Servicer games in modification process

Posted by kevin on September 15, 2011 under Foreclosure Blog | Comments are off for this article

Almost every client that I interview has a story about how he or she was jerked around unmercifully by a servicer.  Some servicers suggest that payments not be made so that the borrower can apply for a HAMP.  Others “lose” paperwork more than once.  Others take 7-8 payments instead of the required 3 and then deny a permanent modification.

What to do?  Well, the bottomline is that you are not going to get anywhere with the servicer who is already abusing you.  Once again, fighting in court is the only real alternative.  In New Jersey, the Supreme Court upheld the ruling in Gonzalez v. Willshire which said that the consumer fraud act applies to mortgage modifications.  The Federal District Court in Massachusetts has struck another blow in favor of borrowers and against Wells Fargo.  In Dixon v. WF, the homeowners fell behind.  They got a call from the servicer, WF, saying that WF would consider them for a modification. WF instructed the Dixons to miss payments so they could be behind enough to qualify.  The Dixons missed the payments and supplied WF with all required paperwork, but WF refused to negotiate a modification with the Dixons and filed a foreclosure.  Sound familiar to anyone out there?

The Dixons fought  back by filing a lawsuit in State court.  WF removed the case to federal court by stating that the federal Home Owners Loan Act preempted state law.  The Dixons said that all they wanted was a good faith negotiation since they had equity in their home.  WF countered that any promise it made to the Dixons was too vague to be binding and WF had no obligation to negotiate.  THESE ARE THE TYPE OF PEOPLE THAT YOU ARE DEALING WITH.  They created this mess to make billions of dollars and now they want to take your home and feel perfectly justified in jerking you around.

The Court felt differently however.  It utilized the concept of promissory estoppel.  That means that you cannot break a promise made to another party if they relied on it.  The Dixons went deeper into the hole because they relied on WF’s promise to negotiate in good faith.  The Court also found that federal law did not pre-empt this right.

Unfortunately, there is a cost involved in fighting for your rights.  But if you do not fight the foreclosure, you cannot stop the foreclosure.