Homeowner Nancy Gosselin hasn’t missed a payment since she refinanced her house with Bremer Bank in 2005. Bremer agrees. But CitiMortgage, which wound up purchasing the loan, started assessing late fees more than two years ago, refused to accept Gosselin’s mortgage payments, and then started foreclosure proceedings last spring to collect those late fees and charges Gosselin apparently didn’t owe. In short, CitiMortgage tried to take Gosselin’s home over $700.
“I again want to sincerely apologize for the inappropriate costumes worn by some of our employees at our Halloween Party in 2010. It was in extremely poor taste and I take full responsibility. I know people were extremely offended and people have every right to be upset with me and my firm.”
–Stephen Baum, whose New York foreclosure firm’s callous Halloween costumes from last year got the media and the blogosphere all fired up this week.
I’ve always liked the introduction to the Fair Debt Collection Practices Act.
There is abundant evidence of the use of abusive, deceptive, and unfair debt collection practices by many debt collectors. Abusive debt collection practices contribute to the number of personal bankruptcies, to marital instability, to the loss of jobs, and to invasions of individual privacy.
I don’t think it goes far enough, though. Abusive debt collection practices also spread depression and contribute to the number of suicides. That’s true for the current foreclosure crisis, as well, according to Martin Andelman, who blogs at the Mortgage Lending Implode-O-Meter. He thinks homeowners are showing signs of Legal Abuse Syndrome, a type of Post-Traumatic Stress Disorder.
Minnesota consumer lawyer Randall Ryder got a $22,000+ Midland Funding debt collection lawsuit dismissed for a client who had been disputing the debt for years, but couldn’t make it go away. Says Ryder “Bringing the proverbial bazooka to a gunfight, we produced a 5 page affidavit with 70 pages of exhibits to prove the client was not liable.”
North Carolina bankruptcy lawyers Duncan Law says that, in some cases, consumers in foreclosure may be able to stay in their home for a year or more while the process plods along. This can be a good thing, especially if it allows families to save for an emergency fund or security deposit.
The still-new Consumer Financial Protection Bureau is doing a lot of listening, trying to figure out where to focus its energy. Here are the main areas of concern according to Gail Hillebrand (formerly of Consumer Reports, now the CFPB’s Associate Director of Consumer Education and Engagement):
- Debt settlement issues. Consumers who pay for debt settlement services are too often not getting the help they were promised.
- Foreclosures, credit scores, credit reports, and their effect on employment. Advocates in Ohio are worried about the impact foreclosure can have on a homeowner’s credit report and credit score, and how the credit report, in turn, can affect future employment prospects.
- Disputing a credit report error. A Montana attorney reported that his clients frequently have difficulty figuring out how to dispute a credit report error, and they often end up purchasing unnecessary and costly credit monitoring or credit repair services when searching for information online.
- Payday lending. Payday lending operations—including those that operate online and those that target people residing on reservations—continue to be a concern for both communities. One Montana speaker described a client with $1,500 in payday loans whose sole income was $1,600 a month in disability payments.
If you want a mortgage modification, most lenders will tell you to stop making mortgage payments before they will consider you for modification. Of course, if you stop making payments and you don’t get a mortgage modification, you will end up in foreclosure. Letting your loan go into default is a risky proposition because the downside is losing your home.
Once you stop making payments—even if you make reduced payments—you are in default on your loan, which means you will go through months of submitting paperwork, navigating phone trees and bank representatives, and re-submitting paperwork the bank lost. Then, one of two things will happen:
Today, the Massachusetts Supreme Court decided that if Wells Fargo and US Bank couldn’t keep track of their property, the court wasn’t going to help them take that property away from the consumers living in it. In other words, the “produce the note” strategy not only works, it is the law. At least in Massachusetts.
This decision could spill over into other states, since the foreclosure process in Massachusetts is similar to other states that permit non-judicial foreclosure. Besides, taking property without competent evidence kind of flies in the face of the Due Process Clause.
The Massachusetts court did point a way forward for the banks: valid assignments. Well, obviously. Unfortunately, the court also said the banks cannot go back and get retroactive assignments, so banks that kept similarly shoddy paperwork may be SOL for the mortgages they think they hold now.
Of course, my guess is that, rather than adopt the court’s reasonable, legal suggestion, the banks will spend millions of dollars lobbying Congress to overturn the Due Process Clause, or something.
Rescission is the right to undo a fraudulent loan—usually a mortgage. The bank gives back the interest and fees, the borrower pays back what remains of the original amount of the loan—and keeps the house—and everybody pretends the loan never happened. Bringing a claim of rescission also terminates a bank’s right to foreclose.
Rescission is a powerful tool in the fight against fraud, and a powerful incentive for banks to avoid it.
The Indiana Court of Appeals have suggested that banks that do not comply with Fair Housing Act servicing guidelines may not be able to foreclose a property until they do. HAMP—the Home Affordable Modification Program—is not much different in character than the FHA servicing guidelines, so the Indiana court’s decision might provide a way to stop foreclosures, at least until banks and mortgage services give the homeowner an honest shot at a HAMP mortgage modification.
It turns out that using HAMP as a shield has been tried with some success, so it’s probably worth a try for frustrated homeowners facing foreclosure after a failed attempt at mortgage modification.
At least robo-signers actually sign their names, even if they have no idea what they are signing. Some foreclosure law firms have a room full of clerks signing attorneys’ names to foreclosure documents. Bank of New York attorney Gary McCafferty said “many documents his firm submitted to court with his signature had in fact been signed by administrative staff . . . .”
As bankruptcy lawyer Max Gardner explains:
“They have a small number of attorneys and a very large back office,” Gardner said. “The first time an attorney knows anything about a case in these kinds of operations is when someone like me files a response.”
As with the robo-signers, forged signatures have resulted in the dismissal of foreclosure lawsuits in courts across the country. It wouldn’t surprised me if they result in the dismissal of a few lawyers from the bar, as well.