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Real Estate Settlement Procedures Act (RESPA)

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Real Estate Settlement Procedures Act (RESPA)

Purpose of the Act

It was created because various companies associated with the buying and selling of real estate, such as lenders, real estate agents, construction companies and title insurance companies were often engaging in providing undisclosed kickbacks to each other, inflating the costs of real estate transactions and obscuring price competition by facilitating bait-and-switch tactics.

For example, a lender advertising a home loan might have advertised the loan with a 5% interest rate, but then when one applies for the loan one is told that one must use the lender’s affiliated title insurance company and pay $5,000 for the service, whereas the normal rate is $1,000. The title company would then have paid $4,000 to the lender. This was made illegal. The reason is to make prices for the services clear so as to allow price competition by consumer demand and to thereby drive down prices.

Restrictions

The Act prohibits kickbacks between lenders and third-party settlement service agents in the real estate settlement process (Section 8 of RESPA). Even reciprocal referrals among these types of professions could be construed in court as a violation of the law of RESPA. It requires lenders to provide a good faith estimate (GFE) for all the approximate costs of a particular loan and finally a HUD-1 (for purchase real estate loans) or a HUD-1A (for refinances of real estate loans) at the closing of the real estate loan. The final HUD-1 or HUD-1A allows the borrower to know specifically the costs of the loan and to whom the fees are being allotted. Beginning January 1, 2010, amendments to RESPA restrict the amount that fees can increase between the GFE and HUD-1 or HUD-1A. Origination charges are not allowed to increase, while certain third party service providers’ fees can increase by no more than 10%.

Account Inquiries – “Qualified Written Request”

If the borrower believes there is an error in the mortgage account, he or she can make a “qualified written request” to the loan servicer. The request must be in writing, identify the borrower by name and account, and include a statement of reasons why the borrower believes the account is in error. The request should include the words “qualified written request”. It cannot be written on the payment coupon, but must be on a separate piece of paper. The Department of Housing and Urban Development provides a sample letter.

The servicer must acknowledge receipt of the request within 20 business days. The servicer then has 60 business days (from the request) to take action on the request. The servicer has to either provide a written notification that the error has been corrected, or provide a written explanation as to why the servicer believes the account is correct. Either way, the servicer has to provide the name and telephone number of a person with whom the borrower can discuss the matter. The servicer cannot provide information to any credit agency regarding any overdue payment during the 60 day period.

If the servicer fails to comply with the “qualified written request”, the borrower is entitled to actual damages, up to $1000 of additional damages if there is a pattern of noncompliance, costs and attorneys fees.

Criticisms

Critics say that kickbacks still occur. For example, lenders often provide captive insurance to the title insurance companies they work with, which critics say is essentially a kickback mechanism. Others counter that economically the transaction is a zero sum game, where if the kickback were forbidden, a lender would simply charge higher prices. One of the core elements of the debate is the fact that customers overwhelmingly go with the default service providers associated with a lender or a real estate agent, even though they sign documents explicitly stating that they can choose to use any service provider. Some say that if the profits of the service providers were truly excessive or if the price of the services were excessively inflated because of illegal or quasi-legal kickbacks, then at some point non-affiliated service providers would attempt to target consumers directly with lower prices to entice them to choose the unaffiliated provider.

There have been various proposals to modify the Real Estate Settlement Procedures Act. One proposal is to change the “open architecture” system currently in place, where a customer can choose to use any service provider for each service, to one where the services are bundled, but where the real estate agent or lender must pay directly for all other costs. Under this system, lenders, who have more buying power, would more aggressively seek the lowest price for real estate settlement services.

While both the HUD-1 and HUD-1A serve to disclose all fees, costs and charges to both the buyer and seller involved in a real estate transaction, it is not uncommon to find mistakes on the HUD. Both buyer and seller should know how to properly read a HUD before closing a transaction and at settlement is not the ideal time to discover unnecessary charges and/or exorbitant fees as the transaction is about to be closed. Buyers or sellers can hire an experienced professional such as an attorney to protect their interests at closing.

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Truth in Lending Act (TILA)

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Truth in Lending Act (TILA)

The Truth in Lending Act (TILA) of 1968 is a United States federal law designed to promote the informed use of consumer credit, by requiring disclosures about its terms and cost to standardize the manner in which costs associated with borrowing are calculated and disclosed.

TILA also gives consumers the right to cancel certain credit transactions that involve a lien on a consumer’s principal dwelling, regulates certain credit card practices, and provides a means for fair and timely resolution of credit billing disputes. With the exception of certain high-cost mortgage loans, TILA does not regulate the charges that may be imposed for consumer credit. Rather, it requires uniform or standardized disclosure of costs and charges so that consumers can shop. It also imposes limitations on home equity plans that are subject to the requirements of Sec. 226.5b and certain higher-cost mortgages that are subject to the requirements of Sec. 226.32. The regulation prohibits certain acts or practices in connection with credit secured by a consumer’s principal dwelling.

The Truth in Lending Act was originally Title I of the Consumer Credit Protection Act, Publication .L. 90-321, 82 Stat. 146, enacted June 29, 1968.

The regulations implementing the statute, which are known as “Regulation Z”, are codified at 12 CFR Part 226. Most of the specific requirements imposed by TILA are found in Regulation Z, so a reference to the requirements of TILA usually refers to the requirements contained in Regulation Z, as well as the statute itself.

From TILA’s inception, the authority to implement the statute by issuing regulations was given to the Federal Reserve Board. However, as of July 21, 2011, TILA’s general rulemaking authority is transferred to the Consumer Financial Protection Bureau, which will be established on that date pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act which was enacted in July 2010. The Federal Reserve will retain some limited rulemaking authority under TILA for loans made by certain motor vehicle dealers, and for certain provisions related to real estate appraisers.

Organization

The regulation is divided into subparts.

Subpart B relates to open-end credit lines (revolving credit accounts), which includes credit card accounts and home-equity lines of credit (HELOCs).

Subpart C relates to closed-end credit, such as home-purchase loans and motor vehicle loans with a fixed loan term. It contains rules on disclosures, treatment of credit balances, annual percentage rate calculations, right of rescission, non requirements, and advertising.

Subpart D contains rules on oral disclosures, Spanish language disclosure in Puerto Rico, record retention, effect on state laws, state exemptions (which only apply to states that had Truth in Lending-type laws prior to the Federal Act), and rate limitations.

Subpart E contains special rules for mortgage transactions. Section 226.32 requires certain disclosures and provides limitations for loans that have rates and fees above specified amounts. Section 226.33 requires disclosures, including the total annual loan cost rate, for reverse mortgage transactions. Section 226.34 prohibits specific acts and practices in connection with mortgage transactions.

Several appendices contain information such as the procedures for determinations about state laws, state exemptions and issuance of staff interpretations, special rules for certain kinds of credit plans, a list of enforcement agencies, model disclosures which if used properly will ensure compliance with the Act, and the rules for computing annual percentage rates in closed-end credit transactions and total annual loan cost rates for reverse mortgage transactions.

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MERS Mortgage Electronic Registration Systems

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For information about Southern California luxury homes in Los Angeles County, Orange County and San Diego County real estate, call Bob Cumming of Keystone Group Properties at 310-496-8122. Keystone Group Properties services discriminating buyers of coastal Southern California real estate in Malibu to homes near the waterfront in Newport Beach to La Jolla.

MERS Mortgage Electronic Registration Systems

MERS’ primary function is to act as a document custodian. Major players in the mortgage lending industry created MERS to simplify the process of transferring mortgages by avoiding the need to re-record liens – and pay county recorder filing fees – each time a loan is assigned. “Instead, servicers record loans only once and MERS’ electronic system monitors transfers and facilitates the trading of notes …” Currently over half of all new residential mortgage loans in the United States are registered with MERS and recorded in county recording offices in MERS’ name.

This has reduced transparency in the mortgage market in two ways. First, consumers and their counsel can no longer turn to the public recording systems to learn the identity of the holder of their note. Today, county recording systems are increasingly full of one meaningless name, MERS, repeated over and over again. But more importantly, all across the country, MERS now brings foreclosure proceedings in its own name – even though it is not the financial party in interest. This is problematic because MERS is not prepared for or equipped to provide responses to consumers’ discovery requests with respect to predatory lending claims and defenses. In effect, the securitization conduit attempts to use a faceless and seemingly innocent proxy with no knowledge of predatory origination or servicing behavior to do the dirty work of seizing the consumer’s home.

Consumers, who are facing foreclosure, that try to assert predatory lending defenses are often forced to join the party – usually an investment trust – that actually will benefit from the foreclosure. As a simple matter of logistics this can be difficult, since the investment trust is even more faceless and seemingly innocent than MERS itself. The investment trust has no customer service personnel and has probably not even retained counsel.

Inquiries to the trustee – if it can be identified – are typically referred to the servicer, who will then direct counsel back to MERS. This pattern of non-response gives the securitization conduit significant leverage in forcing consumers out of their homes. The prospect of waging a protracted discovery battle with all of these well funded parties in hopes of uncovering evidence of predatory lending can be too daunting even for those victims who know such evidence exists. So imposing is this opaque corporate wall, that in a “vast” number of foreclosures, MERS actually succeeds in foreclosing without producing the original note – the legal sine qua non of foreclosure – much less documentation that could support predatory lending defenses.

A critique of the effect of securitization lies in the impact it has on civil procedure. Discovery, negotiation, and litigation in general is more expensive for consumers with securitized loans than it is for loans funded by the traditional secondary market. Legal scholars have made a compelling case for the serious potential consequences for consumers when businesses use procedural dispute resolution costs as a hedge against enforcement of substantive law.

Moreover, an extensive literature demonstrates the great vulnerability of our civil justice system to manipulation of procedure in general, and discovery in particular. For example, a federal district judge’s remarks from the late 1970s seem equally resonant today:

The civil justice system in the United States depends on the willingness of both litigants and lawyers to try in good faith to comply with the rules established for the fair and efficient administration of justice. When those rules are manipulated or violated for purposes of delay, harassment or unfair advantage, the system breaks down. There continues to be abuse of the judicial process. Abuse of the judicial process occurs most often in connection with discovery. Unjustified demands for and refusals to provide discovery prolong litigation and drive up its costs. Fabrication and suppression of material facts are regrettably common occurrences, although lawyers and judges are often reluctant to admit it.

Given these observations, we should not be surprised to find a business system that derives its revenue from creating procedural roadblocks in the way of consumers litigating from the brink of homelessness.

One characteristic of structured finance is the erection of such barriers. In traditional two and three-party mortgage markets, consumers and their counsel had a clearer idea of whom they were borrowing from and who might seek to foreclose upon them if they failed to repay. Service of process, interrogatories, depositions, and negotiations could be expected to involve only one company which was responsible for all, or nearly all, the relationship functions associated with the loan.

By comparison, selling a loan into a contemporary structured finance conduit can force consumers to communicate with and litigate against many more business entities. Even simple litigation tasks, such as service of process, interrogatories, and requests for production of documents, can become much more complicated in structured finance. One could serve one party years’ ago. Today, one might need to serve ten or more different parties or businesses.

This is a major challenge as the consumer will almost always have no knowledge of the name, address or other contact information for many of these firms. Legal counsel for the foreclosing party most likely does not know which businesses were involved in performing the various functions associated with the loan. Phone calls to the loan’s servicer are frequently ignored, subject to excruciating delays, and typically can only reach unknowledgeable staff who themselves lack information on the larger business relationships.

Securitization trustees are not in the business of counseling the thousands of mortgagors pooled in each of the many real estate trusts they oversee. Policy makers must not underestimate the staggering difficulty of reconstructing the facts involved in only one loan. Securitization creates an opaque business structure that consumers have great difficulty forgathering.

Securitization also complicates the paper trail for a given mortgage by facilitating frequent permutations in the servicing and ownership history of the loan. One of the benefits of securitization is that it allows trustees to shop for the most efficient servicer, reassigning servicing rights for loan pools when a better deal comes along. And, depending on how the securitization conduit is structured, a loan may undergo several assignments in route to its destination pool. While these changes may help ensure that the pool securities pay out on time and otherwise manage risks to the businesses involved, they also raises costs for the consumer attempting to piece together who did what to them.

Mortgage loan documentation has become more complex, the organizational technology of securitization has displaced older, more transparent, public systems for maintaining records. Nowhere is this more apparent than the use of the Mortgage Electronic Registration System, or MERS, to circumvent county recording offices.

It is suggested the consumer consult with a legal firm that is most experienced in working with MERS and the multiple issues.

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Foreclosure or Bankruptcy: Best Course of Action?

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Foreclosure or Bankruptcy: What Might Be the Best Course of Action?

While millions of Americans are severely impacted by the economy, we find that more and more families are falling behind in their mortgage payments. A number of families have already or will be faced with the decision of what to do. Is it better to lose your house to foreclosure or file for bankruptcy protection?

Neither option is good for future credit considerations. A foreclosure will remain on your credit history for 7 years, while a bankruptcy remains for 10 years. In spite of the fact a foreclosure stays on the credit report for less time than a bankruptcy, mortgage lenders and banks look more seriously at foreclosures as normally a bankruptcy does not include the house.

It is suggested to contact your lender even if you are behind in payments or have received an official “notice of default” saying you’re several months behind, you still have time before the formal foreclosure process begins.

Foreclosure should not be foregone conclusion. Try to avoid it. The first question you need to decide is whether you want to keep your house or give it up. If you want to keep it, you need to try to work out a plan to get back on track. This involves either making up for the missed payments – which you can do all at once or try to spread out – or coming up with a new plan. One option is to have the loan modified – at a lower interest rate, for example. Or you can ask for “forbearance,” which basically means the lender suspends payments until you can get back on your feet. If you’re in over your head and bought too much house, though, these options probably aren’t going to help. It is suggested you consider professional help in modifying your loans.

It is against California law for an organization to collect up-front fees. If you consider wanting professional help, it is suggested you interview a number of attorneys and law firms and get references. Look at the alternatives and most importantly listen to professional advice and form your own opinion. Make a decision only after this process.

You may have to consider moving. Even if you do lose your house, you don’t want a foreclosure on your record when you go looking for a smaller house or a place to rent. One option is to ask the lender to hold off on foreclosing until you sell. If your mortgage is bigger than your house is worth, you are looking at what’s called a “short sale.”

You can also try something called a “deed in lieu of foreclosure” – which basically means you turn over your house to the lender and walk away without owing anything. But you’ll need to work this out with the lender: you can’t just walk away.

While it’s possible to work out one of these solutions with your lender on your own, you may have better luck with the help of someone who specializes in the process. A good attorney who knows real estate law can help, but you may not be able to afford that. A credit counselor (from an accredited, non-profit agency, not the slime balls who spam you with bogus promises of making your debts “go away”) is another option. Lenders are more likely to go along if a competent third party is there to help smooth the process. California law does not permit upfront fees to credit counselors or parties claiming they can modify loans. Fees can be paid to California licensed attorneys provided they are providing a service. It is suggested you interview a number of attorneys and law firms and make a decision only after this process has been completed.

If all else fails, you may have to consider allowing foreclosure to proceed – or filing for bankruptcy. It depends on each person’s situation. It is suggested one consult with a good credit counselor and a bankruptcy attorney who can review your options and walk you through the various options.

To summarize, the key is to start this process early on and before a notice of default is received.

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Plan for Loan Modifications

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Plan for Loan Modifications

Recent Loan Modification studies have shown that a large percentage of traditional loan modifications put the borrowers more upside down than when they started. Many loan modifications are leaving people with higher monthly payments. In many loan modifications the money you did not pay gets tacked on to the back of the loan… Increasing your loan balance and making you more upside down. This is why over 50% of all loan modifications are in default. They are not fixing the problem they are just postponing it.

Before you go into default on your loans at the advice of some former subprime loan seller, make sure you understand that absent finding some legal leverage over the lender you have a good chance of seeing your payments going up.

It is recommended that legal counsel be used in the structuring of any loan modification. The legal counsel needs to be versed in real estate and loan modifications.

The Loan Modification process should include the following to be effective:

  1. Analysis of the loan(s)
  2. Qualified Written Request and offer of Loan Modification
  3. Letter informing lender of election to pursue remedies carved out by recent California Law under 2923.6 and or Federal Programs under the Truth in lending Act and the Fair Debt collection practices Act.
  4. Letter Disputing debt is a questionable item and may or may not be advisable
  5. Cease and Desist letters a questionable item and may or may not be advisable
  6. Follow up, contact with negotiator, and negotiation by an attorney when needed.

There continue to be multiple scams by a number of different organizations including brokers who put people into the loans in the first place.

Before you spend thousands of dollars with someone, do an investigation. Questions that should be asked include but are not limited to the following:

  1. Is the person licensed by the California Department of Real Estate? Or, the California State Bar?
  2. Are your potential representatives aware that have to be licensed according to the Department of Real Estate (DRE)?
  3. Are they asking you for money up front? They are violating the California Foreclosure Consultant act if they are neither California attorneys nor perhaps Real Estate brokers in possession of a no opinion letter from the California Department of Real Estate?

If a Notice of Default has been filed against your residence only attorneys acting as your legal representative can take up front fees. Most attorneys will want you to sign a retainer agreement for services to be rendered.

  1. If your potential representative is not an attorney make sure he or she is a Real Estate Broker capable of proving their upfront retainer agreement has been given a no opinion letter by the DRE.
  2. If someone says they are attorney backed – ask to speak with the attorney. Normally, you are dealing with someone who cannot be licensed.
  3. Find out how your loan modification people intend to gain leverage over the lender.
  4. If you are offered a loan audit or a Qualified Written Request under RESPA letter – will an attorney be doing the negotiating against the lender? Will you have to hire the attorney after you pay for your loan audit?
  5. Will it do you any good to have a loan audit done if you later have to go out and retain an attorney. You want to retain their services of an attorney before you pay for the audit. The loan audit is the profit center; negotiation takes time.
  6. What kind of results should you expect?
  7. Who will be doing your negotiating?
  8. Will the Loan Modification request go out on Legal Letterhead?
  9. How much will you have to pay? Are you looking for a typical loan mod result or are you looking to leverage the law in the hopes of getting a better than average loan mod result.
  10. What if your are not satisfied with the loan modification offered by the lender?
  11. Should you go into default on both loans prior to requesting a loan modification? Why? An important question is what happens if the loan mod does not work out to your satisfaction?
  12. Will an attorney review the terms of your loan modification with you? Will you have to waive your anti-deficiency protections if you sign your loan modification paperwork? Will an attorney help you leverage recent changes in California law in an attempt to get a substantial reduction in the principle?

To summarize, it cannot be stressed enough to hire experienced legal experts who have been working with lenders in the areas of loan modifications. It is suggested one interview a number of legal experts before a final decision is made.

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What is Predatory Lending?

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What is Predatory Lending?

Predatory Lending are abusive practices used in the mortgage industry that strip borrowers of home equity and threaten families with bankruptcy and foreclosure. DO NOT WAIT UNTIL IT IS TOO LATE IF YOU SUSPECT YOU ARE A VICTIM OF PREDATORY LENDING.

Predatory Lending can be broken down into three categories:Mortgage Origination, 2) Mortgage Servicing; and 3) Mortgage Collection and Foreclosure.

Mortgage Origination

Mortgage Origination is the process by which you obtain your home loan from a mortgage broker or a bank. Predatory lending practices in Mortgage Origination include:

  • Excessive points;
  • Charging fees not allowed or for services not delivered;
  • Charging more than once for the same fee;
  • Providing a low teaser rate that adjusts to a rate you cannot afford;
  • Successively refinancing your loan of “flipping”;
  • “Steering” you into a loan that is more profitable to the Mortgage Originator;
  • Changing the loan terms at closing or “bait & switch”;
  • Closing in a location where you cannot adequately review the documents;
  • Serving alcohol prior to closing;
  • Coaching you to put minimum income or assets on you loan so that you will qualify for a certain amount;
  • Securing an inflated appraisal;
  • Receiving a kickback in money or favors from a particular escrow, title, appraiser or other service provider;
  • Promising they will refinance your mortgage before your payment resets to a higher amount;
  • Having you sign blank documents;
  • Forging documents and signatures;
  • Changing documents after you have signed them; and
  • Loans with prepayment penalties or balloon payments.

Mortgage Servicing

Mortgage Servicing is the process of collecting loan payments and credit your loan. Predatory lending practices in Mortgage Servicing include:

  • Not applying payments on time;
  • Applying payments to “Suspense;”
  • “Jamming” illegal or improper fees;
  • Creating an escrow or impounds account not allowed by the documents;
  • Force placing insurance when you have adequate coverage;
  • Improperly reporting negative credit history;
  • Failing to provide you a detailed loan history; and
  • Refusing to return your calls or letters.

Mortgage Collections and Foreclosure

Mortgage Collection and Foreclosure is the process Lenders use when you pay off your loan or when you house is repossessed for non-payment.

Predatory lending practices in Mortgage Collection & Foreclosure include:

  • Producing a payoff statement that includes improper charges & fees;
  • Foreclosing in the name of an entity that is not the true owner of the mortgage;
  • Failing to provide Default Loan Servicing required by all Fannie Mae mortgages;
  • Failing to follow due process in foreclosure;
  • Fraud on the court;
  • Failing to provide copies of all documents and assignments; and
  • Refusing to adequately communicate with mortgage holder.

California Civil Code 2923.6 California

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California Civil Code 2923.6: California

It appeared the effect of California Civil Code 2923.6 would possibly reduce home loans in California to fair market value in certain situations.
Since then, many decisions have come down from local judges attempting to decipher exactly what it means. Unfortunately, most judges are of the opinion that newly enacted California Civil Code 2923.6 has no teeth, and is a meaningless statute.

Time and time again, California Courts are ruling that the new statute does not create any new duty for servicers of mortgages or that such duties do not apply to borrowers. These Courts then immediately dismiss the case, and usually do not even require the Defendant to file an Answer in Court, eliminating the Plaintiff’s right to any trial.

Notwithstanding some of these decisions, the statute was in fact specifically created to address the foreclosure crisis and help borrowers, as Noted in Section 1 of the Legislative Intent behind the Statute:

The intent of the California Legislature was specifically looking to curb foreclosures and provide modifications to homeowners in their statement of intent. Moreover, Section (a) of 2923.6 specifically references a new DUTY OWED TO ALL PARTIES in the loan pool:

California Civil Code 2923.6(a) specifically creates to a new duty not previously addressed in pooling and servicing agreements. It then states that such a duty not only applies to the particular parties of the loan pool, but all parties. Those same duties extend to all parties in the pool if a duty exists in the pooling and servicing agreement to maximize net present value between particular parties of that pool.

So how do these Courts still decide that no duty exists? How do these Courts dismiss cases by finding that the thousands of borrowers of the loan pool that FUND the entire loan pool are not parties to that pool? If they are really not parties to the loan pool, then why are they even required to make payments on the loans to the loan pools? The logic from these courts that there is no duty or that such a duty does not extend to the borrower is not correct in our opinion.

Whatever the reason, there appears a great injustice is occurring to defaulting homeowners, and the housing crisis is only worsening by these decisions.

Yet the reality is that much of the current housing crisis has a solution in 2923.6, and is precisely why the legislature created this legislation. It’s very simple:

Modify mortgages, keep people in their homes, foreclosures and housing supplies goes down, and prices stabilize. More importantly, to
The Servicers and Lender’s, are now better off since they save about $50,000 or more in foreclosure costs when modifying a loan.

Thus it is strange why most Courts are ruling that the California Legislature spent a lot of time and money writing a meaningless statute with no application or remedy to those in need of loan modification. There are some courts that are becoming more involved to better understand the intent of the legislature. One recent ruling against a mortgage company’s motion to dismiss a lawsuit by ruling that 2923.6 is not a matter of law that can be decided in the beginning of a lawsuit to dismiss it, but is instead a matter of fact that needs to be decided later.

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90 Percent of Foreclosures are Wrongful

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90 Percent of Foreclosures are Wrongful!

A wrongful foreclosure action typically occurs when the lender starts a non-judicial foreclosure action when it simply has no legal cause. This is even more evident now since California passed the Foreclosure prevention act of 2008 SB 1194 codified in Civil Code 2923.5 and 2923.6. In 2009 it is the opinion of some attorneys in California that 90% of all foreclosures are wrongful in that the lender does not Compliance would cost hundreds of millions in staff, paperwork, and workouts that they don’t deem to be in their best interest. The workout is not in their best interest because our tax dollars are guaranteeing the Banks that are Too Big to Fail’s debt. If they don’t foreclose and if they work it out the loss is on them.

There is no incentive to modify loan for the benefit of the consumer.

The banks are therefore incentivized to foreclosure without the mandated contacts with the borrower. But compliance with 2923.5 is not done. The Borrower is never told that he or she have the right to a meeting within 14 days of the contact. They do not get offers to avoid foreclosure. There are typically two short sale offers or a probationary mod that will be declined upon the 90th day.

Wrongful foreclosure actions are also brought when the service providers accept partial payments after initiation of the wrongful foreclosure process, and then continue on with the foreclosure process. These predatory lending strategies, as well as other forms of misleading homeowners, are illegal.
The borrower is the one that files a wrongful disclosure action with the court against the service provider, the holder of the note and if it is a non-judicial foreclosure, against the trustee complaining that there was an illegal, fraudulent or willfully oppressive sale of property under a power of sale contained in a mortgage or deed or court judicial proceeding. The borrower can also allege emotional distress and ask for punitive damages in a wrongful foreclosure action.

Causes of Action

Wrongful foreclosure actions may allege that the amount stated in the notice of default as due and owing is incorrect because of the following reasons:

  • Incorrect interest rate adjustment
  • Incorrect tax impound accounts
  • Misapplied payments
  • Forbearance agreement which was not adhered to by the servicer
  • Unnecessary forced place insurance,
  • Improper accounting for a confirmed chapter 11 or chapter 13 bankruptcy plan.
  • Breach of contract
  • Intentional infliction of emotional distress
  • Negligent infliction of emotional distress
  • Unfair Business Practices
  • Quiet title
  • Wrongful foreclosure
  • Tortuous violation of 2924 2923.5 and 2923.5 and 2932.5

Injunction

Any time prior to the foreclosure sale, a borrower can apply for an injunction with the intent of stopping the foreclosure sale until issues in the lawsuit are resolved. The wrongful foreclosure lawsuit can take anywhere from ten to twenty-four months. Generally, an injunction will only be issued by the court if the court determines that: (1) the borrower is entitled to the injunction; and (2) that if the injunction is not granted, the borrower will be subject to irreparable harm.

Damages Available to Borrower

Damages available to a borrower in a wrongful foreclosure action include: compensation for the detriment caused, which are measured by the value of the property, emotional distress and punitive damages if there is evidence that the servicer or trustee committed fraud, oppression or malice in its wrongful conduct. If the borrower’s allegations are true and correct and the borrower wins the lawsuit, the servicer will have to undue or cancel the foreclosure sale, and pay the borrower’s legal bills.

Why Do Wrongful Foreclosures Occur?

Wrongful foreclosure cases occur usually because of a miscommunication between the lender and the borrower. Most borrowers don’t know who the real lender is. Servicing has changed on average three times. This has occurred with the MERS Mortgage Electronic Registration Systems and the “investor lender” hundreds of times since the origination. The servicers of record now have to contact the borrower. They don’t even know who the lender truly is. The laws that are now in place never contemplated the virtualization of the lending market. The present laws are inadequate to the challenge.

This is even more evident now since California passed the Foreclosure prevention act of 2008 SB 1194 codified in Civil Code 2923.5 and 2923.6. It is the opinion of some legal experts that 90% of all foreclosures are wrongful in that the lender does not comply. The lenders have taken a calculated risk.To comply would cost hundreds of millions in staff, paperwork, and workouts that they don’t deem to be in their best interest.

The workout is not in their best interest because our tax dollars are guaranteeing the Banks that are Too Big to Fail’s debt. If they don’t foreclose and if they work it out the loss is on them. There is no incentive to modify loan for the benefit of the consumer. This could be as a result of an incorrectly applied payment, an error in interest charges and completely inaccurate information communicated between the lender and borrower.

Some borrowers make the situation worse by ignoring their monthly statements and not promptly responding in writing to the lender’s communications. Many borrowers just assume that the lender will correct any inaccuracies or errors. Any one of these actions can quickly turn into a foreclosure action. Once an action is instituted, then the borrower will have to prove that it is wrongful or unwarranted. This is done by the borrower filing a wrongful foreclosure action. Costs are expensive and the action can take time to litigate.

Impact

The wrongful foreclosure will appear on the borrower’s credit report as a foreclosure, thereby ruining the borrower’s credit rating. Inaccurate delinquencies may also accompany the foreclosure on the credit report. After the foreclosure is found to be wrongful, the borrower must then petition to get the delinquencies and foreclosure off the credit report. This can take a long time and is emotionally distressing.

Wrongful foreclosure may also lead to the borrower losing their home and other assets if the borrower does not act quickly. This can have a devastating effect on a family that has been displaced out of their home.

The borrower may be entitled to compensation for their attorney fees, court costs, pain, suffering and emotional distress caused by the action once the borrower’s wrongful foreclosure action is successful in court.

To summarize, it is suggested the homeowner work with real estate attorneys who can help in a professional manner and are more apt to be successful in helping the homeowner.

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Home Prices Continue to Rise in May 2012

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For interest in So California luxury real estate in Los Angeles County, as well as coastal Orange County homes and San Diego homes, call Bob Cumming of Keystone Group Properties at 310-496-8122. Keystone Group Properties serves the discerning buyer and sellers of high-end CA real estate, including La Jolla real estate and properties from Newport Beach, Dana Point and Laguna Beach to Palos Verdes and Palos Verdes Estates, Mission Viejo, Redondo Beach, Santa Monica, and Malibu. We also present exclusive Los Angeles CA homes in Beverly Hills, Bel Air, and Beverly Glen real estate.

Home Prices Continue to Rise in May 2012

According to the S&P/Case-Shiller Home Price Indices

New York, July 31, 2012 – Data through May 2012, released today by S&P Dow Jones Indices for its S&P/Case-Shiller1   Home  Price  Indices,  the leading  measure  of U.S. home prices,  showed  that  average home prices increased by 2.2% in May over April for both the 10- and 20-City Composites.

With May’s data, we found that home prices fell annually by 1.0% for the 10-City Composite and by 0.7% for the 20-City Composite versus May 2011. Both Composites and 17 of the 20 MSAs saw increases in annual returns in May compared to April. Boston, Charlotte and Detroit were the three cities that saw their annual returns worsen in May, with annual rates of -0.1%, +0.9% and +0.6%, respectively. Atlanta continues to be the only city posting a double-digit negative annual return with -14.5%. However, this is an improvement over the -17.0% annual decline recorded in April 2012.   All 20 cities and both Composites posted positive monthly returns. No cities posted new lows in May 2012.

“With May’s data, we saw a continuing trend of rising home prices for the spring,” says David M. Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices. “On a monthly basis, all 20 cities and both Composites posted positive returns and 17 of those cities saw those rates of change increase compared to what was observed for April. Seventeen of the 20 cities and both Composites also saw improved annual rates  of  return.  We  have  observed  two  consecutive   months  of  increasing  home  prices  and  overall improvements in monthly and annual returns; however, we need to remember that spring and early summer are seasonally strong buying months so this trend must continue throughout the summer and into the fall.

“The 10- and 20-City Composites were each up 2.2% for the month and recorded respective annual rates of decline of 1.0% and 0.7%, compared to May 2011. While still negative, these annual changes are the best we’ve since in at least 18 months.

“Taking a closer look at the cities, Phoenix again posted the best annual return. Average home prices in that region were up 11.5% versus May 2011.  It was one of the hardest hit cities in the collapse, and prices are still more than 50% below their June 2006 peak, but the past five months have been positive for that market. Miami and Tampa are two other Sunbelt cities that were hard-hit in the downturn,  but are now showing positive annual rates of change.  Boston, Charlotte and Detroit, on the other hand, saw their annual rates of return deteriorate compared to April, even though prices rose over the month of May.   Las Vegas posted both a positive monthly change in May and saw an improvement in its annual return; that said, the market is still more than 60% below it August 2006 peak.

“June data for existing home sales, new home sales, housing starts and mortgage default rates were a bit mixed, but all are better than their year-ago levels.  The housing market seems to be stabilizing, but we are definitely in a wait-and-see mode for the next few months.”
Measured from their June/July 2006  peaks  through  May  2012,  the  decline  for  both  Composites  is  approximately  33%.  The  10-City Composite  recently  reached  its  low  in  the  current  housing  cycle  in  March  2012  and  the  20-City  in February  2012; at that time both Composites  were down approximately  35% from their summer  2006 peaks.

In May 2012, we observed all 20 MSAs and both Composites posting positive monthly returns. Atlanta, again, was the only city to post a double-digit negative annual rate of return of 14.5%; however it saw improvements in both monthly and annual rates versus what was published for April. Phoenix posted the highest annual rate of growth amongst all 20 cities at +11.5%, an improvement over the +8.6% annual return recorded in April. Chicago fared the best in terms of monthly returns with a 4.5% increase in home prices as compared to April. Atlanta, Cleveland, Detroit and Las Vegas continue to have average home prices below their January 2000 levels.

The table below summarizes the results for May 2012. The S&P/Case-Shiller Home Price Indices are revised for the 24 prior months,  based on the receipt of additional  source data. More than 25 years of history for these data series is available, and can be accessed in full by going to www.homeprice.standardandpoors.com.

Since its launch in early 2006, the S&P/Case-ShillerHome Price Indices have published, and the markets have followed and reported on, the non-seasonally adjusted data set used in the headline indices. For analytical  purposes,  S&P  Dow  Jones  Indices  publishes  a seasonally  adjusted  data  set covered  in the headline indices, as well as for the 17 of 20 markets with tiered price indices and the five condo markets that are tracked.
About S&P Dow Jones Indices

S&P Dow Jones Indices LLC, a subsidiary of The McGraw-Hill Companies is the world’s largest, global resource for index-based concepts, data and research. Home to iconic financial market indicators, such as the S&P 500® and the Dow Jones Industrial AverageSM, S&P Dow Jones Indices LLC has over 115 years of experience constructing innovative and transparent solutions that fulfill the needs of institutional and retail investors. More assets are invested in products based upon our indices than any other provider in the world. With over 830,000 indices covering a wide range of assets classes across the globe, S&P Dow Jones Indices LLC defines the way investors measure and trade the markets. To learn more about our company, please visit www.spdji.com.

It is not possible to invest directly in an index. S&P Dow Jones Indices LLC, Dow Jones, and their respective affiliates, parents, subsidiaries, directors, officers, shareholders, employees and agents (collectively “S&P Dow Jones Indices”) does not sponsor, endorse, sell, or promote any investment fund or other vehicle that is offered by third parties and that seeks to provide an investment return based on the returns of any S&P Dow Jones Indices index. This document does not constitute an offer of services in jurisdictions where S&P Dow Jones Indices or its affiliates do not have the necessary licenses. S&P Dow Jones Indices receives compensation in connection with licensing its indices to third parties.

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FRESH START™ Frequently Asked Questions (FAQ’s)

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For information about Southern California luxury and coastal homes in Los Angeles County, Orange County and San Diego County, call Bob Cumming of Keystone Group Properties at 310-496-8122. Keystone Group Properties services buyers and sellers of exclusive Southern California real estate along the West Coast and in Beverly Hills. Ask us about fabulous So California homes in Newport Beach, Laguna Beach, Laguna Niguel, or Malibu beach homes and beautiful La Jolla CA real estate.

FRESH START™ Frequently Asked Questions (FAQ’s)

Q:  When does FRESH START™ begin negotiations with the homeowner’s lender?
A:  FRESH START™ will engage the lender in the effort to acquire the property within 30 days after they receive the package from the homeowner.

Q:  What type of home is FRESH START™ intended to help?
A:  FRESH START™ was created to assist homeowners with their primary residence and usually does not accept investment or commercial properties into the program.

Q:   What is the typical physical condition of FRESH START™ home?
A:  The home must be in Marketable condition and able to pass a standard home inspection as determined by an independent 3rd party appraiser.  These appraisals are subject to both investor and secondary market review; therefore it must be determined to be in “average or good” condition by the independent appraiser.  If an appraisal report comes in with questions, homeowner can ask for a second appraisal from a 3rd party appraiser.  (Homeowner will incur the cost of a secondary appraisal).

Q:  What type of customer is FRESH START™ intended to help?
A:  FRESH START™ is intended to help homeowners who are upside-­‐down on the value of the property. (The home is worth less than the principle value the homeowners still owes on the mortgage.)

Q:  Who are the lenders that FRESH START™ typically works with?
A:  FRESH START™ usually  works with  licensed  conventional  lenders FHA,  VA,  Fannie  Mae,  Freddie  Mac;  sub-prime, Negative Amortization and bank portfolio loans are acceptable for the FRESH START™ program.

Q:  Who are the lenders that FRESH START™ typically does not work with?
A:  Private lenders or hard moneylenders are not acceptable for FRESH START™.

Q:  How accurate should individuals be when submitting financial figures?
A:  It is imperative that all financial information given to FRESH START™ from the homeowners be complete and accurate.

Q:  What home values are desirable for FRESH START™?
A:  The current market value of the home should be at least 20% lower than the balance of the first mortgage on the home.  Originating first loan or mortgage must exceed $100,000 and must be below $729,750.00.

Q:  How is the current market value of the home determined?
A:  Recent sales of properties comparable to your home are analyzed to determine the initial current market value of your home. Your  real  estate  agent  may  have  provided  some  of  these  to  you  to  assist  in  this  process. The final determining factor will be the Independent 3rd Party Appraiser’s evaluation and value.

Q:  How far behind is the typical homeowner entering FRESH START™?
A:  Homeowners entering FRESH START™ must be at least 60 days late on their mortgage payment. Fresh Start and its employees/referral partners CANNOT and NEVER advise anyone to miss a mortgage payment for any reason.
FRESH START™ and its employees/referral partners CANNOT and NEVER advise anyone to miss a mortgage payment for any reason.  FRESH START™ is designed to help homeowners that have already fallen behind on their mortgage payments due to a financial hardship and cannot currently afford the mortgage payment on their home.

Q:  What type of income is desired to enter FRESH START™?
A:  The  homeowners  entering  FRESH  START™  can  any documentable  source  of  income  that  demonstrates they  are capable of  making  the  monthly FRESH  START™ payment. Our internal Underwriters will determine the validity and acceptability of all income documentation provided.

Q:  How is the FRESH START™ monthly payment calculated?
A:  FRESH START bases the payment on the net present value of the home. Your representative will help you to determine the “NEW “fresh start” payment and if you verified income is sufficient for the “Fresh Start” program.

Q:  What is the upfront fee for FRESH START™?
A:  No upfront fees are charged for FRESH START™. The  homeowner  is  responsible  to  pay  for  an  Independent  3rd party  appraisal  (Approximately  $450.00).  Homeowner will be notified by FRESH START Housing Program of independent appraisal service and timing of appraisal. The appraisal takes place after homeowner accepts terms and conditions of acceptance package from FRESH START Housing Program.

Q:  When will the details of FRESH START™ be disclosed?
A:  All details of FRESH START™ are provided up front and in advance of signing any documents; after receipt of the FRESH START™ Application, your package will be underwritten for admission to FRESH START™. Each homeowner can review the terms of the proposal and accept or decline at their discretion.

Q:  When should I discuss FRESH START™ with an attorney?
A:  We advise our potential clients to consult independent legal counsel for any questions they have about their personal circumstances in relation to FRESH START™.

Q:  How flexible are the terms of FRESH START™?
A:  The homeowner must be willing to cooperate with FRESH START™ and all terms of the agreements to insure that negotiation with the lender is handled correctly. It is important not to interfere with the negotiation process.

Q:  What happens upon acceptance into FRESH START™?
A:  The client will receive a copy of the appraisal report and the lease agreement with the Acceptance Package. The appraisal report will reflect the market value of the home based on comparable sales in the area. In addition you will receive an Acceptance Letter into the program; you must sign and return these forms as instructed.

Q:  When does a homeowner begin making monthly rental payments?
A:  Monthly payments for the actual Lease begin at Close of Escrow (COE) and are due on the 1st of the month; if the escrow closes after mid-month than the 1st lease payment is prorated and the following months lease payment is also due at the close of escrow, your SPA account should have enough to cover these amounts.
The client will make payments to the Special Purpose Account 15 days after acceptance into the program to prove  the ability to afford the home at current market value; this allows a payment history to be established which must be proven to the investor. Payments to your SPA are typically due the 1st of each month.

Q:  What are the funds in the Homeowners Savings Account used for?
A:  As stated the funds in the special purpose account are used for 3 purposes; 1st they prove to the investor that the customer will not have “payment shock” and they are willing and able to make the lease payments.  Next, keep in mind that lease payments are due at the time the lease starts which is to say the 1st lease payment is due immediately upon close of escrow.  Finally the funds in the SPA account equal 2 payments will be used as security deposit on lease.

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