “robot,” and literally there was a person, sometimes even employed by the law firm, that would take the information generated internally by the mortgage companies, through mysterious and unknown processes and procedures, and fill in the blanks in a form affidavit when, if they had been a live witness, any first year lawyer would be able to establish that they lacked personal knowledge of the facts they were putting down on paper. Sometimes the paperwork that they would attach to the affidavit (if they bothered to attach any paperwork) would be documents generated specifically for a mortgage foreclosure affidavit which, at least in Florida, does not constitute a business record admissible in court.
From the beginning, defense lawyers would complain but mostly be ignored until we were able to establish that some of these affidavits were actually false or inaccurate. Initially, most of the errors concerned assertions regarding who the true owner of the mortgage or note was, which is a minor detail that has to be established because it is only the owner of the mortgage or note that is entitled to be a plaintiff in a mortgage foreclosure; one of those legal technicalities. One of the other abuses was that the mortgage companies would routinely claim that they lost the original note, and include it in their foreclosure complaint as a separate count asking the Court to reestablish the missing note. It turned out that the note wast missing at all, but that in many cases the plaintiff didn't even bother to look for it. The problem was of course that, at least in Florida, and practically every other “judicial foreclosure” state, the existence and tendering of the note, or if it’s really lost, the reestablishment of the note, is a requirement to foreclose. In order to reestablish, the mortgage company had to file an affidavit saying they looked for the note and could not find it.
The problem was that they were being disingenuous when they filed these affidavits. Sometimes they lied when they stated in the affidavits what they did to look for them. Sometimes the affidavits were disingenuous when they stated who owned the note, and every once in a while, an attorney defending the homeowner was able to prove these affidavits were inaccurate. When it was disclosed that the lawyers who were representing the banks were part and parcel of this process, some judges got upset, and when it became clear that these affidavits routinely contained falsehoods, even with respect to actual facts, or, in most cases, that the person signing these affidavits did not have personal knowledge of the contents, a great hue and cry was heard throughout the land.
To the best of my knowledge, I do not know of any lawyers or bank representatives who have been arrested or charged with perjury like Mr. Zimmerman’s wife, but I do know that congressmen, senators, judges and other very important people demanded an end to this. Low and behold the “ROBO signing” scandal. Moral of the story? I don’t know if there is one. But I do know, that any time in the mortgage foreclosure process, when a defendant encounters a sworn statement, it would behoove that person to scrutinize the statement with a skeptical eye and make sure that every fact asserted therein is true, accurate, complete, and made by someone who has actual and personal knowledge of the statement that he or she is making. This is something that is easier said than done, which is why sometimes having a lawyer or consulting one is useful.
As that insightful observer of the American scene, Jerry Seinfeld said, “…a lawyer is basically the person that knows the rules of the country. We’re all throwing the dice, playing the game, moving our pieces around the board, but if there is a problem, the lawyer is the only person that has read the inside of the top of the box.”
Tuesday, June 19, 2012
THE MORTGAGE MODIFICATION UNICORN; PRINCIPAL REDUCTION
We do loan modifications; lots of them. It's our primary work in over 90% of the hundreds of residential mortgage foreclosures we have handled in South Florida in the last few years. The holy grail, the goal of most of our clients, when faced with a mortgage which has become “upside down” since the collapse of the real estate market, where the home is worth less than what is owed to the bank, is to obtain a modification of their mortgage, which reduces the principal balance or the amount of the underlying debt.
It is this reduction of principal balance that the “upside down” homeowner has been clamoring for since the beginning of the mortgage crisis and the real estate collapse in which the banks and lenders, for the most part, for most of the last three plus years, have been steadfastly refusing.
The initial public position of the banks, when confronted with this issue, was to complain that if they reduced the principal balance for the “deadbeat” borrowers (the people who weren’t paying their mortgages) they would have to do it for their “good customers,” (the ones that were paying their mortgages). This, they claim, would bankrupt them, would promote bad behavior, would turn every honest, hardworking, bill-paying, contract compliant, red-blooded American into a “deadbeat” and guarantee the destruction of the western world as we know it today.
Guess what? The banks are, selectively, quietly, in individual cases, offering and entering into loan modifications in which the principal balance is reduced and debt is forgiven. Wow!
The unicorn lives. It is white, with a flowing mane, and it is beautiful. Apparently there are males and females because they are breeding and their numbers are increasing. The real trick is how to capture this elusive and beautiful beast.
We have a theory about how to obtain a principal reduction on a residential mortgage, based upon our own empirical experience. (There will be future blogs on this subject.) But the threshold answer on how to obtain such a reduction, although simplistic, is often overlooked by both laypeople trying to negotiate their own loan modification and, in our experience, so called “professionals;"be they the various cottage industries that are sprung up like mushrooms after the rain, or the innumerable law firms engaged in this enterprise;. The secret is to ASK FOR IT.
Various analogies of this approach come to mind, but they cannot be repeated here because this is intended to be a “G” rated blog. So we will conclude this post by simply stating that asking cannot hurt, and while you are asking, if you can present a “package” – a “picture” of a situation where it might be in the mortgage company’s best interest to consider such a reduction, you might yet live to see and experience the miracle of the unicorn.
It is this reduction of principal balance that the “upside down” homeowner has been clamoring for since the beginning of the mortgage crisis and the real estate collapse in which the banks and lenders, for the most part, for most of the last three plus years, have been steadfastly refusing.
The initial public position of the banks, when confronted with this issue, was to complain that if they reduced the principal balance for the “deadbeat” borrowers (the people who weren’t paying their mortgages) they would have to do it for their “good customers,” (the ones that were paying their mortgages). This, they claim, would bankrupt them, would promote bad behavior, would turn every honest, hardworking, bill-paying, contract compliant, red-blooded American into a “deadbeat” and guarantee the destruction of the western world as we know it today.
Guess what? The banks are, selectively, quietly, in individual cases, offering and entering into loan modifications in which the principal balance is reduced and debt is forgiven. Wow!
The unicorn lives. It is white, with a flowing mane, and it is beautiful. Apparently there are males and females because they are breeding and their numbers are increasing. The real trick is how to capture this elusive and beautiful beast.
We have a theory about how to obtain a principal reduction on a residential mortgage, based upon our own empirical experience. (There will be future blogs on this subject.) But the threshold answer on how to obtain such a reduction, although simplistic, is often overlooked by both laypeople trying to negotiate their own loan modification and, in our experience, so called “professionals;"be they the various cottage industries that are sprung up like mushrooms after the rain, or the innumerable law firms engaged in this enterprise;. The secret is to ASK FOR IT.
Various analogies of this approach come to mind, but they cannot be repeated here because this is intended to be a “G” rated blog. So we will conclude this post by simply stating that asking cannot hurt, and while you are asking, if you can present a “package” – a “picture” of a situation where it might be in the mortgage company’s best interest to consider such a reduction, you might yet live to see and experience the miracle of the unicorn.
Monday, June 18, 2012
THE MUSIC STOPS ROCKING WHEN THE PROCESS SERVICER COMES KNOCKING
Okay, so you get served with mortgage foreclosure papers. I have several bits of advice that I want to give at this point, suggestions number 1, 2, and 3 are the same, hire a lawyer, preferably an experienced lawyer.
When we are hired, we almost always have two separate processes we go through that are somewhat independent of each other. One: we work on a loan modification and two: we litigate the foreclosure lawsuit. It is our position that they go hand in hand because, contrary to what has become an “urban legend,” in my over 35 years of experience, I have never witnessed someone getting a “free house.” Ultimately, unless the loan was never funded, the mortgage is going to be enforced at some point. Therefore, it is important, if you want to keep the house, that you try to modify the loan to the point where you can afford to keep the house. And although the loan modification process is normally conducted independently of what you are doing to defend the foreclosure, the ferocity of the defense that is mounted often favorably affects the terms of the modification you ultimately receive.
There are two types of defenses in a foreclosure or, for that matter, any civil litigation. There is what I call procedural or what non-lawyers refer to as “legal loopholes” and then there are actual factual defenses, which are dependent on the particular circumstances of the case. Regarding the first type of defense, the “loopholes,” (this is really a poor description of what is actually involved) in fact, these so-called “loopholes” are probably one of the most important reasons why our system has consistently resulted in a society which provides both freedom and prosperity to its members. Lawyers and other enlightened groups refer to this as “due process of law.” What it means is that there are rules, procedures that must be followed within the judicial system so that a decision which is proper, correct, and fair is achieved. These “loopholes” include the fundamental concept that all parties to a dispute are entitled to present their side of the story, that facts can only be presented when they are reliable, and that there should be an orderly process which ensures that everyone knows the procedure and has an opportunity to be heard; that the decisions that are rendered are based upon an unbiased interpretation of what the facts are, which are then applied to the established rules governing agreements, or in the area of tort law, the party wronged receives compensation from the wrongdoer. (You may have guessed by the last sentence that I am in fact a lawyer, but I assure you that as run-on sentences go, for lawyers, this one is a baby).
The first thing that happens in any lawsuit is for the Court to acquire jurisdiction over the parties. All this means is that the Court acquires the authority over the parties to make a decision. When you file a lawsuit as a Plaintiff, you submit yourself to the jurisdiction of the Court. The service by the process server is how, normally, jurisdiction or authority is established over the Defendants. There are a lot of myths about what is good service, and like everything else dealing with the law, volumes have been written. All I can say about service here is that 99 times out of 100, if the Complaint and Summons was left with a member of the human species at the house, this is usually good service. (Actually, in Florida, there is a type of service that can be obtained through publication, which has certain implications. A notice published in a small local newspaper that no one reads, avoiding the need of a process server to actually find a human being, if the Court can be satisfied that the Defendants are avoiding the process server). When you get served, you should get two pieces of paper, the Complaint, which is very thick and has lots of papers attached to it, and the document, usually two pages long sometimes three in South Florida because it is translated into various languages, called a Summons. READ THE SUMMONS. It tells you that you have 20 days to file a written response to the Complaint with the Clerk of the Court and to serve a copy to the Plaintiff’s attorney. If you don’t, then a default will be entered against you, which means that your procedural rights to contest the foreclosure are over, and it’s only a matter of time before you are apartment hunting.
What to put in the response is the $64.00 question and why my clients pay me the big bucks. The response will raise any procedural issues, but most importantly, will begin to tell your side of the story and set the ground work for making it clear that you will insist that the Bank PROVE everything they have to in order to enforce the Mortgage and Note. In Florida, all mortgage foreclosures are in equity where a particular set of rules apply. The bad news is that this means that you don’t get to have your case decided by a jury. (Whether you believe it or not, the downtrodden always do better with juries). The good news is that fundamental concepts, such as fairness, justice, reprehensible conduct can and should be considered by a Court of Equity. As a practical matter, this should mean that a Court should take into consideration bad conduct on the part of the Bank, which impacts upon the original terms and conditions of the Mortgage and/or how and when it will be enforced.
There are two types of defenses in a foreclosure or, for that matter, any civil litigation. There is what I call procedural or what non-lawyers refer to as “legal loopholes” and then there are actual factual defenses, which are dependent on the particular circumstances of the case. Regarding the first type of defense, the “loopholes,” (this is really a poor description of what is actually involved) in fact, these so-called “loopholes” are probably one of the most important reasons why our system has consistently resulted in a society which provides both freedom and prosperity to its members. Lawyers and other enlightened groups refer to this as “due process of law.” What it means is that there are rules, procedures that must be followed within the judicial system so that a decision which is proper, correct, and fair is achieved. These “loopholes” include the fundamental concept that all parties to a dispute are entitled to present their side of the story, that facts can only be presented when they are reliable, and that there should be an orderly process which ensures that everyone knows the procedure and has an opportunity to be heard; that the decisions that are rendered are based upon an unbiased interpretation of what the facts are, which are then applied to the established rules governing agreements, or in the area of tort law, the party wronged receives compensation from the wrongdoer. (You may have guessed by the last sentence that I am in fact a lawyer, but I assure you that as run-on sentences go, for lawyers, this one is a baby).
The first thing that happens in any lawsuit is for the Court to acquire jurisdiction over the parties. All this means is that the Court acquires the authority over the parties to make a decision. When you file a lawsuit as a Plaintiff, you submit yourself to the jurisdiction of the Court. The service by the process server is how, normally, jurisdiction or authority is established over the Defendants. There are a lot of myths about what is good service, and like everything else dealing with the law, volumes have been written. All I can say about service here is that 99 times out of 100, if the Complaint and Summons was left with a member of the human species at the house, this is usually good service. (Actually, in Florida, there is a type of service that can be obtained through publication, which has certain implications. A notice published in a small local newspaper that no one reads, avoiding the need of a process server to actually find a human being, if the Court can be satisfied that the Defendants are avoiding the process server). When you get served, you should get two pieces of paper, the Complaint, which is very thick and has lots of papers attached to it, and the document, usually two pages long sometimes three in South Florida because it is translated into various languages, called a Summons. READ THE SUMMONS. It tells you that you have 20 days to file a written response to the Complaint with the Clerk of the Court and to serve a copy to the Plaintiff’s attorney. If you don’t, then a default will be entered against you, which means that your procedural rights to contest the foreclosure are over, and it’s only a matter of time before you are apartment hunting.
What to put in the response is the $64.00 question and why my clients pay me the big bucks. The response will raise any procedural issues, but most importantly, will begin to tell your side of the story and set the ground work for making it clear that you will insist that the Bank PROVE everything they have to in order to enforce the Mortgage and Note. In Florida, all mortgage foreclosures are in equity where a particular set of rules apply. The bad news is that this means that you don’t get to have your case decided by a jury. (Whether you believe it or not, the downtrodden always do better with juries). The good news is that fundamental concepts, such as fairness, justice, reprehensible conduct can and should be considered by a Court of Equity. As a practical matter, this should mean that a Court should take into consideration bad conduct on the part of the Bank, which impacts upon the original terms and conditions of the Mortgage and/or how and when it will be enforced.
Thursday, June 14, 2012
BE PREPARED OR WHAT TO DO WHEN YOU ACTUALLY FIND A HUMAN BEING ON THE PHONE WHO SAYS THEY WANT TO HELP YOU
Since the “mortgage crisis” and even before, the principal experience of homeowners or those who work, like my firm, with homeowners, in dealing with the mortgage companies, have been made to suffer the enormous frustration of repeated telephone calls, being placed on hold, filling out and submitting forms, and then following up, only to be told that the Bank cannot find the forms, and having to start all over again. That has really been the hallmark of the process, and the solution and key to success has been persistence. However, it is imperative that you be prepared for that cathartic moment when you actually reach a human being, at the precise confluence of the great time and space continuum, when need intersects with contact with a person who has the desire and authority to help. It does happen, really! Maybe not to you, but somebody eventually wins the lottery, right?
What does be prepared mean? In addition to having your loan information and the detailed prior notes of all communications and efforts in front of you, you need to be able to provide accurate information regarding your financial circumstances; income and expenses and, of course, have copies of everything that you have previously submitted in the loss mitigation process. It is appropriate here for me to mention a fact that must be kept in mind; it is a crime to lie to a federally insured lending institution in order to influence them in making a decision regarding a loan. Surprisingly, some people have actually gone to jail for this. With this in mind, it is important to assemble financial information that shows the hardship which caused your present difficulties, but you still have to show sufficient income to meet “reasonable” shelter expenses, including the modified mortgage that you are seeking, so that it now makes sense for the bank to turn frowns upside down.
A “reasonable mortgage payment” is the amount when combined with other “shelter expenses” equals 31% of the family’s gross income. “Shelter expense” equals mortgage payment, principal and interest, real estate taxes, hazard (windstorm, flood, fire, etc.) insurance, and condo and/or homeowner’s association fees. Most mortgage companies have a website where you can obtain the necessary forms so that you can do all of this in advance before you play the telephone roulette game with your lender. I strongly recommend this approach.
What does be prepared mean? In addition to having your loan information and the detailed prior notes of all communications and efforts in front of you, you need to be able to provide accurate information regarding your financial circumstances; income and expenses and, of course, have copies of everything that you have previously submitted in the loss mitigation process. It is appropriate here for me to mention a fact that must be kept in mind; it is a crime to lie to a federally insured lending institution in order to influence them in making a decision regarding a loan. Surprisingly, some people have actually gone to jail for this. With this in mind, it is important to assemble financial information that shows the hardship which caused your present difficulties, but you still have to show sufficient income to meet “reasonable” shelter expenses, including the modified mortgage that you are seeking, so that it now makes sense for the bank to turn frowns upside down.
A “reasonable mortgage payment” is the amount when combined with other “shelter expenses” equals 31% of the family’s gross income. “Shelter expense” equals mortgage payment, principal and interest, real estate taxes, hazard (windstorm, flood, fire, etc.) insurance, and condo and/or homeowner’s association fees. Most mortgage companies have a website where you can obtain the necessary forms so that you can do all of this in advance before you play the telephone roulette game with your lender. I strongly recommend this approach.
Tuesday, June 12, 2012
WHAT TO DO WHEN YOU GET BEHIND ON YOUR MORTGAGE PAYMENTS
Let’s be practical, enough complaining. It is still possible in this great country, at least in my little patch of paradise; South Florida, to fight back. Sometimes you win, sometimes you lose, but falling behind on your mortgage payment does not mean you have to pack your bags and move out, not by a long shot.
The first thing to do is to contact the mortgage company as soon as possible, preferably before you fall behind, and ask for help.
In dealing with mortgage servicing companies, it’s helpful to be polite, but it’s more important to be to the point and to keep excellent records. You should have your loan statement and loan number; you should write down the time and date of the call, and you should ask the person you are speaking to, even if you have to go through three or four people, to tell you their name and ask them to spell it.
Under the various settlements that the mortgage companies have made with the various governmental agencies, the details of which will be the subject of various future postings, a universal complaint was how difficult it was for customers to deal with the mortgage servicers. One of the solutions, which most of the servicers profess to be implementing to correct this, is to assign to a customer a particular “loan preservation specialist” or “customer service representative.” Accordingly, in addition to collecting the names of the people you speak with and the correct spelling, you should try and collect direct telephone numbers, direct e-mail addresses, direct fax numbers, and the like. Half the battle is being able to deal with the same person who might actually remember something from the last conversation or communication.
The mortgage servicing companies refer to the process of helping customers retain their homes and salvage their mortgages and, hopefully their credit rating as “loss mitigation.” This label, which is universal in the residential mortgage servicing industry, should give you a good insight into what the process is really all about. It is not your “loss” that they are seeking to mitigate, it is the mortgage servicing company and the investor’s loss, and if applicable, the mortgage insurance underwriter’s loss. We will discuss this in detail in future postings, however, it is important to understand that a successful “loss mitigation” is where both sides derive a benefit. The homeowner gets to keep their house and the mortgage company minimizes its losses; presumably by modifying the loan so that they are better off in both the short and the long term than having to go through liquidation, where the property is foreclosed upon and sold at public auction.
It is easy to become cynical and in fact, disillusioned, when you get involved in trying to work something out with your bank. It is a bureaucracy that you are going to have to deal with in the worst sense of the word. We have all experienced the automated voice menu and how frustrating it can be. The process of trying to modify a residential mortgage loan is this on steroids, times three. Understand this from the beginning because the key to success is persistence, and the ability to keep your eye on the goal. It is also helpful to try and assume the calm personality of Mr. Rogers, coupled with the unsinkable good nature of Elmo, and don’t forget, keep scrupulous and detailed notes.
The first thing to do is to contact the mortgage company as soon as possible, preferably before you fall behind, and ask for help.
In dealing with mortgage servicing companies, it’s helpful to be polite, but it’s more important to be to the point and to keep excellent records. You should have your loan statement and loan number; you should write down the time and date of the call, and you should ask the person you are speaking to, even if you have to go through three or four people, to tell you their name and ask them to spell it.
Under the various settlements that the mortgage companies have made with the various governmental agencies, the details of which will be the subject of various future postings, a universal complaint was how difficult it was for customers to deal with the mortgage servicers. One of the solutions, which most of the servicers profess to be implementing to correct this, is to assign to a customer a particular “loan preservation specialist” or “customer service representative.” Accordingly, in addition to collecting the names of the people you speak with and the correct spelling, you should try and collect direct telephone numbers, direct e-mail addresses, direct fax numbers, and the like. Half the battle is being able to deal with the same person who might actually remember something from the last conversation or communication.
The mortgage servicing companies refer to the process of helping customers retain their homes and salvage their mortgages and, hopefully their credit rating as “loss mitigation.” This label, which is universal in the residential mortgage servicing industry, should give you a good insight into what the process is really all about. It is not your “loss” that they are seeking to mitigate, it is the mortgage servicing company and the investor’s loss, and if applicable, the mortgage insurance underwriter’s loss. We will discuss this in detail in future postings, however, it is important to understand that a successful “loss mitigation” is where both sides derive a benefit. The homeowner gets to keep their house and the mortgage company minimizes its losses; presumably by modifying the loan so that they are better off in both the short and the long term than having to go through liquidation, where the property is foreclosed upon and sold at public auction.
It is easy to become cynical and in fact, disillusioned, when you get involved in trying to work something out with your bank. It is a bureaucracy that you are going to have to deal with in the worst sense of the word. We have all experienced the automated voice menu and how frustrating it can be. The process of trying to modify a residential mortgage loan is this on steroids, times three. Understand this from the beginning because the key to success is persistence, and the ability to keep your eye on the goal. It is also helpful to try and assume the calm personality of Mr. Rogers, coupled with the unsinkable good nature of Elmo, and don’t forget, keep scrupulous and detailed notes.
Monday, June 11, 2012
REAL ESTATE CRISIS IN FLORIDA: FROM THE 99% POINT OF VIEW
I am an attorney that has been practicing law in South Florida since I became a lawyer in 1975. I started out as a Legal Services Lawyer for the first 5 or so years and then spent most of the next 25 years representing lenders, in connection with foreclosures of commercial and residential property. That part of my practice stopped completely in 2007, and I was winding my law practice down when the real estate bubble in South Florida burst, and I began my career representing homeowners. Little by little, old clients and friends began referring homeowners to me who were victims of the economic collapse we have all suffered through in the last 3 years.
My clients run the complete spectrum of the 99% of people who work for a living and have bought into the American dream. They include professionals; doctors, lawyers and engineers, as well as blue collar workers, construction workers, government employees, such as teachers and police officers and people who have worked in the hospitality industry. My background as an ex-bank lawyer, a family lawyer, and a general practice lawyer, with over 35 years of experience, has provided me with litigation skills and an inside-out knowledge of the foreclosure process; I couldn’t turn people down.
With many years of experience as a family lawyer in making “the deal,” it appeared that representing homeowners was a perfect fit for me. I’m frankly proud to say that my associate and I, and our staff of 6-7 have effectively represented hundreds of individuals and families and have effectively saved hundreds of homes, by ultimately obtaining some litigation “wins” in some cases and workable “modifications” in many others. My experience in the last 3 years at what is going on now has drawn me, almost forced me, to start this blog.
For most of the last 4 decades, I have been extremely proud to be an attorney as my profession. Despite the many critics, and general ridicule, I thought being a lawyer was the embodiment of the American dream and ideal. The rule of law and the justice system is the ultimate protection that is supposed to give every individual American citizen the same rights as every other citizen. The experience in the last few years, however, has left me deeply disillusioned, and the process I face on a daily basis in representing people whose home and life savings are at stake is, more and more, day after day, becoming more unfair and one-sided; slanted towards the lenders, all in the name of “economic expediency.” The idea of justice, of equity; a man’s home is his castle, the legal traditions that separate and order our Republic, are being ignored, pushed aside, and all too often just considered a nuisance, all in an effort, it seems to me, to help the lenders; whose conduct and behavior precipitated the economic collapse which we are all now facing.
The commentators, and even the general public, seem to criticize the “occupy movement” for its amorphous and undefined bitchiness… “what do they want?” What they want seems clear to me…they want this B.S., the tyranny by the moneylenders, the 1%, to stop. The irony is that the perpetrators who are indeed making “war” against the vast majority of us, use the loaded political term of “class warfare” to criticize anyone who objects. Are we really that stupid?
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