To the surprise of no one who is involved with the process of applying for loan modification, Ocwen–one of the country’s largest loan servicers–has been accused of “backdating” letters to borrowers about loan modifications. This, in effect, would have caused many eligible borrowers from receiving the loss mitigation assistance that state and federal law requires for struggling homeowners.
I continue to be shocked by the level of incompetence and carelessness that lenders and servicers use in reviewing loan modification applications. Homeowners who apply for loan modifications should always, always, always keep copies of everything they submit to their servicer and use some form a mailing confirmation, such as certified mail. If a homeowner is not getting a favorable response to their application, they should consult an attorney right away.
Last week, Massachusetts U.S. District Judge Richard Stearns ruled against the Commonwealth of Massachusetts in its lawsuit against Fannie Mae and Freddie Mac. Earlier this year, Massachusetts brought this lawsuit against Fannie Mae and Freddie Mac to enforce a new law that prohibited lenders from refusing to work with nonprofits who help former homeowners buy back foreclosed properties.
I haven’t had an opportunity to review all of the legal arguments in this case, but as a policy matter, Fannie Mae and Freddie Mac’s refusal to follow this state law is shortsighted. These buy back programs ensure that Fannie Mae and Freddie Mac get fair market value of foreclosed properties while allowing former homeowners to remain in their homes. It is a good deal for all involved parties and as government-sponsored enterprises, Fannie Mae and Freddie Mac should be doing much more to help homeowners in need.
Yesterday, I received a letter for one of my client’s regarding her loan modification. This client had been fighting with her loan servicer for over two years to obtain a loan modification, despite having documented income and a clear interest in saving the home. I filed a foreclosure defense lawsuit for her earlier this year and I’m pleased that the case has been settled with my client getting the loan modification she deserved.
In this letter, her servicer notified her that the first mortgage payment would be due on January 1, 2012. Bizarre? Unfortunately, from what I have seen with loan modification files, these errors and careless errors have been all too common.
I’m sure some will ask: what’s the big deal? Couldn’t your client just call the servicer and get the correct date? The problem is the widespread practice of loan servicers routinely playing games with loan modification applications in blatant violation of state and federal law. Struggling homeowners, who can afford a modified payment, become the victims of these errors. A single, incorrect date may not be a huge deal, but it is reminder that loan servicers are often sloppy with their paperwork. With this in mind, homeowners need to keep records of everything they submit to a loan servicer and seek an attorney if the servicer is not playing by the rules.
Question: Do I need to hire a lawyer for a landlord/tenant case?
Answer: As with all legal questions: it depends. In Massachusetts, a business entity (ex. corporation, limited liability company) must be represented by an attorney in court (except for small claims court). If your business organization (as opposed to you personally) is involved in a landlord/tenant matter, you need a lawyer.
If you are not a business organization, you do have the option of representing yourself in court. While some people can represent themselves effectively in these matters, many find these issues too complex to handle without a legal background. More importantly, many landlord/tenant matters become contentious, with both sides unable to work together for a resolution to the case. If you find yourself in such a situation, give serious thought to hiring a lawyer for your case.
Homeowners who have questions about their mortgage loans or wish to dispute an error with their servicer have a useful tool at their disposal: a qualified written request (“QWR”).
A QWR is a requirement for loan servicers under the Real Estate Settlement Procedures Act (“RESPA”). QWRs are written requests to loan servicers to dispute an error in a mortgage loan. For example, if a homeowner believes that their loan servicer has not properly credited their account with a mortgage loan payment, they can notify the servicer of this through a QWR.
QWRs are useful not only for fixing errors, but also for obtaining important information about their mortgage loan. A homeowner can request that the mortgage servicer notify them of which entity owns the loan and request a copy of the promissory note (the contract that the homeowner entered into for the purchase of the home). Believe it or not, this information is not always easy to find, and a QWR is a useful means of getting this information.
A QWR needs to be in writing, and should be sent separately from a regular loan payment to the servicer. Loan servicers often have separate addresses for QWRs (which can often be found on their websites). If you cannot find this address, you can call the servicer and ask where it should be sent to. A QWR should always be sent using certified mail, so there is proof that the servicer received the request.
When preparing a QWR, avoid making a “laundry list” of documents that you are looking for. Case law suggests that a loan servicer does not need to respond to a long list of requested documents, but instead, merely needs to address a borrower’s specific concerns. The best practice in a QWR request is to state your reason for writing the letter and request any relevant documents related to the inquiry. For example, I always ask for a validation of the underlining debt; specifically a copy of the promissory note and any documents showing how this instrument has been sold during the life of the loan.
A borrower can sue a loan servicer for its failure to comply with a QWR. With this in mind, borrowers should keep detailed records of their QWR letter and proof that it was sent.
When a landlord rents an apartment, the landlord remains the owner of the property but grants possession of the premises to the tenant(s). In other words, even though a landlord is still the owner of the property, they no longer have unlimited access to the premises. Massachusetts law only allows a landlord to enter a rented apartment for a number of limited reasons, such as to inspect the premises, make repairs, or show the apartment to a potential new renter.
A landlord is required, however, to give the tenant(s) reasonable notice before entry. While there is no set rule on what “reasonable notice” is, I recommend that landlords provide at least one day’s notice prior to entry. Most importantly, landlords should provide this notice in writing, even if the landlord speaks with the tenant in person. A quick email is one easy way to do this.
If a landlord refuses to provide a tenant with notice prior to entry, a tenant can seek damages against the landlord, including an injunction or restraining order preventing the landlord from entering the apartment. Such steps, however, are often unnecessary; sometimes a cordial conversation between the landlord and tenant is all that is needed to resolve these problems.
Question: If I am foreclosed, will I owe the bank any money from my mortgage loan?
Answer: After a foreclosure, the bank is entitled to collect any deficiency judgment owed following the foreclosure sale. The deficiency judgment is the difference between the amount you owe on the loan and the amount of money the home is sold for at the foreclosure sale. For example, if you owe $400,000 on the mortgage loan and the home sells for $300,000, the deficiency judgment would be $100,000. This is the amount that the lender could attempt to collect against you personally in a lawsuit.
A homeowner’s personal liability on the mortgage loan can be eliminated through a bankruptcy. If you filed for bankruptcy and received a discharge on your mortgage loan, the lender cannot collect this debt against you (it can, however, still foreclose the home).
The deadline for a bank to file a deficiency judgment case on a mortgage loan is two years after the foreclosure sale (“Statute of Limitations”). If the bank does not file in these two years, they lose their right to collect this debt.
Banks rarely attempt to collect deficiency judgments; most of the time, the homeowner will not have any assets that make such a lawsuit worthwhile. Nonetheless, a homeowner should always ask the bank to waive the deficiency judgment against them in any settlement for a foreclosure matter.
There are several tax consequences relating to deficiency judgments. Homeowners should always consult a tax expert before making any decisions related to these matters.
Massachusetts eviction law allows a tenant to ask the court to delay their move-out from the property. This is commonly referred to as a “stay of execution.” An execution is the formal court document that permits a landlord to obtain possession of the premises through the sheriff or constable. Eviction law allows a tenant to request that the court delay issuing this document and, consequently, postpone the eviction.
As written, the law really only applies to “no-fault evictions”, where the tenant is being forced to leave without cause (as opposed to an eviction based on non-payment of rent or violation of the lease). However, under the right circumstances, the court may be inclined to stay an execution for tenants in other circumstances, if they can show good cause. The law allows the court to stay the execution for up to six months (twelve months for a party over sixty years of age).
A stay of execution can be difficult to obtain and is left entirely to the discretion of the judge. The judge will likely want to see good reasons for granting a stay, and proof that the tenant is making a real effort to find new housing. Tenants have a better chance of getting a stay of execution if they are willing to pay rent for the time they wish to remain in the premises.
Landlords need to remember that tenants have this option of seeking a stay of execution in an eviction case, and should require the tenant to waive this right as part of any settlement agreement in one of these cases.
Question: I have been foreclosed. Do I need to leave my home right away?
Answer: No. Massachusetts is a “non-judicial foreclosure state.” This means that the lender can perform a foreclosure without going to court. However, once the foreclosure is complete, the lender needs to obtain possession of the property, which can only be done through a formal eviction (“summary process”). This usually begins several months after the foreclosure sale occurred. A former homeowner can only be evicted from a property if the lender obtains an execution for possession following a successful eviction. Homeowners who have been foreclosed should seek an attorney if faced with an eviction summons; even if the homeowner does not plan to stay in the home, an attorney can help the homeowner leave the home on the best terms possible.
I’m willing to bet that among the frequently asked questions on landlord/tenant law, the following is at the top of the list: “If my tenant is not paying his or her rent, can I change the locks of the apartment? Can I turn off the utilities?” The answer, in one word: No!
These actions of trying to evict a tenant without going to court, often called “self-help,” are against the law. Not only will this result in civil liabilities, which could include huge monetary damages, a landlord can end up in jail for doing any form of “self help.” Simply put, a formal eviction is the sole means of dealing with a tenant that a landlord wants to get rid of. This doesn’t mean that a landlord cannot try to settle a case with a tenant outside of court, but any interference with a tenant’s living situation is a huge problem.
No doubt, landlord/tenant cases can be frustrating, but landlords are much better off speaking with an experienced attorney instead of trying to take matters into their own hands. The risks just aren’t worth it.