Faces Of Foreclosure

A last-ditch loan-mod effort . . .

Borrowers place hopes on forensic loan reviews
Steve Bergsman
Inman News

. . . The forensic loan review is expensive (pricing is usually $2,000 to $5,000) and even if it is successful in discovering problems in your underlying mortgage documents, that’s usually not enough to make a difference with your bank.

The forensic loan review is an in-depth scrutinization and subsequent report on all documentation, transactional data and associated aspects of the residential loan origination process. The review often focuses on the closing documents to see if they contain violations of the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA), or if there was any kind of fraud or misrepresentation.

This type of review is only successful if you, as a consumer, go the next step, which is to bring a lawsuit against your lender.

“An audit by itself is not some magical way to make everything go away — it is just a beginning,” notes Dean Mostofi, the founder of National Loan Audits in Rockville, Md. “Borrowers who contact lenders with an audit don’t get too far. It’s in their best interest to go in with an attorney.”

Editor’s note: It is our experience that lenders will NOT modify unless you go in with an attorney in any case; so we have been working with a group named Marin Family Action in Marin that has been raising funds to hire attorneys to represent us in court. It works!

The good news is most lawsuits based on the findings of a forensic loan review are generally successful in attaining for the borrower a loan modification. The bad news: hiring a law firm is just another big expense at a time when you are so hurting financially you are in danger of losing your home.

More than 50 percent of the loans our company reviewed have material misrepresentations, says Jeffrey Taylor, managing director and chief business development officer for Digital Risk LLC in Dallas, which does work for large banks and government agencies, not individual consumers.

One of the first companies to do forensic loan reviews for consumers was You Walk Away LLC in Carlsbad, Calif. “We found about 80 percent of the loans we looked at had some type of violation in them. Clearly, a lot of adjustable-rate mortgages had violations,” says Jon Maddux, CEO . . . lenders were, and still are, so overwhelmed with foreclosures that even if you walked into an office and handed them proof that there were problems in the original loan documentation, they still put you in the queue along with everyone else. Meanwhile, the clock continued to click down on the foreclosure process.

Maddux realized even with a forensic review no progress would be made with your lender unless you actually sued.

“The borrowers are struggling to get the attention of overworked loan servicers, who are scrambling with as many modifications, workouts and deals as they can come up with,” says James Thompson, an attorney in the Chicago office of Jenner & Block LLP. “You can get to the head of the line sometimes if you show up with an attorney and a forensic loan examination saying there is a TILA violation.”

In researching the short history of consumer forensic loan reviews I hadn’t come across even one situation in which a homeowner lawsuit had actually gone to the end of the court process, mostly because if there is an actual, verifiable violation it would be difficult for lenders to win a case. So why should they bother to fight?

. . . Here’s the way it has usually worked out: The homeowner’s attorney goes to the lender with this message, “If this goes to litigation it is going to cost you $200,000 in penalties plus the cost of legal work when all the borrower really wants is an affordable mortgage and affordable interest rate to stay in the home.”

“I don’t see very many of these litigating,” says August Blass, CEO and president of National Loan Auditors in Walnut Creek, Calif. “Most of these settle. This brings the settlement offer to the table a little bit faster. It’s not to say a lender would have not been brought to the table without the audit, it just seems to fast-track it a little bit as the lender knows you are being handled by an attorney and there are illegalities being claimed on the loan.”

So, what do you get for your dollars and efforts?

If the object of the forensic loan review and, perhaps, lawsuit, is a loan modification, then this is a very attainable goal. If you instead believe the mortgage should be totally rescinded, then you need to consider what that means.

What it absolutely does NOT mean is that you that simply wash your hands of the loan and walk away as if it never happened. What it does mean is that the consumer gets to buy back the loan. In short, the borrower has to be able to repay the amount that was borrowed . . .

As Blass observes, most homeowners want a loan modification that will let them remain in the house where they currently live — “they don’t actually want the loan rescinded.”

From Steve Bergsman, a freelance writer in Arizona and author of several books, including “After the Fall: Opportunities and Strategies for Real Estate Investing in the Coming Decade.”

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Copyright 2010 Inman News

http://www.showyourhome.com/Homes/News/Article.aspx?id=inmannews112528

Banks ignore struggles of responsible borrowers
Lost in the foreclosure melee are thousands of mortgage holders who are trying to act early to save their credit and their home — only to find that no one at their bank will listen.
By Marilyn Lewis
MSN Real Estate

Need help from your bank before you’re forced to default? Good luck with that. Conventional wisdom may tell homeowners who can see financial trouble approaching to reach out for help as soon as possible. But most borrowers trying to follow that advice are finding they can’t get their bankers to discuss the options — including loan modifications — until they’ve missed payments.

“It is extremely difficult for any consumer who is not delinquent to even find someone to talk with at their lender,” says Michele Johnson, head of Consumer Credit Counseling Service of Nevada and Utah. “The consumer who is really being proactive and trying to do the right thing faces challenges that are unexpected.”

Marvin Webb, pastor of the Bethlehem Missionary Baptist Church in Richmond, Calif., called his bank nearly two months ago to say that although his credit is good and he’s current in his payments, he can see financial trouble coming. “They said they were looking for a loan they could put me in, something good. But they never got back to me,” Webb says.

He called back recently. “I told them what they told me, and they still didn’t have anything to say . . . .

What’s your home worth?
Logic suggests banks should help struggling homeowners early, renegotiating loans to avoid even-more-costly foreclosure.

Ben Windust, Wells Fargo senior vice president for customer and default operations, says, “We can always work with any borrower who is having any kind of financial difficulty,” even before a loan is in default. But those who work with homeowners say that, mostly, that’s not happening.

“One of the really unfortunate contradictions of this crisis is that it’s only when people have ruined their credit that they can get even a response from their bank,” says Adam Kruggel, director of the Contra Costa Interfaith Supporting Community Organization. Part of the problem is banks are overwhelmed by the flood of people who cannot make payments. And that leaves plenty of struggling but still-current borrowers “hanging on and sometimes they are making enormous sacrifices; in some cases they are draining their entire life savings” to keep up their mortgage payments, he says.

Sean Woods was one of them. At this time last year, he was a mortgage broker in Goodyear, Ariz., an expensive suburb of Phoenix. He was earning about $12,000 a month, he says, so payments of roughly $4,500 a month on two loans for his family’s home in a golf-course community seemed manageable.

Then, in February, Woods received what turned out to be his last mortgage commission payment . . . prices were falling and sales were slowing. “I saw the writing on the wall,” he says. In late spring, he called Washington Mutual to say that although he was current in his payments, he was struggling. He was running through savings and using credit-card cash advances to make his home payments.

He asked to talk to the bank’s loss-mitigation department . . . Woods says he told his bank, “I’m making the payments, but it won’t be long before trouble will be upon me, before I start missing payments.”

Loss mitigation basically told me, ‘This loan is performing. You haven’t missed a payment.’ Basically (they said), ‘Call us when you start missing payments.’”

The big picture
Like the troubled loans they are meant to fix, modification plans can include complex loan features: interest-only periods that reset in a few years, gradually increasing payments, or complicated formulas for sharing appreciation or equity. Some simply stretch the loan over 40 years, reducing the payment amounts but increasing the total loan cost . . .

Banks are making relatively few modifications. In the third quarter of 2008, only about 40,000 loans were modified — a small proportion of the millions of loans said to be in trouble. And 58% of loans modified this year were back in default within eight months, according to the Office of Comptroller of the Currency.

Rod Dubitsky, a banking industry analyst at Credit Suisse, says there’s no consistent program or standard to help people who are struggling financially but who are still current . . . he recommends that the government should analyze data from banks on modification agreements to see which modification plans are really working, then create a national program with uniform standards.

Editor’s Note: I just received the following . . . Here is the timeline of the ongoing saga of one person’s attempt to be responsible AND keep the family home. It is so close to my own situation, that I decided to publish it (with permission).

The Foreclosure Secrets Guide. I apologize going into this because the link takes you to one of those ugly pitch pages AND because I think this PDF publication is overpriced at $197 (or $67 through mid-November). However, it comes with a money-back guarantee from the writer/publisher and his strategies WORK; I saw a piece in action during a Visit to the Sheriff’s Office and I will let you know next week if this helped save Dennis’ home. If you can get through more battling, this may help you save your house. This was included immediately following a response from a realtor who is trying to save her home and who wrote saying that the bank did not disclose how they applied her late fees. Apparently you have the right to a full disclosure of how fees are applied AND you have the right to ask for ALL of the original documents so that you actually know who owns your house. If we do not fight back. this inept and/or illegal behaviour on the part of lending institutions will continue! Her closing comment: “Even though I am in the industry, I am so soured on mortgages and mortgage lenders, I may never buy another property again.”

This is a large lending institution; it is NOT Bank of America; I repeat, it is NOT Bank of America; they seem to be doing a good job for their clients.
The following can be verified.

THE SAGA OF LOAN MODIFICATION . . .

I preface this with I have NEVER asked anyone for anything. I have worked full time every day for 50 years, including in the corporate finance department of a well-regarded bank. I KNOW how a lending institution is SUPPOSED to run! Although my home has been seriously devalued, that is not a concern to me. I live in the home and would pass it on to family; the price will eventually turn around. The property devaluation has NOTHING to do with restructure and it is actually not the fault of a lending institution; devaluation is part of the ups and downs of real estate (or any investment).

I also would like naysayers to know that I would not ask for anything now were it not for the fact that The President of the United States has given mortgage lenders money to help tax-paying working people restructure home loans. The money is there and the lenders are having a difficult time parting with it . . . they’d rather give themselves bonuses. Because I was an executive assistant for many years, I keep notes on everything. What’s “restructure” look like?

• April-September, 2008: Stage 2 Breast Cancer Treatment (Chemotherapy and Breast Cancer) – Worked full-time throughout. Depleted most of my savings with co-pays.
• December 2008: Laid off from my executive assistant position. Had 2-3 months of savings remaining. Out of work for the first time in my life along with many thousands of other fine, highly skilled people!
• December 2008: Property was devalued by $97,000 by the County Tax Assessor.
• December 2008: Given the employment situation, I contacted my creditors seeking breathing room: By July 2009, I would have two retirement incomes, in addition to income from work. All cooperated immediately except The Lender (who will be named if/when appropriate). The Lender requested paperwork, which was lost repeatedly.
• January 5, 2009: The Lender sent a form letter requesting more paperwork. I sent it via mail and FAX. When I called in, no paperwork could be located. I sent it again. It was lost again, so I contacted a non-profit negotiator seeking help.
• February 8, 2009: Received a form letter from The Lender regarding options, including “loan modification.” Because I was short one month, The Lender stopped applying payments, even after sufficient funds were in my account to make payments. The Lender started charging me substantial late fees.
• March 5, 2009: Letter from The Lender indicating that they would talk with the negotiator.
• April 2009: No word from The Lender. I went through debit counseling/consolidation, “home save” counseling, etc.

Editor’s Note: News stories continually report numbers of “houses” lost to foreclosure. As I have mentioned elsewhere, “foreclosure” is not about “homes.” Foreclosure is about men, women, children, and pets losing their shelter, and the collapsing of community. The list of pain is endless: About 2 million children had or will have their lives disrupted; they fall behind in school, they have to move away from frirends, they have to live in tent cities under America’s freeways. One of my closest friends just had a heart attack from the stress of lost clientele to her business due to the flagging economy which led her to believe she might be able to restructure. She is with Wachovia and was told — after several months of trying to get an answer — that she would now have to wait to November. It was too much. People have committed suicide. And it gets to the simple things we love: I care for a feral cat. I have tried socializing the cat and can actually pet her, but after a few years it seems that Mrs. Dancer prefers sleeping in my backyard shed and depends on the homeowner (in this instance, me) for food and water. (Mrs. Dancer was caught and neutered for those of you who are rightfully concerned about such things.) Animals like this stand to lose their homes also. Because we are in a rural area, if Mrs. Dancer is left alone with an empty house, she will be subject to dogs, racoons, skunks, and wolves. PLEASE keep in mind that it is less expensive to KEEP someone in housing than to provide services to homeless people and/or to attempt to get them back into a home.

• May 9, 2009: No response from The Lender. Due to the lagging job market, I was unable to get my salary up quickly. Financial counselors recommended bankruptcy.
• June 2009: I called The Lender; they said that the loan had been sold and the holders of the note do not want to negotiate.
• June 18, 2009: The Lender sent a letter asking for information (which had previously been sent), along with information re the bankruptcy. The letter stated: “If your client wishes to retain the home we have programs available . . . extended repayment plans as well as possible modification of repayment terms . . . “ signed by . . .”
• June 2009: Called The Lender to check status. During the conversation The Lender said: “if you didn’t file bankruptcy, we could have helped you.” This struck me as insane given that we were six months into the process and if The Lender had acted in a timely manner, I might have avoided bankruptcy completely.
• On October 20, 2009 an associate recommended checking the County Recorder’s Office to see if my house had been sold out from under me – apparently it happens. The County Recorder’s office had an “Assignment of Deed of Trust” indicating that the Grantor (which was not The Lender I had been working with) had sold the deed to Grantee.” Apparently, according to federal law, both the grantors and grantees are to inform borrowers of such a sale with 15 days. I never received anything on either transfer.
• June-July: More lost paperwork by The Lender.
• July 9, 2009: Court document with inaccurate information provided by/signed by The Lender’s representatives (under penalty of perjury). I checked with my attorney; The Lender did, in fact, perjure itself but he basically said, “too bad ‘cause they have dozens of lawyers and you can’t win.” (Documents can be provided.)
• July 16, 2009: At the recommendation of a U.S. Senators, Congressional Inquiries filed.)
• July 24, 2009 generic update letter from The Lender: “We’re writing to let you know what we’ve received your request for assistance with your mortgage payment challenges . . . reviewing information . . . committed to working with more customers than ever . . .” Signed by . . . . At no time have I talked with or heard from the same person and this person never got back to me.
• July 27, 2009: Documentation sent to The Lender through the negotiator indicating that my income – which now comes from five sources (including SSI beginning mid-2009, and a retirement account) – is close to where it was when I took out the loan in 2006.
• August 2009: NINE MONTHS INTO THIS PROCESS . . . Letter dated 8/9/2009 received Saturday, August 15, 2009 stating that $30,000 needs to be paid by September 9, 2009 or The Lender will accelerate foreclosure.
• September 2009: House again devalued by the Office of the Assessor; the upside of this, of course, is that my taxes go down
• September 27, 2009: Received modification recommendation via mail – not through the negotiator, who has been negotiating on my behalf for several months. “Modification” was at same payment level that I had been and The Lender was requesting full payments for three months, after which time they would review the account again at January 2010. At the negotiator’s request, a copy was sent to them and they continued negotiations.
• September 29, 2009: I called The Lender to make sure they were negotiating with the negotiator and to be sure that they did NOT expect payments to be sent per their September letter. The woman I spoke with said I did not have to sign the agreement, but I should send the payments in. I asked if they would be applied to the loan. I wasn’t clear about her answer and I explained that I was afraid to send them in given that they have not been applying payments to the loan, but had been using all funds for late fees.
• I was also told during this period that I did not quality for ANY of President Obama’s modification plans, which further confused me . . . in that case, why do I have letters suggesting that modification is possible?
• October 10, 2009: The negotiator said The Lender representative had my paperwork and that the representative agreed that the “modification” proposed was “ridiculous” and said to continue working to obtain a better solution. The negotiator said The Lender has changed its mind again and said we would know something in a week or two.
• October 21, 2009: Letter dated October 14, 2009 from one of The Lender’s Mortgage Specialists. The Lender in response to a Congressional Inquiry: Misinformation. Incorrect figures. INACCURACIES ON THE LENDER’s PART:
  

  “The Lender was subsequently notified that you would be unable to afford the payments required to the above-referenced Agreement as your financial situation had changed.” Not true. No one told The Lender that I was “unable to afford the payments.” I told them because we did not/do not have a concrete offer, I was uncomfortable making ANY payments to them given the missing/lost paperwork throughout this process. (I was recently told that current Lender’s tactics is to get as much money out of individuals, then to foreclose anyway.) While I no longer know what is or isn’t true, because of the last ten months, I would not put anything past this Lender.

• October 21, 2009: County Recorder’s office indicates that the Deed of Trust was reassigned in mid-2009 . . . six months AFTER my initial request for restructure. I was never informed of either transfer. Again, aren’t they legally bound to inform clients within 15 days of the transfer?




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• October 21, 2009: Telephone messages to call The Lender at xxx-xxx-xxxx. I called 5:59 p.m. PST. Initially, no one knew why The Lender called. A rep said that there is “conflicting” information in the file: She said that one statement is that The Lender is considering modification; another is that The Lender is not considering modification. The Lender’s representative offered, “I’m confused.” Then she asked for updated budget information, which I provided. The Lender’ figures indicated that I was a few thousand dollars short each month on my income. Not true. New information has been provided to them throughout this process; The Lender’ files were not updated. She carefully went through my numbers to update their records. And she said I have to submit more paperwork . . . after almost a year of lost paperwork, I don’t see the point.
• October 22, 2009, 4:11 PM: Another message to call The Lender. This time is was a call center. I explained that I spoke with someone the prior day. She found the updated information, but when she repeated it back, some was still incorrect. Unfortunately, I was tired and upset at the insanity of all of this. A few rare tears fell. I told her that in my 50 years of work, I’d never seen anything like this mess. She was typing fast, so while The Lender has lost paperwork and never gotten anything accurate since December 2008, she probably got this right. Sad. I requested that The Lender begin contacting me through the Negotiator as I was exhausted at this process, confused by the inaccuracies and I prefer that a professional stay on top of this.
• October 23, 2009: Updated information sent to the Negotiator (and FAXED) with copy of October 14, 2009 letter from The Lender and updates on conversation(s) with The Lender.
• October 29, 2009, 11:56 a.m.: Call from The Lender in xxx asking for paperwork and before I could respond she said, “oh I see we have the paperwork.” I asked if it had been sent from the Negotiator. She said yes. I asked her who held the note on this property. Ensuing conversation:
  

  The Lender Rep: “In September 2006, XXXXX (The Lender Mortgage Backed Securities) purchased the note.”

  Me: “I was told XX or someone had the note and they would not negotiate. Also, according to the County Recorder’s office, Deed of Trust was reassigned on June 19, 2009.

  Lender’s Rep: “That is incorrect.” (She repeated this twice when I asked about it again.)

  Me: “Then the County Recorder’s Office is wrong? They have the paperwork in their records.”

  Lender’s Rep: She sounded confused and said, “Oh, we have to correct that.”

  Me: “I AM confused. Aren’t you supposed to notify me when the note on my property is transferred or sold?”

  Lender’s Rep: Yes.

  Me: And isn’t whoever purchased the note supposed to notify me also?

  Lender’s Rep:: Yes.

• This type of confusion is indicative of The Lender’s ongoing “management” of my request for loan modification. This, along with the fact that I have NEVER talked with the same person more than once since this started in December 2008, is a perfect example of WHY I did not want to make payments for three months without a firm agreement as to a loan modification. There is NO indication that The Lender knows what it is doing.
• I told several of this Lender’s reps during the past few months that I am afraid of The Lender and I am afraid to talk to The Lender because of their repeated twisting of information.

Am I afraid to send you this? Am I worried about some type of retaliation if the Lender can figure out who this might be? You BET!

Would any of my friends believe that I’m afraid of anything. NO THEY WOULD NOT. This is a first.