Archive for February, 2013

What Makes It All Worthwhile

Foreclosure defense is not always easy.  Sometimes, it’s downright maddening.  Emails like the following make it all worthwhile.  This is what it’s all about … knowing people’s lives are changed by the work we do.  This isn’t a solo effort, either – my staff joins in this …

Dear Mark,
I just want to thank you again for all of your hard work and dedication in getting our foreclosure case dismissed.  Your entire staff,  from the first meeting in your office,  to your paralegals, receptionists,  and to speaking with you yesterday, has been a godsend  during a very difficult time for us.  Words cannot express our gratitude.    If you ever need a reference, please feel free to give our name and number, we will help in any way we can.   Again sir, thank you so, so much.  We wish you much success in the future.  God Bless you and your family.   You are a good man.
Sincerely, [Jane and Joe Homeowner]

Do you think the banks ever take a minute to think about the homeowners whose lives they impact with their conduct? I fear not.

What about the Congressmen considering HB87 … do you think they’re thinking about these homeowners?  Gosh, I hope so.

Mark Stopa

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The Problems with House Bill 87

As you may have read on the front page of today’s Bradenton Herald, I’ve joined Florida Consumer Justice Advocates, a group that is fighting against the passage of House Bill 87, a proposed piece of legislation being touted by some of Florida’s congressmen as a solution to the logjam of cases pending in Florida’s courts.  Frankly, I’m concerned about what a small handful of legislators are trying to do to consumers in Florida – hence my involvement – and it’s probably past time that I explain what’s going on here.

According to some misinformed Florida legislators, the Florida court system is unable to adjudicate foreclosure cases quickly enough.  Proponents of such a position point to the number of days – something like 850 – which they say it takes to prosecute a foreclosure case in Florida.  These individuals love to blame the judges and the court process, acting as if the system is broken and needs to be fixed.  House Bill 87 is the proposed “fix” of these misinformed few.

Before I go any further, please realize this is merely *proposed* legislation.  I’m confident we can and will defeat the bill (and that’s why I’ve joined a group fighting against it).  That said, we all need to take action and talk to our congressmen to ensure our collective voice is heard.

House Bill 87 has two enormous problems, but before I address this disgraceful piece of proposed legislation, let’s get something out of the way right off the bat.  Judges are not the problem.  Court resources are not the problem.  The court process is not the problem.  The biggest reason foreclosure cases go slowly in Florida is because banks want them to go slowly.  That bears repeating.

The biggest reason foreclosure cases go slowly in Florida is because banks want them to go slowly.

Sure, foreclosure cases often go slower when lawyers like myself are involved.  However, even with the increasing number of lawyers defending foreclosures nowadays, the vast majority of foreclosure cases in Florida remain unopposed.  Think about that for a minute … advocates of this proposed legislation complain about how long it takes to adjudicate a foreclosure case, yet most cases are unopposed.  Let me be frank … there is absolutely no excuse for banks to be unable to finish a foreclosure case in, say, less than a year when a case is unopposed.  Yet, somehow, it’s rare for any foreclosure to be finished that quickly, even when nobody is putting up a fight on the defense side.

Those considering this proposed legislation should think about this dynamic and ask themselves this …

Why are we working to change the law in a manner that’s adverse to consumers when banks are able to prosecute foreclosures under the current system but refuse to do so?

If you don’t agree or don’t understand, go read Florida Statute 702.10.  This statute has existed for many years, since long before the foreclosure crisis began.  I’ll spare you the legal jargon and summarize the statute this way … if a bank wants to get a quickie foreclosure against a homeowner, it can obtain a “show cause” hearing under the current statute.  If the homeowner doesn’t defend that hearing and “show cause,” then the bank gets the quickie foreclosure.  One hearing and that’s it – case over.

So why do foreclosure cases in Florida take so long despite such a statute?  Simple.  Banks can use Florida Statute 702.10, but they choose not to do so.  In fact, I’d say the banks use this statute in less than 1% of foreclosure cases in Florida.  Yes, fewer than 1% of cases utilize the accelerated foreclosure process that’s been in place for years.  (I acknowledge I don’t have hard data to support that estimate, but I’m comfortable it’s accurate based on my vast experience over the past few years.  And lest you think my estimate is off because the banks don’t use the quickie procedure on my cases (but do on others), please understand that banks make the decision whether to utilize the quickie procedure before I am ever retained.  The banks are choosing not to utilize the quickie procedure across the board, not merely on cases that are defended with counsel.)

Hence, for anyone involved in the process of considering House Bill 87, I reiterate my initial question:

Why are you changing the law to make the system faster when the banks don’t utilize the accelerated procedures already in place?

If the banks’ conscious decision to forego the accelerated procedure in Fla. Stat. 702.10 isn’t enough to convince you, then go ask a judge.  I could give examples (of the many Florida judges who have lamented how banks don’t prosecute their own cases), but there’s no need – go ask ANY Florida judge.  I’m quite confident that ANY and EVERY Florida judge will tell you the reason foreclosure cases go slowly in Florida is because banks file the cases then don’t set hearings, don’t set trial, and don’t try to win.  In fact, many of the disagreements foreclosure defense attorneys such as myself have had with Florida judges is when the judges set trials or hearings in cases when the banks have failed to do so.  Yes, it’s often the judges, not the banks themselves, who set hearings and trials in foreclosure cases which the banks themselves refuse to prosecute.

If you don’t believe me (because you think I’m biased) and don’t believe the judges (because you think they don’t want to accept the blame), or if you just can’t believe a bank wouldn’t try to win a foreclosure case, go sit in a courtroom for a day. Or go check out a few court dockets online.  As you do, you’ll see how foreclosure cases often languish in Florida because the banks who filed them don’t prosecute them quickly.  Everyone involved in the process knows this is how it works in Florida.

Foreclosure cases languish because the plaintiffs who filed them don’t prosecute them.

My initial point, hence, is this … there is no need for new legislation to make foreclosures go faster, as the system itself isn’t the problem.  The banks are the problem.

Now that we’ve established how House Bill 87 is being proposed to address a problem that doesn’t exist, let’s address the two big problems with the language of the bill.

First, under the current version of Fla. Stat. 702.10, if a homeowner defends at a “show cause” hearing, then the judge “shall” not enter a final judgment of foreclosure via the accelerated procedure.  In other words, as the law currently exists, if the homeowner doesn’t defend the case, then the bank gets a quickie foreclosure, but if the homeowner defends, then the bank has to go through the normal court process, i.e. summary judgment or trial, to prevail.

Even as a consumer advocate and defense attorney, I understand the rationale of the statute as it presently exists.  If a homeowner isn’t going to defend a foreclosure case (as many don’t), then why drag out the process?  Just give that bank a judgment (presuming compliance with the statute and the proper, verified pleadings).  But if a homeowner defends the case, then the bank should have to prove its entitlement to foreclosure as any plaintiff in any court case would, i.e. at summary judgment or trial, after the case is litigated like any other court case.

The first, huge problem with House Bill 87 is that it completely changes Fla. Stat. 702.10 with one small word – “may.”  Under the current statute, if a homeowner defends the case and files the appropriate paperwork at that quickie hearing, then the judge “shall” preclude the final judgment from being entered at that hearing.  As a consumer, if you show up and defend, you at least know you’ll get your day in court, just as you should, and just as you’re entitled in any court proceeding.

Under the proposed House Bill 87, the statute would be changed so the judge “may” preclude the final judgment from being entered at that quickie hearing.  The problem with “may” instead of shall” is that “may” implies ”may not.”  Hence, a homeowner could defend the case and file the appropriate paperwork at that “show cause” hearing, yet the judge could allow a final judgment to be entered anyway.  No day in court, no trial, no discovery, no due process – the judge could simply rule in the bank’s favor, without a trial and without summary judgment, simply because he/she wanted to do so.  Perhaps worse yet, the proposed change to the statute provides no guidance as to why/when a judge should allow the quickie foreclosure even when the case is being defended and why/when the judge should not … it would simply be up to each judge to decide when to allow a foreclosure case to proceed like a normal case and when to allow a quickie judgment.

If this statute were enacted in this format, it would be a complete and total disgrace.  Consumers would be deprived of trials and discovery and due process simply because the judge preferred that the bank win the case quickly, even where that homeowner was presenting legitimate defenses.  With all we’ve learned about bank fraud and robosigning and the legitimate defenses homeowners have to foreclosure, it’s absurd anyone has to even advocate against such a draconian piece of legislation.

Another glaring problem with the proposed change to “may” is that there is no guidance given as to why/when a quickie judgment should be entered and why/when it should not.  There would be no uniformity in the rulings of judges, as some would allow the quickie foreclosures while others would not, with little rhyme or reason for the disparate rulings.  Public confidence in the judiciary would further deteriorate, as those who allowed the quickie foreclosures would be viewed as “pro bank” while those who did not would be viewed as “pro homeowner.”  Lawsuits simply aren’t adjudicated this way.

The second glaring problem with House Bill 87 is that it authorizes judges to require mortgagors of properties that are not owner-occupied to make monthly mortgage payments into the court registry during the pendency of a lawsuit, failing which the homeowner loses possession of the property as a sanction, even without the bank proving its standing or its entitlement to foreclose.

Yes, House Bill 87 would make homeowners who don’t live in the property pay on a monthly basis for the right to defend the case.  No payment = no right to defend.  And the payments wouldn’t be based on current market rates, but based on the original loan amount.  Miss one payment and down comes the hammer – loss of possession – even if the bank didn’t prove its standing or its entitlement to foreclose.

Is that really what Florida has become, a state where one must pay for the right to defend?  Silly me, I thought the right to due process was a right enjoyed by all, not just those who can afford to pay for it.

There are many other problems with House Bill 87.  Frankly, I could go through it line by line and point out problems all day long.  That said, these are the things that get my ire.  Why are we changing the law in a way that harms Florida consumers to “fix” a court process that isn’t broken, one which enables banks to prosecute cases quickly even as they refuse?  How can we possibly allow any judge to deprive homeowners of their day in court, particularly without any set guidelines in place?  And how can anyone justify forcing homeowners to pay on a monthly basis for the right to enjoy due process?

I firmly believe we will defeat this bad bill.  Just don’t take my word for it.  Join me in the fight.  Talk to your friends, family, and neighbors.  More importantly, call your local Congressman.  Tell him/her House Bill 87 is bad and should not become law.

Mark Stopa

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“Substantial Compliance” in the Paragraph 22 Context

I have been fortunate enough to win a lot of foreclosure cases where the plaintiffs failed to comply with the conditions precedent set forth in paragraph 22 of the mortgages upon which they’re suing … but I certainly haven’t won them all.  On those occasions where I did not win, it was typically because a judge ruled that Florida law required only the bank “substantially comply” with the conditions precedent in paragraph 22, and the letter which was sent comported with that standard.  Most judges before whom I’ve appeared have not employed this principle of law, but a few have.

Recently, a judge denied one of my motions for summary judgment, asserting “substantial compliance” as the legal standard, without a single case cite being submitted.  This really troubled me, and it prompted me to do a LOT of research and write this 14-page Memorandum of Law.

Please read the memo.  Understand the issues.  Realize there’s more to complying with the conditions precedent in paragraph 22 than the bank sending a letter – the letter must contain certain, specified information.  Be sure and argue that “substantial compliance” is not the legal standard in Florida, but, even if it were, that the mere sending of a letter is not “substantial compliance.”

This is a significant battleground in foreclosure cases in Florida.  Many circuit judges are on our side, and the appellate judges who have ruled on the issue certainly seem to be as well.  So keep pushing this issue.  Keep fighting.  This is a key issue, and, given the state of the law in Florida, it’s one I’m confident we can win.

Mark Stopa

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Hiding the Fraud?

I’ve noticed a trend in recent weeks in my foreclosure defense practice, one that’s become significant enough that it’s worth mentioning … banks are trying to avoid putting anything in writing under oath.  I mean nothing.  At all.  As in, the case can go from start to finish without anything in writing under oath.

First, a little background …  You know the history here.  In the process of trying to foreclose on millions of well-intentioned homeowners, banks got caught robo-signing fraudulent documents, particularly affidavits, leading to various problems and sanctions.  (Too few sanctions, yes, but sanctions nonetheless.)

So how have the banks responded?  By stopping the fraud and cleaning up their business practices?  Hehehehe.  That’s just silly.  To avoid further problems, the banks are frequently trying to avoid filing anything that could be deemed fraudulent.  The biggest difference?  Affidavits in support of summary judgment are being replaced by trials with live testimony.

What’s the difference, you ask?  With an affidavit, there’s a written document in a court file … a paper trail that could be used later to prove fraud.  With trial testimony, there’s no written document and, hence, no paper trail to prove fraud.  Think of it this way … imagine the Department of Justice wanted to evaluate the proof a bank submitted to prevail in a foreclosure case where a foreclosure judgment was entered 12 months ago.  If there’s an affidavit, the DOJ could go to the courthouse and get a copy of the affidavit to assess whether there was fraud.  If there’s no affidavit, and the foreclosure judgment was entered after testimony at trial, there’s no paper trail, so the bank has total deniability.  There’s nothing under oath in writing that anyone could say is fraudulent.  (Yes, I realize these investigations are few and far between, but that’s a different story.)

I’ve also noticed the banks’ reluctance to go under oath when answering interrogatories.  Florida law requires that interrogatory answers be given under oath, i.e. under penalty of perjury.  Banks routinely answer interrogatories by failing to provide substantive information, and even when they do provide information, the verification on those interrogatory answers is often not under oath.  Any lawyer knows interrogatory answers need to be given under oath, so why would a bank sign these answers but refuse to give them under oath?  In my view, the answer is simple … banks avoid answers under oath to avoid the potential pitfalls of doing so, including prosecution for perjury.

I’m not saying banks never provide written filings under oath in foreclosure cases.  They still do.  But the frequency with which they do has definitely decreased in recent months, and I can’t help but conclude these are the reasons why.

Update:  In response to a good question about trial testimony being transcribed by a court reporter … many trials have no court reporter, particularly uncontested trials.  And for those that do, there’s no transcript unless somebody pays to have it transcribed, which is hard to imagine happening where the case is uncontested.  Hence, testimony at trial is a sneaky way to prevent anything in writing, under oath ever being put in a court file.

Mark Stopa

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How Pino Impacts My Foreclosure Defense Practice

Forgive me if I didn’t come rushing to the computer to write a blog after the Florida Supreme Court issued its decision in Pino v. Bank of New York Mellon last week.  Yes, that decision garnered national attention, but it was a yawner for me.  The outcome was completely and totally, 100% predictable.  I hate to sound callous, but were you really surprised the Court ruled a bank could sweep evidence of fraud under the rug, voluntarily dismiss a lawsuit after evidence of that fraud emerged, and file a new lawsuit?  Hehehehe.  If you really harbored hope for a different ruling, you haven’t been paying attention.  If you expected some broad-sweeping ruling that spoke out against foreclosure fraud, you’ve been living under a rock.

Remember back in 2007, when the Florida courts had a chance to undermine the MERS system?  Other states have since found the MERS system illegal, and a local judge named Walt Logan ruled MERS lacked authority to do anything as a “nominee.”  However, Florida’s Second District Court of Appeal declined to invalidate the MERS system, instead ruling a “holder” can foreclose even without being the “owner.”  Mortgage Electronic Registration Systems, Inc. v. Azize, 965 So. 2d 151 (Fla. 2d DCA 2007).  As a result, at least in Florida, the banking industry has been able to get away with transferring notes/mortgages without a “chain of title” being recorded in the Official Records, basically by anyone coming to court with an endorsed note.  For anyone challenging the mortgage industry’s sloppy practices, Azize was strike one.

In 2010, Florida’s Fifth District Court of Appeal was presented with the argument that a foreclosure plaintiff could not prevail where the mortgage was “owned” by MERS, as “nominee,” while the Note was held by someone else.  After all, a mortgage does not exist separate from the note, as the former is merely security for the latter, so how could one entity “hold” the Note while another has the Mortgage?  The Fifth District obliterated this distinction, allowing plaintiffs to foreclose a mortgage based on an endorsed note irrespective of the fact that the fact that the Note and Mortgage were owned/held by different entities.  See Taylor v. Deutsche Bank Nat’l Trust Co., 44 So. 3d 618 (Fla. 5th DCA 2010).  This was strike two against anyone challenging MERS or the banks’ fraudulent practices.

In 2011, Florida’s Fourth District Court of Appeal got the chance to adjudicate Pino v. Deutsche Bank Nat’l Trust Co., 57 So. 3d 950 (Fla. 4th DCA 2011).  This was clearly an important case, so instead of the typical, three-judge panel, the decision was en banc, meaning every judge on the Fourth District joined in the decision.  Sadly, all but one such judge agreed that a foreclosure plaintiff could voluntarily dismiss a lawsuit without prejudice and refile a new action even when evidence is presented of a significant fraud by that plaintiff upon the court.  Obviously, Pino was a wonderful opportunity for Florida courts to explain they would not tolerate fraud in the foreclosure context, particularly fraud upon the courts.  Yet the Fourth District declined to do so, deferring to a procedural rule.  While I understand the rationale behind the procedural rule that authorizes plaintiffs to voluntarily dismiss, the moral of that first Pino decision, in my eyes, was that if the Florida courts had a procedural reason, a loophole, or any quasi-legitimate basis to look the other way on bank fraud, they were going to take it.  Clearly, Florida’s highest courts were just not going to allow the foreclosure process to be turned on its head by arguments of foreclosure fraud.

As of 2012, many Florida foreclosure defense attorneys were arguing that securitized trusts lacked standing in foreclosure cases because the notes were not conveyed into the trusts in a manner consistent with the pooling and servicing agreements for those trusts.  This was (and, in my opinion, is) a perfectly appropriate argument.  How can any trust own something when its own trust rules says it cannot?  Regardless, Florida’s Third District Court of Appeal shot down that argument, providing a two-sentence decision (without a single citation to a Florida case) that homeowners “lack standing” to challenge the issue.  Castillo v. Deutsche Bank Nat’l Trust Co., 89 So. 3d 1069 (Fla. 3d DCA 2012).  Once again, the Florida courts showed they weren’t going to allow any sort of widespread argument that plaintiffs couldn’t foreclose in Florida courts based on the banking industry’s fraudulent paperwork.

In fairness, the Florida Supreme Court did create Rule 1.110(b) in 2010, which required foreclosure plaintiffs to verify all complaints before filing them.  In 2012, however, Florida’s Second District Court of Appeal clarified that this rule did not require a verification under penalty of perjury, as Florida law had operated for dozens of years, see Fla.Stat. 92.525, but ruled that a verification on “knowledge and belief” was sufficient.  See Wells Fargo Bank, N.A. v. Taboada, 93 So. 3d 1073 (Fla. 2d DCA 2012).  As a result, the verification requirement has no teeth whatsoever, as even if the person who signs it did so knowing the information contained in that complaint was false, he/she is not subject to penalties of perjury because the rule does not require that type of verification.

So that’s a quick summary of what we’ve seen from Florida’s highest courts in recent years on the issue of foreclosure fraud.  Everything about the MERS process is okay, problems with the securitized trust are irrelevant, an endorsed note is all plaintiffs need, and even if a homeowner proves fraud in a foreclosure case, the bank can merely dismiss that case without prejudice and file a new one, burying the fraud forever.

Of course, just as telling as what we heard in these decisions was what we haven’t heard from the Florida Supreme Court since the foreclosure crisis began.  No pronouncements against fraud.  No rule amendments to prevent fraud.  Nothing from the Florida legislature, either, which, instead of trying to prevent foreclosure fraud, is now trying to pass a new law that could make foreclosures go faster.

With this backdrop in place, how can anyone have been surprised by last week’s Pino decision?  If you’ve been paying attention, that ruling has been in place for years – it was merely finalized last week.

I might sound like I’m criticizing the courts.  I’m not.  I mean, who the heck am I to criticize the Florida Supreme Court (a question I ask with all sincerity)?  Even if it were my intent to criticize, what good would it do?  Obviously this blog isn’t going to change the substantive rulings, or lack thereof, that come out of the Florida Supreme Court.  Hence, the point isn’t to criticize … the point is to show why I handle things the way I do.

Let’s put it this way … The other day, a friend on Facebook (feel free to friend me – Mark Stopa) asked me why I don’t spend more time defending foreclosures by talking about foreclosure fraud.  Well, this blog shows why.  Regardless of what I think about it, those arguments don’t work.  The judges just don’t like them.  And whether I like it or not, Florida courts just aren’t going to create a system that prevents homeowners from getting foreclosed (certainly not on any widespread basis) based on foreclosure fraud.

Suppose you’re playing cards.  Do you whine and complain if you get a crummy hand?  Quit?  Or do you play the best you can with the hand you’re dealt?

For me, that’s what foreclosure defense is – doing the best you can with the hand you’re dealt.  I don’t like all of the rules/laws.  I don’t always have a great hand.  But I play the best I can with the hand I’m dealt.

In a different state, with a different set of laws, I’d love to cram foreclosure fraud down the banks’ throats over and over again.  But in Florida, with this backdrop of case law, this is why I don’t talk much about foreclosure fraud.  This is why I talk about things like paragraph 22 and standing at inception.  Paragraph 22 might not be sexy or fun, but, in my experience, it works.  So as much as others might lament Pino and the absence of any sanction for foreclosure fraud, I’m going to keep doing the best I can with the hands I’m dealt.  While other defense lawyers in the industry charge clients for the privilege of pounding their heads into the wall (by making arguments about foreclosure fraud that clients want them to make but that Florida judges routinely reject), I’ll keep making the arguments with which I’ve had success.  For me, doing the best I can with the hand I’m dealt – that’s what foreclosure defense is all about.

Let’s put it this way … it’s quite possible to get your foreclosure case dismissed without prejudice based on violations of paragraph 22, lack of standing, or lack of standing at inception.  It’s entirely reasonable to hope you can settle with your bank – loan modifications, short sales, and deficiency waivers happen regularly in my practice.  But if you’re looking to prove bank fraud in Florida, you’re probably going to be as disappointed as when you read Pino.

Mark Stopa

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Want a Loan Modification? Save Your Money!

Whenever a homeowner facing foreclosure tells me that he/she wants to obtain a loan modification, what’s the first thing I discuss?  No, it’s not that loan modifications are hard to come by, especially those with principal reductions (even though that’s true).  And no, it’s not that banks have all sorts of perverse financial incentives to foreclose rather than work out a mortgage modification (even though, sadly, that’s true as well).

The first thing I ask my clients is how much money they’ve been able to save while the foreclosure lawsuit has been pending.

Look … I’m not judgmental.  I get that the economy sucks and that a lot of good people are unemployed or underemployed.  I understand that, for many people, saving money just isn’t possible.  And I understand that nobody wants to lose their home.  That said, if you haven’t made a mortgage payment in two years, have been unemployed for 18 months, and have no savings, how do you think you’re ever going to get a loan modification?  I think I’m pretty adept at defending foreclosure lawsuits, but if this is your financial situation, there’s nothing I can do to make a bank give you a loan modification.  Can I fight the foreclosure lawsuit?  Absolutely?  But can I somehow force a bank to give you a modification (when you basically have no money)?  Sorry, no.

Here’s the cold, hard reality, as I see it (not intended to be harsh but to help homeowners realize the situation they face) … why would a bank modify your loan if you can’t afford to pay, even at a reduced rate?  Even if we can get past the other hurdles to obtaining a modification (the perverse financial incentives to foreclose, the infrequency with which modifications are offered, and the perception that offering principal reductions would induce everyone to default), if you can’t afford to pay, then what’s the point?  Ultimately, the best way you can prove your ability to pay is to save money.  Saying you can pay is one thing – pulling out cash is another.

This is why my first discussion with clients who say they want a loan modification is to inquire about the amount of money they’ve saved.  In my view, if you haven’t been able to save any money while the foreclosure case has been pending, then you probably can’t afford to pay, even if a loan modification were offered.  After all, if you were able to pay on a monthly basis, then you’d have some money saved.

Sometimes, this advice creates some understandable anger.  “You don’t know what you’re talking about, Stopa.  I just chose to spend my money in other ways.  I paid other debts.  I have a job now.  I can afford a modification.”

OK.  But here’s the problem.  On the rare instances where I’ve seen modifications offered, they often look like this.

At first glance, this loan modification offer looks appealing, and in some ways, it is.  The monthly payments are reduced, and it even has a principal reduction!  For some homeowners, this sort of offer is a godsend, creating the ability to keep ones home and avoid foreclosure.

However, look closer.

Do you see how the agreement requires that monthly payments begin immediately?  There’s no “wait 60 days until I get a job” – the monthly payments start now.

Do you see how the agreement is predicated on proof of insurance?  For the homeowner to get this modification, he/she will have to immediately obtain homeowners’ insurance – and pay for it.  For anyone whose insurance lapsed, getting insurance right away will not be easy, or cheap.

Do you see how “any payments for taxes and insurance will be [the homeowner’s] responsibility in addition to the payments of principal and interest”?  Hence, the homeowner not only has to pay the monthly payment, he/she has to pay property taxes, too.  Does that include delinquent taxes?  The agreement is not entirely clear, but I’d say so.  Of course, these taxes could be many thousands of dollars.

Do you see how “fees and charges that were not included in [the new] principal balance will be [the homeowner’s] responsibility”?  What does this mean, exactly?  Frankly, your guess is as good as mine – this agreement, as written, is clear as mud.  Does it mean that the fees and costs the bank incurred in the foreclosure case have to be paid by the homeowner?  If so, when?  And how much are these fees and costs?  We really don’t know, but that’s the problem – arguably, the bank could simply hand you a bill and say “pay this.”  Sure, you could fight that.  But if you signed, and those are the terms on which the bank is giving the modification, you may have no choice but to pay.

Do you see how “any expenses incurred in connection with the servicing of [the] loan, but not yet charged to [the] account as of the date of this Agreement, may be charged to [the] account after the date of this Agreement.”  What does this mean, exactly?  How much are these charges?  When are they due to be paid?  Again, you may get stuck paying this bill in order to get your modification.

There are other problems with this modification as well, including (1) there is no representation from the lender that it is the owner/holder of the Note and Mortgage; (2) the foreclosure case proceeds unless/until the homeowner has done everything the agreement requires, including obtain Ocwen’s signature; and (3) nothing in the agreement requires the foreclosure case to be dismissed even if all of the terms are complied with.

The point here, though, is that even if the homeowner wanted to do this modification, it requires immediate, out-of-pocket payments – monthly payments, starting immediately, but also payments for insurance, property taxes (including back due taxes), and, arguably, some unspecified amounts for fees, costs, and service charges.

This is a good illustration why I encourage homeowners who want a loan modification to save their money.  As you can see, if you don’t have cash on hand to pay these expenses, then even if a loan modification does come your way, you won’t be able to take advantage.  So when you hear me asking about whether you’ve saved your money, please realize – I’m not being judgmental.  I’m trying to assess whether you can comply with the terms of a loan modification even if you’re one of the lucky homeowners to whom such a modification is offered.

Mark Stopa

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