What’s Next in the Foreclosure Defense World

We’re seeing several new trends that we think will shape the foreclosure defense discussion for at least the next several months to year. Last year things shifted every sixty days or so; now they’re changing about every six months.

These are the trends I’m seeing and a couple of predictions for the coming months:

1. Attorneys asking for help with foreclosure defense, loan audits and paralegal
services. Recently, I’ve drafted an Amended Complaint for a foreclosure lawsuit pending in California as well as a Motion in Opposition to a Lift Stay for a bankruptcy case. Both of these were prepared for attorneys defending a homeowner.

2. Homeowners are introducing us to their attorney after their audit is complete.

3. Snoops and spies working for the bank will continue to operate in the social media space in attempts to discredit anyone who helps homeowners fight foreclosure.

4. Homeowners will continue to educate themselves on foreclosure defense and the case law decisions in homeowners’ favor will continue to grow. We see a continuing and growing demand from homeowners who are getting prepared to fight their foreclosures themselves or with the help of an attorney.

5. Despite the negativity, there will be more people, including foreclosure defense attorneys and related professionals, entering the foreclosure defense profession to help homeowners. (If you’re looking for another service to complement an existing related business, NOW is the time to learn how to audit and get your business going, because I think we’ll see an explosion of growth in the next six months to a year. We offer several options if you want training.)

6. I think we’re going to start seeing title companies going under from losses. The title company always loses, and when you always lose, you run out of money. In the future, I don’t see how every foreclosure in the United States will not have a defect in title after being stolen from the owners.

7. I’ve mentioned before that I think this is all going to be sorted out in the courts. We’re already seeing early signs in Florida of the courts telling the banks that they cannot foreclose, and it’s just a matter of time before it reaches the rest of the country. I think in the next six to twelve months, the 9th Circuit will hear a case and decide in favor of a homeowner on the merits of the law (and not what’s going on in the media or coming from the government) and it will really get easier to win against the banks. When we have a couple of solid Federal case decisions from nearly every Federal Circuit in the United States, I think the servicers will either start negotiating in earnest or they will collapse.

I think their collapse is a more likely outcome. No homeowner is going to make another house payment to a party who has no right to collect payments. I’ve seen too much evidence during audits of how the documents are fabricated literally weeks prior to foreclosure, which means there probably isn’t a file folder anywhere in Deutsche Bank’s building that contains evidence of a transfer of a single Note in the United States. I don’t think they properly evidenced the transfers of the majority of the loans at issue, and without that documentation, how can they demonstrate lawful authority to foreclose?

Combine that with the “Move Your Money” movement and the new financial reform legislation, bad publicity, and viola! You have a financial disaster for the big banks. And there won’t be another bailout!

8. We’ll see that social media, meaning the sharing of information, especially from foreclosure defense blogs, will bring this mess to an end much faster than if there were no social media.

We will continue our efforts to write outstanding content, produce videos, and continue sharing what we think is working as we notice it. I work hard to write content that is different than what the other blogs are writing about, although sometimes it’s tough to generate this much content and keep it fresh!

Thanks to our readers ….this blogging stuff is a lot of fun. I’m so grateful for the opportunity to share my knowledge with you.

Got questions? Need a loan audit? Need some other help? Send me an e-mail: Christine@desertedgelegal.com.

DISCLAIMER:

****CHRISTINE SPRINGER IS NOT A LICENSED ATTORNEY. THIS BLOG IS COMPRISED OF HER OPINIONS, OBSERVATIONS AND INTERPRETATIONS AND IS NOT INTENDED TO BE CONSTRUED AS LEGAL ADVICE. PLEASE CONSULT WITH AN ATTORNEY BEFORE RELYING ON OR TAKING ANY ACTION BASED ON THE INFORMATION IN THIS BLOG.****

Should More Homeowners Walk Away?

I read a very interesting article today by Josh Brodesky of the Arizona Daily Star. He cites a study by a University of Arizona law professor named Brent White, who recently wrote a paper that concluded that it was in most people’s best interest to walk away from their homes.

As the article points out, it wasn’t that a professor was telling people to just walk away from their homes. He had a bigger point to make: why are the banks being bailed out for making bad loans, yet homeowners are still expected to hold up their end of the deals?  He argues that the government, real estate agents and mortgage brokers, among other players in the lending game, were encouraging people to buy a home because it was a good investment. Yet now that the market has collapsed, the homeowners are left holding the bag.

A friend of mine who has filed a predatory lending lawsuit in federal court says that the part of this lending mess that makes him the most angry is how the bank, MERS, and the rest of the defendants all want to collect the money due to them under the loan, yet none of them want to accept responsibility in their part of the mess of his loan and the overall mortgage problem in this country. They all want the money; yet nobody wants to take responsibility for the crap loan he was sold without his knowledge. As he put it, if he had known that he was participating in an illegal scheme, he would have just said no.

Similar to the conclusion in Dr. White’s paper, the housing mess has fallen squarely on the backs of the middle class, and the government and the banking industry are standing around, passing the buck, and doing nothing meaningful to help homeowners.

This attitude is further reflected in the way the loan modification process unfolds. If you’ve tried to negotiate a loan modification, it’s a long, drawn out process that leaves the homeowner really angry. The government’s HAMP program has no teeth either – homeowners are suing the Treasury and the lenders for not following the guidelines, yet judges have repeatedly found that a bank has no duty to modify a loan under HAMP.

And how about getting a short sale approved? I know a handful of people who waited months to get a short sale approved. I know there are some of you out there who have had luck with short sales and modifications, but you are in the minority. I know because I hear from people daily asking me for help.

I’m personally conflicted on whether the government should intervene in a meaningful way. I’m politically and socially liberal but am so angry at how our government is handling this mess that I can’t call myself a Democrat anymore. I think they are going to get their rear ends handed to them in the mid-term elections in 2010 and in the next presidential election.

I don’t think the government should hand every homeowner a wad of cash, but would it be too much to ask that our elected officials pass some laws, since that’s what they are paid to do, that make it easier for a homeowner to get a loan modification or to make the bank to respond to a short sale offer within a reasonable period of time? How about relaxing the deficiency statutes in states that have them so that people don’t have to file bankruptcy to recover from a financial disaster when they lose their home?

If we’re not going to put Geithner in jail for his role in bringing on this economic crisis, surely he can figure out a way to make it easier for a homeowner to get a loan modification under Treasury guidelines!

Over the summer I sent a letter to President Obama expressing my anger at how his administration has responded to the housing mess. Guess what I got back? A form letter from him recommending the administration’s HAMP program!

Now, to be clear, I was not expecting a personal response. However, I certainly didn’t expect a letter that makes it clear that he’s still drinking the HAMP kool-aid.

I will probably get a lot of people who unfollow me after reading this post, but let’s be clear: what he’s doing on this issue isn’t working and it doesn’t matter which party he belongs to. I voted for Obama, and he hasn’t done ANYTHING meaningful to help homeowners. It really doesn’t matter which party he belongs to — this housing crisis isn’t a one party problem. We should all be holding the president responsible for their failure to act regardless of which party he or she belonged to.

With fewer options, maybe more people need to walk away and let the market start to crash again – and maybe the banks and our elected officials will take notice.

Wall Street is paying out record bonuses this year while Main Street struggles to keep a roof over their heads and pay for necessities. I’m personally tired of watching these greedy bankers get paid out millions in bonuses when the average person is struggling.

I wish I could tell you who to complain to in our government, but who’s listening to anything the people have to say? No one, as far as I can tell.

There is a serious leadership crisis in America. It’s becoming clear to me that it’s up to us, American citizens, to find a way out of this mess ourselves, because our government is clueless.

What can you do to help your fellow Americans?

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.

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.

Bring Back the Judicial Cramdown Option

A new statistic out last week by bank regulators shows that 50% of people who obtain mortgage modifications eventually default again.

While this statistic is rather depressing, it’s really telling a great story about how lenders and servicers still aren’t doing enough to help homeowners, and it’s telling about our economy and what’s happening in the housing market as a whole.

There are several reasons people are re-defaulting.

First, the programs currently in place, whether government programs or voluntary programs though lenders, aren’t realistic. In most cases, they offer terrible repayment options such as asking for a higher payment, or some other option that makes no sense.

Second, the government’s program, Making Home Affordable, has no legal requirement that lenders participate. That means that if you qualify for the program, your lender is not legally obligated to grant you a loan modification under the program. What’s the point?

Last week I posted a blog article about a court judge who held in favor of a lender, saying that lenders don’t have a duty to modify loans under the program. There are more and more stories on the internet of this happening to people all across the country.

Third, we still have substantial job losses across the United States. Without creation of new jobs, people don’t have the income to pay for their now-underwater homes.

Fourth, we haven’t reached the bottom of the housing market. Yes, I know this isn’t what’s being reported in the media. We still have the coming wave of Alt-A foreclosures and a massive problem with the commercial real estate sector of the economy. Check out Dr. Housing Bubble’s blog, where he shows you with data why the housing market hasn’t hit bottom.

I’ve also heard from many people that they are being given trial modifications under Making Home Affordable, but the lenders aren’t following through after the trial period to modify the loans permanently. 

It stands to reason that if you modify your loan once, in a year you’ll still be in bad shape if housing prices continue to drop because of continued foreclosures.

I think it’s time to dust off the judicial cramdown option to give homeowners a fighting chance to keep their homes. Judicial cramdown is the term being used to describe changing the law to allow judges to “cramdown” the balance of a mortgage in bankruptcy.

Earlier this year, Senator Dick Durbin of Illinois threatened to reintroduce the judicial cramdown legislation if lenders didn’t modify at least 500,000 loans by November of 2009.

The government’s research on re-defaults indicates that the borrowers who received bigger reductions in their house payments did not have trouble making their payments a year later. If a judge were allowed to cram down the amount of principal so that the borrower could afford the payment, this would be a real option for homeowners who are serious about keeping their home.

Unfortunately, I don’t think this legislation is politically popular right now, as I think lawmakers are still waiting to see what happens with loan modifications.

If it is passed in the future, you’ll see lenders finally negotiating in good faith because borrowers have the bankruptcy option available to them.

For the majority of borrowers, a principal reduction is needed to make it economically feasible to stay in their homes. And until lenders are forced to negotiate in good faith, we’re going to continue to see this mess unfold.

 What do you think? Post your comments below!