With foreclosures rising to an all time high, homeowners are faced with a dark tunnel and some fear they have no one to lead them to the light. At the same time, some homeowners are seeking that guide and are only finding a less than ethical company to take their money and leave them further destitute, and stranded. With foreclosures at an all time high, loss mitigation companies have been pouring out of the woodwork, and popping up in every crack. The choices are not limited, but appropriate resources are.

There are several companies out there offering this service that have never actually done loss mitigation. Several have learned the trade through an online book, or class and are now trying to profit from others losses. Make sure you do your homework, and talk with the company directly to learn of their experience.

Purpose of a Loss Mitigation Firm- To assist homeowners who have fallen behind in their mortgage payments avoid foreclosure. It is generally necessary to hire a professional foreclosure prevention firm, or a loss mitigation firm to speak on your behalf. A good firm will possess the knowledge required to stop foreclosure in most situations. With that knowledge experience in the field should come also.

In my experience homeowners who have tried to negotiate on their own with their mortgage company have usually come up worse than what they started with. Mortgage companies are used to talking to homeowners that know very little about the loan they are in. Homeowners are generally taken advantage of for that very reason. In addition to negatively impacting the negotiation, homeowners also struggle making contact with a useful party at their mortgage company. This is yet another reason to hire a professional. A resourceful loss mitigation firm will have contacts with most major mortgage companies, and experience much less resistance than a homeowner.

This is something that homeowners can do on their own. Just as filing a Bankruptcy, building a house, or getting a divorce. However, it is common practice to hire a professional in those fields to make sure the job is done correctly. Saving your home from foreclosure should be just as important as building it.

1. What exactly is a loan modification? A loan modification is a permanent change in one or more terms of a borrower’s home loan, allows the loan to be reinstated, and results in a payment the homeowner can afford
2. Can the lender include late charges in the Loan Modification? The federal plan mandates that the bank waive any administrative charges, late fees and penalties when offering a loan workout.
3. How will the new government programs help me get a loan modification?  The Federal government has allocated $75 billion dollars to subsidize lenders and servicers who offer a loan workout to their clients.  Now, the banks will have a monetary incentive to offer help to qualified borrowers.  In addition, homeowners who pay their new modified payments on time will be eligible up to $5000 credit to their loan balance.
4. How do I know if I will qualify for a loan modification? The number 1 criteria your lender is looking at is your ability to make the new modified payment now and in the future. You need to supply the lender with proof of your income, along with a complete and accurate financial statement detailing your income and expenses to show them that if granted the modification, you will be able to afford the new, lower payment.  You must also be able to demonstrate that you are facing a financial hardship-lower income or higher expenses for example.
5. Do I have to be currently delinquent on my payments to get a loan modification? President Obama has included a special incentive under the Home Affordable Modification Plan that will pay lenders an extra bonus for reaching out to homeowners not yet delinquent but at risk in the future.  The goal is to help borrowers before they fall into default.
6. What is an acceptable Hardship situation? Each homeowner has a unique set of circumstances that caused them to fall behind on their home loan, but generally the lenders consider divorce/separation, loss of income, death of spouse, co borrower or family member, illness, job relocation, military service to be acceptable reasons to consider a loan modification. A compelling hardship letter included in your application is a very important part of a successful application.
7. Will a loan modification help me stop foreclosure? Yes, that is the goal-by working with your lender to find a loan workout solution, your loan is brought current and the foreclosure process is halted.
8. Can my missed payments be added back into my new loan modification? Yes, the arrears can be added to the new loan balance and spread out over the term to allow the loan to be brought current.
9. Can I do a loan modification myself or should I pay someone to represent me? That is entirely up to you and your comfort level with dealing with your lender.  The Treasury Department is strongly discouraging the payment of any fee to a third party to represent you in a loan workout. Regardless of what you decide, the first thing you should do is learn all you can about the process, your legal rights, and what it takes to get your application approved.  An informed homeowner is harder to take advantage of and will have a much greater chance of success.
10. So how do I get started to modify my loan? Before contacting your bank’s loss mitigation department or a loan mod company, do your homework-learn as much as you can about the loan modification process so you can make informed decisions.

President Obama’s Home Affordable Modification Plan offers real hope for millions of homeowners who need a solution to stay in their home.  Not everyone will qualify however, and interested borrowers will have to complete loan modification application forms, provide proof of their income and meet certain eligibility requirements.  Most lenders are participating in this new government subsidized plan, and homeowners are encouraged to learn how they can qualify and apply for a loan workout and avoid foreclosure. 

At first blush, the notion seems like a win-win-win. Former homeowners get to stay in their houses; even if a mortgage payment isn’t affordable, market rent may be. Neighborhoods ostensibly benefit, too, since it’s safe — and better for property prices — when blocks aren’t full of foreclosure-related vacancies. And lenders? Turning properties into rentals until the market rebounds may sound like an appealing alternative to selling assets at cut-rate prices. “This is another tool to use, and it doesn’t cost the government anything,” says Congressman Gary Miller, who has sponsored a bill to make it easier for banks to enter into long-term leases with tenants. (See high-end homes that won’t sell.)

Yet there is little reason to believe that Fannie’s move is going to immediately spark a wave of me-too programs. Cheryl Lang, CEO of Integrated Mortgage Solutions, a firm that helps manage repossessed houses, says she’s seen some interest in the concept, but companies are hesitant to implement it for fear of the legal consequences. “Once a lender takes possession, if there’s a mold issue or Chinese drywall, whatever the problem is with that house, whether or not the lender is aware of it, that’s a liability,” says Lang. She recalls being on a panel sponsored by the Mortgage Bankers Association a few months ago and watching as the attorneys in the room went round and round on the issue.

Many of the nation’s largest lenders, including Citigroup and J.P Morgan Chase, have meager interest in converting homes into rentals. “We’re in the lending business,” says Chase spokesman Tom Kelly. “We’re not really equipped to be landlords.” Lenders are sitting on nearly half a million repossessed houses nationwide, but getting rid of them quickly, even if that means taking a hit on price, seems to be the preferred response. A recent presentation by the head of Chase’s retail financial services division showed that the company’s servicing portfolio went from having about 52,000 repossessed homes in Sept. 2008 to some 30,000 in Sept. 2009. Over that period, the average price at which the firm sold houses from that stock dropped from $175,000 to $150,000. (See how to plan for retirement at any age.)

Fannie Mae has brought in a property management company to run its rental program, but even with that imported expertise, the number of people who wind up as tenants likely won’t be large. There are many alternatives that must be pursued first, including loan modification and selling the house for less than it’s worth. Only people who exhaust other options and are eligible for a deed in lieu of foreclosure — a process of handing over the deed in exchange for loan forgiveness — will have the option to rent. In the first nine of months of 2009, Fannie Mae executed just under 2,000 deed-in-lieu transactions — the pool from which renters will come. Freddie Mac, another federal housing agency, has been offering leases to former owners on a month-to-month basis since March, but hasn’t said how many people have taken advantage of the offer.

Now, none of that means rent-backs won’t eventually take off. There are plenty of examples in the recent past of housing policy starting at the federal housing agencies and later expanding industry-wide thanks to strong-arming from some combination of the Obama Administration and Congress. Loan modifications are the quintessential example. Perhaps one more relevant bit here is the law that was passed earlier this year requiring banks that repossess houses to honor the terms of existing leases (i.e., to not immediately kick out any existing renters). Fannie Mae already had such a policy in place. Over the summer, an assistant secretary of the Treasury Department told a Senate panel that the Administration was considering rent-backs, but the idea hasn’t gained traction since then.

After all, the big Administration push has been loan modifications. Earlier this week, Treasury reported that through October more than 650,000 homeowners have received trial modifications under the government’s Making Home Affordable plan. How lasting that help will be, though, is a different question: as of Sept. 1, only 1,711 borrowers had successfully completed the trial phase and received permanent changes to their loan terms, according to a report by the Congressional Oversight Panel.

If loan modifications aren’t the long-term success the Administration is banking on, people will wind up losing their homes to foreclosure anyway, and the number of repossessed properties owned by banks will again swell. Perhaps then, more attention will turn to the idea of renting houses back to former owners.

Read more: http://www.time.com/time/business/article/0,8599,1938255,00.html?xid=rss-topstories#ixzz0WeWinWQt

Read more: http://www.time.com/time/business/article/0,8599,1938255,00.html?xid=rss-topstories#ixzz0WeWJPfGh

Giving troubled borrowers yet another way to avoid foreclosure, Fannie Mae said on Thursday it would allow eligible homeowners to rent their own homes.

The Deed for Lease program lets homeowners transfer the deed back to their lender and then sign a lease to remain in the home. The effort is aimed at borrowers with mortgages owned or guaranteed by Fannie Mae who do not qualify for or cannot sustain a loan modification. Borrowers must live in the home as their primary residence and must be released from any subordinate liens.

The program aims to reduce the number of foreclosed properties being abandoned because they often fall into disrepair and hurt the surrounding homes’ values. Also, it keeps a roof over troubled borrowers’ heads and a steady stream of income coming from the property. Tenants of homeowners may also be eligible for leases.

“This new program helps eliminate some of the uncertainty of foreclosure, keeps families and tenants in their homes during a transitional period, and helps to stabilize neighborhoods and communities,” said Jay Ryan, vice president of Fannie Mae, a mortgage-guarantee firm under federal government control.

Homeowners must show they can afford market rent, but that payment cannot be more than 31% of the borrower’s pre-tax income. Leases may be up to 12 months, with the possibility of renewal or month-to-month extensions. If the property is sold, the new owner picks up the lease.

“It really buys them time,” said Paul Habibi, real estate professor at UCLA’s Anderson School of Management.

Stopping foreclosures

But in the long-run the program only delays the inevitable sale of the distressed properties.

While this initiative is not part of the Obama administration’s loan modification program, the White House is leaning heavily on Fannie Mae and its sister firm, Freddie Mac, to assist in stemming the foreclosure crisis.

Freddie Mac launched a program in January that allowed borrowers to stay in their homes on a month-to-month basis after they go through foreclosure.

Despite the government and financial industry initiatives, foreclosures hit an all-time high in the third quarter. During that time, 937,840 homes received a foreclosure letter — whether a default notice, auction notice or bank repossession, according to RealtyTrac.

Last month, Treasury officials announced that 500,000 troubled borrowers have been put into trial modifications under the president’s plan. The program calls for eligible homeowners to pay no more than 31% of their pre-tax income toward their mortgages.

At the same time as it tries to ramp up its loan modification program, the administration is looking for ways to help those not eligible for adjustments. In May, officials unveiled a program to incent borrowers and loan servicers to participate in short sales and deeds in lieu. Under that initiative, borrowers get up to $1,500 to assist with relocation expenses and Treasury pays servicers $1,000 when the deal is completed.

Short sales, in which the home is sold for less than the mortgage balance and loan servicers may forgive the difference, and deeds in lieu, in which borrowers voluntarily forfeit the deed and the debt may be erased, are faster and cheaper than foreclosure

Shared by Neil Martin
Tuesday, June 30, 2009 at 5:58pm

I am so fed up with the bloody nay sayers out there. I am so bloody fed up with those who wish to turn the loan Restructuring/Loan Modification business over to the banks and or the attorneys. Who the heck got us into this reprehensible situation in the first place.

Well we are giving it back to them if we don’t watch out.

The banks will do EVERYTHING in their power to retain their money (they have a profit to maintain and shareholders to pay). You think they care about you? Even if you are a shareholder…. If you said yes then you are living any where else but here on earth. No, the banks are out for only one thing and that is to preserve their Bottom line, their Profits, their Salaries. And how will they do that, by making sure you accept an loan on their terms so they can make the best of a bad deal that they underwrote to start with. Martin Andelman wrote a splendid article that I advise everyone to read and digest. http://mandelman.ml-implode.com/2009/06/former-sub-prime-lenders-are-back-to-profit-off-the-mess-they-made-seriously/ In this he really makes you understand just a little of what the Banks are all about.

Ask yourself this one question. When you are on hold with your bank do they say “This is an attempt to collect a debt” or do the say “This is an attempt to modify your loan”. If they truly had your best intentions in mind they would, (and if they say the latter then go for it), unfortunately I have never heard them say it and most likely will have to wait a very long time before I do (hell will freeze over first in my opinion) but please call me if you do.

Attorneys,,,,will tell you that only they can help you. B.S. With bells on. Only a few states require an attorney intervention and then in particular circumstances such as foreclosure, (then they are worth it) otherwise the borrower is paying through the nose and are Most definitely the Most expensive. Most of them are breaking the very law they tell you, that they and only they can do. By outsourcing the business end to me they are not representing you, we are since we do the negotiating. I know, first hand.They pay me to do their work. And I can prove this. But I won’t because it would hurt my business and my income (unless someone is willing to pay me more, any callers ?????).

Crooks. And I mean crooks. Those that would take your house, your dreams, your hopes. This is huge, independent group and are actively out to scam you. One particularly nasty scheme is to take your money and do nothing until your foreclosure date is upon you then advise you that the best possible solution is to do a short sale, oh and by the way they will offer you 70 cents on the dollar. Beware of all of the scams out there. The brokers and attorneys I know are good people and I am very happy to be working with them but there are always those who will take advantage of you.

If they say it is free, guess what….. they lie. Beware no one works for free, for nothing, not the banks, not the attorneys, not even the government. We, the tax payer are paying them. Who pays those that don’t work for the government??? if not you, then who? Are the banks working for free?? don’t make me laugh. Will you work for free? If so I have a job for you. Please call 555.5555 Oh and please give me your SS number, date of birth and bank account details aswell. Thank you so much, I’ll be in touch.

The answer to all of this is not a simple nor a one line answer, it is complex, the business is complex. And my friends is that. Every loan, every person, every home, each is and by definition has to be, wait for it. Different. It can not be any other way. Every persons situation is unique, every person needs to be represented, to feel that they are empowered to look to their own well being. This can only be accomplished by allowing the free market to truly work as the free market should. The market itself will regulate itself. Satisfy the clients needs and accomplish the goal and reap a small but worthy fee. No reward. No Market. No loan. No Home

Ladies and Gentlemen of this industry. I implore you to be responsible. Home owners I implore you to be realistic and understand that the bank is not your friend. Like you, they are after their and only their best interests.

Thank you for reading this.

PS I just bought more stock in Bank of America. Great price and it will go up.

The government’s meddling in sub prime mortgage issues makes legitimate, third party loss mitigation services more vital than ever in terms of our role as consumer advocates. Distressed homeowners have to watch out for loan modification/loss mitigation scammers, the worst of whom may be their own lenders or servicers. It’s sad but true. Roughly half of the loan modifications I look at are those from homeowners who attempted to negotiate their own loan mods that are full of errors and omissions OR they are not really loan mods at all. It’s a scandal that no one is really aware of UNLESS you are an industry inside. 

As you have all experienced, taking good loss mitigation applications and getting paid in a timely manner can be challenging, to say the least. Our new system makes loss mitigation a lot easier and more profitable as we have automated the pre-qualification process and we now have experienced, major bank trained loss mitigation specialists on board that essentially allows us to work out of the lenders’ and servicers’ own playbook. 

Although the last year or so has been challenging to say the least, US HomeSavers keeps plugging along. We’ve made some changes in staffing and technology over the last couple of months that vastly simplifies the application/approval process which, as you all know, I hold to be of paramount importance in our efforts to bring reality and results into the loss mitigation business. We have instituted an US HomeSavers Loss Mitigation Reseller Program whereby you can offer homeowners fixed price loan modification services at super competitive rates that can be fully guaranteed, partially guaranteed or not guaranteed as part of the loan modification pre-qualification process. There are no upfront costs for you to become a Reseller. 

You will be supplied with a Bank Qualification datasheet which is primarily an Excel Spreadsheet modeled after the industry standard software used by the big banks to determine homeowner eligibility for home retention programs. All you have to do is get your customer to complete the pre-qual app or you do it for them. (preferred). E-mail it to me for a QC Check and our processing department will either approve the pre-qual or deny it in 24 hours. If we decline the application, you realtors should be sharp enough to get the pre-foreclosure sale listing which will most likely be a short sale. Short sales will be processed under the new CDPE standard for which you will receive instructions and the forms needed.

If the application is approved, your job is to collect the required documentation and the service fee “deposit” from your customer. Once the formal application is submitted and accepted by the processing department. Let me close for now with two important items of note. 1) I got 14 out of 16 loan mods approved last Friday representing just under $21,000 in gross revenue and 2) if you have any interest taking advantage of this free opportunity, you need to join my Loss Mitigation Reality Group at http://finance.groups.yahoo.com/group/Loss-Mitigation-Reality then complete the attached Reseller Application documents attached to this e-mail. Dutch, you are exempt but call me so I can get you entered into the system.  

Thanks,

Curt

Judges across the nation, including Boyko, Rose, Kurtz, Schack, Rosenblatt, Bufford, O’Malley, Shaw, Bryant and Foley have issued orders dismissing foreclosures brought by lenders that have illegally securitized loans and are no longer current holders of the notes. These “quiet title actions” have forced lenders, including Chase, Citibank, Wells Fargo, Washington Mutual, Countrywide, Lehman, Shearson, Indymac, Bear Stearns, Wachovia, and Bank of America to unravel their notes’ dizzying journey from the mortgage closing to an investment bank or depositor, then to a series of trustees who pooled and sold the loans and issued shares of mortgage backed securities. What makes these securitizations illegal is how fraudulently they were conducted, by foregoing proper assignments and transfers required by law to secure an interest in the underlying real estate.

Now, the Obama Administration not only wants to continue this fraud, but is planning to reward the very investment banks and hedge funds that were architects and participants of the securitization that created the global financial crisis.

While this is devastating news to taxpayers who will be stuck with more debt, it is great news for homeowners’ with securitized loans. Ironically, their mortgage lenders’ haste to securitize their loans has provided a security blanket that protects them from foreclosure. In fact, many homeowners already own their homes free and clear and just don’t know it yet, hence the purpose of my new book. Consider this reversal of misfortune divine intervention against a greedy global conspiracy aimed at defrauding homeowners and stealing their homes.

But don’t look to the federal government for help, as they have been part of the conspiracy. The Obama foreclosure plan, wise to the fact that securitized mortgages cannot be legally modified, is focusing instead on homeowners not in default, leaving another ten million homeowners hung out to dry. The research group, Realtytrak estimates over three million homeowners now face foreclosure and another six million will soon be in payment shock when their toxic loans reset this year, forcing them into foreclosure.

Like an uninvited and unwelcome Santa Ana, millions of American homeowners are reeling from a blast of illegal foreclosures and unlawful evictions. Tragically, while many have already turned in their keys, others are quickly learning if they can find fraud, they can forget foreclosure. The recently won class action predatory lending lawsuit, The People of California vs. Countrywide, which settled for 8.7 billion dollars, has been a wake-up call to many distressed homeowners now empowered to wage mortgage war. Homeowners already kicked out of their precious homes can file fraud claims post eviction.

And there is plenty of fraud to go around: fraud in the solicitation, processing, closing, securitizing and servicing of toxic mortgages; fraud in the courtroom as lenders’ attorneys file fraudulent foreclosures; fraud in the packaging, selling and credit-rating of mortgage backed securities; and fraud in the illegal modifications of securitized loans.

While the government keeps bailing out the very institutions at the heart of the fraud, like the mortgage giants and their insurance company, there just isn’t enough money in the world to cover the costs of bad loans, litigation, credit default swaps and fraudulent workouts. A better move would be to quickly extinguish these loans upon evidence of homeowner fraud.

You may be wondering, how did this mess happen? How did the economy just ten years ago, buoyed by a transformational president and a budget surplus, end up in a recession soon to become a depression? The answer is greed.

The derivatives explosion, coupled with the Fed’s lowering of interest rates and the Senate’s relaxation of credit standards led Wall Street to create toxic “non-traditional loans” sold to homeowners purely to generate profit. These include hybrid adjustable rate mortgages, no doc loans and even NINJA loans, made with no income, no assets and no job. As the loans changed hands during each stage of the securitization process, fees were paid in the form of yield spread premiums, kickbacks, commissions, referral fees, bonuses, closing costs and profits.

It has been nothing short of a conspiracy to defraud homeowners, with everyone from the loan broker, to the loan officer, to the appraiser, to the title agent, to the servicer, to the Depositor, to the Trustee, to the foreclosing Trustee, to the lender’s attorney — all on the take. But homeowners are wising up, and hiring attorneys skilled in predatory lending litigation.

Southern California commercial litigator, Robert Allan of the Robert Allan Law Group, says this: “These claims can be won if counsel for the homeowner can prove the lender’s intention to fraudulently induce the homeowner into a transaction for the lender’s sole benefit. A lender has a statutory duty to ensure a homeowner has the financial ability to repay a loan for their home.” Allan believes a forensic audit of the loan is crucial to establishing the lender’s intent and in evaluating the merits of a homeowner’s claim.

Nationally recognized forensic mortgage auditor, Marie McDonnell agrees, “A mortgage audit these days is a search for fraud in the inducement, origination, closing and servicing of toxic loans. It is the homeowners’ best plan of attack against their predatory lender and a sure defense against foreclosure.”
McDonnell, along with other advocates, auditors and attorneys, believes over 80% of adjustable rate mortgages were fraudulently induced so the lenders could quickly transform the loans into profitable mortgage backed securities.

Next to California’s rapidly growing foreclosure crisis, Florida, not far behind, has taken up the fight. Attorney April Charney, known as “the foreclosure killer,” provides attorney workshops to stop and reverse foreclosures, while litigators across the nation focus on educating judges about the illegal machinations inherent in securitized mortgages. Charney says, “It is common to prove that transfers and endorsements of notes were not properly made, and the real note holders are impossible to identify. The securitization process has failed, and the lenders cannot live up to the claims and contracts outlined in their 10 and 8K Securities and Exchange Commission filings.” By demanding that lenders prove their right to foreclose, Charney untangles the covert interweaving of conspiring mortgage brokers, lenders, investment banks, depositors and trustees who had their hands in the securitization cookie jar.

My upcoming book, entitled Mortgage Wars: How to Fight Fraud and Reverse Foreclosure not only helps homeowners overcome payment shock and post traumatic stress disorder, but leads them, step by step, into a plan of engagement against their predatory lenders, including how to evaluate their toxic loan, get it audited, rescind it and hire the right attorney to take their lender to court.

Predatory lending lawsuits not only bring quiet title to the court’s attention, which will result in foreclosure dismissal, but pay substantial damages to homeowners, including a full refund from their lender, as well as attorney fees. Luckily, laws like The Truth in Lending Act and the Real Estate Settlement Procedures Act, fall squarely on the side of defrauded homeowners. Other typical causes of action include fraud and fraudulent misrepresentation, unfair competition and unjust enrichment. I discussed this issue with Senator Arlen Specter during a recent dinner and he agreed that victimized homeowners ought to go before a judge and demand justice.

This road to reversing payment shock, delinquency, default, foreclosure, or even eviction — by filing a predatory claim, like Bryan and Susan Andrews did against Chevy Chase Bank, focuses on the lender’s fraudulent misrepresentations and predatory practices. While the Andrews’ lawsuit has yet to reach class action status, the couple walked out of court owning their home free and clear. Their Wisconsin attorney, Kevin Demet, is fighting for class action status straight to the Supreme Court. He is encouraging other attorneys who represent defrauded homeowners to do the same.

To date, the media has had it all wrong, painting a false picture of a nation of deadbeats who sought liar loans. In reality, the demand for derivatives led to the conspiracy to defraud homeowners and investors alike in a parallel scheme of falsely inflating loan amounts, real estate values and credit ratings.
And, while homeowners have an arsenal of legal weapons at their disposal to fight their mortgage wars and win, they need to be shown, step by step, how to do it. The home is the family’s sanctuary and psychological haven. Ripping homeowners from their homes is not only wrong, it is extremely damaging to the family system and has already proven fatal in some cases.

As far as the ballooning government bailout goes, there is not enough money in the world to save toxic lenders from their eventual fate. While the Obama Administration should follow the lead of Ohio, which insists that lenders prove their right to foreclose before filing foreclosures, the nation of enraged homeowners will more likely litigate their cases en masse in order to remove toxic lenders from title via judges’ orders for re-conveyance.

However, if, in a fantastic and improbable flight into health, President Obama decided to play Robin Hood, and demand toxic loans be extinguished, vindicated homeowners would be able to quickly reverse the recession. That would be an economic stimulus plan that would actually work, rather than handing the predators more taxpayer money taken from of the pockets of defrauded homeowners. But denial runs deep and cronyism runs deeper. When the Administration learned it couldn’t beat the holders of mortgage backed securities into rewriting pooling and servicing agreements, it decided to join them. By relieving predatory lenders of their toxic loans and investors of their worthless securities at the taxpayer’s expense, the final nail on the coffin of our nation’s economy will be in place.

Mortgage Wars will be available in bookstores in June. Or go to www.yourmortgagewar.com to order an advance copy and find resources.

Iris Martin, writing in the Huffington Post on Monday set forth her claim that a huge percentage of securitized mortgages are fraudulent and asserted that many foreclosures are already being thrown out of court based on the poor or non-existent titles of those of those who are bringing the foreclosure action.

Lack of perfection of title is just one reason that Martin feels that thousands of homes may actually already belong free and clear to homeowners who are just not yet aware of their legal situation and that thousands of others that have already been foreclosed may become the focus of lawsuits once the former owners realize what has happened to them.  She claims that not only will President Obama’s plan to create public-private partnerships to purchase and manage toxic assets not work, but it will be the final blow to the global economy.

The imperfect title problem came about, she says, because transfers and endorsements of notes were not properly made or not made at all and the real owner of a note may be impossible to identify.
Martin is promoting a new book to be published in June promoting her thesis so her theory needs to be taken with more than one grain of salt but, during the early 1990’s real-estate-led banking crisis there were significant problems with mortgages that had been either bought or sold by failed banks where assignments had not been properly recorded and ownership was problematic.  One investor who had purchased a portfolio of FDIC loans blithely carried out a foreclosure in FDIC’s name because he had failed to record and then lost his assignment.  He was mightily offended that FDIC refused to sign documents making the farce legal. These unperfected liens not only popped up when foreclosures were initiated but also when homeowners who had paid off their mortgages sort of thought they would like a discharge.

That these problems were created long before mortgages were sliced and diced into derivatives and that banks seem to be having a heck of a time unwinding these securities gives some credence to Martin’s claims.  It has seemed odd from the start that lenders were telling both Congressional hearings and television interviewers that it was extremely difficult to modify a loan because so many investors were involved.  Could it be that they simply didn’t know who the investor were?

Martin references numerous cases nationwide where judges threw out foreclosures where lenders had brought action against “illegally securitized loans and are no longer current holders of the notes.”

Martin sees another problem where homeowners have a defense against foreclosure or avenues for redress when they have already lost their homes.  These cases would be based on the more familiar type of mortgage fraud, predatory lending.  She quotes one litigator from California who states that predatory lending claims, which can not only free the homeowner from the mortgage but result in substantial damages, can be won if the homeowner can provide that the loan was made purely for the lender’s sole benefit.

A Wisconsin couple recently won such a case charging fraudulent misrepresentation and predatory practices.  Now their attorney is fighting his way through the courts to convert the suit to class action status.

Ms. Martin maintains that there is not enough money in the world - or even from the government - to save lenders from their eventual fate as homeowners sue en masse to remove lenders from the titles to their homes.

Ms. Martin’s book will certainly attract wide attention even months before its publication.  If she is right, the outcome is too terrible to contemplate.  Even if she is wrong, her book may push enough people toward litigating their fate to become a self-fulfilling prophecy.

Purpose

This Revised Advisory is intended to alert consumers interested in, and those businesses offering, or contemplating offering, “loss mitigation consulting,” “foreclosure prevention,” “mortgage loan modification,” or similar services, that the Maryland Credit Services Businesses Act (”MCSBA”)1 aand the Protection of Homeowners in Foreclosure Act (”PHIFA”)2 potentially apply to those services. The original Advisory, dated September 8, 2008, discussed situations in which PHIFA applies to such services. This Revised Advisory includes the same discussion, and further elaborates that the MCSBA will often apply to such services as well.

A New Business Model

A recent development in the ongoing subprime mortgage and foreclosure crisis is the emergence of a new type of business which purports to offer loss mitigation consulting, foreclosure prevention, mortgage loan modification, or similar services. The Commissioner of Financial Regulation (”Commissioner”) has seen an increasing number of advertisements, direct-mail solicitations and other marketing materials offering Maryland consumers assistance in negotiating resolutions of their delinquent residential mortgage loans with lenders and servicers, or assistance in negotiating lower mortgage loan rates, in exchange for up-front fees. These marketing materials suggest that these businesses will help delinquent borrowers obtain payment plans, loan modifications, and/or short sales and deeds in lieu of foreclosure. Mortgage brokers themselves have been targeted by these businesses in hopes of obtaining referrals. The Commissioner has begun to receive consumer complaints regarding fees paid to third parties providing these services. The Commissioner has also received inquiries from persons interested in entering these new types of businesses.

Maryland Credit Services Businesses Act

Applicability

Businesses which provide loss mitigation consulting, foreclosure prevention, mortgage loan modification, and/or similar services likely will be subject to the MCSBA. As the services provided by these businesses typically include the possibility of deferral of payment on consumers’ mortgage loans, these businesses often will come under the definition of “credit services businesses” under the MCSBA. As such, they are required to be licensed as credit services businesses (”CSBs”), and they are subject to various investigatory, enforcement, and penalty provisions as licensees.3,4

Consumer Protections

The MCSBA provides a number of important consumer protections, including, but not limited to, the following:

No Up-Front Fees: Under the Act, a CSB may not charge or receive any up-front fees, or any other fees, before fully and completely performing all services on behalf of consumers.
 
Must Be Licensed: Any individual or company offering credit repair services as described in the Act must be licensed by the Commissioner of Financial Regulation (”Commissioner”).
 
Written Contract Required: A CSB must enter into a written contract with each consumer. Among other provisions, such contracts must include a detailed description of the services to be performed and the results to be achieved by the CSB.
 
Written Disclosures Required: A CSB must provide the consumer with a written information statement before entering into a contract and before receiving money or other valuable consideration. The information statement must include, among other things, specific statements related to the consumer’s rights under the federal Fair Credit Reporting Act.
 
Right of Rescission: The MCSBA provides that consumers have the right to cancel a contract with a CSB any time prior to midnight of the third business day after the date of the transaction.5
Other Important Provisions of the MCSBA

A CSB may not create, or assist a consumer in creating, a new credit identity by obtaining and using a different name, address, telephone number, Social Security Number, or employer tax identification number.
 
A CSB may not make, assist, or advise a consumer to make, any statement or other representation that is false or misleading to a consumer reporting agency, government agency, or person to whom the consumer applies or intends to apply for an extension of credit, regarding their creditworthiness, credit standing, credit capacity, or true identity.
 
A CSB may not make or use any false or misleading representations in their offer of services to consumers.
Penalties for Violation

Anyone violating the MCSBA may be subject to significant administrative, civil, and criminal penalties, including, but not limited to, fines up to $5,000 or imprisonment up to 3 years, or both.

Review the MCSBA Carefully, including Licensing Requirements

This Advisory Notice is not a comprehensive analysis of the applicability of the MCSBA to persons offering loss mitigation consulting, foreclosure prevention, mortgage loan modification, or similar services. All persons who may be, or who are contemplating, providing such services are urged to carefully review the MCSBA (including all licensing requirements) with their counsel to ensure compliance.

Protection of Homeowners in Foreclosure Act

PHIFA Prohibits Up-Front Fees and Certain Other Payments

PHIFA prohibits foreclosure consultants (defined below) from engaging in a number of different activities. Thus, among other things, foreclosure consultants are prohibited from the following:

Claiming, demanding, charging, collecting, or receiving any compensation until after the foreclosure consultant has fully performed each and every service the foreclosure consultant contracted to perform or represented that the foreclosure consultant would perform;
 
Claiming, demanding, charging, collecting, or receiving any interest or any other compensation for any loan that the foreclosure consultant makes to the homeowner that exceeds 8% per year;
 
Receiving any consideration from any third party in connection with foreclosure consulting services provided to a homeowner unless the consideration:
Is first fully disclosed in writing to the homeowner;
Is clearly listed on any settlement documents; and
Is not in violation of any provision of PHIFA;
 
Receiving a commission, regardless of how described, for the sale of a residence in default that exceeds 8% of the sales price; and/or
Receiving any money to be held in escrow or on a contingent basis on behalf of the homeowner.
Who is a “Foreclosure Consultant”?

If a person offers the services described below to a mortgage borrower who is at least sixty days in default, it is likely that the person will be a “foreclosure consultant” under PHIFA.6 Thus a homeowner need not be in foreclosure for PHIFA to apply.

“Foreclosure consultant” is defined under PHIFA as a person who:
Solicits or contacts a homeowner in writing, in person, or through any electronic or telecommunications medium and directly or indirectly makes a representation or offer to perform any service involving any of the following:
Stopping, enjoining, delaying, voiding setting aside, annulling, staying, or postponing a foreclosure sale;
Obtaining forbearance from any servicer, beneficiary, or mortgagee;
Assisting the homeowner in exercising a right of reinstatement provided in the loan documents, or in refinancing a loan in foreclosure and for which notice of foreclosure proceedings has been published;
Obtaining an extension of the period within which the homeowner may reinstate the homeowner’s obligation or extend the deadline to object to the ratification;
Obtaining waiver of an acceleration clause contained in the mortgage on a residence in default or in any promissory note or contract secured by the mortgage;
Assisting the homeowner to obtain a loan or advance of funds;
Avoiding or ameliorating the impairment of the homeowner’s credit resulting from certain events related to the foreclosure;
Saving the homeowner’s residence from foreclosure;
Purchasing or obtaining an option to purchase the homeowner’s residence within 20 days of an advertised or docketed foreclosure sale; or
Arranging for the homeowner to become a lessee or renter entitled to continue to reside in the homeowner’s residence after a sale or transfer; or
Systematically contacts owners of residences in default to offer foreclosure consulting services.
 
“Residence in default” is defined, in part, as residential real property located in Maryland on which the mortgage is at least 60 days in default.
 
“Foreclosure consulting service” includes any of the following:
Receiving money for the purpose of distributing it to creditors in payment or partial payment of any obligation secured by a lien on a residence in default;
Contacting creditors on behalf of a homeowner;
Arranging or attempting to arrange for an extension of the period within which a homeowner may cure the homeowner’s default and reinstate the homeowner’s obligation;
Arranging or attempting to arrange for any delay or postponement of the sale of a residence in default;
Arranging or facilitating the purchase of a homeowner’s equity of redemption or legal or equitable title.
Arranging or facilitation the sale of a homeowner’s resident or the transfer of legal title, in any form, to another party as an alternative to foreclosure; or
Arranging for or facilitating a homeowner remaining in the homeowner’s residence after a sale or transfer as a tenant, renter, or lessee under terms provided in a written lease.
Therefore, if a service provider systematically contacts owners of Maryland residences whose mortgage loans are at least 60 days in default or in foreclosure for the purpose of offering to contact creditors on their behalf, the service provider is acting as a foreclosure consultant under PHIFA. This will cover many persons offering loss mitigation consulting, foreclosure prevention, mortgage loan modification, or similar services.

Likewise, if for a fee a person refers an owner of a residence at least 60 days in default or in foreclosure to a third party foreclosure consultant who ends up violating PHIFA, the referring party may also be found liable for the violation because of the referrer’s involvement as an accomplice in the transaction giving rise to the violation.

Homeowners’ Rights of Rescission under PHIFA

In addition to any other legal rights regarding cancellation or rescission7 of a contract, PHIFA provides homeowners with various rights of rescission, including, but not limited to, the following:

The right to rescind a foreclosure consulting contract at any time (i.e. an “unlimited right of rescission”).
The right to rescind a contract for the sale or transfer of the residence in default within 5 days after the execution of the contract.
Civil and Criminal Penalties

A person who violates PHIFA is guilty of a misdemeanor and on conviction is subject to imprisonment not exceeding 3 years or a fine not exceeding $10,000, or both.

The Attorney General or the Commissioner may seek an injunction to prohibit a person who has engaged or is engaging in a violation of PHIFA from engaging or continuing to engage in the violation. Additionally, the court may enter any order or judgment necessary to:

Prevent the use of any prohibited practice by a person;
Restore any money or real or personal property acquired by means of any prohibited practice to an injured person; or
Appoint a receiver in case of willful violation of PHIFA.
In any action brought by the Attorney General or the Commissioner under PHIFA, the Attorney General or Commissioner is entitled to recover the costs of the action for the use of the State.

A violation of PHIFA is an unfair and deceptive trade practice within the meaning of Title 13 of the Commercial Law Article, and is subject to the enforcement and penalty provisions contained therein.

Moreover, PHIFA provides for a private right of action. Therefore, in addition to any action by the Attorney General or the Commissioner, a homeowner may bring an action for damages incurred as the result of a practice prohibited by PHIFA. A homeowner who brings an action under PHIFA and who is awarded damages may also seek, and the court may award, reasonable attorney’s fees. If the court finds that the defendant willfully or knowingly violated PHIFA, the court may award damages equal to three times the amount of actual damages.

Review PHIFA Carefully

This Advisory Notice is not a comprehensive analysis of the applicability of PHIFA to persons offering loss mitigation consulting, foreclosure prevention, mortgage loan modification, or similar services. In addition to the prohibition on up-front fees, PHIFA contains many other consumer protections. Such requirements and restrictions relate to issues such as foreclosure consulting contracts, mandatory written disclosures, and a general prohibition on activities known as “foreclosure rescue transactions.”

All persons who may be, or who are contemplating, providing loss mitigation consulting, foreclosure prevention, mortgage loan modification, or similar services are urged to carefully review PHIFA with their counsel to ensure compliance.

The Commissioner Will Investigate Complaints Regarding the MCSBA or PHIFA

The Commissioner will investigate complaints alleging MCSBA and/or PHIFA violations relating to persons offering loss mitigation consulting, foreclosure prevention, mortgage loan modification, or similar services, and will pursue appropriate remedies. Consumers who wish to file a complaint with the Commissioner may call 888-784-0136 or 410-230-6097.
 
 
1 MCSBA is codified in the Annotated Code of Maryland, Commercial Law Article (”CL”), § 14-1901 et seq.
2 PHIFA is codified in the Annotated Code of Maryland, Real Property Article (”RP”), § 7-301 et seq.
3 Relevant statutes include, but are not limited to, the following: CL § 14-1903(b); Title 11, Subtitle 3 of the Financial Institutions Article; Title 2, Subtitle 1 of the Financial Institutions Article.
4 For a list of individuals and entities which are excluded from being considered “credit services businesses” under the MCSBA, and which are thus exempt from the licensing and other MCSBA requirements, see CL § 14-1901(e)(3). Note that under subparagraph (e)(3)(vi), an individual admitted to the Bar of the Court of Appeals of Maryland is exempt only “when the individual renders services within the course and scope of practice by the individual as a lawyer and does not engage in the credit services business on a regular and continuing basis.”
5 If PHIFA is also implicated by particular loan modification services, PHIFA’s “unlimited right of rescission” will apply instead (see discussion of PHIFA).
6 For a list of individuals and entities exempt from the provisions of PHIFA, see RP § 7-302.
7 Under PHIFA, homeowners will continue to maintain certain debts and other financial obligations even after rescission, although their rights of rescission cannot be conditioned on the repayment of any funds.