Posted on October 20th, 2010 by Mark Stopa
The impact of Foreclosure-Gate on the title insurance industry continues to rear its ugly head. Today, Fidelity announced it will require lenders to sign a warranty ensuring their foreclosures were done properly before issuing title insurance.
“It’s just the prudent thing to do,” Peter Sadowski, executive vice president and chief legal officer for Fidelity National, said in an interview. “It is important for the servicers and the lenders to represent to us and to the people we are going to be insuring that there are no problems.”
Under the new policy,“[e]ven if a court sets aside a foreclosure due to a defect in documentation, the foreclosing lender would be required to return all funds obtained from our insureds, resulting in no loss under the title insurance policy,” Foley said.
This is huge news. Presuming this policy gets adopted by all title insurance agencies (as I presume it will), then this may prevent the destruction of the title insurance industry (a fear I’ve been discussing for many months). Essentially, the title insurance companies are shifting the risk associated with wrongful foreclosures and blighted titles onto the banks. It’s as if they’re saying “You did it wrong, banks, so if there’s a problem with title, you pay to fix it.”
Meanwhile, the banks want us to believe that their foreclosures are being done correctly. Just this week they terminated their temporary, self-imposed moratorium on foreclosures, coupled with press clippings that they found no problems with their foreclosure processes. This is one of those instances, though, where actions speak louder than words. The fact that Fidelity feels the need to insure against the possibility of title defects via faulty foreclosures speaks volumes. After all, the banks may say the foreclosures are being done correctly, but the title insurance companies obviously know better. At this point, so do we.
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Posted on October 20th, 2010 by Mark Stopa
Just as I was finishing my last blog about loan modifications, I received a comment on this blog from a homeowner. The homeowner’s story moved me, so much so that I felt compelled to post it (with her permission), below. As you read it, ask yourself “Does this sound like a deadbeat? Or does this sound like an honest, honorable, hard-working American who is trying to do right for her family and meet her financial obligations?”
What particularly irks me about this situation is that she was induced to default by a scam operation out of California that promised a loan modification but never delivered.
Dear Sir, I am writing to you as my last hope to save my home. My husband lost his job here in Tampa Fl. and had to move to Houston in order to keep his job at a lower rate. On March 8, 2010, we paid $2,500, up front, to a California company called National Relief Group to get a loan modification. They told us it would take 120 days to complete, not to contact our lender, and to stop paying our mortgage in order to get our home modified. Its been now 8 months and still no answer and we are now $14,000.00 behind including late fees and penalties. Since then my husband was cheating on me and left me right after life support and took off. I filed for divorce and got granted the house. However I was to refinance the house in my name and the kids. Since my divorce, my credit was ruined being so lengthy almost 18 months and costly. As the months went by I got a letter from the Attorneys for Bank of America. They filed a suit for foreclosure, I panic because that was not our intention. I want to keep my home – I just needed assistance to lower the modification in order to keep paying the house. I called the company that was supposed to modify the loan and for months they kept saying it was in negotiation process, and we kept getting deeper in the hole with no promises it would go through. So I called Bank of America. I was told that if I wanted to keep my house, I would have to come up with $14,000. I told them to please work with me by doing a repayment plan for the back paid fees and penalties, or to put the back pay towards the end of the loan and I would continue to pay the mortgage, as I do not want to lose my house. The lady I spoke to from BOA was rude, obnoxious and uncaring to my plea. She said to ask my family, friends, etc. to help bring my mortgage up to date in order to keep it from foreclosure. She also informed me that I would have to come up with $10,000 and they would do a six month plan which would take me from $1234 a month to $2700 a month. I told her I could not afford that payment and she told me that was the only way I could keep my house from foreclosure and she also said I would have to come up with the money soon because they move fast on foreclosures, within 30 to 60 days. I cried to her, I pleaded to her that this was not my fault, why I was in this position and it would be a win-win situation to keep the house out of foreclosure if I’m willing to pay my mortgage every month but I could not come up with the back payments thru no fault of my own, all we were trying to do was to get help by modifying the loan to make it affordable to us since my now ex had lost his job in Tampa.
Needless to say that I sat there in shock and confused as to how a person wants to keep their home and can find noone to help them. I recently got another letter from the court advising that the attorneys for BOA are also not only doing the foreclosure but also seeking attorney’s fees as well. This is insane. I am a disabled woman on a fixed income now receiving alimony, my sons have moved back into my home and between the 3 of us we can pay the mortgage. However, I am so disgusted that the banks will not work with me, I can’t refinance, I can’t seem to get any help from anyone in keeping my home. Its all I have left. I am turning to you for help, guidance and direction as to what I can do so I don’t lose my home. I am able to make my monthly mortgage payments, however I cannot cough up, nor do I have family left and/or friends who can help me with this kind of back pay. Something has to be done as I am not one to walk away from my responsibilities without giving my all. I am not a loser or a low life as people are calling us that now, just a disabled woman trying to keep a roof over her head.
Anything you can do to help us would be greatly appreciated as I feel you are my last hope. If you have any questions, please feel free to contact me at 727-XXX-XXXX.
Sadly, this story is not unusual. In fact, I hear stories like this every single day. Contrary to what many Americans think, most homeowners aren’t “deadbeats.” Most of my clients aren’t “taking advantage of the system.” These homeowners are good people who are trying to do the right thing. Can the banks say the same?
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Posted on October 20th, 2010 by Mark Stopa
I’ve repeatedly expressed my frustrations with the loan modification process, or lack thereof, on this blog. Honest, well-intentioned homeowners cannot get a bank representative to communicate with them. Many such homeowners were actively induced to default, purportedly to become eligible for a modification that, in my experience, never arrives. Even in those rare instances where a loan modification is offered, it’s typically not a meaningful modification – the homeowner is essentially making the same monthly payment that he/she was paying all along. What does that accomplish? What’s the point?
Unfortunately, it’s even worse than that. As this article illustrates, banks often want homeowners to enter a modification just so a subsequent foreclosure will be easier for them! I’ve seen this often enough that I feel comfortable opining:
Banks aren’t offering modifications to help homeowners – they’re offering modifications to help themselves!
Lest you disagree, consider the loan modification agreement that just came across my desk. Like most modifications I’ve seen, three aspects of this agreement are just brutal for homeowners:
1) All foreclosure defenses are waived. Under most loan modification agreements, if a homeowner signs, then defaults on the modification agreement, the homeowner agrees that all defenses to foreclosure are waived. Essentially, if the homeowner defaults on the modification agreement, the bank can dribble up to the basket and slam-dunk a foreclosure without opposition.
“But the bank doesn’t own and hold the Note,” you argue. Maybe so, but since the homeowner warrants otherwise in the modification agreement, the homeowner is barred from challenging the bank’s standing after defaulting on the modification agreement (or that’s what the bank will argue, anyway).
What does this mean? Essentially, the homeowner takes what may be a very defensible foreclosure case – one where the bank may be unable to prove it owns and holds the Note and Mortgage – and turns it into an easy case for the bank by signing a modification agreement. In my view, the banks are offering modifications to make it easier for themselves to foreclose! It’s a one-sided agreement – for the banks!
With this in mind, if the modification agreement doesn’t entail a significant reduction in payments, what’s the point? In my view, modification agreements generally aren’t a good idea (the way they’re currently set up) unless the homeowner is absolutely certain that he/she can make the requisite payments indefinitely into the future. After all, once you default on a modification agreement, chances are it’s “game over.”
2) The foreclosure lawsuit remains pending. In most lawsuits, when the parties enter a settlement agreement, the lawsuit is dismissed. Sometimes, the suit is dismissed with a court order that reserves jurisdiction to enforce the parties’ settlement agreement, but this is standard fare – lawsuits are dismissed when the parties settle. Unfortunately, that’s not how it works with loan modification agreements in foreclosure cases. To illustrate, the modification agreement in my hands says “The Lender agrees to suspend all foreclosure activities so long as I comply with the terms of the Loan Documents.” Hence, if the homeowner defaults – or if the Bank asserts the homeowner defaults – all the Bank has to do is resume prosecution of the existing foreclosure lawsuit, which remains pending. It doesn’t matter if the default occurred six months after the modification or two years – all the bank has to do is resume the existing foreclosure case. And since the homeowner has waived all defenses, obtaining a foreclosure judgment truly is the equivalent of Shaq dunking the ball on an 8-foot basket without any defense.
(Judges, I respectfully submit you should do something about this. How many pending cases are on your dockets where nothing has happened because the parties agreed to a loan modification but the bank refuses to dismiss? I’d suggest an Administrative Order that requires dismissals of foreclosure lawsuits where the parties enter a Loan Modification Agreement. There is no reason for cases to remain pending for months or even years when the parties have amicably resolved their dispute.)
3. The bank makes no representations whatsoever. You know what scares the heck out of me with these modification agreements, more than anything else? The bank that is receiving the money does not make any warranties or representations whatsoever – not even a representation that it is the rightful owner and holder of the Note and Mortgage! Lest you think that’s “no big deal,” consider this.
We all know that most Notes and Mortgages have been transferred or assigned from one bank to another, many times over. Often the banks don’t know who owns/holds the Note and Mortgage, much less prove it. If the Bank you’re entering a loan modification with does not represent, in writing, that it owns and holds your Note and Mortgage, then what’s to stop another bank from emerging, months down the road, and suing you for foreclosure on that same Note and Mortgage? Unfortunately, absolutely nothing. That’s why, if it were my client, I’d require the bank to sign the loan modification with a written representation that it owns and holds the Note and Mortgage and is the party entitled to collect mortgage payments. I’d also demand to see the original Note. Without these precautions, my clients may be handing out money to an absolute stranger – one with no right to collect – and with what I know, that’s not a risk I’d feel comfortable recommending.
But even that’s not good enough. In addition to this representation, I’d want the bank to indemnify my clients from any losses they incur as a result of another bank making a successful claim on that Note and Mortgage. In other words, if another bank sues my client for foreclosure, after the modification agreement, the bank that modified with us should bear the losses, not my clients. To ensure the bank would be able to foot this bill, I’d also want some financial disclosures, especially if the bank was one I’m not familiar with.
In sum, if you’re a homeowner facing foreclosure and the bank is offering you a loan modification, I’d be very careful about what you’re getting. Read the fine print closely. If your payments aren’t going down significantly, you’re waiving defenses, the foreclosure lawsuit remains pending, and the bank isn’t making any written representations, chances are the modification agreement is designed to help the bank, not the homeowner.
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Posted on October 20th, 2010 by Mark Stopa
Maryland’s highest court has adopted an emergency rule, effective immediately, designed to identify and weed out irregularities in foreclosure cases.
Consider this another illustration of how, little by little, courts are doing more than rubber-stamping foreclosure judgments (in the wake of widespread proof of foreclosure fraud throughout our courts). Are you paying attention, Florida Supreme Court? As I blogged previously, you have the authority to do something similar.
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