Posted by kevin on March 30, 2018 under Foreclosure Blog | 
I have not posted in a few months because there was little happening of any interest to borrowers. I continue to read the “advance sheets” which have a few, what are referred to as, “unpublished” appellate decisions in New Jersey over the last couple of months. All borrower appeals were rejected.
A war story. I appeared in court in January to stay a sheriff sale. The background: Loan in 2007, foreclosure by BAC in 2009. Client was offered a modification in 2010, but the offer was withdrawn by BAC because they claimed the modification acceptance arrived late. Perhaps, the fact that the borrower does not speak, read or write English had something to do with that. The robo-signing stay in NJ put the case on hold for 8 months; however, after the stay was lifted, BAC did nothing for two years. The Clerk moved to dismiss but BAC got the case reinstated in 2014. After reinstatement, BAC once again did nothing and the case was dismissed in 2016. All the while, interest and fees are piling up. In late 2016, Bank of America filed a second foreclosure.
I became involved in 2017 just about the time that final judgment was entered. We applied for a loan modification under a so-called proprietary modification plan. That means that it is the lender’s (or servicer’s) in house mod plan. The problem was that the BOA never made public what the guidelines were for obtaining their proprietary plans. The servicer notified me that my client did not have sufficient income to obtain a modification under the investment property modification plan. I called the “point of contact” person and requested information about the plan guidelines so that I could confirm whether, in fact, my client did to qualify, and how much more income he would need to qualify. The reason was that the borrower’s son, who had substantial income, was willing to sign on the loan (which was disclosed to the servicer). Neither the point of contact person nor her supervisor, could tell me how much income was needed to qualify for the investment property mod plan. They could not (or would not) give me a copy of the plan guidelines. At BOA’s suggestion, we appealed the decision but were again rejected.
I served a QWR (qualified written request) to ascertain the plan terms and received a reply that borrower did not have sufficient income to qualify. I served a Notice of Error and the response from BOA is that they did not have to tell us the plan guidelines since it was proprietary. WTF? I once again told the servicer that the son was willing to sign on the loan and provided his income documentation. BOA refused to consider any amendment and refused to put off the sale.
The Judge heard the case, listened to my arguments and said that BOA was under no obligation to offer my client a modification. That is true, but was not the point. The point was that once a servicer or lender publicizes that it has a modification program and invites the borrowing public to apply for such a modification, it should be compelled to make public the terms for qualifying for such a program. Otherwise, we are dealing with an Alice in Wonderland situation. The Judge did not see it that way and my client lost the property.
Draw your own conclusions.
Posted by kevin on June 19, 2015 under Foreclosure Blog |
For what appears to be the up-teenth time, the OCC has imposed sanctions on 6 servicers for assorted violations relating to modifications including failures a)to respond to requests for information, b)to make good faith effort to prevent foreclosure in the first place and c) to track existing modification applications.
Wells Fargo and HSBC got one thump across the buttocks in that they are prohibited from acquiring servicing rights, entering into new servicing contracts, and banned from offshoring servicing rights. In addition, these banks need OCC approval to hire senior mortgage servicing officers.
JPMorgan Chase, US Bank, Santander Holdings and Everbank got slaps on the wrist. They also must get OCC approval to hire senior staff and must also get OCC approval to buy servicing rights, enter into new servicing contracts, outsourcing servicing rights and offshoring servicing rights.
Either the banks/servicers have become immune to punishment or the punishment is too lenient because I have not seen any real downturn in unlawful activities notwithstanding the continued crackdown.
I am reminded of a client that I had in a shareholder dispute. She could not resist blurting out her opinion about witness testimony during the trial. The Judge became more than a little upset. He held her in contempt and fined her $100. The Judge shot me a look right afterwards indicating that he had put the fear of God into her. Well, my client was humbled for the rest of the day. Then, the next day, she started commenting again. The first transgression got a warning. However, I knew that the warning was falling on deaf ears because while my client was yessing the Judge, she was getting her checkbook out of her pocketbook. By the last day of a 6 day bench trial, she was held in contempt 3 or 4 times and warned about a dozen other times. Clearly, $100 was not enough of a fine to change her behavior.
OCC is just chastising these banks. The punishment makes for a good press release but the offenders will find a way around the sanction. So, the laws will continue to be violated to the detriment of the consumer public. Only when some bank or better yet bank executive gets his ass kicked by the regulator with a loss of employment or incarceration will the situation get better. Unfortunately, that ain’t gonna happen.
Posted by kevin on December 24, 2014 under Foreclosure Blog |
MHA (Making Home’s Affordable) was set up by the government to induce lender’s to make deals with borrowers whether it be mortgage modification, dealing with second mortgages, short sales, deeds in lieu.
Oh excuse me, MHA may be about modifications, short sales and the like, but the inducement is not to the lender but the servicers. Not the guy that owns the mortgage, but the bean counter who collects the payments and sends them to the appropriate party.
What’s the big deal? Well, in defending foreclosure cases for the last 5 years, and reading pooling and servicing agreements, I have concluded that the interests of the servicer is many times in conflict with the interests of lenders or investors in securitized trusts. Investors and lenders usually fare better if they can work out a deal with the borrower. Servicers, on the other hand, seem to do better if there is a foreclosure.
That is why I was not too surprised to read the numerous stories about Ocwen getting hammered by the New York Superintendent of Financial Servicers. As part of the 150 million dollar settlement, William Erbay, the founder of Ocwen, is being forced out as CEO. Ocwen must come up with one hundred million in foreclosure relief and fifty million is going to be paid to Ocwen customers in NY. Do we have any governmental agency in NJ that protects borrowers? Heaven forbid. Moreover, Ocwen’s operations are to be monitored by an independent monitor for two years. Stock prices have fallen by 30% in that last week. Moreover, a $39 billion deal with Wells Fargo may be down the crapper.
What did Ocwen do? Basically, what most servicers do; that is, jerk around borrowers. However, Ocwen did it on a scale that made other servicers look like the JV (stealing a term from the Prez). For example, complaints against Ocwen were two times more frequent than complaints against BOA and 5 to 6 times more frequent than complaints against Wells Fargo. ( I have dealt with BOA and WF, and they are not what I would call “user friendly”).
Ocwen ran up costs by farming work out to affiliates which had strong ties to Ocwen and its executives. They backdated letters to borrowers which made it look like they were responding in accord with regulations under Dodd-Frank. According to Richard Cordray, the head of the CPFB, Ocwen took advantage of borrowers at every stage of the process. Another strategy attributed to Ocwen is that they would accept a package of documents and information from a borrower, wait 29 days, and then, instead of deeming the package complete for review by underwriter, Ocwen would send a deficiency letter to the borrower and request updates. What was not in the articles, but what I fear happened, was that Ocwen used the incomplete application as the basis for extracting additional monthly payments out of the borrowers during the so-called trial period. If you were to cross-check those payments against the servicing agreement, I would not be surprised to find out that the servicer kept a portion (if not all) of those payments.
Ocwen is not only servicer that plays games, but they got nailed. I would not be surprised if other servicers wind up on the wrong side of regulators in the future.
Merry Christmas.
Posted by kevin on November 27, 2014 under Foreclosure Blog |
I have been quite vocal concerning how the current Administration sold out the people by backing off on Chapter 13 cramdown in 2009. Instead, we got HAMP and MHA. The first few versions were just awful. Borrowers were routinely being ripped off by servicers on trial modifications;payments were made and glommed by the servicers; permanent mods were not given; and the borrower had no recourse because the courts said absent a permanent mod (and contractual relationship) the borrower had no standing to sue the servicer.
In late 2012, with HAMP version 4, I thought that we might have something. At least on paper, it seemed better than previous versions. Well, in real life, not the improvement that I expected. Why? The servicers still run the show. The government wags it finger at the servicers and tells them to fly right, but nothing substantive happens. Finally, the GSE’s, Fannie Mae and Freddie Mac, and the VA are not covered by the government program, MHA.
Why am I saying Happy Anniversary? I represent a elderly woman in a Chapter 13. As part of the Plan, we proposed a modification which called for capitalization of arrearages and a reduction in the interest rate to 4% escalating to 5% on the first mortgage loan to JP Morgan Chase . Junior encumbrances were to be stripped for lack of equity.
If you are familiar with HAMP Version 4, you know that the proposed mod is pretty much plain vanilla. On November 25, 2013, I sent a complete modification package to Chase to modify a note payable to JP Morgan Chase. In mid- February, 2014, the servicer (also Chase) called with good news and bad news- my application was deemed complete and was scheduled to go to underwriting, however, the servicing rights were being transferred to another servicer. I was assured that my file would be forthwith sent to the new servicer and I would have a decision right away. Guess what? I did not believe the Chase people.
It took a month to find the right servicer ( the new servicer assigned the loan to a subservicer). Then it took another month to find out who the point of contact person was. BTW, the point of contact person is very cordial and smart , but he is not running the show. By mid May, I was told that Chase had not yet sent the file to the new servicer so I had to start from scratch. I sent a complete, updated application with documents and proposal in late May.
In NJ, the Chapter 13 trustees will push to confirm plans with mods conditionally. The condition is that the debtor has to get the mod within 4 months of the confirmation or the case is dismissed. Because of the confusion with the new servicers, I was able to put the confirmation off until June. However, I had to make 3 appearances (no, they would not let me do it over the phone) to plead my case and get a lecture from the trustee for not having a mod in place. Every three weeks or so, my client gets a letter from the servicer asking for an updated whatever. Within a few days, we comply with the request(s). September comes and goes and the trustee files a notice that we are in default because we do not have a mod in place and requests that the case be dismissed. I am forced to file a written response. We have a hearing in mid-December.
The point of contact persons assured me that we would have a decision by the end of November, but nothing yet. He also tells me, for the first time, that the loan was sold to Freddie Mac so we are not operating under HAMP guidelines. In the meanwhile, the paralegal at the lender files a motion to vacate the stay because we do not have a mod as set forth in the confirmation order. Thank goodness, her boss pulled the motion.
You can’t make this shit up. To add insult to injury, I checked my time records last week to discover that I have spent more time on the modification than I did on the nuts and bolts Chapter 13 case including motions to strip. Go figure. To be continued.
Posted by kevin on April 7, 2014 under Foreclosure Blog |
The first rule is that HAMP, the government program for mortgage modifications, does not apply to government loans. If FANNIE or FREDDIE bought the loan (whether for their own portfolio or sold to investors), HAMP does not apply. We will deal with this in later blogs.
Other basics:
2. HAMP applies to first lien mortgages originated on or before January 1, 2009.
3. HAMP applies to condo’s, coop’s and manufactured housing if state lien law makes mortgage a lien on real estate.
4. The property securing the mortgage loan has not been condemned and is habitable.
5. Borrower has a documented financial hardship and does not have sufficient other assets to pay mortgage as currently stated.
6. Borrower agrees to escrow for taxes and insurance (if not doing already) prior to any trial period.
7. The unpaid principal balance prior to capitalization is not greater than $729,750 for 1 Unit, $934,200 for 2 Unit, $1,129,250 for 3 Unit and $1,403,400 for 4 Unit.
8. The mortgage is secured by a one to four unit property.
9. The borrower has submitted an initial package for modification on or before December 31, 2015 and the modification effective date is on or before September 30, 2016.
If you have followed my blogs, you know that I believe that HAMP is not bad on paper, but problematic in its implementation. Servicers still jerk people around, and borrowers cannot look to the courts for help unless they have a temporary modification. But, with the courts clamping down on defenses and looking the other way on evidence issues, it may be the best game in town at this point. So, look into it. Time is running out.
Posted by kevin on December 10, 2013 under Foreclosure Blog |
Joseph Smith, the overseer of the $25 billion settlement, issued a recent report pointing out that Bank of America has violated the settlement because it failed to file accurate documents in bankruptcies. What that means is not clear. Did they add up a column of numbers incorrectly or did they submit robo-signed documents. Moreover, it is not clear that there was any real sanction for violations other than a promise to do better.
I have many problems with the $25 billion settlement. Among them is that the overseer seems to be a very qualified guy with a reputation for protecting consumers when he was the Commissioner of Banking in North Carolina. However, as overseer what we see are reports and sanctions that do not even amount to a slap on the wrist.
In the meanwhile, I really have not seen any real reduction in the antics that the lenders/ servicers are up to in foreclosure actions. In NJ, we see an upsurge in servicers stating that they are the lenders notwithstanding the there is ample proof that they are just the servicer. How do they do it? A combination of no meaningful discovery being allowed to borrowers and use of allonges which are endorsed in blank. The servicer puts in a certification that it came into possession of the note prior to the foreclosure filing. The problem is that the allonges, starting in about 2012, all started to look exactly alike as to form. The tranasction and the closing of loan date is on the top of the page followed by an endorsement in blank. Before 2012, I do not recall seeing this allonge form at all. Now, it is standard. So, it could be just a coincidence. Or it could be that the endorsements were all made after 2012 irrespective of when the note was signed by the borrower or sold. What do you think?
Many client and prospective clients tell me of the antics of servicers during the modification process. Being put on hold for long periods of time. Leaving messages and not getting call backs. Documents are lost time and again. Your “point of contact” person is never available. What can you do? Is it negligence on the part to the servicers or bad faith? Can you sue them? Is it a defense against the foreclosure?
The answer is that if you have not been offered a trial modification that you accepted, you are SOL against the servicer and lender. Why? You have no contractual right to a modification. Making Homes Affordable is a deal between the federal government and the banks. You are not the federal government. So, you have no standing to sue. The overseer has standing to do what is listed in the $25 billion settlement which includes wrist slapping. You can complain to people who will not listen whether that be the servicer, the lender, the consumer affairs department in NJ or the courts.
However, if you do get a trial modification and then get jerked around, you have standing and can sue the servicer and lender. In fact, in New Jersey, it may be a consumer fraud violation. In those limited cases, it may be worthwhile to pursue legal action.
Posted by kevin on November 23, 2013 under Foreclosure Blog |
Periodically, we have been tuning in to the negotiations between the Justice Dept and JP Morgan Chase (“JPMC”). It is clear that JPMC wanted to settle to put a cap on its liabilities and to probably also to keep from the public damaging information about the types of loans it was making, servicer improprieties, and robo-signing issues (although technically part of $25 Billion settlement, chance that negative info could have come out in discovery). At any rate, this past Tuesday, the deal with the Justice Dept (which included pro-active States) was finalized for $13 Billion. Here is the breakdown:
$4 Billion to help struggling homeowners of which $2 Billion to lower principal balances and $2 Billion for other homeowner relief including lowering interest rates;
$4 Billion to FHFA for questionable loans sold to Fannie and Freddie;
$1.4 Billion to National Credit Union Administration;
$300 Million to California AG;$515 Million to FDIC;
$2 Billion to Justice Dept.
$300 Million to California AG;
$20 Million to Delaware AG;
$100 Million to Illinois AG;
$34.4 Million to Massachusetts AG; and
$614 Million to NY AG.
(Nothing for NJ because we have been less than pro-active in this fight (as we were in the Revolutionary War and Civil War- but let’s not get into that). The deal does not include a “get out of jail free” pass for possible criminal activity.
In addition, on November 15, JPMC agreed to pay $4.5 Billion to an investor group including Black Rock, Goldman Sachs Asset Management, LP and others based on sale of securities by JP Morgan and Bear Stearns.
Now, if these settlements were based on bad loans sold by JPMC to investors or Fannie and Freddie, how come the loans that backed up these securities are not viewed as equally bad? On the positive side, however, money is available for settlements. Although servicers still dance borrowers around during the modification process (and that is not going to change dramatically no matter what MHA says), we believe that Borrowers with JPMC, or Bear Stearns loans should actively pursue modification. The money is there.
Posted by kevin on August 11, 2013 under Foreclosure Blog |
In mid June, 2013, it was reported in the financial news that a lawsuit had been brought against BOA in the US District Court in Massachusetts claiming that BOA routinely denied borrows permanent modifications under HAMP. So what else is new? Well, in this case, the borrowers enlisted the help of 5 former BOA employees who are providing testimony against their ex-employers. BTW BOA vigorously denies these allegations stating they are absurd and patently false. Having been in the trenches for the last 4 years, I wonder???
Now, a program that is basically run by the servicer, who is
1. the agent for the bank;
2. paid by the bank or the trustee in a securitized trust; and
3. in many instances, stands to make more from a foreclosure than a modification of the loan
would never jerk around a borrower. If you believe that, I have a bridge you may want to buy.
The allegations of borrowers echo what defense counsel has heard since HAMP was instituted. Documents are conveniently lost. The borrower cannot speak with the same person twice. Decisions are not made. Permanent mods are denied after the bank or trust has taken numerous trial mod payments.
What makes this Massachusetts lawsuit different is that the borrowers have statements from ex-employees who claim that:
1. they were instructed to inform homeowners that modification documents were not timely received, not received at all, or missing when they were, in fact, received and in a timely manner.
2. employees were rewarded with cash bonus or gift cards for meeting a quota for monthly foreclosures.
3. employees were encouraged to do anything they could to maximize fees to the bank including lying.
Moreover, the employees are from different BOA offices around the country.
Now, I do not know if these employees are telling the truth. However, can they all be lying? Especially in light of a rich history of borrower complaints all over the country. Even in NJ, judges comment about the problems that borrowers face in obtaining a modification.
I look forward to seeing how this litigation shakes out. I hope that the Judge in Massachusetts does not bounce the case on some procedural technicality, but decides it on the merits.
As I say on my website and blog, I believe that on paper, the new re-incarnation of HAMP is vastly better than previous versions. However, that pre-supposes that the servicer is going to play it straight. Unfortunately, the stories of many borrowers (including many of my clients) question that proposition. Maybe if BOA gets slammed for punitive damages in this lawsuit, servicers may think twice before they play it fast and loose.
Posted by kevin on February 6, 2013 under Foreclosure Blog |
NJ set up a mediation program for residential property in foreclosure. To qualify, the property must be owner occupied, and a foreclosure complaint must have been filed already. According to the judges who run the foreclosure bench-bar conferences, about 40% of cases in mediation reach some form of resolution. What “some form of resolution” is, I am not exactly clear. I know that I have not received any permanent modifications through the mediation process.
That being said, mediation does have some good points. First, the servicer has to appear (telephonically but that’s better than nothing) at each hearing. So, you have a live body on the other end of the phone who has read your submission most of the time. Second, the mediation process takes time, and time is the ally of the homeower.
Now, that does not mean that it is not frustrating. You submit papers, get no feedback, and then on the day of the mediation, you are told that the documents are “stale”, or some documents are missing, or that no decision has been made. Mediators try to make the servicers move the case, but the mediators really have no muscle. The only person who can effectively get the attention of the servicer to expedite the process and make meaningful offers is the judge. However, judges have been reluctant to step into that role. (Perhaps they are too overburdened with their court calendars.)
Rumors have been swirling around the last few months that the mediation program will be cut or discontinued because of a lack of funding. At the bench-bar conference last week, it was announced that the mediation program will end in the beginning of March, 2013 unless the Chief Justice can come up with additional funding. Of course, the CJ does not have the ability to print money, so he is looking to the Governor for money. I have not heard anything from the governor’s office on this.
There has been some talk about lawyers running the mediation on a pro bono (free) basis. Frankly, I do not see any attorney doing more than 1-2 cases on a pro bono basis. Moreover, I do not see many HUD counselors working for nothing either.
Stay tuned. This may get intersting.
Posted by kevin on May 13, 2012 under Foreclosure Blog |
A couple of months ago, we informed you that the various Attorneys General entered into a settlement with the 5 largest servicers over robo-signing and other servicing irregularities. In the next few posts, I want to explain to you the terms of the settlement. However, before we can get into the details, we need to understand the basics. Why was the deal made with servicers and not lenders?
What is a servicer and how does it differ from your lender? It is not always clear. In fact, most borrowers think that their servicer is actually their lender. If you go on the Freddie Mac website, a borrower is advised to contact its lender for details and then in parentheses it says (servicer). So, Freddie Mac is acknowledging the confusion.
A lender is the entity that gives the borrower the money or buys the loan from the original lender. A servicer is an entity that collects your mortgage payments on behalf of the lender and distributes those payments pursuant to the terms of the loan agreements. In the old days (before 1970), the entity that lent you the money actually collected your payments and did the bookkeeping associated with your mortgage loan. So, the lender and the servicer were one and the same.
For purposes of this paper, let’s refer to the lender as a bank. Historically, the bank made a mortgage loan and made its money, primarily, on interest payments. They serviced their own loans; that is, they collected the money, paid the taxes and insurance, performed the paperwork, and dealt with any defaults on the loan by foreclosure or otherwise.
With the advent of Fannie Mae, Freddie Mac, and later private securitizations, however, a marketplace was set up where banks could sell their mortgage loans to investors. By selling their loans, the bank would get most, if not all of its money back, and thereby have money to make more loans. So, instead of making its money primarily from interest payments, banks started to become involved in high volume lending and made the bulk of their money on first mortgages on the fees that it charged to the borrowers. Those fees included application fees, points, credit report fees and the like.
When banks started selling their loans, they quickly noticed that investors who wanted to buy the income stream of the mortgage notes did not necessarily want to collect the payments each month and perform the paperwork. But banks, especially large banks, had the infrastucture already in place to do the servicing. So, what happened? The banks that sold the loans to investors, in some cases, made a deal with the investor to service the loans that it sold- for a fee.
Now to finish off the scenario, many large banks did not sell all their loans. For the most part, large banks retained or held their second mortgages. In this circumstance, the bank acted in the like it did in the old days- it was both lender and servicer.
How did the servicers get involved in the 25 Billion dollar settlement? Well, although foreclosures are supposed to be brought in the name of the lender, the reality is that the servicer is the entity that deals with the defaulted loan. The servicer is the one that calls or writes to the borrower to find out why payments have stopped and whether the loan could be put back on track by modification, forbearance, short sale or the like. In addition, it is the servicer that has all the information necessary to prosecute the foreclosure. So, the servicer usually hires the lawyers, appraisers, real estate people, litigation support companies and the like on the behalf of the lender. And it was the servicer that was involved in all the shenanigans relating to robo-signing, lost notes, improper charges, fraudulent endorsements and more which were being investigated by the various AG’s and led to the 25 billion dollar settlement.
Posted by kevin on January 26, 2012 under Foreclosure Blog |
2011 was a slow year for foreclosures in NJ. The robo-signing issue put practically all foreclosures on hold. When the NJ Supreme Court finally gave the go ahead to most of the banks to continue with foreclosure action, the banks decided to sit on the fence for two reasons: first, to get a ruling from the Supreme Court of NJ on what exactly must be presented in a Notice of Intent to Foreclose and what the penalty for non-compliance is; and second, to see if the national robo-signing deal pushed by the Obama administration could be effected. As of this date, neither has occurred. However, if I were a betting man, I would bet that the NJ Supremes will come down with their decision in the Notice of Intent to Foreclose case (Guillaume) before the people in Washington get off their duffs. In fact, that decision should come down any day now.
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Posted by kevin on September 15, 2011 under Foreclosure Blog |
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.
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