Foreclosure Help

Foreclosure Help

Foreclosure help can be essential for homeowners attempting to avoid foreclosure and save their homes.  One of the biggest mistakes homeowners make is waiting too long to get assistance with this stressful process.  When should homeowners seek foreclosure help?

Preparing a Loan Modification Application 

Foreclosure defense is not about getting a free home; foreclosure defense is about getting an affordable loan payment.  A loan modification is the general way to obtain this relief from a mortgage lender.  Applying for a loan modification, however, can be a complex process, requiring enormous paperwork and follow-up phone calls with the loan servicer.

A homeowner does not need a lawyer or other professional to help with this process.  However, if a homeowner does it on their own, they need to keep up with the paperwork requirements and do the application correctly.  If the homeowner does not have the time or interest in preparing an application, they should absolutely get the help of a reputable professional for this process.  The Massachusetts Attorney General’s Office is one good resource for seeking such assistance, and there are other non-profit organizations around the state who similarly help with loan modification applications.

Problems With The Review of a Loan Modification Application

If a homeowner is having trouble with a loan modification application, foreclosure help is a must.  Often, a lender’s repeated failure to properly review one of these applications, by “losing” paperwork and coming up with bogus reasons for denial, can be grounds for legal action.

Imminent Foreclosure Sale Date

A homeowner with a imminent foreclosure sale date should likewise obtain foreclosure help, mainly through an attorney.  An attorney can help a homeowner understand options available for stopping a foreclosure and see if a permanent resolution to the problem can be reached.

After a Foreclosure Sale

In my opinion, foreclosure help is an absolute must for any homeowner who has already been foreclosed.  A foreclosure defense attorney can help a former homeowner determine if there are grounds to rescind or buy back the foreclosed property.  Even if the homeowner has no interest in staying in the home, an attorney can be incredibly helpful in ensuring that the homeowner’s rights are protected, and avoiding an additional liability.

If you find yourself in need of foreclosure help, contact me for a consultation.

Sherwin Law Firm Succeeds in Bringing Lawsuit Over a Denial of a Loan Modification

I’m pleased to announced that I prevailed today in bringing a lawsuit against a national lender for the denial of a loan modification.  The court rejected the lender’s argument that the lawsuit should be dismissed, allowing the lawsuit to go forward as planned.  In this lawsuit, I am seeking damages against a lender whose two year refusal to properly review my client’s loan modification application forced him into foreclosure.

What is a Loan Modification?

A loan modification is the restructuring of a mortgage loan to make the payments more affordable.  This generally consists of a combination of a lowered interest rate, term extension, and principle forbearance.  To apply for a loan modification, a borrower must generally prove they have sufficient income to afford a modified loan payment.  Lenders generally want borrowers to provide bank account statements, tax returns, and a variety of other documents about the need for this assistance.

Problems in Applying for Loan Modifications

Despite loan modifications being intended to help homeowners, the process of applying for this assistance is often a mess.  It is not uncommon for lenders to “lose” paperwork and required the repeated submission of the same documents over and over again.  Mortgage lenders have been known to deny loan modifications for reasons that do not make the slightest bit of sense.

What Can Be Done After a Denial of a Loan Modification?

In Massachusetts, like most of the country, a lender is not required to offer a homeowner a loan modification.  As such, a homeowner generally does not have a viable claim against a lender merely because their modification application has been denied.

Massachusetts courts, however, do allow lawsuits to be brought under the Consumer Protection Law under certain circumstances involving the denial of a loan modification.  The Consumer Protection Law, commonly known as Chapter 93A, prohibits “unfair and deceptive business practices.”  Massachusetts courts have taken the positions that repeated instances of misconduct by a lender in the denial of a loan modification can constitute a Consumer Protection Law claim.  This is the key, however: the borrower must alleged more than simply that their application was denied.  Rather, the borrower must show, as one court puts it, a “pattern or course of conduct involving misrepresentations, delay, and evasiveness” in reviewing a loan modification application.

The Consumer Protection Law can be a powerful weapon for consumers facing the denial of a loan modification.  This law, in certain circumstances, can allow for attorney fees, treble damages, and costs if the court find in the borrower’s favor.  In addition to money, the law also provides for equitable relief, which is a remedy other than money, such as a court order rescinding a foreclosure sale.

If your find yourself struggling with the denial of a loan modification, contact me to see if you have a similarly viable lawsuit against your lender.

Beware of Foreclosure Scams

While there are many dedicated professionals committed to helping struggling homeowners avoid foreclosure, the unfortunate reality is that the foreclosure crisis has its share of con artists.  Too often, I have met with homeowners who have come to me after having been scammed by an alleged business claiming to help avoid foreclosure.  These scams require homeowners to pay a large sum of money upfront and give the alleged “business” permission to speak with their financial institution.  These scammers do nothing to help the homeowner, leaving them to face foreclosure despite having spent money for purported foreclosure defense services.

A strong indication of a foreclosure scam is when the alleged business tells the homeowner to send them their monthly mortgage payments, and claims it will then forward the money to the financial institution as part of a loan modification.  Last month, a Lowell man was convicted of such a scheme, showing that such fraud remains prevalent as the foreclosure crisis continues.

How should homeowners beware of foreclosure scams?

  • Research any business, non-profit, or attorney who you are considering hiring for your case.  If you can’t find a reputable website, location of a physical office, or any indication that the service has been in operation for a while, proceed with caution.
  • Stay clear of any business, non-profit, or attorney who requests that you make mortgage payments directly towards them.  There is no reason why loan payments should go anywhere besides directly to your financial institution.
  • As the old adage goes: if it sounds too good to be true, it probably is.  If the purported foreclosure defense service guarantees to get you a free home or permanently avoid foreclosure, strongly considering speaking with a reputable professional.

If you find yourself in need of assistance with foreclosure, contact me for a consultation.  Too much is at stake to take chances with a fraudulent foreclosure defense service.

Appeals Court Issues Decision on Legal Rights Following a Loan Modification

 

The Massachusetts Appeals Court issued an important decision last week concerning a homeowner’s legal rights following a loan modification.  In Barrasso v. New Century Mortgage Corporation, the Appeals Court held that a homeowner was unable to raise prior claims related to their mortgage loan after accepting a modification of that loan (a copy of the decision is below).

Background

In Barrasso, the homeowner entered into a loan modification with their lender, for the purpose of making the loan payments more affordable.  Years later, the homeowner brought a lawsuit against the lender, challenging several of the mortgage loan assignments and whether the present holder of the mortgage was the proper holder of the loan.

Legal Decision

Barrasso held that the homeowner was estopped from challenging the transfer of his mortgage due to the homeowner’s signing of this loan modification.  Estoppel is a legal defense that prevents a party from making an allegation or defense that contradicts a prior representation.  The loan modification in Barrasso, like most loan modification agreements, required the homeowner to agree to several factual representations about the mortgage loan, namely, who held the mortgage.  The Court reasoned that, because the homeowner benefited from this loan modification agreement, it could not then deny one of the prior statements in this agreement that it had agreed to: who the owner of the mortgage was.

Implications to Homeowners

Barrasso follows a line of reasoning that I have often taken with loan modifications: the signing of one of these agreements generally waives any prior legal claims associated with the loan.  A loan modification, in essence, is a new loan, with new terms and conditions.  If a homeowner had legal claims arising from the original loan (such as predatory lending), the homeowner probably won’t be able to raise them following a loan modification.  As explained by Barrasso, if a homeowner gets the benefits of a loan modification, it can’t then go back and raise matters that arose before the modification.

Some loan modification agreements, such as those coming from the federal Home Affordable Modification Program (“HAMP”), do not require a homeowner to waive any legal rights against a lender.  Barrasso makes clear, however, that  a loan modification has strong implications for one’s legal rights following one of these agreements.  Homeowners should keep this in mind when considering accepting a loan modification: homeowners generally won’t be able to raise claims arising out of the prior loan.

Barrasso should not scare homeowners away from accepting a loan modification.  Loan modifications are the best means of avoiding foreclosure, and a homeowner should absolutely accept a modification with an affordable loan payment.  The key is to make sure that such a modification is right for the homeowner.  If you find yourself in such a scenario, contact me for a consultation.

Barrasso v. New Century

Deadline For HAMP

Loan Mod

The final deadline for HAMP (“Home Affordable Modification Program”)  is rapidly approaching: applications for this federal program are due December 30, 2016.

HAMP is a federal program aimed at helping struggling homeowners avoid foreclosure.  Eligible homeowners can obtain a loan modification through a combination of an interest rate reduction, term extension, and principle forbearance.  Applying for HAMP requires proof of income, a variety of tax and financial documents, and a hardship affidavit (showing a reason why the homeowner cannot make their normal loan payments).

HAMP, to say the least, has been a nightmare: servicers routinely lose paperwork, delay reviewing modifications, and deny applications for false and ambiguous reasons.  Despite its shortfalls, HAMP remains one of the best options for homeowners trying to avoid foreclosure.  With this in mind, homeowners in need of loss mitigation assistance should make a note of the deadline for HAMP and submit an application as quickly as possible.

The deadline for HAMP has been extended in the past and I wouldn’t be surprised if that happens again.  However, homeowners should assume that it won’t be extended, and get prepared to submit an application well before the December 30, 2016 deadline.  Don’t procrastinate!  A HAMP application requires an enormous amount of time and collection of documents.  You do not want a loan servicer to deny your application on the grounds that your application was not submitted in time (a reason for denial that, unfortunately, I see occurring for many homeowners who will apply at the end of the year).

When applying for HAMP (or any other loan modification program), be sure to keep a paper trail of your application process.  If you find yourself not getting the results you need, contact a foreclosure defense attorney for assistance.

Tips on Applying for a Loan Modification

Papers

Applying for a loan modification can be an incredibly frustrating experience.  Anyone who hasn’t tried to submit one of these applications to a loan servicer has little idea of how much time and work can go into this process.  I certainty didn’t before I began working in this area of law.  Here are some tips on applying for a loan modification, which I hope are helpful in completing one of these applications.

  • Read the Application Instructions Carefully:  Bank and loan servicers will not hesitate to reject an loan modification application if a page is missing or a line item is not correctly filled out.  One particular trouble spot is with bank account statements: loan modification applications often require every page of these statements, even if several of these pages are blank.  Are some of these requirements overkill?  Absolutely.  But, failing to follow them will result in denied applications and lost time.
  • Show Proof of Income:  To show that you can sustain a loan modification, you need to prove that you have income.  If you work for someone else or receive benefits (such as Social Security), this can easily be done through your paystubs or bank statements.  If you work for yourself, or receive rental income, this gets trickier: the loan sevicer will want to see deposits of this income into a bank account.  If you can’t show this, you can’t prove you have this income.  Be sure that you can show sufficient proof of your income.
  • Show Proof that the Loan Servicer Received Your Application:  Loan modification applications and supplemental information for your application should always be sent through some form of certified mail, to show that the recipient got the information.  If you are submitting the application by fax, get a confirmation that the fax was sent.  Moreover, be sure to follow-up with the loan servicer several days after sending in these documents.
  • Be Prepared to Apply More Than Once:  The unfortunate reality of applying for a loan modification is that the process can take a while, even if you have been applying for it correctly.  Be prepared to apply more than once.
  • Create a Log of Your Applications:  The single most important one of my tips for applying for a loan modification is to create a paper trail of your applications and communications with the loan servicer.  This record will be a tremendous help if you need to take further action later on against the servicer.

If, after several attempts, you have not been successful in getting a review of your loan modification applications, obtain a consultation with a foreclosure defense attorney, who can help you determine the best way to proceed.

Santos v. U.S. Bank: Loan Modification Denial

SJC

The Massachusetts Appeals Court issued an important decision last week in Santos v. U.S. Bank (full decision below) regarding a loan modification denial.  The Court rejected the borrower’s negligence claim, but acknowledge that other grounds exist for fighting a loan modification denial. (Disclaimer: I was involved briefly in both the trial court and appeal of this case).

In Santos, the homeowner was denied a loan modification under the Home Affordable Modification Program (“HAMP”), a federal program that encourages servicers to give struggling homeowners a loan modification.  HAMP, by all accounts, has been a mess: servicers routinely “loose” required paperwork for these applications, deny borrowers for baseless reasons, and stall the process as long as possible.  The failure to properly review these applications, in my opinion, is a major reason for thw continued foreclosure crisis across the country.

After being denied a loan modification, the homeowner in Santos sued the servicer on a claim of negligence: a cause of action against someone for failure to take proper care in doing something (negligence claims are often raised in personal injury cases).  One of the required elements for a negligence claim is that the opposing party have a duty of care to the claimant.  In Santos, the Appeals Court rejected the borrower’s lawsuit because the Court determined that the loan servicer owed no duty of care to the borrower for reviewing his loan modification (despite being a participant in the HAMP program).  Because the servicer owed no duty to the borrower, the borrower in Santos was not permitted to pursue a negligence claim.

The Appeals Court did, however, acknowledge that other grounds could be used for fighting a loan modification denial, such as a Consumer Protection Law (“Chapter 93A”) claim.  To bring such a claim, however, the borrower needs to do more than merely alleged that the servicer failed to follow the HAMP guidelines but instead, that the servicer committed unfair and deceptive business practices (a higher burden than negligence).

Santos illustrates a strange paradox in foreclosure defense: participating loan services in the HAMP program are required to consider homeowners for loan modifications, but failure to properly review a modification application, by itself, will not provide a homeowner with their “day in court” on these matters.  This occurrence is frustrating for homeowners (and foreclosure defense attorneys!) who see that an applicant is entitled to a loan modification, but may not necessarily have a legal cause of action on this important matter.

Santos also discussed another important legal question: whether homeowners can “split” foreclosure defenses in different cases. The Court ruled on the homeowner’s attempt to pursue a foreclosure defense that he had an opportunity to do in the prior, post-foreclosure eviction case (the homeowner filed this case after being evicted from the home).  The Court ruled that res judicata, a legal defense preventing a party from raising claims in multiple cases, barred the homeowner’s later attempt to pursue this defense.  A homeowner, simply put, gets “one bite at the apple” in fighting a foreclosure.  If a homeowner does not raise a foreclosure defense in their legal case, they run the risk of losing it forever.

So, what are the take home lessons from Santos?

  1. Pursuing a case for a loan modification denial requires a showing of a pattern of abuse by the lender in reviewing an application.  Homeowners pursuing a loan modification should always, always keep a paper trail on their application attempts to help build such a case if a lawsuit becomes necessary.
  2. A successful foreclosure defense requires a homeowner to pursue all of their potential claims in a lawsuit, or risk losing them down the road.  This often becomes an issue for homeowners who attempt to represent themselves in court, fail to raise important defenses, and find themselves with limited options if their initial lawsuit is unsuccessful: a reason why such claimants should speak with a foreclosure defense attorney to discuss their options.
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What is a Loan Modification?

loan

I write often about loan modifications, but I’ve had many clients ask me what is a loan modification, and how does it compare to a loan refinance. It is an important topic, as loan modifications are essential for foreclosure defense. 

A loan modification is a restructuring of a mortgage loan.  The purpose is to make the monthly payments of the loan more affordable for the homeowners (the federal HAMP program aims to get the payment down to 31% of the homeowner’s monthly income).  Loan modifications attempt to do this through a variety of four different steps:

  1. Capitalization
  2. Interest Rate Reduction
  3. Term Extension
  4. Principle Forebearance
  5. Principle Reduction

Capitalization is where the lender adds the unpaid arrearage of the loan to the mortgage debt.   Through capitalization, the lender adds these unpaid expenses to the principle of the loan, which the borrower will repay as the part of the entire loan.

An interest rate reduction is where the lender decreases the loan’s interest rate, making the monthly loan payments more affordable.  HAMP permits a loan’s interest rate to be reduced to a minimum of 2%.  Non-HAMP loan modifications generally use the market interest rate (presently between 3% – 4%).

A term extension is an increase of the length of the loan.  HAMP permits loans to be extended up to forty years.  As the length of the loan increases, the monthly payments in turn decrease.

A principle forbearance is where a lender agrees to take a large chunk of a loan and put it at the end of the term.  A borrower is not required to pay interest on this amount of money, and it only becomes due once the loan term ends or the home is sold.  The purpose of a principle forebearance is to make the loan more affordable: while the borrower still owes this money, he or she will not pay interest on this portion of the loan.   However, this money ia still owed to a lender.  In contrast, under principle forgiveness, the  lender agrees to forgive a portion of the loan.  Understanding the difference between these two terms is critical in understanding what is a loan modification, as these two options come up often with modifications.  HAMP, for example, only allows for principle forbearances, without forgiving any portion of the loan.  Non-HAMP modifications, sometimes referred to as “in-house modifications” may be more open to debt forgiveness.

I hope this overview is helpful in understanding what is a loan modification.  If you find yourself having difficult obtaining a loan modification, contact me for a consultation.  As I always tell my clients, a lawyer is not a financial adviser.  Homeowners in need of loss mitigation assistance should always speak with a financial and tax adviser for advice on the advantages and consequences of accepting any sort of loan modification.

99 Homes: Fact v. Fiction

99 Homes Movie Poster.jpg

When foreclosure defense comes to the big screen, you know I’m going to see it.  I took a break from work this weekend to watch 99 Homes, a movie about the 2o1o foreclosure crisis in Florida.  Overall, I thought it was a great movie that brought to life many of the issues I confront with foreclosure defense.   The movie tells the story of a father who, after losing his job, is foreclosed.  In need of work, he ends up getting hired by the same realtor who evicted him, and falls into the sleazy work of foreclosing people who were in his same situation.

For this post, I want to discuss the facts v. fiction of the depiction of the foreclosure/eviction process as shown in the movie.  Bear in mind that I am a Massachusetts attorney, which has a different foreclosure process than Florida.  However, many of the issues remain the same regardless of the state where a foreclosure occurs.

FACT

  • Difficulty in Contacting a Loan Servicer/Bank is a Major Reason Why Foreclosures Occur 

99 Homes does a great job of showing how a homeowner’s inability to successfully work with a loan servicer/bank is often the reason for foreclosure.  Too often, I have seen banks willfully ignore loan modification applications for qualifying homeowners and create excuse after excuse for refusing to properly consider homeowners for loss mitigation assistance.  99 Homes shows how the banks’ refusal to properly offer this assistance has forced many homeowners into foreclosure.

  • The Court Process is Not “User Friendly”

99 Homes shows many of the homeowners attempting to represent themselves in court, with disastrous results.  The movie takes place in 2010, when courts were flooded with foreclosure cases, and many judges simply pushed these matters through.  While things are better now, the court process can still be very difficult to understand, especially for a lay person.  For foreclosure defense, a homeowner should strongly consider seeking the assistance of an experienced lawyer with these matters.

  • The Federal Government is a Major Owner of Foreclosed Properties 

The realtor in 99 Homes often discussed how “Fannie/Freddie” were two of his largest clients.  Fannie Mae and Freddie Mac are government-sponsored entities who are the owners of many mortgage loans across the country.  When a foreclosure occurs, these entities often become the owner of these homes.

  • “Cash for Keys” Is a Popular Means of Shortening the Foreclosure/Eviction Process

The movie depicts the use of “cash for keys” for settling post-foreclosure eviction cases: the bank offers the homeowner a cash settlement (usually $3,000-$5,000) to immediately leave the home.  “Cash for keys” isn’t a terrible option for homeowners who wish to leave their homes and need financial assistance in doing so.  A homeowner interested in this deal should still consult an attorney to discuss this option.

FICTION

  • A Homeowner Facing Foreclosure Can Be Out in a Matter of Days

99 Homes seems to suggest that a homeowner can be out of a foreclosed home in a matter of days.  In Massachusetts, the entire foreclosure process can take 2-3 years, which leaves homeowners with the time necessary to try and save their homes.  Sooner is always better than later in fighting a foreclosure, but rarely does a homeowner only have a matter of days to deal with a foreclosure.

  • Homeowners Have Limited Means of Fighting Foreclosure

Many of the homeowners in the movie are depicted as having few, if any, defenses to foreclosure.  In reality, homeowners have many more defenses available, such as a loan servicer’s refusal to properly consider a loan modification and failure to send the required notices required by the mortgage and law.  Not all of these defenses will work for each homeowner, but homeowners often do have means of defending themselves in these cases.

In need of assistance with foreclosure defense?  Contact me for a consultation.

Fannie Mae’s Standard Loan Modification Program

Loan Mod

Fannie Mae announced last week that it dropped the interest rate for its standard loan modification program.  The new rate is now 4%–competitive with today’s market rates.

Fannie Mae’s standard loan modification program is an alternative to the federal government’s Home Affordable Modification Program (“HAMP”).  The program is available for homeowners whose mortgage loans are owned by Fannie Mae and who are delinquent on their loana.  Similar to a HAMP loan modification, a borrower must have verified income and a hardship (a reason for needing a loan modification).  Fannie Mae loan modifications are an option for borrowers who do not qualify for a HAMP loan modification or were not able to make payments under a prior HAMP loan modification.

Unlike HAMP, Fannie Mae standard loan modifications require considerably less paperwork.  However, these loan modifications often come with a slightly higher interest rate than HAMP modifications and may not allow for as much principle forebearance.

Fannie Mae  standard loan modifications can be a great option for many struggling homeowners trying to avoid foreclosure.  While the interest rates are often higher than HAMP loan modifications, the advantages of obtaining a permanent modification without the burden of an extensive application process make it a great option for many homeowners.

Homeowners interested in this program should consult their loan servicer to see if they apply.  Generally, this program requires homeowners to make trial payment plans (“TPP”), which usually consist of three modified loan payments prior to receiving a permanent modification.  As with all loan modifications, homeowners should create a paper trail  and consult an attorney if they are not getting anywhere with their lender.