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The Kramer opposition to the Attorney General order to show cause

30 Aug

A good read

Opposition of Defendant (AG)

Qusetions I am being asked about the Mass Joinder and Kaslow and Kramer and Mitchell Stien

25 Aug

Attorney’s Frequently Asked Questions

1 Who is Mitchell J. Stein

2 Who is Philip A. Kramer

3 Lead Attorney Phillip A Kramer Introduces The Lawsuit(s)

4 Can I get a local lawyer to sue my lender or do a lawsuit myself?

5 What are Attorney Phillip A Kramer’s qualifications?

6 How do I know if my loan is the type that can join the suit?

7 What are my possible outcomes if I become a Named Plaintiff

8 What is MERS and why is it illegal and fraudulent?

9 What is the difference between Loan Modification and this Litigation?

10 What documents do I need to provide?

11 What is the flow of communication between my attorney and myself?

12 Should I continue to make my mortgage payments if I am accepted as a plaintiff on this suit?

13 What if I’m dealing with a pending foreclosure?

14 What about those annoying calls from my lender(s)?

15 How long until I can expect resolution?

16 What is the motivation behind this law suit?

17 In a nutshell, what did the banks do wrong?

18 How did this whole mess happen?

19 What is Securitization?

20 Litigation Verses Modification In Table Format

Who Is Mitchell J Stein?
http://members.calbar.ca.gov/fal/Member/Detail/121750

Who Is Philip A Kramer?

http://members.calbar.ca.gov/search/member_detail.aspx?x=113969

Lead Attorney Phillip A Kramer Introduces The Lawsuit(s)

Can I get a local lawyer to sue my lender or do a lawsuit myself?

What are Attorney Phillip A Kramer’s qualifications?

How do I know if my loan is the type that can join the suit?

What are my possible outcomes if I become a Named Plaintiff

What is MERS and why is it illegal and fraudulent?

What is the difference between Loan Modification and this Litigation?

What documents do I need to provide?
What is the flow of communication between my attorney and myself?

Should I continue to make my mortgage payments
if I am accepted as a plaintiff on this suit?

What if I’m dealing with a pending foreclosure?

What about those annoying calls from my lender(s)?

How long until I can expect resolution?

What is the motivation behind this law suit?

In a nutshell, what did the banks do wrong?

How Did This Whole Mess Happen?

The Breakdown

To put this in perspective…the banks got greedy, really greedy. They were not satisfied with just making the 6% interest on your mortgage, they wanted more. So they chopped up their home loan portfolios and packaged them into “mortgage backed securities” (MBS) that could then be sold to Wall Street investors for even bigger profits. The only problem was, Wall Street had a huge appetite for these MBS’s and could not get enough of them. They kept demanding more of them from the banks so they did everything in their power to churn more out but unfortunately they took time to package and properly securitize. What happened next is where they went wrong. The banks decided to cut corners and avoid two critical steps in the securitization process so they could speed up the funding of these loans from the standard 45 – 60 days to as quick as 4 to 5 days. We all know time is money on Wall Street right? They committed this fraud knowingly and just kept doing it, over and over again 62 million times as shown on all of the documents being currently presented to the courts. The banks left their fingerprints on the gun, providing homeowners with the legal leverage needed to expose this fraud and use it to save their homes from imminent foreclosure.

The question is….will you choose to take action like so many have already done or will you sit back and wait to see what happens? The banks are counting on you doing nothing and going quietly? Become the “squeaky wheel” – show them you are serious about defending your home!

Securitization Explained

The Alphabet Problem – The Pooling and Servicing Agreement

The Pooling and Servicing Agreement (PSA) is the document that actually creates a residential mortgage backed securitized trust and establishes the obligations and authority of the Master Servicer and the Primary Servicer. The PSA also establishes that mandatory rules and procedures for the sales and transfers of the mortgages and mortgage notes from the originator’s to the Trust. It is this unbroken chain of assignments and negotiations that creates what we have called “The Alphabet Problem.”

In order to understand the “Alphabet Problem,” you must keep in mind that the primary purpose of securitization is to make sure the assets (e.g., mortgage notes) are both FDIC and Bankruptcy “remote” from the originator. As a result, the common structures seek to create at least two “true sales” between the originator and the Trust. You therefore have in the most basic securitized structure the originator, the sponsor, the depositor and the Trust. We refer to these parties as the A (originator), B (sponsor), C (depositor) and D (Trust) alphabet players. The other primary but non-designated player in my alphabet game is the Master Document Custodian for the Trust. The MDC is entrusted with the physical custody of all of the “original” notes and mortgages and the assignment, sales and purchase agreements. The MDC must also execute representations and attestations that all of the transfers really and truly occurred “on-time” and in the required “order” and that “true sales” occurred at each link in the chain. Section 2.01 of most PSAs includes the mandatory conveyancing rules for the Trust and the representations and warranties. The basic terms of this Section of the standard PSA is set-forth below:

The complete inability of the mortgage servicers and the Trusts to produce such unbroken chains of proof along with the original documents is the genesis for all of the recent court rulings. One would think that a simple request to the Master Document Custodian would solve these problems. However, a review of the cases reveals a massive volume of transfers and assignments executed long after the “closing date” for the Trust from the “originator” directly to the “trust.” We refer to these documents as “A to D” transfers and assignments. There are some serious problems with the A to D documents. First, at the time these documents are executed the A party has nothing to sell or transfer since the PSA provides such a sale and transfer occurred years ago. Second, the documents completely circumvent the primary objective of securitization by ignoring the “true sales” to the Sponsor (the B party) and the Depositor (the C party). In a true securitization, you would never have any direct transfers (A to D) from the originator to the trust. Third, these A to D transfers are totally inconsistent with the representations and warranties made in the PSA to the Securities and Exchange Commission and to the holders of the bonds (the “Certificate holders”) issued by the Trust. Fourth, in many cases the A to D documents are executed by parties who are not employed by the originator but who claim to have “signing authority” or some type of “agency authority” from the originator. Finally, in many of these A to D document cases the originator is legally defunct at the time the document is in fact signed or the document is signed with a current date but then states that it has an “effective date” that was one or two years earlier. Hence, this is what we call the Alphabet Problem. In the eyes of the courts and millions of homeowners nationwide, all of this spells out the word FRAUD, and there is no legal defense for the lender on this.

editors comment

THEY COULD HAVE A LEGITIMATE CAUSE OF ACTION.
THE BIG FIVE LENDERS SAT AROUND A TABLE SOMEWHERE AND PLANNED FOR THE INFUSION OF CAPITAL AND THE PUMPING OF THE REAL ESTATE MARKET IN AN UNPRECEDENTED AMOUNT. SEE THE DOCUMENTARY “INSIDE JOB” ACADEMY AWARD WINNER FOR A DOCUMENTARY. AT SOME TIME THEY KNEW THAT THEY WHERE GOING TO STOP THE MUSIC AND THERE WOULD BE NO CHAIRS TO SIT IN ONCE THE MUSIC STOPPED.
THE KRAMER LAWSUIT IS ABOUT THIS FRAUD PERPETRATED ON THE AMERICAN TAXPAYER. THE PROBLEM IS IT WAS SOLD AS A FORECLOSURE DEFENSE METHOD WHICH IT IS NOT. THE OTHER PROBLEM IS THAT AN ATTORNEY NEEDS TO HAVE A RELATIONSHIP WITH HIS CLIENT TO DIRECTLY REPRESENT THE CLIENTS INTEREST. WITH OVER 10,000 CLIENTS AND 55 MILLION IN FEES THIS WOULD BE IMPOSSIBLE TASK. I BELIEVE THIS IS WHERE THE FALSE ADVERTISING ISSUE PRESENTS ITSELF.

MABRY tip no injunction needed to stop foreclosure TERRY MABRY et al., opinion 2923.5 Cilvil code

12 Jun

The court in Mabry

Latest ruling on Civil Code 2923.5

26 Feb

B. Perata Mortgage Relief Act, Cal. Civ. Code § 2923.5

Plaintiffs’ second cause of action arises under the Perata Mortgage Relief Act, Cal. Civ. Code § 2923.5. Plaintiffs argue U.S. Bank is liable for monetary damages under this provision because it “failed and refused to explore” “alternatives to the drastic remedy of foreclosure, such as loan modifications” before initiating foreclosure proceedings. (FAC PP 17-18.) Furthermore, Plaintiffs allege U.S. Bank violated Cal. Civ. Code § 2923.5(c) by failing to include with the notice of sale a declaration that it contacted the borrower to explore such options. (Opp’n at 6.)

Section 2923.5(a)(2) requires a “mortgagee, beneficiary or authorized agent” to “contact the borrower in person or by telephone in order to assess the borrower’s [*1166] financial situation and explore options for the borrower to avoid foreclosure.” For a lender which had recorded a notice of default prior to the effective date of the statute, as is the case here, § 2923.5(c) imposes a duty to attempt to negotiate with a borrower before recording a notice of sale. These provisions cover loans initiated between January 1, 2003 and December 31, 2007. Cal. Civ. Code § 2923.5(h)(3), (i).

U.S. Bank’s primary argument is that Plaintiffs’ claim should be dismissed because neither § 2923.5 nor its legislative history clearly indicate an intent to create a private right of action. (Mot. at 8.) Plaintiffs counter that such a conclusion is unsupported by the legislative history; the California legislature would not have enacted this “urgency” legislation, intended to curb high foreclosure rates in the state, without any accompanying enforcement mechanism. (Opp’n at 5.) The court agrees with Plaintiffs. While the Ninth Circuit has yet to address this issue, the court found no decision from this circuit [**15] where a § 2923.5 claim had been dismissed on the basis advanced by U.S. Bank. See, e.g. Gentsch v. Ownit Mortgage Solutions Inc., 2009 U.S. Dist. LEXIS 45163, 2009 WL 1390843, at *6 (E.D. Cal., May 14, 2009)(addressing merits of claim); Lee v. First Franklin Fin. Corp., 2009 U.S. Dist. LEXIS 44461, 2009 WL 1371740, at *1 (E.D. Cal., May 15, 2009) (addressing evidentiary support for claim).

On the other hand, the statute does not require a lender to actually modify a defaulting borrower’s loan but rather requires only contacts or attempted contacts in a good faith effort to prevent foreclosure. Cal. Civ. Code § 2923.5(a)(2). Plaintiffs allege only that U.S. Bank “failed and refused to explore such alternatives” but do not allege whether they were contacted or not. (FAC P 18.) Plaintiffs’ use of the phrase “refused to explore,” combined with the “Declaration of Compliance” accompanying the Notice of Trustee’s Sale, imply Plaintiffs were contacted as required by the statute. (Doc. No. 7-2, Exh. 4 at 3.) Because Plaintiffs have failed to state a claim under Cal. Civ. Code § 2923.5, U.S. Bank’s motion to dismiss is granted. Plaintiffs’ claim is dismissed without prejudice.

An individual Chapter 11 bankruptcy may be better for you than Chapter 13

28 Jan

by Chip Parker, Jacksonville Bankruptcy Attorney on October 25, 2009 · Posted in Chapter 11 Bankruptcy

In my 17 years of practicing bankruptcy law, I have never been as excited by anything as the development of the individual Chapter 11 case.

Traditionally, Chapter 13 has been used for personal reorganizations while Chapter 11 has been reserved for more complex corporate reorganizations.� However, a small handful of sophisticated bankruptcy lawyers, like Brett Mearkle of Jacksonville, Florida and BLN contributors Brett Weiss and Kurt O�Keefe, are taking advantage of the debtor-friendly rules of Chapter 11, to provide more meaningful debt restructuring for individual consumers.

Before 2005, individual Chapter 11 cases were virtually non-existent. However, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, which has generally been horrible for individual debtors, changed a critical rule in Chapter 11 that has made it the choice for bankruptcy lawyers seeking the best restructuring options for many middle-class Americans.� That rule, known as the Absolute Priority Rule, no longer applies to individuals filing under Chapter 11.� The result is that, unlike corporate debtors, an individual (or married couple) filing under Chapter 11 does not have to repay 100% of his unsecured debts.� Rather, the individual need only pay his �disposable income� over a 5 year period, just like in Chapter 13 cases.

The challenge for bankruptcy lawyers is streamlining the Chapter 11 case for consumers to bring the overall cost of filing down.� Currently, my firm has managed to bring down the cost of a typical Chapter 11, but even so, the individual Chapter 11 case costs $10,000 to $30,000, depending on the facts.� However, in as many as half of all consumer reorganizations, these increased fees and costs are far outweighed by the savings and convenience of Chapter 11.

These savings, like �cram down� of automobiles and elimination of the trustee�s administrative fee, will be discussed in more detail in my upcoming articles.

The change to the Absolute Priority Rule has gone widely unnoticed by consumer bankruptcy lawyers, largely because so few understand Chapter 11.� However, we are starting to realize the power of Chapter 11 for consumers, and a concerted effort is being made by many to understand this complicated area of bankruptcy law.� I’ll be in Tucson next week, attending a three day seminar conducted by The National Association of Consumer Bankruptcy Attorneys to learn how to identify which consumers will benefit from Chapter 11 and how to file these types of bankruptcies.� Of course a three-day seminar is really the beginning of an education in Chapter 11, and I predict there will be more advanced seminars to follow.

Be on the lookout for more articles and videos by me and other BLNers on the advantages and nuances of the individual Chapter 11.

Bankruptcy Court Wipes Out Mortgage Debt When Servicer Fails to Document Claim

27 Oct

10/26/2009 By: Darrell Delamaide

A federal bankruptcy judge in New York created new uncertainties for mortgage servicers when he expunged a mortgage debt after the servicer could not provide sufficient documentation that it had a claim on the home.

The ruling came earlier this month in bankruptcy court in the Southern District of New York in a case involving Mount Laurel, New Jersey-based PHH Mortgage and a property in White Plains, the New York Times reported.

Judge Robert Drain wiped out a $461,263 mortgage debt on the property, in another case of how things can go wrong when documentation does not keep up with transfers of mortgages in a world of securitized loans.

A recent ruling by the Kansas Supreme Court similarly denied the Mortgage Electronic Registration Service (MERS) rights to recovery in a foreclosure case, even though MERS often stands in for banks that actually hold the mortgage. As a consequence, the bank holding the mortgage lost out in the foreclosure.

In the PHH case, the homeowner, who was not identified, filed for bankruptcy and PHH claimed its mortgage debt.

When attempts by the homeowner’s lawyer to get PHH to modify the debt met with no success, he asked for proof of PHH’s standing and received a letter stating that PHH was the servicer of the loan but that the holder of the note was U.S. Bank, as trustee of a securitization pool.

When he then asked for proof that U.S. Bank was indeed the holder of the note, he received only an affidavit from an executive at PHH Mortgage, the Times reported.

Among the documents supplied to the court to support PHH’s assertion was a copy of the assignment of the mortgage, but this was signed by the same PHH executive identified this time as an official of MERS, and was dated March 26 of this year, well after the bankruptcy had been filed.

In the hearing, the PHH lawyer argued that in the secondary market, there are many cases where assignment of mortgages or assignment of notes don’t happen at the time they should – that this was standard operating procedure for many years.

Judge Drain rejected that argument, the Times reported. “I think that I have a more than 50 percent doubt that if the debtor paid this claim, it would be paying the wrong person,” the newspaper quoted him as saying. “That’s the problem. And that’s because the claimant has not shown an assignment of a mortgage.”

PHH is appealing Judge Drain’s decision.

The ruling also puts the homeowner in uncharted territory. “Right now I am in bankruptcy court with a house that has no discernible debt on it,” her lawyer told the Times, “yet I have a client with a signed mortgage. We cannot in theory just go out and sell this house because the title company won’t give a clear title on it.”

The lawyer’s options are to file an amended plan or sue to try to get clear title to the property.

Foreclosure Victory For Nor Cal Area Homeowner!

7 Sep

A Sacramento area court ruling against the plaintiff came in an unlawful detainer hearing last Friday. Lenders and servicers are taking notice of the “sale” by trustee that was set aside in favor of a loan modification. Submitted by Steve Shafer

February 5, 2009 / Sacramento California – The Bay Area Superior Court decision and judgment against the plaintiff allows the “sale” by the trustee to be set aside in favor of a loan modification.
Lenders nationwide who originate and service loans know California offers them a “safe haven” from homeowner’s who dispute a recent foreclosure. That means overwhelming odds for anyone in foreclosure who loses their home to a lender in a foreclosure. The borrower becomes a holdover and must respond to an unlawful detainer after their home is lost.

That was not the case for an El Dorado area resident at a recent hearing for an unlawful detainer matter heard in a Placerville County superior court room. The recent victory in court was in an unlawful detainer matter for the defendant Ms. Stella Onyeu and mortgage lender and securities sponsor – AURORA LOAN SERVICES v. STELLA D. ONYEU (case number PCU2008032).

AURORA LOAN SERVICES like so many other lender servicing agents has come under greater scrutiny as of late for questionable business practices. According to its web site Aurora Loan Services is operating as usual. The company is a subsidiary of Lehman Brothers Bank, and not part of the Lehman Brothers Holding Inc. bankruptcy filing.

The case was originally filed in October of last year and shortly thereafter was dismissed when the Plaintiff failed to show at a scheduled hearing. Subsequent motions were filed to vacate the dismissal in favor of a motion to dismiss by the plaintiffs. The matter was heard recently heard again by the same court and earlier mentioned presiding judge. Mark Terbeek is the attorney for the Defendant and Maher Soliman a Juris Pro witness provided case development and court expert testimony.

This judgment for the defendant is monumental given the courts limited jurisdiction related to the lenders sole focus to have the borrower removed from the home. The issues at hand are the legal procedural limitations and high attrition rate for defendants and their attorney’s. The problem is the defendant’s lack of standing for pleading a wrongful foreclosure due to jurisdiction of the court.

So what does this all mean? Many homeowners can find some hope, for the moment, in knowing the otherwise unfriendly California UD courts will now hold some promise for hearing arguments as to the foreclosure and the plaintiffs standing. According to foreclosure and REO sales analyst Brenda Michelson of Nationwide Loan Services “It’s hit or miss at this level of the law and the courts willingness to step outside of its jurisdiction.” The smaller outlying courts seem to me to be more willing to entertain defense arguments that the plaintiff may not be the holder in due course and lacks capacity throughout the foreclosure” Terbeek’s response is that if the plaintiff cannot demonstrate a logical and properly conveyed transfer of the beneficial interest – it is not entitled to possession.

After the foreclosure and conveyance back to the trustee, the homeowner is considered unlawfully occupying the dwelling as a holdover. However, the court ruled that AURORA had in fact violated its duty to show good faith and comply accordingly under the recent California statutes and amendments Power of Sale provision. The presiding judge who heard the matter ordered a judgment against the company allowed for Terbeek to enter a request for all legal fees due.

According to legal expert Soliman, “there are more attorneys willing to now jump into the wrongful foreclosure business and fight the court on the jurisdiction issue. However, it is nearly impossible to rely on the judge and courts at this level”. Soliman is an examiner with Nationwide Loan Services and has engagements in multiple cases throughout California through attorneys such as Terbeek who represented the defendant.

Jurisdiction: An Overview

The term jurisdiction is really synonymous with the word “power” and the sovereignty on behalf of which it functions. Any court possesses jurisdiction over matters only to the extent granted to it by the Constitution, or legislation of a paramount fundamental question for lawyers is whether a given court has jurisdiction to preside over a given case. A jurisdictional question may be broken down into various components including whether there is jurisdiction over the person (in personam), the subject matter, or res (in rem), and to render the particular judgment sought.

An unlawful detainer lawsuit is a “summary” court procedure. This means that the court action moves forward very quickly, and that the time given the tenant to respond during the lawsuit is very short. For example, in most cases, the tenant has only five days to file a written response to the lawsuit after being served with a copy of the landlord’s complaint. Normally, a judge will hear and decide the case within 20 days after the borrower now tenant files an answer.

The question of whether a given court has the power to determine a jurisdictional question is itself a jurisdictional question. Such a legal question is referred to as “jurisdiction to determine jurisdiction.” In order to evict the tenant, the landlord must file an unlawful detainer lawsuit in superior court. In an eviction lawsuit, the lender is the “plaintiff” and the prior borrower and homeowners become an occupant holdover and the “defendant.” Immediately after the trustee sale of the home the conveyance by the trustee is entered in favor of the lender. Until recently in most cases the lender is with in its right foreclose if a borrower has missed a number of payments, failed to make the insurance premiums or not paid the property taxes. “But sometimes a lender is wrong and you can fight foreclosure by challenging the foreclosure process and related documents” said Soliman.

As the new owner of record AURORA HOME LOAN SERVICES must follow procedures no different than that of a landlord in a tenant occupancy dispute. The next step is to remove the homeowner from the subject dwelling. If the tenant doesn’t voluntarily move out after the landlord has properly given the required notice to the tenant, the landlord can evict the tenant. If the lender makes a mistake in its filing of the foreclosure documents a court my throw out the whole foreclosure case. In the case of a wrongful foreclosure the borrower’s claims are limited to affirmative defenses.

Affirmative Defenses

Unlike a judicial proceeding, California lenders need to merely wait out the mandatory term for issuing default notices and ensure it has properly served those notices to the borrower. In other words the hearing and trial taken place in the above referenced matter is not subject to arguments brought by the homeowner for wrongful foreclosure versus the question as to lawful possession of the property by the lender.

California lenders are typically limited to only the defenses a landlord will face when opposed and made subject to claims of wrongfully trying to evict a tenant. Claims such as the Plaintiff has breached the warranty to provide habitable premises, plaintiff did not give proper credit before the notice to pay or quit expired or plaintiff waived, changed, or canceled the notice to quit, or filed the complaint to retaliate against defendant are often completely unrelated to the matter at hand. The courts decision to enforce the provisions of an earlier modification in lieu of a foreclosure sends a major wake up call to the lenders who are under siege to avoid foreclose and be done with mortgage mess affecting United States homeowners. Soliman says the decision is unfortunately not likely to be read into as case precedent for future lawyers and wrongful defendants seeking to introduce our case as an example of a lenders wrongful action.

Soliman goes on to say “it’s both interesting and entertaining to see experienced attorneys who jump in and immediately question the issue of the courts authority. Its reality time when they get to their first hearing and see first hand the problematic issues with jurisdiction.”

Servicing agents are never the less on notice they must be ready to defend themselves when the opportunity to argue the plaintiffs standing are allowed in an unlawful detainer motivate by a foreclosure. Therefore, the debate about what the courts hear will remain open and subject to further scrutiny by the lawyers for both sides and judges who preside over the courts at this level.

Nationwide Loan Servicing is an approved Expert Witness who provides court testimoney in matters concerning wrongful foreclosures, Federal Savings Banks regultory violations and SEC filings for private registrations.

SB 94 and its interferance with the practice

5 Sep

CA SB 94 on Lawyers & Loan Modifications Passes Assembly… 62-10

The California Assembly has passed Senate Bill 94, a bill that seeks to protect homeowners from loan modification scammers, but could end up having the unintended consequence of eliminating a homeowner’s ability to retain an attorney to help them save their home from foreclosure.

The bill, which has an “urgency clause” attached to it, now must pass the State Senate, and if passed, could be signed by the Governor on October 11th, and go into effect immediately thereafter.

SB 94’s author is California State Senator Ron Calderon, the Chair of the Senate Banking Committee, which shouldn’t come as much of a surprise to anyone familiar with the bigger picture. Sen. Calderon, while acknowledging that fee-for-service providers can provide valuable services to homeowners at risk of foreclosure, authored SB 94 to ensure that providers of these services are not compensated until the contracted services have been performed.

SB 94 prevents companies, individuals… and even attorneys… from receiving fees or any other form of compensation until after the contracted services have been rendered. The bill will now go to the Democratic controlled Senate where it is expected to pass.

Supporters of the bill say that the state is literally teeming with con artists who take advantage of homeowners desperate to save their homes from foreclosure by charging hefty fees up front and then failing to deliver anything of value in return. They say that by making it illegal to charge up front fees, they will be protecting consumers from being scammed.

While there’s no question that there have been some unscrupulous people that have taken advantage of homeowners in distress, the number of these scammers is unclear. Now that we’ve learned that lenders and servicers have only modified an average of 9% of qualified mortgages under the Obama plan, it’s hard to tell which companies were scamming and which were made to look like scams by the servicers and lenders who failed to live up to their agreement with the federal government.

In fact, ever since it’s come to light that mortgage servicers have been sued hundreds of times, that they continue to violate the HAMP provisions, that they foreclose when they’re not supposed to, charge up front fees for modifications, require homeowners to sign waivers, and so much more, who can be sure who the scammers really are. Bank of America, for example, got the worst grade of any bank on the President’s report card listing, modifying only 4% of the eligible mortgages since the plan began. We’ve given B of A something like $200 billion and they still claim that they’re having a hard time answering the phones over there, so who’s scamming who?

To make matters worse, and in the spirit of Y2K, the media has fanned the flames of irrationality with stories of people losing their homes as a result of someone failing to get their loan modified. The stories go something like this:

We gave them 1,000. They told us to stop making our mortgage payment. They promised us a principal reduction. We didn’t hear from them for months. And then we lost our house.

I am so sure. Can that even happen? I own a house or two. Walk me through how that happened again, because I absolutely guarantee you… no way could those things happen to me and I end up losing my house over it. Not a chance in the world. I’m not saying I couldn’t lose a house, but it sure as heck would take a damn sight more than that to make it happen.

Depending on how you read the language in the bill, it may prevent licensed California attorneys from requiring a retainer in advance of services being rendered, and this could essentially eliminate a homeowner’s ability to hire a lawyer to help save their home.

Supporters, on the other hand, respond that homeowners will still be able to hire attorneys, but that the attorneys will now have to wait until after services have been rendered before being paid for their services. They say that attorneys, just like real estate agents and mortgage brokers, will now only be able to receive compensation after services have been rendered.

But, assuming they’re talking about at the end of the transaction, there are key differences. Real estate agents and mortgage brokers are paid OUT OF ESCROW at the end of a transaction. They don’t send clients a bill for their services after the property is sold.

Homeowners at risk of foreclosure are having trouble paying their bills and for the most part, their credit ratings have suffered as a result. If an attorney were to represent a homeowner seeking a loan modification, and then bill for his or her services after the loan was modified, the attorney would be nothing more than an unsecured creditor of a homeowner who’s only marginally credit worthy at best. If the homeowner didn’t pay the bill, the attorney would have no recourse other than to sue the homeowner in Small Claims Court where they would likely receive small payments over time if lucky.

Extending unsecured credit to homeowners that are already struggling to pay their bills, and then having to sue them in order to collect simply isn’t a business model that attorneys, or anyone else for that matter, are likely to embrace. In fact, the more than 50 California attorneys involved in loan modifications that I contacted to ask about this issue all confirmed that they would not represent homeowners on that basis.

One attorney, who asked not to be identified, said: “Getting a lender or servicer to agree to a loan modification takes months, sometimes six or nine months. If I worked on behalf of homeowners for six or nine months and then didn’t get paid by a number of them, it wouldn’t be very long before I’d have to close my doors. No lawyer is going to do that kind of work without any security and anyone who thinks they will, simply isn’t familiar with what’s involved.”

“I don’t think there’s any question that SB 94 will make it almost impossible for a homeowner to obtain legal representation related to loan modifications,” explained another attorney who also asked not to be identified. ”The banks have fought lawyers helping clients through the loan modification process every step of the way, so I’m not surprised they’ve pushed for this legislation to pass.”

Proponents of the legislation recite the all too familiar mantra about there being so many scammers out there that the state has no choice but to move to shut down any one offering to help homeowners secure loan modifications that charges a fee for the services. They point out that consumers can just call their banks directly, or that there are nonprofit organizations throughout the state that can help homeowners with loan modifications.

While the latter is certainly true, it’s only further evidence that there exists a group of people in positions of influence that are unfamiliar , or at the very least not adequately familiar with obtaining a loan modification through a nonprofit organization, and they’ve certainly never tried calling a bank directly.

The fact that there are nonprofit housing counselors available, and the degree to which they may or may not be able to assist a given homeowner, is irrelevant. Homeowners are well aware of the nonprofit options available. They are also aware that they can call their banks directly. From the President of the United States and and U.S. Attorney General to the community newspapers found in every small town in America, homeowners have heard the fairy tales about about these options, and they’ve tried them… over and over again, often times for many months. When they didn’t get the desired results, they hired a firm to help them.

Yet, even the State Bar of California is supporting SB 94, and even AB 764, a California Assembly variation on the theme, and one even more draconian because of its requirement that attorneys only be allowed to bill a client after a successful loan modification has been obtained. That means that an attorney would have to guarantee a homeowner that he or she would obtain a modification agreement from a lender or servicer or not get paid for trying. Absurd on so many levels. Frankly, if AB 764 passes, would the last one out of California please turn off the lights and bring the flag.

As of late July, the California State Bar said it was investigating 391 complaints against 141 attorneys, as opposed to nine investigations related to loan modifications in 2008. The Bar hasn’t read anywhere all of the complaints its received, but you don’t have to be a statistician to figure out that there’s more to the complaints that meets the eye. So far the State Bar has taken action against three attorneys and the Attorney General another four… so, let’s see… carry the 3… that’s 7 lawyers. Two or three more and they could have a softball team.

At the federal level they’re still reporting the same numbers they were last spring. Closed 11… sent 71 letters… blah, blah, blah… we’ve got a country of 300 million and at least 5 million are in trouble on their mortgage. The simple fact is, they’re going to have to come up with some serious numbers before I’m going to be scared of bumping into a scammer on every corner.

Looking Ahead…

California’s ALT-A and Option ARM mortgages are just beginning to re-set, causing payments to rise, and with almost half of the mortgages in California already underwater, these homeowners will be unable to refinance and foreclosures will increase as a result. Prime jumbo foreclosure rates are already up a mind blowing 634% as compared with January 2008 levels, according to LPS Applied Analytics.

Clearly, if SB 94 ends up reducing the number of legitimate firms available for homeowners to turn to, everyone involved in its passage is going to be retiring. While many sub-prime borrowers have suffered silently through this horror show of a housing crisis, the ALT-A and Option ARM borrowers are highly unlikely to slip quietly into the night.

There are a couple of things about the latest version of SB 94 that I found interesting:

1. It says that a lawyer can’t collect a fee or any other compensation before serivces have been delivered, but it doesn’t make clear whether attorneys can ask the client to deposit funds in the law firm’s trust account and then bill against thsoe funds as amounts are earned. Funds deposited in a law firm trust account remain the client’s funds, so they’re not a lawyer’s “fees or other compensation”. Those funds are there so that when the fees have been earned, the lawyer doesn’t have to hope his or her bill gets paid. Of course, it also says that an attorney can’t hold any security interest, but money in a trust account a client’s money, the attorney has no lien against it. All of this is a matter of interpretation, of course, so who knows.

2. While there used to be language in both the real estate and lawyer sections that prohibited breaking up services related to a loan modification, in the latest version all of the language related to breaking up services as applied to attorneys has been eliminated. It still applies to real estate licensed firms, but not to attorneys. This may be a good thing, as at least a lawyer could complete sections of the work involved as opposed to having to wait until the very end, which the way the banks have been handling things, could be nine months away.

3. The bill says nothing about the amounts that may be charged for services in connection with a loan modification. So, in the case of an attorney, that would seem to mean that… well, you can put one, two and three together from there.

4. Lawyers are not included in definition of foreclosure consultant. And there is a requirement that new language be inserted in contracts, along the lines of “You don’t have to pay anyone to get a loan modification… blah, blah, blah.” Like that will be news to any homeowner in America. I’ve spoken with hundreds and never ran across one who didn’t try it themselves before calling a lawyer. I realize the Attorney General doesn’t seem to know that, but look… he’s been busy.

Conclusion…

Will SB 94 actually stop con artists from taking advantage of homeowners in distress? Or will it end up only stopping reputable lawyers from helping homeowners, while foreclosures increase and our economy continues its deflationary free fall? Will the California State Bar ever finishing reading the complaints being received, and if they ever do, will they understand what they’ve read. Or is our destiny that the masses won’t understand what’s happening around them until it sucks them under as well.

I surely hope not. But for now, I’m just hoping people can still a hire an attorney next week to help save their homes, because if they can’t… the Bar is going to get a lot more letters from unhappy homeowners.

Don't get HAMP ED out of your home!

5 Sep

By Walter Hackett, Esq.
The federal government has trumpeted its Home Affordable Modification Program or “HAMP” solution as THE solution to runaway foreclosures – few things could be further from the truth. Under HAMP a homeowner will be offered a “workout” that can result in the homeowner being “worked out” of his or her home. Here’s how it works. A participating lender or servicer will send a distressed homeowner a HAMP workout agreement. The agreement consists of an “offer” pursuant to which the homeowner is permitted to remit partial or half of their regular monthly payments for 3 or more months. The required payments are NOT reduced, instead the partial payments are placed into a suspense account. In many cases once enough is gathered to pay the oldest payment due the funds are removed from the suspense account and applied to the mortgage loan. At the end of the trial period the homeowner will be further behind than when they started the “workout” plan.
In California, the agreements clearly specify the acceptance of partial payments by the lender or servicer does NOT cure any default. Further, the fact a homeowner is in the workout program does NOT require the lender or servicer to suspend or postpone any non-judicial foreclosure activity with the possible exception of an actual trustee’s sale. A homeowner could complete the workout plan and be faced with an imminent trustee’s sale. Worse, if a homeowner performs EXACTLY as required by the workout agreement, they are NOT assured a loan modification. Instead the agreement will include vague statements that the homeowner MAY receive an offer to modify his or her loan however there is NO duty on the part of the servicer or lender to modify a loan regardless of the homeowner’s compliance with the agreement.

A homeowner who fully performs under a HAMP workout is all but guaranteed to have given away thousands of dollars with NO assurance of keeping his or her home or ever seeing anything resembling an offer to modify a mortgage loan.
While it may well be the case the government was making an honest effort to help, the reality is the HAMP program is only guaranteed to help those who need help least – lenders and servicers. If you receive ANY written offer to modify your loan meet with a REAL licensed attorney and ask them to review the agreement to determine what you are REALLY agreeing to, the home you save might be your own.

Brown Sues 21 Individuals and 14 Companies Who Ripped Off Homeowners Desperate for Mortgage Relief

17 Jul

News Release
July 15, 2009
For Immediate Release
Contact: (916) 324-5500
Print Version
Attachments

Los Angeles – As part of a massive federal-state crackdown on loan modification scams, Attorney General Edmund G. Brown Jr. at a press conference today announced the filing of legal action against 21 individuals and 14 companies who ripped off thousands of homeowners desperately seeking mortgage relief.

Brown is demanding millions in civil penalties, restitution for victims and permanent injunctions to keep the companies and defendants from offering mortgage-relief services.

“The loan modification industry is teeming with confidence men and charlatans, who rip off desperate homeowners facing foreclosure,” Brown said. “Despite firm promises and money-back guarantees, these scam artists pocketed thousands of dollars from each victim and didn’t provide an ounce of relief.”

Brown filed five lawsuits as part of “Operation Loan Lies,” a nationwide sweep of sham loan modification consultants, which he conducted with the Federal Trade Commission, the U.S. Attorney’s office and 22 other federal and state agencies. In total, 189 suits and orders to stop doing business were filed across the country.

Following the housing collapse, hundreds of loan modification and foreclosure-prevention companies have cropped up, charging thousands of dollars in upfront fees and claiming that they can reduce mortgage payments. Yet, loan modifications are rarely, if ever, obtained. Less than 1 percent of homeowners nationwide have received principal reductions of any kind.

Brown has been leading the fight against fraudulent loan modification companies. He has sought court orders to shut down several companies including First Gov and Foreclosure Freedom and has brought criminal charges and obtained lengthy prison sentences for deceptive loan modification consultants.

Brown’s office filed the following lawsuits in Orange County and U.S. District Court for the Central District (Los Angeles):

– U.S. Homeowners Assistance, based in Irvine;
– U.S. Foreclosure Relief Corp and its legal affiliate Adrian Pomery, based in the City of Orange;
– Home Relief Services, LLC, with offices in Irvine, Newport Beach and Anaheim, and its legal affiliate, the Diener Law Firm;
– RMR Group Loss Mitigation, LLC and its legal affiliates Shippey & Associates and Arthur Aldridge. RMR Group has offices in Newport Beach, City of Orange, Huntington Beach, Corona, and Fresno;
– and
– United First, Inc, and its lawyer affiliate Mitchell Roth, based in Los Angeles.

U.S. Homeowners Assistance
Brown on Monday sued U.S. Homeowners Assistance, and its executives — Hakimullah “Sean” Sarpas and Zulmai Nazarzai — for bilking dozens of homeowners out of thousands of dollars each.

U.S. Homeowners Assistance claimed to be a government agency with a 98 percent success rate in aiding homeowners. In reality, the company was not a government agency and was never certified as an approved housing counselor by the U.S. Department of Housing and Urban Development. None of U.S. Homeowners Assistance’s known victims received loan modifications despite paying upfront fees ranging from $1,200 to $3,500.

For example, in January 2008, one victim received a letter from her lender indicating that her monthly mortgage payment would increase from $2,300 to $3,500. Days later, she received an unsolicited phone call from U.S. Homeowners Assistance promising a 40 percent reduction in principal and a $2,000 reduction in her monthly payment. She paid $3500 upfront for U.S. Homeowners Assistance’s services.

At the end of April 2008, her lender informed her that her loan modification request had been denied and sent her the documents that U.S. Homeowners Assistance had filed on her behalf. After reviewing those documents, she discovered that U.S. Homeowners Assistance had forged her signature and falsified her financial information – including fabricating a lease agreement with a fictitious tenant.

When she confronted U.S. Homeowners Assistance, she was immediately disconnected and has not been able to reach the company.

Brown’s suit contends that U.S. Homeowners Assistance violated:
– California Business and Professions Code section 17500 by falsely stating they were a government agency and misleading homeowners by claiming a 98 percent success rate in obtaining loan modifications;

– California Business and Professions Code section 17200 by failing to perform services made in exchange for upfront fees;

– California Civil Code section 2945.4 for unlawfully collecting upfront fees for loan modification services;

– California Civil Code section 2945.45 for failing to register with the California Attorney General’s Office as foreclosure consultants; and

– California Penal Code section 487 for grand theft.

Brown is seeking $7.5 million in civil penalties, full restitution for victims, and a permanent injunction to keep the company and the defendants from offering foreclosure consultant services.

US Homeowners Assistance also did business as Statewide Financial Group, Inc., We Beat All Rates, and US Homeowners Preservation Center.

US Foreclosure Relief Corporation
Brown last week sued US Foreclosure Relief Corporation, H.E. Service Company, their executives — George Escalante and Cesar Lopez — as well as their legal affiliate Adrian Pomery for running a scam promising homeowners reductions in their principal and interest rates as low as 4 percent. Brown was joined in this suit by the Federal Trade Commission and the State of Missouri.

Using aggressive telemarketing tactics, the defendants solicited desperate homeowners and charged an upfront fee ranging from $1,800 to $2,800 for loan modification services. During one nine-month period alone, consumers paid defendants in excess of $4.4 million. Yet, in most instances, defendants failed to provide the mortgage-relief services. Once consumers paid the fee, the defendants avoided responding to consumers’ inquiries.

In response to a large number of consumer complaints, several government agencies directed the defendants to stop their illegal practices. Instead, they changed their business name and continued their operations – using six different business aliases in the past eight months alone.

Brown’s lawsuit alleges the companies and individuals violated:
– The National Do Not Call Registry, 16 C.F.R. section 310.4 and California Business and Professions Code section 17200 by telemarketing their services to persons on the registry;

– The National Do Not Call Registry, 16 C.F.R. section 310.8 and California Business and Professions Code section 17200 by telemarketing their services without paying the mandatory annual fee for access to telephone numbers within the area codes included in the registry;

– California Civil Code section 2945 et seq. and California Business and Professions Code section 17200 by demanding and collecting up-front fees prior to performing any services, failing to include statutory notices in their contracts, and failing to comply with other requirements imposed on mortgage foreclosure consultants;

– California Business and Professions Code sections 17200 and 17500 by representing that they would obtain home loan modifications for consumers but failing to do so in most instances; by representing that consumers must make further payments even though they had not performed any of the promised services; by representing that they have a high success rate and that they can obtain loan modification within no more than 60 days when in fact these representations were false; and by directing consumers to avoid contact with their lenders and to stop making loan payments causing some lenders to initiate foreclosure proceedings and causing damage to consumers’ credit records.

Victims of this scam include a father of four battling cancer, a small business owner, an elderly disabled couple, a sheriff whose income dropped due to city budget cuts and an Iraq-war veteran. None of these victims received the loan modification promised.

Brown is seeking unspecified civil penalties, full restitution for victims, and a permanent injunction to keep the company and the defendants from offering foreclosure consultant services.

The defendants also did business under other names including Lighthouse Services and California Foreclosure Specialists.

Home Relief Services, LLC
Brown Monday sued Home Relief Services, LLC., its executives Terence Green Sr. and Stefano Marrero, the Diener Law Firm and its principal attorney Christopher L. Diener for bilking thousands of homeowners out of thousands of dollars each.

Home Relief Services charged homeowners over $4,000 in upfront fees, promised to lower interest rates to 4 percent, convert adjustable-rate mortgages to low fixed-rate loans and reduce principal up to 50 percent within 30 to 60 days. None of the known victims received a modification with the assistance of the defendants.

In some cases, these companies also sought to be the lenders’ agent in the short-sale of their clients’ homes. In doing so, the defendants attempted to use their customers’ personal financial information for their own benefit.

Home Relief Services and the Diener Law Firm directed homeowners to stop contacting their lender because the defendants would act as their sole agent and negotiator.

Brown’s lawsuit contends that the defendants violated:
– California Business and Professions Code section 17500 by claiming a 95 percent success rate and promising consumers significant reductions in the principal balance of their mortgages;

– California Business and Professions Code section 17200 by failing to perform on promises made in exchange for upfront fees;

– California Civil Code section 2945.4 for unlawfully collecting upfront fees for loan modification services;

– California Business and Professions Code section 2945.3 by failing to include cancellation notices in their contracts;

– California Civil Code section 2945.45 by not registering with the Attorney General’s office as foreclosure consultants; and

– California Penal Code section 487 for grand theft.

Brown is seeking $10 million in civil penalties, full restitution for victims, and a permanent injunction to keep the company and the defendants from offering foreclosure consultant services.

Two other companies with the same management were also involved in the effort to deceive homeowners: Payment Relief Services, Inc. and Golden State Funding, Inc.

RMR Group Loss Mitigation Group
Brown Monday sued RMR Group Loss Mitigation and its executives Michael Scott Armendariz of Huntington Beach, Ruben Curiel of Lancaster, and Ricardo Haag of Corona; Living Water Lending, Inc.; and attorney Arthur Steven Aldridge of Westlake Village as well as the law firm of Shippey & Associates and its principal attorney Karla C. Shippey of Yorba Linda – for bilking over 500 victims out of nearly $1 million.

The company solicited homeowners through telephone calls and in-person home visits. Employees claimed a 98 percent success rate and a money-back guarantee. None of the known victims received any refunds or modifications with the assistance of defendants.

For example, in July 2008, a 71-year old victim learned his monthly mortgage payments would increase from $2,470 to $3,295. He paid $2,995, yet received no loan modification and no refund.

Additionally, RMR insisted that homeowners refrain from contacting their lenders because the defendants would act as their agents.

Brown’s suit contends that the defendants violated:

– California Business and Professions Code section 17500 by claiming a 98 percent success rate and promising consumers significant reductions in the principal balance of their mortgages;

– California Business and Professions Code section 17200 by failing to perform on promises made in exchange for upfront fees;

– California Civil Code section 2945.4 for unlawfully collecting upfront fees for loan modification services;

– California Business and Professions Code section 2945.3 by failing to include cancellation notices in their contracts;

– California Civil Code section 2945.45 by not registering with the Attorney General’s office as foreclosure consultants; and

– California Penal Code section 487 for grand theft.

Brown is seeking $7.5 million in civil penalties, full restitution for victims, and a permanent injunction to keep the company and the defendants from offering foreclosure consultant services.

United First, Inc.
On July 6, 2009, Brown sued a foreclosure consultant and an attorney — Paul Noe Jr. and Mitchell Roth – who conned 2,000 desperate homeowners into paying exorbitant fees for “phony lawsuits” to forestall foreclosure proceedings.

These lawsuits were filed and abandoned, even though homeowners were charged $1,800 in upfront fees, at least $1,200 per month and contingency fees of up to 80 percent of their home’s value.

Noe convinced more than 2,000 homeowners to sign “joint venture” agreements with his company, United First, and hire Roth to file suits claiming that the borrower’s loan was invalid because the mortgages had been sold so many times on Wall Street that the lender could not demonstrate who owned it. Similar suits in other states have never resulted in the elimination of the borrower’s mortgage debt.

After filing the lawsuits, Roth did virtually nothing to advance the cases. He often failed to make required court filings, respond to legal motions, comply with court deadlines, or appear at court hearings. Instead, Roth’s firm simply tried to extend the lawsuits as long as possible in order to collect additional monthly fees.

United First charged homeowners approximately $1,800 in upfront fees, plus at least $1,200 per month. If the case was settled, homeowners were required to pay 50 percent of the cash value of the settlement. For example, if United First won a $100,000 reduction of the mortgage debt, the homeowner would have to pay United First a fee of $50,000. If United First completely eliminated the homeowner’s debt, the homeowner would be required to pay the company 80 percent of the value of the home.

Brown’s lawsuit contends that Noe, Roth and United First:

– Violated California’s credit counseling and foreclosure consultant laws, Civil Code sections 1789 and 2945

– Inserted unconscionable terms in contracts;

– Engaged in improper running and capping, meaning that Roth improperly partnered with United First, Inc. and Noe, who were not lawyers, to generate business for his law firm violating California Business and Professions Code 6150; and

– Violated 17500 of the California Business and Professions Code.

Brown’s office is seeking $2 million in civil penalties, full restitution for victims, and a permanent injunction to keep the company and the defendants from offering foreclosure consultant services.

Tips for Homeowners
Brown’s office issued these tips for homeowners to avoid becoming a victim:

DON’T pay money to people who promise to work with your lender to modify your loan. It is unlawful for foreclosure consultants to collect money before (1) they give you a written contract describing the services they promise to provide and (2) they actually perform all the services described in the contract, such as negotiating new monthly payments or a new mortgage loan. However, an advance fee may be charged by an attorney, or by a real estate broker who has submitted the advance fee agreement to the Department of Real Estate, for review.

DO call your lender yourself. Your lender wants to hear from you, and will likely be much more willing to work directly with you than with a foreclosure consultant.

DON’T ignore letters from your lender. Consider contacting your lender yourself, many lenders are willing to work with homeowners who are behind on their payments.

DON’T transfer title or sell your house to a “foreclosure rescuer.” Fraudulent foreclosure consultants often promise that if homeowners transfer title, they may stay in the home as renters and buy their home back later. The foreclosure consultants claim that transfer is necessary so that someone with a better credit rating can obtain a new loan to prevent foreclosure. BEWARE! This is a common scheme so-called “rescuers” use to evict homeowners and steal all or most of the home’s equity.

DON’T pay your mortgage payments to someone other than your lender or loan servicer, even if he or she promises to pass the payment on. Fraudulent foreclosure consultants often keep the money for themselves.

DON’T sign any documents without reading them first. Many homeowners think that they are signing documents for a new loan to pay off the mortgage they are behind on. Later, they discover that they actually transferred ownership to the “rescuer.”

DO contact housing counselors approved by the U.S. Department of Housing and Urban Development (HUD), who may be able to help you for free. For a referral to a housing counselor near you, contact HUD at 1-800-569-4287 (TTY: 1-800-877-8339) or http://www.hud.gov.

If you believe you have been the victim of a mortgage-relief scam in California, please contact the Attorney General’s Public Inquiry Unit at http://ag.ca.gov/consumers/general.php.
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