Video: CA SB 94 Becomes Law: No More Upfront Fees for Loan Mods

Thinking of Walking Away?

My dad snail-mailed me an article last week (thanks Dad!) that appeared in the AARP News Bulletin about  a woman named Archie Stewart, who abandoned her house in Cleveland (presumably because she couldn’t get the lender, HSBC Bank, to negotiate with her on her house payments, although the article doesn’t give specifics about her situation).

The article says that HSBC set Ms. Stewart’s home for foreclosure but never actually foreclosed on the home, which meant she still owned the property. Stewart, 62 and on Social Security, is still liable for the debt and the property.

The problem? She applied for subsidized housing but was rejected because she still owned a home. In her case, the home has become a public nuisance after being vandalized, and a lien remains on the home for more than it’s worth. She has no way of removing her name from the title of the home, and no one else wants the property, not even the bank.

The article says that her situation is not unique. Apparently, there are homeowners who find themselves in this situation, where servicers begin the foreclosure process, postpone the sale and never follow through with the foreclosure.

The article’s expert, Kermit Lind, a clinical law professor at Cleveland State University, says most homeowners in a walkaway situation have no recourse. Lind is working to propose state-level legislation to change that.

So, if you’ve walked away from a property, check with your local county recorder’s office to determine whether it’s actually been foreclosed upon. You might want to contact the lender to ask when the sale will take place.

If you’re thinking of walking away, be aware that this situation may happen. I suggest you continue to carry insurance on the property until the bank forecloses. If something happens to the abandoned property, you are responsible for it.Unless you’ve filed for bankruptcy, my guess is that you remain responsible for any damage or vandalism to the property, which could be even more financially devastating than simply walking away.

Breaking News: ABA Files Suit Challenging the Validity of the Repeal of AZ SB 1271

Well, we all knew it was just a matter of time before we heard from the Arizona Bankers Association over the repeal of SB 1271. They didn’t spend all that money to get the bill passed, only to see it repealed when everyone found out about it.

The greedy bankers are at it again! I wish I could say that I’m surprised.

The Associated Press reports that the Arizona Supreme Court is being asked to overturn budget legislation that repeals a controversial new state law on legal protections for homeowners after foreclosures.

The suit was apparently filed on Tuesday by the Arizona Bankers Association, who says the repealed legislation is unconstitutional on several grounds, namely because the issue wasn’t included in Gov. Jan Brewer’s special session call for action on budget and tax matters.

I don’t have much more information to report on this at the moment, but stay tuned. I’m sure it will get interesting.

What to Do If Your Servicer Won’t Tell You Who The Investor is on Your Note

I’ve been receiving LOTS of great questions from homeowners lately and I’m honored that you trust us enough to send us your questions.

Today I received an e-mail along the following lines, with the pertinent part in bold:

Hi Christine:

My servicer is National City. I have been trying to get a loan mod for 10 months.

You’ve probably heard this many times, but until I was in default I could not get their attention. Eventually they listened; of course my credit is now destroyed. Anyway, long story short my “modified” loan is now more than I was previously (and could not afford) paying, as my previous loan was 6% interest only, and the modified loan is 4% for 5 years, 5% for 25 years, but fully amortized.

My request to the servicer to find out my investor, so that I could talk to them, rather than a National City loss mitigation person was fruitless. National City claims they cannot reveal the investor. I even wrote a letter asking for the investor, but got a letter stating they could not reveal the investor because of some agreement they have.

How can I find out who owns my loan. If I am able to 3% interest I can stay in my home. As it is right now, I’m on borrowed time.

Is your B.S. alert on right now? Mine went off a long time ago. I wish I could say that I’m surprised, but I’m not. If this is happening to this person, I’m sure it’s happening to a lot of you because someone took the time to e-mail me (Christine@DesertEdgeLegal.com) about it. If there’s one person struggling with it, that means there are probably thousands of you out there struggling with the same issue.

Aside from the heartbreaking story of how the lender screwed another homeowner with a bad loan modification (please, save yourself this problem and have an attorney look over your loan mod agreement BEFORE you sign it!), the bigger issue I want to discuss is how to make your servicer reveal who owns your note.

Take a look at this link to Neil Garfield’s blog about how to get through to judges who are unfamiliar with securitization. This is good information (from a lawyer) who explains why you should force the servicer to tell you who the investor is on your note. The servicer, MERS, and everyone else playing the foreclosure game doesn’t have standing! Only the investor or mortgage pool has standing to foreclose.

As Garfield says, begin with the QWR. The lender has twenty days to acknowledge your correspondence and sixty days to make a good faith effort to provide the documents under RESPA.

If you don’t get a response or it’s not a complete response, send them another letter and bug the hell out of them. Threaten to file a lawsuit if they don’t comply and report them to the regulatory authorities. Make your voice heard!

After you get the response, get yourself a loan audit with an auditor who can research the chain of assignment issues, securitization and undisclosed finance charges. (I happen to know a really great loan auditor….)

Once you have the audit and a clear picture of what’s happening with your loan, you can proceed from there. Options may include filing a TILA/RESPA lawsuit, getting a loan modification or fighting foreclosure using the audit results.

If your QWR and loan audit reveals the lender is a mortgage pool, look on the Securities and Exchange Commission’s website, called the EDGAR database. There’s a wealth of information on that site and will reveal a lot of about the mortgage pool security.

Check this out: some of you have mortgages that may have already been paid off!  For example: Aurora Loan Services is the servicing arm of Lehman Brothers, who securitized ALL of its mortgages. They cannot prove which of these loans have been paid, written down, bailed out or who even owns them.

Note: If you have a loan serviced by Aurora Loan Services, your loan is LIKELY securitized.

If, during the discovery phase of litigation it is revealed (1) payments from TARP (Troubled Asset Relief Program, a.k.a. “bailout”) or from investors have been applied to your collateral in the stream of securitization and investment and/or (2) the loan was table funded (your lender was paid a commission to “act” as the lender at the table, ostensibly to pretend to underwrite the loan, perform due diligence, confirm the appraisal, confirm the viability of the transaction, and confirm the affordability and benefits) and/or (3) the debt was released in bankruptcy, you may have a legal claim of satisfaction on some or all of your debt.

Loan modifications have been a great tool, but ultimately if you don’t owe the money on your loan, why modify it? This is why I think more people are missing the boat when it comes to resolving their mortgage issues with a loan modification. Many of you have serious predatory lending issues in your documents and have causes of action under TILA and RESPA that could show your loan was paid off. It’s possible that many of you are paying for something you really don’t owe.

Whatever you do, don’t wait until the last minute to deal with these issues. If you know you’re looking at a mess down the road, get started early. Sixty days isn’t a lot of time in the scope of a foreclosure filing. Plan ahead and execute so you have your strategy in place for whatever you want to accomplish.

As always, I love hearing from you, so send me an e-mail at Christine@DesertEdgeLegal.com or post your comments below.

Video: The FDIC Is Broke

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Recession Will Be ‘Full-Blown Depression’: Strategist

“This global recession will turn into a “full-blown depression,” Nicu Harajchi, CEO of N1 Asset Management, said Friday, adding that global stimulus hasn’t come down to Main Street.”

“When it comes down to corporate America, corporate Europe or even in Asia, in Japan, we are not seeing Main Street making any money,” he said. “Consumers are losing their jobs. They are struggling with their mortgages, with their credit. And we are just seeing this continuing.”

The $5 trillion injection is “monetary expansion,” according to Harajchi. “At some point, which we believe to be 2010/11, some of the central banks are going to recall some of that money and that will turn from monetary expansion to monetary contraction.”

He also said he doesn’t see the corporates or the public “being able to pay back that debt.”

You can read the full article here

Banks Lower Fees After Criticism

California SB 94 Expected to Become Law Today – No More Upfront Fees on Loan Modifications

Today, California Governor Schwarzenegger is expected to sign SB 94 into law.

To summarize, the bill prohibits persons from charging advance fees to borrowers in connection with the modification of the terms of the borrower’s loan, require those who wish to charge a fee for loan modification services (after performing them) to provide a specified notice to borrowers regarding other options available  to the borrower, prohibit servicers from imposing any interest or charge for performing services for borrowers in connection with loan modifications or other forms of loan forbearance of forgiveness; and close a loophole in the California Finance Lenders Law.

As we’ve discussed on this blog before, this bill will probably end the loan modification industry in California as we know it.

If you listen to the steady stream of propaganda coming from the California Attorney General’s office, you’d think everyone who performed loan modifications is a scam artist.

The California Attorney General’s advice to do your own loan modification is highly irresponsible. He assumes that the banks have borrowers’ best interests at heart, which we all know is not true. If you’re worried about scammers, let’s take a look at the banking industry, which is the biggest scam artist of them all.

According to a legal assistant contact in one of our attorney’s offices, loan modification companies and law firms alike are literally closing their doors because of this law. The industry is changing overnight.

The good news for homeowners who want to hire an attorney’s office to obtain a loan audit is that it will allow them to break up the cost of the loan modification over time. Because of the rule against charging upfront fees, the costs of the loan modification will be billed over time as the work is completed.

The downside is that the cost of a loan modification from a legitimate provider will go up because of increased administrative and collection costs.

Coming Soon: Open Season on Real Estate Appraisers in Arizona

It was just a matter of time before someone started looking at what appraisers were doing during the run up to the real estate bubble, and now it’s clear that appraisers will be held liable for their negligence in appraising properties in the coming months.

In a recent appeals decision titled Sage v. Blagg Appraisers, Sage, (the buyer/borrower) sued Blagg Appraisers (“Blagg”) after discovering that Blagg had overcalculated the square footage of the property by nearly 30%.

The lower trial court granted summary judgment to Blagg, concluding that two prior Arizona appellate decisions, Kuehn and Hoffman established that an appraiser hired by the lender did not owe a duty to the buyer.

For those of you unfamiliar with the term summary judgment, it means:

“A final decision by a judge, upon a party’s motion, that resolves a lawsuit before there is a trial. The party making the motion marshals all the evidence in its favor, compares it to the other side’s evidence, and argues that there are no “triable issues of fact.” Summary judgment is awarded if the undisputed facts and the law make it clear that it would be impossible for the opposing party to prevail if the matter were to proceed to trial.” From Nolo.com

Sage appealed, and the Arizona Court of Appeals reversed the trial court’s opinion, holding that the prior appellate decisions did not govern the circumstances in Sage’s case.

Rather, based on “public policy . . . , the realities of the loan/purchase transaction by which one typically acquires a home, and emerging industry guidelines recognizing that the buyer/borrower normally relies on the appraiser in the situation we address,” the Court of Appeals unanimously held that “an appraiser owes a duty not only to the lender that contracts for the appraisal but also to the prospective borrower who intends to purchase the home.”

The Court reasoned that expanding the duty to borrowers would add nothing to appraisers’ substantive obligations to lenders because “the appraiser is obligated to perform the appraisal in a non-negligent fashion; the appraiser will owe the prospective homebuyer the same standard of care.” Furthermore, the Court could “see no public policy reason to exclude the buyer/borrower from the scope of the appraiser’s duty in a case such as this.”

The Court also referenced recent changes to the appraisal report forms that are universally used by appraisers in mortgage finance transactions and in which they must certify that the buyer has a right to rely on the appraisal:

Our recognition of the duty owed by an appraiser to the buyer/borrower, moreover, is consistent with evolving industry standards that acknowledge that a buyer/borrower in fact relies on an appraisal prepared at the request of the lender.

In March 2005 . . . the Federal Home Loan Mortgage Corporation (”Freddie Mac”) and the Federal National Mortgage Association (”Fannie Mae”) issued a revised Uniform Residential Appraisal Report for use by appraisers hired by lenders in mortgage finance transactions. See Freddie Mac & Fannie Mae, Uniform Residential Appraisal Report (2005), available at http://www.freddiemac.com/sell/forms/pdf/70.pdf. . . . The federal form [] requires appraisers to certify their understanding that the borrower and a limited class of others in the same mortgage finance transaction “may rely on this appraisal report.”

As a result, Sage was allowed to proceed with her lawsuit against Blagg. You can read the decision here. Sage was represented by local attorneys Berk & Moskowitz, PC.

So what does the mean for the rest of you who think the appraiser was negligent in appraising your home prior to purchase? It means they could be held liable for their mistakes in appraising homes. This decision will likely open the doors to other lawsuits against appraisers for their negligence in appraising homes.

I’ve spoken to many homeowners who suspected that the appraiser’s report was suspiciously high, or the appraiser went outside of the accepted range to make the house appraise for a certain amount to that the borrower could qualify for the loan, and heard various other stories from homeowners about how the appraiser screwed something up during the transaction. In some extreme cases of appraisal fraud, appraisers were regularly appraising homes for 25% over their real value so that the lender could make higher loans to borrowers.

The bottom line as a result of this decision is that appraisers in fact owe a duty to the borrower, regardless of whether they are paid by the lender.

Got questions? Send me an e-mail at Christine@DesertEdgeLegal.com.

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