MORTGAGE RIGHTS
Loan Modification Mistakes Litigating Loan Modification Mistakes
Are you in foreclosure? I ask this question first because I only deal with modification failures in foreclosure actions. Let me explain. If your question deals with such things as whether the rent your son pays counts as income, I am not the person you need. There is free foreclosure help available to you at HUD-Approved Counseling Agencies. These agencies, which are sponsored by the U.S. Department of Housing and Urban Development, can develop a tailored plan of action for your situation and help you work with your mortgage company. With their knowledge of the available programs and financial situations, the agencies can help you organize your finances, understand your mortgage options, and find a solution that works for you. Call (800)569-4287 The phone system will ask you to enter your ZIP code and will refer you to a counselor near you. There are attorneys who can represent you during the application process, answering such questions as whether the waterfall was followed correctly or what to do if a qualified application was wrongfully denied. I belong to two excellent listserves that are dedicated to these questions: the HAMP Enforcement Google Group and the NACA Mortgage Listserve. I do not know whether homeowners can obtain the names of the members of the Google Group. Only lawyers who are members of NACA (National Association of Consumer Advocates) can access the mortgage listserve. NACA, however, publishes a list of attorneys who work in this area. Go to consumeradvocates.org and click on the Find an Attorney box. Another source of considerable knowledge is the National Consumer Law Center. Its website is nclc.org. The Mortgage Professor site (mtgprofessor.com) also has articles on loan modifications and homeowners with payment problems. The Mortgage Porfessor is Jack M. Guttentag, Professor of Finance Emeritus at the Wharton School of the University of Pennsylvania. You have to love the internet for putting you in touch with such skilled advice! Loss Mitigation Litigation I become involved when a homeowner is driven into foreclosure because the servicer failed to act properly. I analyze the loss mitigation process for defenses and counterclaims. I focus on how procedural errors can force homeowners into foreclosure, and prevent the homeowners from saving their homes. For example, as I explain in Time Is Not on Your Side, undue delay can make it impossible for a homeowner to accept a loan modification. The Consumer Financial Protection Bureau brought an enforcement action against Flagstar Bank that included a number of the abusive practices in this area. Flagstar was so abusive, the CFPB found that the bank illegally blocked homeowners from saving their homes. The CFPB enforcement action is a good description of how the loss modification process can drive homeowners out of their homes. Flagler's violations grew out of its inadequate response to the foreclosure crisis. In 2011, Flagstar had 13,000 active applications for help, but only 25 full-time employees and a company in India to handle the load. For a time, it took Flagstar's staff up to 9 months to review a single application. Those of you who have already attempted to get a modification know that some of the information is time-sensitive. For example, the servicer may ask for your last 2 pay stubs. This information about your pay is out of date every time you are paid because your new pay stub is one of the "last two" pay stubs that the mortgage company asked for. Flagstar cleared its backlog of applications by denying all files that contained expired documents, such as pay stubs, even though the documents had expired because Flagler sat on the applications too long! Flagstar's handling of phone calls should be familiar with those of you who have tried to get a modification. My clients have reported long wait times; transfers to departments that could not answer the homeowner's questions; and, rude employees who called the homeowners "deadbeats" and told them to just pay their mortgage. At Flagstar, the average hold time was 25 minutes. Fifty percent of the homeowners who called Flagstar's loss mitigation department gave up, hanging up before they got help. When Flagstar actually reviewed an application, it did a bad job of it. Flagstar routinely miscalculated the homeowner's income. This is a real problem because the decision whether to grant a modification depends heavily on the borrower's income. Flagstar wrongfully denied modifications to qualified homeowners. Flagstar failed to give homeowners a reason for their denial. This information is important since homeowners can correct some problems and reapply. Flagstar's homeowners did not get this chance. The Consumer Financial Protection Bureau now requires mortgage companies to provide an appeal process in which employees who were not involved in the denial review the application. Flagstar failed to tell its homeowners that they could appeal. The normal length of a trial modification is 3 months. Flagstar kept homeowners in trial modifications for lengthy periods. As I explain in the next section, the delay caused some homeowners to default. Repeated Requests for Documents A complaint I hear over and over is that the servicer asks for the same documents repeatedly. There is a way to turn this practice back on the servicer. You need, however, to keep track of what you sent to the servicer and when you sent it. I use an internet fax service becuase it archives a complete copy of my fax along with a record of when the fax was received. Shops such as Fed Ex Office can do the same thing for you. If a servicer repeatedly asks for documents it has already received, it violates the reasonable diligence requirement in RESPA (Real Estate Settlement Procedures ACt). RESPA provides that a "servicer shall exercise reasonable diligence in obtaining documents and information to complete a loss mitigation application." 12 C.F.R. § 1024.41(b)(1). Here is an example taken from a court's opinion: The Dionnes allege that Chase violated this regulation by repeatedly requesting documents they had already submitted multiple times, and by requesting documents even when it had previously told the Dionnes that it did not need anything further from them. Further, Chase claimed certain faxed documents were illegible, but the Dionnes verified that faxed copies of those documents were legible. These allegations set forth a plausible claim that Chase did not exercise reasonable diligence in obtaining documents and information to complete the Dionnes' loss mitigation application. Dionne v. Fed. Nat'l Mortg. Ass'n, 2016 DNH 93 (D.N.H., 2016) Misrepresentation Another problem for homeowners is that the loan servicer makes misrepresentations. Here is an outrageous example: Plaintiff owned property in Riverside. In July 2005, plaintiff refinanced the loan on his property with a total loan amount of $815,000. This was an adjustable rate mortgage. The loan was serviced by defendant HomEq Servicing (HomEq). For the first 21 months of the loan, plaintiff was current on his payments. During the period between June 2007 and September 2007, the monthly payment on the loan increased first to $5,968 per month, and then to $6,800 per month. In August 2007, plaintiff applied for a loan modification to try making payments more affordable. In February 2008, HomEq informed plaintiff that he had to make “a lump sum $12,000 payment as a ‘modification processing fee’ before Plaintiff could ... see the terms of the proposed modification.” Plaintiff paid the fee. In March 2008, HomEq gave plaintiff a loan modification agreement, to which the parties agreed. Under the terms of that agreement, plaintiff's loan balance was increased to $834,051.86. The interest rate was fixed at 5.990 percent (the prior rate was 7.490 percent), and the monthly payment would be $6,236.78. Plaintiff made a payment under that agreement,1 but the next month HomEq stated they would no longer honor the terms of that agreement. Instead, HomEq sent a new agreement that increased the loan balance to $870,767.34. It offered no explanation for the change. Plaintiff believed the March 2008 agreement was valid, and thus he made payments to HomEq under that agreement for March, April, and June of 2008, totaling $18,789. In June 2008, HomEq sent plaintiff yet another loan modification agreement, this time raising the balance to $895,117.18, again without explanation. In July 2008, HomEq sent correspondence to plaintiff demanding a payment of $35,684 to process a new loan modification. HomEq then began refusing plaintiff's payments under the March 2008 agreement, requiring that he pay $7,600 per month instead. When plaintiff insisted on the terms of the March 2008 agreement, HomEq recorded a notice of default and election to sell the property. In October 2008, HomEq recorded a notice of trustee's sale of the property with a sale date of November 20, 2008. HomEq then informed plaintiff it would give him a new modification if he would send a payment of $14,050. In light of the looming sale date, plaintiff complied. Instead of sending a loan modification agreement, however, HomEq sent a forbearance agreement and demanded a payment of $1,450 before it would send a modification agreement. Plaintiff continued trying to work with HomEq until February 2009, when HomEq sent another loan modification agreement, this time asking for an upfront payment of $29,771. “Having paid $44,000.00 over a 10 month period for modifications that never materialized, Plaintiff had no faith that any further payments would have any better result so he declined to make the requested payment.” Defendants set a sale date for plaintiff's house of March 23, 2009. On March 19, 2009, plaintiff obtained a temporary restraining order against the sale of his house from the Riverside County Superior Court. Plaintiff alleges on information and belief that defendants had notice of the order. Nonetheless, defendants proceeded with the sale on March 23, 2009, and dispossessed plaintiff. Miles v. Deutsche Bank Nat'l Trust Co., 236 Cal. App. 4th 394, 186 Cal.Rptr.3d 625 (Cal. App., 2015) HomEq argued that the misrepresentation claim was not valid because the representation concerned a future event, giving the homeowner a modification. The court rejected this argument: The defendants contend a misrepresentation cause of action does not lie where the misrepresentation pertains to future events: “The reason for this requirement is obvious: it is not possible to determine whether someone making a representation did so with knowledge, or reckless disregard, of the truth of the alleged representation if the representation was not made at a time in which it was known to be true or false. Therefore, the alleged promise to modify the Plaintiff's loan cannot form the basis of a fraud or misrepresentation claim, because the Plaintiff cannot allege that the person making such a representation knew it to be true or false, as it concerned a future event.” Defendants later concede, however, “The only circumstances under which a future promise may form the basis of a fraud claim is where the plaintiff can allege facts that the promisor made a promise with no intent of performing.” Indeed, the nature of promissory fraud is that it is a promise of future performance with no present intent to actually perform. (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638, 49 Cal.Rptr.2d 377, 909 P.2d 981.) And this is precisely what plaintiff alleges: “42. Defendants induced Plaintiff into entering into making payments of more than $44,000.00 on the promise of providing Plaintiff with a reasonable modification of the loan on the Property. [¶] 43. At the time that Defendants made these representations, they knew them to be false as Defendants had no intention of honoring their promise to provide Plaintiff with a permanent loan modification but instead, intended to strip the Plaintiff of all of his liquid assets and then proceed with foreclosure on Plaintiff's Property.” Accordingly, the misrepresentation causes of action are not demurrable on the ground they involved a future event.
NEXT: Time Is Not on Your Side
 MORTGAGE RIGHTS
The site does not provide legal advice. Neither Susan LaCava nor her law firm, LaCava Law, S.C., represent you until there is a signed retainer agreement.
Loan Modification Mistakes Litigating Loan Modification Mistakes Are you in foreclosure? I ask this question first because I only deal with modification failures in foreclosure actions. Let me explain. If your question deals with such things as whether the rent your son pays counts as income, I am not the person you need. There is free foreclosure help available to you at HUD-Approved Counseling Agencies. These agencies, which are sponsored by the U.S. Department of Housing and Urban Development, can develop a tailored plan of action for your situation and help you work with your mortgage company. With their knowledge of the available programs and financial situations, the agencies can help you organize your finances, understand your mortgage options, and find a solution that works for you. Call (800)569-4287 The phone system will ask you to enter your ZIP code and will refer you to a counselor near you. There are attorneys who can represent you during the application process, answering such questions as whether the waterfall was followed correctly or what to do if a qualified application was wrongfully denied. I belong to two excellent listserves that are dedicated to these questions: the HAMP Enforcement Google Group and the NACA Mortgage Listserve. I do not know whether homeowners can obtain the names of the members of the Google Group. Only lawyers who are members of NACA (National Association of Consumer Advocates) can access the mortgage listserve. NACA, however, publishes a list of attorneys who work in this area. Go to consumeradvocates.org and click on the Find an Attorney box. Another source of considerable knowledge is the National Consumer Law Center. Its website is nclc.org. The Mortgage Professor site (mtgprofessor.com) also has articles on loan modifications and homeowners with payment problems. The Mortgage Porfessor is Jack M. Guttentag, Professor of Finance Emeritus at the Wharton School of the University of Pennsylvania. You have to love the internet for putting you in touch with such skilled advice! Loss Mitigation Litigation I become involved when a homeowner is driven into foreclosure because the servicer failed to act properly. I analyze the loss mitigation process for defenses and counterclaims. I focus on how procedural errors can force homeowners into foreclosure, and prevent the homeowners from saving their homes. For example, as I explain in Time Is Not on Your Side, undue delay can make it impossible for a homeowner to accept a loan modification. The Consumer Financial Protection Bureau brought an enforcement action against Flagstar Bank that included a number of the abusive practices in this area. Flagstar was so abusive, the CFPB found that the bank illegally blocked homeowners from saving their homes. The CFPB enforcement action is a good description of how the loss modification process can drive homeowners out of their homes. Flagler's violations grew out of its inadequate response to the foreclosure crisis. In 2011, Flagstar had 13,000 active applications for help, but only 25 full-time employees and a company in India to handle the load. For a time, it took Flagstar's staff up to 9 months to review a single application. Those of you who have already attempted to get a modification know that some of the information is time-sensitive. For example, the servicer may ask for your last 2 pay stubs. This information about your pay is out of date every time you are paid because your new pay stub is one of the "last two" pay stubs that the mortgage company asked for. Flagstar cleared its backlog of applications by denying all files that contained expired documents, such as pay stubs, even though the documents had expired because Flagler sat on the applications too long! Flagstar's handling of phone calls should be familiar with those of you who have tried to get a modification. My clients have reported long wait times; transfers to departments that could not answer the homeowner's questions; and, rude employees who called the homeowners "deadbeats" and told them to just pay their mortgage. At Flagstar, the average hold time was 25 minutes. Fifty percent of the homeowners who called Flagstar's loss mitigation department gave up, hanging up before they got help. When Flagstar actually reviewed an application, it did a bad job of it. Flagstar routinely miscalculated the homeowner's income. This is a real problem because the decision whether to grant a modification depends heavily on the borrower's income. Flagstar wrongfully denied modifications to qualified homeowners. Flagstar failed to give homeowners a reason for their denial. This information is important since homeowners can correct some problems and reapply. Flagstar's homeowners did not get this chance. The Consumer Financial Protection Bureau now requires mortgage companies to provide an appeal process in which employees who were not involved in the denial review the application. Flagstar failed to tell its homeowners that they could appeal. The normal length of a trial modification is 3 months. Flagstar kept homeowners in trial modifications for lengthy periods. As I explain in the next section, the delay caused some homeowners to default. Repeated Requests for Documents A complaint I hear over and over is that the servicer asks for the same documents repeatedly. There is a way to turn this practice back on the servicer. You need, however, to keep track of what you sent to the servicer and when you sent it. I use an internet fax service becuase it archives a complete copy of my fax along with a record of when the fax was received. Shops such as Fed Ex Office can do the same thing for you. If a servicer repeatedly asks for documents it has already received, it violates the reasonable diligence requirement in RESPA (Real Estate Settlement Procedures ACt). RESPA provides that a "servicer shall exercise reasonable diligence in obtaining documents and information to complete a loss mitigation application." 12 C.F.R. § 1024.41(b)(1). Here is an example taken from a court's opinion: The Dionnes allege that Chase violated this regulation by repeatedly requesting documents they had already submitted multiple times, and by requesting documents even when it had previously told the Dionnes that it did not need anything further from them. Further, Chase claimed certain faxed documents were illegible, but the Dionnes verified that faxed copies of those documents were legible. These allegations set forth a plausible claim that Chase did not exercise reasonable diligence in obtaining documents and information to complete the Dionnes' loss mitigation application. Dionne v. Fed. Nat'l Mortg. Ass'n, 2016 DNH 93 (D.N.H., 2016) Misrepresentation Another problem for homeowners is that the loan servicer makes misrepresentations. Here is an outrageous example: Plaintiff owned property in Riverside. In July 2005, plaintiff refinanced the loan on his property with a total loan amount of $815,000. This was an adjustable rate mortgage. The loan was serviced by defendant HomEq Servicing (HomEq). For the first 21 months of the loan, plaintiff was current on his payments. During the period between June 2007 and September 2007, the monthly payment on the loan increased first to $5,968 per month, and then to $6,800 per month. In August 2007, plaintiff applied for a loan modification to try making payments more affordable. In February 2008, HomEq informed plaintiff that he had to make “a lump sum $12,000 payment as a ‘modification processing fee’ before Plaintiff could ... see the terms of the proposed modification.” Plaintiff paid the fee. In March 2008, HomEq gave plaintiff a loan modification agreement, to which the parties agreed. Under the terms of that agreement, plaintiff's loan balance was increased to $834,051.86. The interest rate was fixed at 5.990 percent (the prior rate was 7.490 percent), and the monthly payment would be $6,236.78. Plaintiff made a payment under that agreement,1 but the next month HomEq stated they would no longer honor the terms of that agreement. Instead, HomEq sent a new agreement that increased the loan balance to $870,767.34. It offered no explanation for the change. Plaintiff believed the March 2008 agreement was valid, and thus he made payments to HomEq under that agreement for March, April, and June of 2008, totaling $18,789. In June 2008, HomEq sent plaintiff yet another loan modification agreement, this time raising the balance to $895,117.18, again without explanation. In July 2008, HomEq sent correspondence to plaintiff demanding a payment of $35,684 to process a new loan modification. HomEq then began refusing plaintiff's payments under the March 2008 agreement, requiring that he pay $7,600 per month instead. When plaintiff insisted on the terms of the March 2008 agreement, HomEq recorded a notice of default and election to sell the property. In October 2008, HomEq recorded a notice of trustee's sale of the property with a sale date of November 20, 2008. HomEq then informed plaintiff it would give him a new modification if he would send a payment of $14,050. In light of the looming sale date, plaintiff complied. Instead of sending a loan modification agreement, however, HomEq sent a forbearance agreement and demanded a payment of $1,450 before it would send a modification agreement. Plaintiff continued trying to work with HomEq until February 2009, when HomEq sent another loan modification agreement, this time asking for an upfront payment of $29,771. “Having paid $44,000.00 over a 10 month period for modifications that never materialized, Plaintiff had no faith that any further payments would have any better result so he declined to make the requested payment.” Defendants set a sale date for plaintiff's house of March 23, 2009. On March 19, 2009, plaintiff obtained a temporary restraining order against the sale of his house from the Riverside County Superior Court. Plaintiff alleges on information and belief that defendants had notice of the order. Nonetheless, defendants proceeded with the sale on March 23, 2009, and dispossessed plaintiff. Miles v. Deutsche Bank Nat'l Trust Co., 236 Cal. App. 4th 394, 186 Cal.Rptr.3d 625 (Cal. App., 2015) HomEq argued that the misrepresentation claim was not valid because the representation concerned a future event, giving the homeowner a modification. The court rejected this argument: The defendants contend a misrepresentation cause of action does not lie where the misrepresentation pertains to future events: “The reason for this requirement is obvious: it is not possible to determine whether someone making a representation did so with knowledge, or reckless disregard, of the truth of the alleged representation if the representation was not made at a time in which it was known to be true or false. Therefore, the alleged promise to modify the Plaintiff's loan cannot form the basis of a fraud or misrepresentation claim, because the Plaintiff cannot allege that the person making such a representation knew it to be true or false, as it concerned a future event.” Defendants later concede, however, “The only circumstances under which a future promise may form the basis of a fraud claim is where the plaintiff can allege facts that the promisor made a promise with no intent of performing.” Indeed, the nature of promissory fraud is that it is a promise of future performance with no present intent to actually perform. (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638, 49 Cal.Rptr.2d 377, 909 P.2d 981.) And this is precisely what plaintiff alleges: “42. Defendants induced Plaintiff into entering into making payments of more than $44,000.00 on the promise of providing Plaintiff with a reasonable modification of the loan on the Property. [¶] 43. At the time that Defendants made these representations, they knew them to be false as Defendants had no intention of honoring their promise to provide Plaintiff with a permanent loan modification but instead, intended to strip the Plaintiff of all of his liquid assets and then proceed with foreclosure on Plaintiff's Property.” Accordingly, the misrepresentation causes of action are not demurrable on the ground they involved a future event.
 MORTGAGE RIGHTS
 MORTGAGE RIGHTS
The site does not provide legal advice. Neither Susan LaCava nor her law firm, LaCava Law, S.C., represent you until there is a signed retainer agreement.
Loan Modification Mistakes Litigating Loan Modification Mistakes Are you in foreclosure? I ask this question first because I only deal with modification failures in foreclosure actions. Let me explain. If your question deals with such things as whether the rent your son pays counts as income, I am not the person you need. There is free foreclosure help available to you at HUD-Approved Counseling Agencies. These agencies, which are sponsored by the U.S. Department of Housing and Urban Development, can develop a tailored plan of action for your situation and help you work with your mortgage company. With their knowledge of the available programs and financial situations, the agencies can help you organize your finances, understand your mortgage options, and find a solution that works for you. Call (800)569-4287 The phone system will ask you to enter your ZIP code and will refer you to a counselor near you. There are attorneys who can represent you during the application process, answering such questions as whether the waterfall was followed correctly or what to do if a qualified application was wrongfully denied. I belong to two excellent listserves that are dedicated to these questions: the HAMP Enforcement Google Group and the NACA Mortgage Listserve. I do not know whether homeowners can obtain the names of the members of the Google Group. Only lawyers who are members of NACA (National Association of Consumer Advocates) can access the mortgage listserve. NACA, however, publishes a list of attorneys who work in this area. Go to consumeradvocates.org and click on the Find an Attorney box. Another source of considerable knowledge is the National Consumer Law Center. Its website is nclc.org. The Mortgage Professor site (mtgprofessor.com) also has articles on loan modifications and homeowners with payment problems. The Mortgage Porfessor is Jack M. Guttentag, Professor of Finance Emeritus at the Wharton School of the University of Pennsylvania. You have to love the internet for putting you in touch with such skilled advice! Loss Mitigation Litigation I become involved when a homeowner is driven into foreclosure because the servicer failed to act properly. I analyze the loss mitigation process for defenses and counterclaims. I focus on how procedural errors can force homeowners into foreclosure, and prevent the homeowners from saving their homes. For example, as I explain in Time Is Not on Your Side, undue delay can make it impossible for a homeowner to accept a loan modification. The Consumer Financial Protection Bureau brought an enforcement action against Flagstar Bank that included a number of the abusive practices in this area. Flagstar was so abusive, the CFPB found that the bank illegally blocked homeowners from saving their homes. The CFPB enforcement action is a good description of how the loss modification process can drive homeowners out of their homes. Flagler's violations grew out of its inadequate response to the foreclosure crisis. In 2011, Flagstar had 13,000 active applications for help, but only 25 full-time employees and a company in India to handle the load. For a time, it took Flagstar's staff up to 9 months to review a single application. Those of you who have already attempted to get a modification know that some of the information is time-sensitive. For example, the servicer may ask for your last 2 pay stubs. This information about your pay is out of date every time you are paid because your new pay stub is one of the "last two" pay stubs that the mortgage company asked for. Flagstar cleared its backlog of applications by denying all files that contained expired documents, such as pay stubs, even though the documents had expired because Flagler sat on the applications too long! Flagstar's handling of phone calls should be familiar with those of you who have tried to get a modification. My clients have reported long wait times; transfers to departments that could not answer the homeowner's questions; and, rude employees who called the homeowners "deadbeats" and told them to just pay their mortgage. At Flagstar, the average hold time was 25 minutes. Fifty percent of the homeowners who called Flagstar's loss mitigation department gave up, hanging up before they got help. When Flagstar actually reviewed an application, it did a bad job of it. Flagstar routinely miscalculated the homeowner's income. This is a real problem because the decision whether to grant a modification depends heavily on the borrower's income. Flagstar wrongfully denied modifications to qualified homeowners. Flagstar failed to give homeowners a reason for their denial. This information is important since homeowners can correct some problems and reapply. Flagstar's homeowners did not get this chance. The Consumer Financial Protection Bureau now requires mortgage companies to provide an appeal process in which employees who were not involved in the denial review the application. Flagstar failed to tell its homeowners that they could appeal. The normal length of a trial modification is 3 months. Flagstar kept homeowners in trial modifications for lengthy periods. As I explain in the next section, the delay caused some homeowners to default. Repeated Requests for Documents A complaint I hear over and over is that the servicer asks for the same documents repeatedly. There is a way to turn this practice back on the servicer. You need, however, to keep track of what you sent to the servicer and when you sent it. I use an internet fax service becuase it archives a complete copy of my fax along with a record of when the fax was received. Shops such as Fed Ex Office can do the same thing for you. If a servicer repeatedly asks for documents it has already received, it violates the reasonable diligence requirement in RESPA (Real Estate Settlement Procedures ACt). RESPA provides that a "servicer shall exercise reasonable diligence in obtaining documents and information to complete a loss mitigation application." 12 C.F.R. § 1024.41(b)(1). Here is an example taken from a court's opinion: The Dionnes allege that Chase violated this regulation by repeatedly requesting documents they had already submitted multiple times, and by requesting documents even when it had previously told the Dionnes that it did not need anything further from them. Further, Chase claimed certain faxed documents were illegible, but the Dionnes verified that faxed copies of those documents were legible. These allegations set forth a plausible claim that Chase did not exercise reasonable diligence in obtaining documents and information to complete the Dionnes' loss mitigation application. Dionne v. Fed. Nat'l Mortg. Ass'n, 2016 DNH 93 (D.N.H., 2016) Misrepresentation Another problem for homeowners is that the loan servicer makes misrepresentations. Here is an outrageous example: Plaintiff owned property in Riverside. In July 2005, plaintiff refinanced the loan on his property with a total loan amount of $815,000. This was an adjustable rate mortgage. The loan was serviced by defendant HomEq Servicing (HomEq). For the first 21 months of the loan, plaintiff was current on his payments. During the period between June 2007 and September 2007, the monthly payment on the loan increased first to $5,968 per month, and then to $6,800 per month. In August 2007, plaintiff applied for a loan modification to try making payments more affordable. In February 2008, HomEq informed plaintiff that he had to make “a lump sum $12,000 payment as a ‘modification processing fee’ before Plaintiff could ... see the terms of the proposed modification.” Plaintiff paid the fee. In March 2008, HomEq gave plaintiff a loan modification agreement, to which the parties agreed. Under the terms of that agreement, plaintiff's loan balance was increased to $834,051.86. The interest rate was fixed at 5.990 percent (the prior rate was 7.490 percent), and the monthly payment would be $6,236.78. Plaintiff made a payment under that agreement,1 but the next month HomEq stated they would no longer honor the terms of that agreement. Instead, HomEq sent a new agreement that increased the loan balance to $870,767.34. It offered no explanation for the change. Plaintiff believed the March 2008 agreement was valid, and thus he made payments to HomEq under that agreement for March, April, and June of 2008, totaling $18,789. In June 2008, HomEq sent plaintiff yet another loan modification agreement, this time raising the balance to $895,117.18, again without explanation. In July 2008, HomEq sent correspondence to plaintiff demanding a payment of $35,684 to process a new loan modification. HomEq then began refusing plaintiff's payments under the March 2008 agreement, requiring that he pay $7,600 per month instead. When plaintiff insisted on the terms of the March 2008 agreement, HomEq recorded a notice of default and election to sell the property. In October 2008, HomEq recorded a notice of trustee's sale of the property with a sale date of November 20, 2008. HomEq then informed plaintiff it would give him a new modification if he would send a payment of $14,050. In light of the looming sale date, plaintiff complied. Instead of sending a loan modification agreement, however, HomEq sent a forbearance agreement and demanded a payment of $1,450 before it would send a modification agreement. Plaintiff continued trying to work with HomEq until February 2009, when HomEq sent another loan modification agreement, this time asking for an upfront payment of $29,771. “Having paid $44,000.00 over a 10 month period for modifications that never materialized, Plaintiff had no faith that any further payments would have any better result so he declined to make the requested payment.” Defendants set a sale date for plaintiff's house of March 23, 2009. On March 19, 2009, plaintiff obtained a temporary restraining order against the sale of his house from the Riverside County Superior Court. Plaintiff alleges on information and belief that defendants had notice of the order. Nonetheless, defendants proceeded with the sale on March 23, 2009, and dispossessed plaintiff. Miles v. Deutsche Bank Nat'l Trust Co., 236 Cal. App. 4th 394, 186 Cal.Rptr.3d 625 (Cal. App., 2015) HomEq argued that the misrepresentation claim was not valid because the representation concerned a future event, giving the homeowner a modification. The court rejected this argument: The defendants contend a misrepresentation cause of action does not lie where the misrepresentation pertains to future events: “The reason for this requirement is obvious: it is not possible to determine whether someone making a representation did so with knowledge, or reckless disregard, of the truth of the alleged representation if the representation was not made at a time in which it was known to be true or false. Therefore, the alleged promise to modify the Plaintiff's loan cannot form the basis of a fraud or misrepresentation claim, because the Plaintiff cannot allege that the person making such a representation knew it to be true or false, as it concerned a future event.” Defendants later concede, however, “The only circumstances under which a future promise may form the basis of a fraud claim is where the plaintiff can allege facts that the promisor made a promise with no intent of performing.” Indeed, the nature of promissory fraud is that it is a promise of future performance with no present intent to actually perform. (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638, 49 Cal.Rptr.2d 377, 909 P.2d 981.) And this is precisely what plaintiff alleges: “42. Defendants induced Plaintiff into entering into making payments of more than $44,000.00 on the promise of providing Plaintiff with a reasonable modification of the loan on the Property. [¶] 43. At the time that Defendants made these representations, they knew them to be false as Defendants had no intention of honoring their promise to provide Plaintiff with a permanent loan modification but instead, intended to strip the Plaintiff of all of his liquid assets and then proceed with foreclosure on Plaintiff's Property.” Accordingly, the misrepresentation causes of action are not demurrable on the ground they involved a future event.
 MORTGAGE RIGHTS
 MORTGAGE RIGHTS
The site does not provide legal advice. Neither Susan LaCava nor her law firm, LaCava Law, S.C., represent you until there is a signed retainer agreement.
Loan Modification Mistakes Litigating Loan Modification Mistakes Are you in foreclosure? I ask this question first because I only deal with modification failures in foreclosure actions. Let me explain. If your question deals with such things as whether the rent your son pays counts as income, I am not the person you need. There is free foreclosure help available to you at HUD-Approved Counseling Agencies. These agencies, which are sponsored by the U.S. Department of Housing and Urban Development, can develop a tailored plan of action for your situation and help you work with your mortgage company. With their knowledge of the available programs and financial situations, the agencies can help you organize your finances, understand your mortgage options, and find a solution that works for you. Call (800)569-4287 The phone system will ask you to enter your ZIP code and will refer you to a counselor near you. There are attorneys who can represent you during the application process, answering such questions as whether the waterfall was followed correctly or what to do if a qualified application was wrongfully denied. I belong to two excellent listserves that are dedicated to these questions: the HAMP Enforcement Google Group and the NACA Mortgage Listserve. I do not know whether homeowners can obtain the names of the members of the Google Group. Only lawyers who are members of NACA (National Association of Consumer Advocates) can access the mortgage listserve. NACA, however, publishes a list of attorneys who work in this area. Go to consumeradvocates.org and click on the Find an Attorney box. Another source of considerable knowledge is the National Consumer Law Center. Its website is nclc.org. The Mortgage Professor site (mtgprofessor.com) also has articles on loan modifications and homeowners with payment problems. The Mortgage Porfessor is Jack M. Guttentag, Professor of Finance Emeritus at the Wharton School of the University of Pennsylvania. You have to love the internet for putting you in touch with such skilled advice! Loss Mitigation Litigation I become involved when a homeowner is driven into foreclosure because the servicer failed to act properly. I analyze the loss mitigation process for defenses and counterclaims. I focus on how procedural errors can force homeowners into foreclosure, and prevent the homeowners from saving their homes. For example, as I explain in Time Is Not on Your Side, undue delay can make it impossible for a homeowner to accept a loan modification. The Consumer Financial Protection Bureau brought an enforcement action against Flagstar Bank that included a number of the abusive practices in this area. Flagstar was so abusive, the CFPB found that the bank illegally blocked homeowners from saving their homes. The CFPB enforcement action is a good description of how the loss modification process can drive homeowners out of their homes. Flagler's violations grew out of its inadequate response to the foreclosure crisis. In 2011, Flagstar had 13,000 active applications for help, but only 25 full-time employees and a company in India to handle the load. For a time, it took Flagstar's staff up to 9 months to review a single application. Those of you who have already attempted to get a modification know that some of the information is time-sensitive. For example, the servicer may ask for your last 2 pay stubs. This information about your pay is out of date every time you are paid because your new pay stub is one of the "last two" pay stubs that the mortgage company asked for. Flagstar cleared its backlog of applications by denying all files that contained expired documents, such as pay stubs, even though the documents had expired because Flagler sat on the applications too long! Flagstar's handling of phone calls should be familiar with those of you who have tried to get a modification. My clients have reported long wait times; transfers to departments that could not answer the homeowner's questions; and, rude employees who called the homeowners "deadbeats" and told them to just pay their mortgage. At Flagstar, the average hold time was 25 minutes. Fifty percent of the homeowners who called Flagstar's loss mitigation department gave up, hanging up before they got help. When Flagstar actually reviewed an application, it did a bad job of it. Flagstar routinely miscalculated the homeowner's income. This is a real problem because the decision whether to grant a modification depends heavily on the borrower's income. Flagstar wrongfully denied modifications to qualified homeowners. Flagstar failed to give homeowners a reason for their denial. This information is important since homeowners can correct some problems and reapply. Flagstar's homeowners did not get this chance. The Consumer Financial Protection Bureau now requires mortgage companies to provide an appeal process in which employees who were not involved in the denial review the application. Flagstar failed to tell its homeowners that they could appeal. The normal length of a trial modification is 3 months. Flagstar kept homeowners in trial modifications for lengthy periods. As I explain in the next section, the delay caused some homeowners to default. Repeated Requests for Documents A complaint I hear over and over is that the servicer asks for the same documents repeatedly. There is a way to turn this practice back on the servicer. You need, however, to keep track of what you sent to the servicer and when you sent it. I use an internet fax service becuase it archives a complete copy of my fax along with a record of when the fax was received. Shops such as Fed Ex Office can do the same thing for you. If a servicer repeatedly asks for documents it has already received, it violates the reasonable diligence requirement in RESPA (Real Estate Settlement Procedures ACt). RESPA provides that a "servicer shall exercise reasonable diligence in obtaining documents and information to complete a loss mitigation application." 12 C.F.R. § 1024.41(b)(1). Here is an example taken from a court's opinion: The Dionnes allege that Chase violated this regulation by repeatedly requesting documents they had already submitted multiple times, and by requesting documents even when it had previously told the Dionnes that it did not need anything further from them. Further, Chase claimed certain faxed documents were illegible, but the Dionnes verified that faxed copies of those documents were legible. These allegations set forth a plausible claim that Chase did not exercise reasonable diligence in obtaining documents and information to complete the Dionnes' loss mitigation application. Dionne v. Fed. Nat'l Mortg. Ass'n, 2016 DNH 93 (D.N.H., 2016) Misrepresentation Another problem for homeowners is that the loan servicer makes misrepresentations. Here is an outrageous example: Plaintiff owned property in Riverside. In July 2005, plaintiff refinanced the loan on his property with a total loan amount of $815,000. This was an adjustable rate mortgage. The loan was serviced by defendant HomEq Servicing (HomEq). For the first 21 months of the loan, plaintiff was current on his payments. During the period between June 2007 and September 2007, the monthly payment on the loan increased first to $5,968 per month, and then to $6,800 per month. In August 2007, plaintiff applied for a loan modification to try making payments more affordable. In February 2008, HomEq informed plaintiff that he had to make “a lump sum $12,000 payment as a ‘modification processing fee’ before Plaintiff could ... see the terms of the proposed modification.” Plaintiff paid the fee. In March 2008, HomEq gave plaintiff a loan modification agreement, to which the parties agreed. Under the terms of that agreement, plaintiff's loan balance was increased to $834,051.86. The interest rate was fixed at 5.990 percent (the prior rate was 7.490 percent), and the monthly payment would be $6,236.78. Plaintiff made a payment under that agreement,1 but the next month HomEq stated they would no longer honor the terms of that agreement. Instead, HomEq sent a new agreement that increased the loan balance to $870,767.34. It offered no explanation for the change. Plaintiff believed the March 2008 agreement was valid, and thus he made payments to HomEq under that agreement for March, April, and June of 2008, totaling $18,789. In June 2008, HomEq sent plaintiff yet another loan modification agreement, this time raising the balance to $895,117.18, again without explanation. In July 2008, HomEq sent correspondence to plaintiff demanding a payment of $35,684 to process a new loan modification. HomEq then began refusing plaintiff's payments under the March 2008 agreement, requiring that he pay $7,600 per month instead. When plaintiff insisted on the terms of the March 2008 agreement, HomEq recorded a notice of default and election to sell the property. In October 2008, HomEq recorded a notice of trustee's sale of the property with a sale date of November 20, 2008. HomEq then informed plaintiff it would give him a new modification if he would send a payment of $14,050. In light of the looming sale date, plaintiff complied. Instead of sending a loan modification agreement, however, HomEq sent a forbearance agreement and demanded a payment of $1,450 before it would send a modification agreement. Plaintiff continued trying to work with HomEq until February 2009, when HomEq sent another loan modification agreement, this time asking for an upfront payment of $29,771. “Having paid $44,000.00 over a 10 month period for modifications that never materialized, Plaintiff had no faith that any further payments would have any better result so he declined to make the requested payment.” Defendants set a sale date for plaintiff's house of March 23, 2009. On March 19, 2009, plaintiff obtained a temporary restraining order against the sale of his house from the Riverside County Superior Court. Plaintiff alleges on information and belief that defendants had notice of the order. Nonetheless, defendants proceeded with the sale on March 23, 2009, and dispossessed plaintiff. Miles v. Deutsche Bank Nat'l Trust Co., 236 Cal. App. 4th 394, 186 Cal.Rptr.3d 625 (Cal. App., 2015) HomEq argued that the misrepresentation claim was not valid because the representation concerned a future event, giving the homeowner a modification. The court rejected this argument: The defendants contend a misrepresentation cause of action does not lie where the misrepresentation pertains to future events: “The reason for this requirement is obvious: it is not possible to determine whether someone making a representation did so with knowledge, or reckless disregard, of the truth of the alleged representation if the representation was not made at a time in which it was known to be true or false. Therefore, the alleged promise to modify the Plaintiff's loan cannot form the basis of a fraud or misrepresentation claim, because the Plaintiff cannot allege that the person making such a representation knew it to be true or false, as it concerned a future event.” Defendants later concede, however, “The only circumstances under which a future promise may form the basis of a fraud claim is where the plaintiff can allege facts that the promisor made a promise with no intent of performing.” Indeed, the nature of promissory fraud is that it is a promise of future performance with no present intent to actually perform. (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638, 49 Cal.Rptr.2d 377, 909 P.2d 981.) And this is precisely what plaintiff alleges: “42. Defendants induced Plaintiff into entering into making payments of more than $44,000.00 on the promise of providing Plaintiff with a reasonable modification of the loan on the Property. [¶] 43. At the time that Defendants made these representations, they knew them to be false as Defendants had no intention of honoring their promise to provide Plaintiff with a permanent loan modification but instead, intended to strip the Plaintiff of all of his liquid assets and then proceed with foreclosure on Plaintiff's Property.” Accordingly, the misrepresentation causes of action are not demurrable on the ground they involved a future event.
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