Recent News: Federal Report Shows Loan Servicers Offering Few Loan Modifications to Borrowers

A recent report from the federal government shows that loan servicers are offering few loan modifications to borrowers through the federal government's Making Home Affordable Program.  This program, created in the wake of the financial crisis, was intended to keep struggling owners in their homes.  Instead of providing a necessary defense to foreclosure, the program has become a mess, with many borrowers being rejected for loan modifications through the Home Affordable Modification Program ("HAMP").  One article suggests that an astonishing 70% of all loan modification applications are denied by servicers.   

I can count on my right hand the number of struggling borrowers who have been promptly considered for a loan modification by their servicer.  The majority go through months of back and forth communications with their lenders, who typically "lose" the required documentation or come up with absurd reasons for denial.

What's a homeowner in need of a loan modification to do?  Create a paper trail of one's efforts to apply for a loan modification and contact a lawyer if you are not getting the results you need. 

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http://maforeclosurelawblog.sherwinlawfirm.com/2015/08/recent-news-federal-report-shows-loan.html

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Pinti v. Emigrant Mortgage: Strict Compliance Required for Paragraph 22 of the Standard Mortgage

The Supreme Judicial Court issued its long awaited decision last week in Pinti v. Emigrant Mortgage, holding that a foreclosing entity needs to strictly comply with paragraph 22 of the standard mortgage.  (DISCLAIMER:  I represented the plaintiffs in Pinti in their Superior Court case).

The "standard mortgage" is the mortgage form used for almost all residential mortgages and comes from Fannie Mae/Freddie Mac (two of the largest holders of mortgages in the United States). Paragraph 22 of this mortgage requires the mortgagee to provide the homeowner with a default notice prior to foreclosure, containing specific disclosures.  These disclosures include:

• A thirty-day right to cure the loan default
• The borrower's right to reinstate after acceleration of the loan
• The right to bring a court action to assert the non-existence of a default or any other defense to acceleration and the foreclosure sale

The default notice in Pinti incorrectly stated one of these disclosures.  The question for the Court was whether strict compliance was required for this notice.

This matter of strict compliance was the make or break issue for this case.  The plaintiffs in Pinti, like most homeowners, could not show prejudice for this type of error (as in, they could not show that this error was the direct reason why the foreclosure occurred).   To have a viable claim, the plaintiffs in Pinti needed to show that any failure to comply with this notice made the foreclosure void.  The Supreme Judicial Court agreed that this heightened standard of review is necessary for paragraph 22.

Many people following this case (myself included) expected the Court to decide the case similar to U.S. Bank v. Schumacher, where the Court held that the statutory right-to-cure notice (which comes from Massachusetts law, and not the mortgage itself), was not a part of the foreclosure process, and therefore not requiring strict compliance.  The important difference was that the disclosure requirement in Pinti came from the mortgage itself. 

The Court made Pinti prospective:  it applies to only notices sent after July 17, 2015 (the Court left the question open as to whether those homeowners who have raised this defense when the Pinti decision came out are also entitled to the benefit of this holding).

So, what are the take home lessons of Pinti?

• The Supreme Judicial Court reaffirmed that strict compliance is required for the terms of the mortgage.  Beyond the default notice requirement of paragraph 22, Pinti could also have implications for other requirements in the standard mortgage. 
• Real risks comes in purchasing a foreclosed property.  The buyer of the home in Pinti was a third-party buyer (someone other than the foreclosing entity).  Anyone considering buying a foreclosed property should hire an attorney and get a title insurance policy.

Are you facing foreclosure?  Contact me to see if the Pinti decision (or another foreclosure defense) can help you save your home.

BLOG POST:

http://maforeclosurelawblog.sherwinlawfirm.com/2015/07/pinti-v-emigrant-mortgage.htm

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Beware of Foreclosure Defense Scams

In addition to the loss of homeownership for many Americans, the continuing foreclosure crisis has another dire consequence: the rise of foreclosure defense scams.  A recent story from New Jersey about a family losing their home due to a nationwide foreclosure scheme demonstrates the importance of struggling homeowners needing to be careful in seeking foreclosure defense assistance.

Foreclosure scams often involve attempts to provide loan modifications to struggling homeowners.  These often come from purported companies offering to assist with the loan modification process.  Often, they reference the Home Affordable Modification Program ("HAMP")--a federal loan modification program.  Almost always, these scammers directly solicit homeowners through mail, the Internet, or phone.  These con artists often require homeowners to pay large, upfront fees and typically do little to assist with foreclosure defense.   

How should struggling homeowners avoid these scams?  By staying away from any shady offer to assist with foreclosure defense.  I recommend that homeowners only accept help from a reputable attorney, a non-profit organization, or a state or federal government agency.  Private companies offering loan modification or other foreclosure defense assistance should raise a red flag for homeowners, if these purported businesses do not have proper credentials. 

Let me add an important caveat to this advice: I'm not suggesting that those in need of foreclosure defense avoid seeking the help of anyone requiring a fee for their services.  While there are many free services available for homeowners trying to avoid foreclosure, these programs aren't the best for everyone.  There are many reputable professionals--myself included--who do charge a fee for their work.  Homeowners should not rule out paying someone to help save their home, but do need to be diligent in making sure that their money goes to a reputable professional.

BLOG POST:

http://maforeclosurelawblog.sherwinlawfirm.com/2015/07/beware-of-foreclosure-defense-scams.html

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http://www.sherwinlawfirm.com 

Happy Fourth of July!

Principle Reduction for Mortgage Loans

A recent Wall Street Journal article discusses the ongoing conflict regarding principle reduction for mortgage loans.  As the article stresses, Fannie Mae/Freddie Mac—two of the largest holders of mortgage loans in the United States—usually do not permit principle reductions of loans (where the lender forgoes a portion of the unpaid debt).  Most loan modification programs, both government based and private, generally do not allow for a principle reduction; while the lender will "forbear" the unpaid debt (usually in a balloon payment at the end of the loan), the debt does not go away.  This reality is something I stress to each of my clients: while I always aim for a loan modification with principle reduction, it is never a guarantee.

BLOG POST:

http://maforeclosurelawblog.sherwinlawfirm.com/2015/06/principle-reduction-for-loans.html

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http://www.sherwinlawfirm.com 

"Strategic Default" and Foreclosure Defense

If you have been following the news in the last few weeks, you have probably heard about the New York Times's editorial Why I Defaulted on My Student Loans.  In this opinion piece, the author gives his reasons for not paying his student loans and encourages other borrowers in a similar scenario to do the same.  The article has generated alot of buzz, with several financial and legal experts criticizing this approach.  (Click here and here for good reads on this topic).  

With this in mind, I thought I would discuss in this blog post a related question I sometimes get regarding foreclosure:  does it ever make sense to do a "strategic default" on a mortgage loan?  Is it ever worth it to stop paying for a home?

If the goal is to live at the home for a few years rent free (without concern to the impact on one's credit history), then I suppose a default may make sense.  Otherwise, purposely deciding not to pay a mortgage loan is a bad idea.

As I have written before, getting a free home from a foreclosure defense lawsuit is an unrealistic goal.  The much more realistic goal is affordability: a loan payment that the borrower can pay. However, even with a strong case, foreclosure defense is tough. With that said, a borrower should never risk loosing their home in hopes of getting a free home or a reduced principle balance.  If a borrower is having trouble affording their home, they should try for a loan modification (and consult an attorney if they are not making any progress in this difficult process).  

BLOG POST:

http://maforeclosurelawblog.sherwinlawfirm.com/2015/06/default-mortgage-loan.htm

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http://www.sherwinlawfirm.com

FAQ: What is a Right-to-Cure Notice? When Am I Suppose to Receive This Letter?

Question:  What is a right-to-cure notice?  When am I suppose to receive this letter?

Answer:  A right-to-cure notice is a letter that your servicer must send you prior to foreclosure that gives you an opportunity to reinstate your mortgage loan. The notice will state all of the past, undue mortgage loan payments and tell you the amount needed to make the loan current.  The law on these notices also requires the servicer to include specific disclosures, including the name and contact information of your mortgagee.  

An error in one of these notices may be grounds for challenging foreclosure.  However, after a foreclosure has occurred, a homeowner can only use this defense if they can prove "fundamental unfairness."  There aren't too many court cases on what this means, but the leading case in this area of law suggests that it has to be a major mistake.  Speak to a foreclosure defense attorney to learn if one of these defenses might help you save your home.

BLOG POST:

http://maforeclosurelawblog.sherwinlawfirm.com/2015/06/faq-what-is-right-to-cure-notice.html

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