It's been all over the news since California State Attorney General Jerry Brown made the latest announcement in foreclosure scams. "Forensic Loan Audits" are solicited to homeowners in danger of foreclosure but have not been proven to give an advantage in obtaining loan modification from the bank, he says.
A forensic loan audit is conducted by specialist, and entails pouring over all of the loan documents given to the borrower at the time or origination or in response to a qualified written request. The loan audit can sometimes be as complex as the loan documents themselves, outlining the bank's failure to comply with federal laws such as the Real Estate Settlement Practices Act ("RESPA") and the Truth in Lending Act ("TILA").
When loan modifications were new, a few years ago, forensic loan audits may have mattered. But they don't anymore. Loan servicers only care about your eligibility for loan modification under the Obama Housing Plan and your ability to pay the modified monthly loan payments. AG Brown is right to advise homeowners to be wary of foreclosure consultants who claim that a forensic loan audit will improve the chance of securing loan modification. '
This is not to say that forensic loan audits are completely without merit. For example, a loan audit can be of value to someone who honestly wants to know if or how they were taken advantage of when they
if you are considering filing a lawsuit against your bank, a forensic loan audit is absolutely necessary. You, or your attorney, must determine the state and federal violations which occurred before, during and after the loan closing in order to a court action against your bank. At QMS Law, we will consider your situation and determine whether a forensic loan audit is appropriate for your situation. We will not recommend one unless you need one.
Thursday, February 25, 2010
Wednesday, February 10, 2010
FTC seeks to implement its own version of "SB-94"
The Federal Trade Commission is currently seeking input, particularly from attorneys, as to a proposed law that would prevent loan modification providers from charging fees up front. The law would allow loan modification companies to collect money only after the services are provided.
"Homeowners facing foreclosure or struggling to make mortgage payments shouldn't have to contend with fraudulent companies that don't provide what they promise," said FTC Chairman Jon Leibowitz. "The proposed rule would outlaw upfront fees so companies can't take the money and run."
I agree with him in that the last thing that struggling homeowners need to worry about is being defrauded. But I disagree that the best way to address this problem is by preventing loan modification providers from earning any money. In my opinion, the best way to prevent fraud would be to draft specific regulations that loan modification providers must follow. For example, loan modification company may not advertise that a modification is 100% guaranteed. Or, private loan modification companies must disclose that they are not affiliated with government-funded organizations. The FTC could compile these regulations in an easy-to-read 1 page notice that could be sent to homeowners by banks or mortgage companies prior to initiating foreclosure proceedings.
As discussed in my previous posts, banks are simply taking too long to evaluate borrowers for loan modification and in many cases, denying borrowers based on arbitrary or incorrect information. In many cases, the process can drag on for more than one year. What business can sustain itself without getting paid for one year? None.
The regulations proposed by the FTC would have a chilling effect on loan modification providers, homeowners and ultimately, the economy as a whole. Homeowners will be forced to face the banks alone, will have no recourse when they are denied (in many cases, wrongfully denied), and finally, will face foreclosure and lose their homes. I'm sure that lobbyists for the banks are thrilled.
"Homeowners facing foreclosure or struggling to make mortgage payments shouldn't have to contend with fraudulent companies that don't provide what they promise," said FTC Chairman Jon Leibowitz. "The proposed rule would outlaw upfront fees so companies can't take the money and run."
I agree with him in that the last thing that struggling homeowners need to worry about is being defrauded. But I disagree that the best way to address this problem is by preventing loan modification providers from earning any money. In my opinion, the best way to prevent fraud would be to draft specific regulations that loan modification providers must follow. For example, loan modification company may not advertise that a modification is 100% guaranteed. Or, private loan modification companies must disclose that they are not affiliated with government-funded organizations. The FTC could compile these regulations in an easy-to-read 1 page notice that could be sent to homeowners by banks or mortgage companies prior to initiating foreclosure proceedings.
As discussed in my previous posts, banks are simply taking too long to evaluate borrowers for loan modification and in many cases, denying borrowers based on arbitrary or incorrect information. In many cases, the process can drag on for more than one year. What business can sustain itself without getting paid for one year? None.
The regulations proposed by the FTC would have a chilling effect on loan modification providers, homeowners and ultimately, the economy as a whole. Homeowners will be forced to face the banks alone, will have no recourse when they are denied (in many cases, wrongfully denied), and finally, will face foreclosure and lose their homes. I'm sure that lobbyists for the banks are thrilled.
Wednesday, January 20, 2010
The housing crisis may not be fixed until unemployment rates fall
A new report suggests that even if loan modification programs function as intended -- which they do not -- our nation will not emerge from the dark days the housing crisis until the unemployment problem is fixed.
Many homeowners who received trial or permanent modification in 2009 were unable to keep up with their reduced monthly mortgage payment. Because they lost their jobs and cannot find new ones. To me the situation seems, for lack of a better word, hopeless. People aren't spending money because they just don't have money to spend. Many do not have jobs anymore. Businesses aren't hiring because there is not enough demand. Many are cutting budgets and enduring massive layoffs.
Is the problem ever going to get better? Well I think it has to. Eventually. But I also think that it's going to take a very long time. As in 2 more years, at least, before everything gets back to normal. Maybe even 3.
If you are suffering financial distress, there is light at the end of the tunnel. Quintana McConnin & Sarte LLP is a full service law firm committed to helping homeowners and other similarly situated victims of the economic crisis. Visit us online at www.qmslaw.com.
Many homeowners who received trial or permanent modification in 2009 were unable to keep up with their reduced monthly mortgage payment. Because they lost their jobs and cannot find new ones. To me the situation seems, for lack of a better word, hopeless. People aren't spending money because they just don't have money to spend. Many do not have jobs anymore. Businesses aren't hiring because there is not enough demand. Many are cutting budgets and enduring massive layoffs.
Is the problem ever going to get better? Well I think it has to. Eventually. But I also think that it's going to take a very long time. As in 2 more years, at least, before everything gets back to normal. Maybe even 3.
If you are suffering financial distress, there is light at the end of the tunnel. Quintana McConnin & Sarte LLP is a full service law firm committed to helping homeowners and other similarly situated victims of the economic crisis. Visit us online at www.qmslaw.com.
Wednesday, December 9, 2009
Banks Blame Homeowners For Banks' Failure To Issue Permanent Loan Modification
Several news sources have presented myriad explanations for banks' failure to issue permanent modifications as required by new government guidelines. The biggest challenge, according to a December 9, 2009 report in ABC News, is that only one in three homeowners send back the necessary paperwork to achieve permanent loan modification under the Obama administration's new program.
To me, this is shocking.
The amount of paperwork that homeowners must complete to be offered even a trial modification is gargantuan. It is logic defying that 66% of homeowners will comply with the banks and send in this paperwork up to the point they are offered a trial modification, and then stop dead in their tracks and pass up the a permanent modification.
Any bank exec that says that homeowners are not cooperating is lying. Well, maybe not lying (because I'm sure there are some homeowners that have not cooperated), but definitely stretching the truth.
But how can banks rely on this excuse? It's simple, really: neglect to provide homeowners will an complete list of paperwork that is necessary, and then blame them on the back end for not complying with their instructions.
And do banks really do this? YES. At least one bank, IndyMac, has pulled this stunt with my firm. IndyMac approved one of our clients, who will remain nameless, for a trial modification. As part of the trial modification package, IndyMac enclosed a bullet-point list of the documents necessary to accept the modification. I instructed our client to bring me all of the requested documents, met with him for about 30 minutes, and overnighted the complete package and a check for the first month's trial payment to IndyMac. And yes, I double checked my work to make sure every document on that bullet-point list was enclosed.
Less than a month later, when we called to check on the status of our client's case, we learned that he had been denied loan modification. The reason? Because all the documents that were supposedly required were not submitted. Immediately, I called IndyMac and demanded an explanation. IndyMac told me at this time of two or three other documents it needed, including tax returns, were not enclosed with the acceptance package. This was especially surprising to me, because nowhere in any of IndyMac's instructions did it indicate that tax returns or any additional documents would be required.
Ok, fine, I thought. No problem we'll just submit the requested documents and supplement the acceptance package. But no, that would be too easy. IndyMac told me that our client would have to start the entire loan modification process over again, from scratch.
Undeterred, I called again the next day and was able to speak with a supervisor. He was sympathetic to our client's situation and gave me a special fax number so that we could supplement the acceptance package with the required documents. But that was a few months ago, and we still have not received any sort of permanent modification.
To me, this is shocking.
The amount of paperwork that homeowners must complete to be offered even a trial modification is gargantuan. It is logic defying that 66% of homeowners will comply with the banks and send in this paperwork up to the point they are offered a trial modification, and then stop dead in their tracks and pass up the a permanent modification.
Any bank exec that says that homeowners are not cooperating is lying. Well, maybe not lying (because I'm sure there are some homeowners that have not cooperated), but definitely stretching the truth.
But how can banks rely on this excuse? It's simple, really: neglect to provide homeowners will an complete list of paperwork that is necessary, and then blame them on the back end for not complying with their instructions.
And do banks really do this? YES. At least one bank, IndyMac, has pulled this stunt with my firm. IndyMac approved one of our clients, who will remain nameless, for a trial modification. As part of the trial modification package, IndyMac enclosed a bullet-point list of the documents necessary to accept the modification. I instructed our client to bring me all of the requested documents, met with him for about 30 minutes, and overnighted the complete package and a check for the first month's trial payment to IndyMac. And yes, I double checked my work to make sure every document on that bullet-point list was enclosed.
Less than a month later, when we called to check on the status of our client's case, we learned that he had been denied loan modification. The reason? Because all the documents that were supposedly required were not submitted. Immediately, I called IndyMac and demanded an explanation. IndyMac told me at this time of two or three other documents it needed, including tax returns, were not enclosed with the acceptance package. This was especially surprising to me, because nowhere in any of IndyMac's instructions did it indicate that tax returns or any additional documents would be required.
Ok, fine, I thought. No problem we'll just submit the requested documents and supplement the acceptance package. But no, that would be too easy. IndyMac told me that our client would have to start the entire loan modification process over again, from scratch.
Undeterred, I called again the next day and was able to speak with a supervisor. He was sympathetic to our client's situation and gave me a special fax number so that we could supplement the acceptance package with the required documents. But that was a few months ago, and we still have not received any sort of permanent modification.
Friday, December 4, 2009
Is keeping your (underwater) home the best solution? Maybe not, a new theory suggests
People buy homes for different reasons. Maybe to start a family. Maybe as an investment property. In any case, it is ingrained in homeowners' minds that the goal is to keep the house forever, or sell it at a profit. Losing a home at a foreclosure sale is never something a homeowner would happily acquiesce to.
Until now.
University of Arizona Law professor Brent T. White suggests in a new academic paper entitled "Underwater and Not Walking Away: Shame, Fear and the Social Management of the Housing Crisis" that many homeowners should welcome the opportunity to dump their homes and never look back.
A home is "underwater" if the amount owed on the property exceeds its current market value. Professor White's research indicates that walking away from an underwater mortgage may save troubled homeowners hundreds of thousands of dollars in the following years if they stop paying their mortgage and allow the bank to do what it wills.
White also suggests that societal and emotional factors affect peoples' decisions to remain in underwater homes. Homeowners may be worried about feelings of shame or embarrassment that accompany losing a home through foreclosure, or general attitudes and morals of the community may prevent them from making wise financial decisions.
If a house was 100% financed by the banks, I completely agree with White. The homeowner has little to lose (i.e. no down payment to be recovered) and much to gain (i.e. freedom from a financial sinkhole). It is true that credit scores will take a hit, but this can be repaired in a few years. Hanging on to the house may cause financial discomfort for decades.
If the homeowner made a significant down-payment, I think the decision to walk away depends on how long the homeowner has been in the home. For example, if someone made a $100,000 down payment and has only lived in the house for 12 months, it may be worth riding out the storm and selling the house when the market improves.
Source: Harney, Kenneth R. "Is opting to default wrong?" Los Angeles Times, 29 Nov. 2009, p. B14
Until now.
University of Arizona Law professor Brent T. White suggests in a new academic paper entitled "Underwater and Not Walking Away: Shame, Fear and the Social Management of the Housing Crisis" that many homeowners should welcome the opportunity to dump their homes and never look back.
A home is "underwater" if the amount owed on the property exceeds its current market value. Professor White's research indicates that walking away from an underwater mortgage may save troubled homeowners hundreds of thousands of dollars in the following years if they stop paying their mortgage and allow the bank to do what it wills.
White also suggests that societal and emotional factors affect peoples' decisions to remain in underwater homes. Homeowners may be worried about feelings of shame or embarrassment that accompany losing a home through foreclosure, or general attitudes and morals of the community may prevent them from making wise financial decisions.
If a house was 100% financed by the banks, I completely agree with White. The homeowner has little to lose (i.e. no down payment to be recovered) and much to gain (i.e. freedom from a financial sinkhole). It is true that credit scores will take a hit, but this can be repaired in a few years. Hanging on to the house may cause financial discomfort for decades.
If the homeowner made a significant down-payment, I think the decision to walk away depends on how long the homeowner has been in the home. For example, if someone made a $100,000 down payment and has only lived in the house for 12 months, it may be worth riding out the storm and selling the house when the market improves.
Source: Harney, Kenneth R. "Is opting to default wrong?" Los Angeles Times, 29 Nov. 2009, p. B14
Tuesday, December 1, 2009
5 More California Lawyers Brought to Justice for Loan Mod Fraud
The State Bar of California created the Loan Modification Task Force to combat loan mod scam artists in April 2009. Some background: As the housing meltdown worsened, it became more and more common for scammers to take homeowners' money in exchange for a guaranteed loan modification. Within weeks or months the scammers would disappear without a trace, and homeowners would find that little to no work had been done on their mortgage. In fact, many homeowners would learn they were scammed when the banks initiated foreclosure proceedings against them.
Although recent developments in California law that purport to help homeowners may serve a counter (such as SB-94, see below), the Loan Modification Task Force ("LMTF") gets down and dirty to stop scammers. The LMTF has been successful in exterminating a number of illegal operations; approximately 20,000 attorney files have been removed from the offices of attorneys whose loan modification scam shops have been shut down.
It is recently reported in the California Bar Journal that 5 more attorneys have been exposed and prosecuted. Their practices, located in Los Angeles and Orange County, falsely promised unsuspecting homeowners loan modifications that would allow them to remain in their homes. These attorneys, ranging in age from 34 to 75, have either resigned or been placed on involuntary inactive enrollment. ("Resigned" does not mean retain its traditional meaning here; in this context, it means that the attorney will not be able to practice law in California).
So what can we take away from all of this? For one, the LMTF is achieving success in helping rid Southern California of the leeches we know as loan mod scammers. More importantly, though, is this helpful tip for anyone considering retaining an attorney. Do your research and check their membership record. You can easily access an attorney's disciplinary record by going to www.calbar.gov and clicking on the "Attorney Search" link on the right-hand side of the website. It takes minutes to do and can save you countless hours and thousands of dollars.
Although recent developments in California law that purport to help homeowners may serve a counter (such as SB-94, see below), the Loan Modification Task Force ("LMTF") gets down and dirty to stop scammers. The LMTF has been successful in exterminating a number of illegal operations; approximately 20,000 attorney files have been removed from the offices of attorneys whose loan modification scam shops have been shut down.
It is recently reported in the California Bar Journal that 5 more attorneys have been exposed and prosecuted. Their practices, located in Los Angeles and Orange County, falsely promised unsuspecting homeowners loan modifications that would allow them to remain in their homes. These attorneys, ranging in age from 34 to 75, have either resigned or been placed on involuntary inactive enrollment. ("Resigned" does not mean retain its traditional meaning here; in this context, it means that the attorney will not be able to practice law in California).
So what can we take away from all of this? For one, the LMTF is achieving success in helping rid Southern California of the leeches we know as loan mod scammers. More importantly, though, is this helpful tip for anyone considering retaining an attorney. Do your research and check their membership record. You can easily access an attorney's disciplinary record by going to www.calbar.gov and clicking on the "Attorney Search" link on the right-hand side of the website. It takes minutes to do and can save you countless hours and thousands of dollars.
Friday, November 20, 2009
Why is my loan modification taking so long?
Just a year ago, lenders processed loan modifications quickly, sometimes in as little as a month. In the last few months, the picture has changed drastically. Banks are understaffed and disorganized, losing borrower information and failing to communicate effectively with the very borrowers they are foreclosing on. "The judges are seeking more and more a pattern of indifference to record-keeping and good business practices," said Robert Lawless, a law professor at the University of Illinois who specializes in bankruptcy law.
Some common examples of lender irresponsibility include (1) Routine loss of borrower financial information that has been submitted for loan modification (in some cases up to three times); (2) Lenders purposely disconnecting phone lines are putting a caller on hold for a long time; and (3) Multiple representatives from the same lender giving the borrower conflicting information. Even HUD-approved housing counselors face the same stonewalling tactics used on homeowners. Depending on who they [housing counselors] talk to, and the level of seniority and the level of training and the different servicers (they deal with), they get completely different outcomes," said Helene Raynaud, an executive at the National Foundation for Credit Counseling.
Some common examples of lender irresponsibility include (1) Routine loss of borrower financial information that has been submitted for loan modification (in some cases up to three times); (2) Lenders purposely disconnecting phone lines are putting a caller on hold for a long time; and (3) Multiple representatives from the same lender giving the borrower conflicting information. Even HUD-approved housing counselors face the same stonewalling tactics used on homeowners. Depending on who they [housing counselors] talk to, and the level of seniority and the level of training and the different servicers (they deal with), they get completely different outcomes," said Helene Raynaud, an executive at the National Foundation for Credit Counseling.
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