FHFA Decision May Signal Beginning of Principal Reductions For Fannie Mae and Freddie Mac Loans

             One of the most frustrating parts of representing homeowners facing foreclosure over the past six years has been the steadfast refusal of the two biggest players in the mortgage marketplace, Fannie Mae and Freddie Mac, to allow for the reduction of principal on mortgages under their ownership or control.

 

            Nearly 20% of American homeowners owe more to their mortgage holder than their home is worth. Underwater Loans, loans where the balance exceeds the value of the home, including loans that have been modified are at much greater risk of default than loans where the principal balance of the loan is less than the current market value of the home. This only makes sense. A homeowner with “skin in the game” is much more likely to make sacrifices necessary to make their mortgage payments under difficult circumstances than someone who has no realistic chance of ever recovering their investment.

 

            An underwater homeowner often finds themselves one roof replacement or furnace repair away from having no reasonable choice but to default on their loan.

 

            It has become clear to economists who have studied the matter and to those of us who work with distressed homeowners on the front lines that principal reduction loan modifications create outcomes with the best potential for success for both the homeowner and whoever is the ultimate recipient of the homeowner’s mortgage payments. There is clear empirical evidence that the “net present value” of a $100,000 loan modified to the present value of a $100,000 home is higher than the “net present value” of a $150,000 loan secured by a house worth $100,000 and far higher than the liquidation value of that $100,000 home through foreclosures.

 

            It is indisputable that the correct business decision for Fannie Mae and Freddie Mac to do as most other owners of distressed mortgage loans have done and negotiate principal reduction loan modification with borrowers who are able to pay and who want to remain in their home. But the agency that was created to over see Fannie Mae and Freddie Mac, The Federal Housing Finance Agency (the “FHFA”) has maintained a strict policy against such modifications from the beginning of the housing crisis until now.

 

            This has been a huge source of frustration for many clients of our firm. Too many of our clients have walked away from homes they loved, and could afford at market value because of this arbitrary policy that is as bad for Fannie Mae and Freddie Mac Shareholders and Bondholders as it is for the homeowners who have lost their homes.

 

            There may be a small glimmer of hope on the horizon for homeowners who have underwater loans owned by Fannie Mae and Freddie Mac. Mel Watt, a former Congressman who was sworn in as the Director of the FHFA in January was an advocate of principal reduction as a Member of Congress and he has promised to take another look at the issue in his new role. This weekend the Washington Post reported that at least one family is being permitted to buy their home back after foreclosure at market value, and says that despite the delays that the policy remains under review.

 

            This development makes it more important than ever for homeowners with Fannie Mae and Freddie Mac loans to fight to slow down foreclosure proceedings. There are often significant legal defenses that can be raised to both defeat and slow down foreclosure efforts that might put borrowers currently facing foreclosure in position to be among the first to negotiate a principal reduction loan modification with Fannie Mae and Freddie Mac.

 

Marc Dann

 

mdann@dannlaw.com

 

216-373-0539

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Homeowners Frustrated By Loan Modification Process can Sue Under New CFPB Regulations

Today’s Plain Dealer reports on our groundbreaking case against J.P. Morgan Chase for their failure to process our client’s loan modification package in an timely fashion and for foreclosing on our client while a completed loan modification application had been submitted to Chase.

New regulations under the Truth in Lending Act (TILA) and the Real Estate Settlement Protection Act (RESPA) for the first time allow aggrieved homeowners a right to sue mortgage loan servicers who fail to process loan modification applications in a timely fashion. That is exactly what we did last week in the Federal District Court for the Northern District of Ohio.

The new regulations also prohibit the filing of a foreclosure action, or taking affirmative steps within a foreclosure action if a homeowner has a submitted a completed loan modification application. The ban on foreclosure under the regulations is for 120 days.

These rules should not be news to Chase or to other loan servicers because the new regulations are based on the standards that Chase itself agreed to in the National Mortgage Settlement just two years ago.

We will keep you updated on our efforts to hold Chase accountable in this case. If you are frustrated in your effort to obtain a loan modification it is important to consult with an attorney who is familiar with the new servicing regulations and the significant rights of homeowners, including the right to sue.

Marc Dann

mdann@dannlaw.com

216-373-0539

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JP Morgan Chase tells a current borrower to default in order to apply for a loan modification then files for foreclosure instead; The Dann Law firm files one of the first cases in Ohio alleging violations of the new Federal consumer protections and real estate procedure laws in response

There are a number of reasons that people fall into foreclosure, but following the directions given to you by your servicers should never be one of them. However, that’s exactly what happened to Bethanne Wasko.

Bethanne had always made the payments on the adjustable-rate mortgage she had through JP Morgan Chase on her home in Poland, Ohio, until she sought a loan modification and was told by Chase that she would need to stop making payments in order to be eligible. Bethanne did as she was told, but instead of offering her the modification she sought, the bank filed for foreclosure.

“In this case Chase did exactly the opposite of what Congress and The Consumer Finance Protection Bureau directed Loan Servicers to do” said Marc Dann, the Managing Partner of the Dann Law Firm and a former Ohio Attorney General.

The Dann Law Firm successfully defended Bethanne against this action. Both parties agreed that the foreclosure would be dismissed and Bethanne was instructed to submit a loan modification application. Again, Bethanne followed directions. She submitted a complete loss mitigation application on March 26, 2014.

Chase never responded. Instead, Chase refiled for foreclosure on June 5, 2014.

The Dann Law Firm is alleging that Chase is in violation of new Frank-Dodd Wall Street Reform and Consumer Protections Act, the Real Estate Settlement Procedures Act and the Truth in Lending Act and is pursuing one of the first actions in Ohio citing these recent reforms.

Under the new regulations, a servicer cannot file for foreclosure when a modification application has been filed. Furthermore, the servicer is required to promptly review any modification filed 45 days or more before a foreclosure sale and notify the borrower if the application is complete within five days of the filing. Finally, a servicer that has received a loan modification application is required to evaluate the borrower for all mitigation options and provide written notice of which options the borrower may be eligible to receive.
In Bethanne’s case, after filing for foreclosure against her, Chase twice asked for more time to review the loan modification application. Both those extension deadlines have passed. Chase has neither responded to her loan modification request nor dismissed the new foreclosure filing against her.

“For anyone that questioned the necessity for these new, more stringent regulations of the mortgage industry, Bethanne’s case is a prime example of why they are necessary,” said Dann. “We are now looking to the court to uphold these new regulations and protects Bethanne and countless of other homeowners like her.”

Marc Dann
mdann@dannlaw.com
216-373-0539

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How to Pick Your Real Estate Lawyer

While residents of other states may try to close real estate transactions with the aid of an attorney, most Ohio buyers and sellers are savvy enough to know they need a real estate lawyer to guide them through the process.

From transfer tax stamps to water bill requirements to title insurance, real estate transactions in Ohio are fraught with peril for the uninitiated. To help you start this process, here are a few tips on how to pick your real estate lawyer.

Check your local bar association. Most major cities, as well as some counties, have a bar association that can help guide you to a real estate lawyer.  Bar associations oversee the attorneys in their jurisdiction, so they typically steer you towards attorneys who are in good standing, and will be able to help you buy or sell a home in a safe and secure manner.

Search the Internet. The Internet is the new phonebook, so most real estate lawyers have an online presence, even if it’s in the form of a very basic website. The best real estate attorneys in Ohio don’t necessarily have the fanciest websites, but make sure to call the advertised lawyer first and ask questions about their level of experience before agreeing to meet.

Ask about their real estate experience. Once you’ve found a potential real estate attorney, you’ll want to make sure they have the experience necessary to guide you through your real estate deal. If an attorney doesn’t have experience closing deals in your county or municipality, you may want to search for another lawyer, as local knowledge is crucial in most residential real estate transactions.

Don’t listen to advice from the seller’s agent. In some real estate transactions, homebuyers will listen to advice from the seller’s real estate agent. You may be tempted to simply use the seller’s agent to save money. But this is not wise! Remember, the seller’s agent represents the interests of the seller. If you want to make sure your interests are protected, it’s better to hire your own real estate lawyer.

These are just a few of the things to consider when determining how to pick a real estate lawyer. During the course of your deal, your attorney will have to review title documents, make sure the title to the property is cleared, and sift through a mountain of closing documents.

Since the task is so difficult, you want to make sure you’ve picked the best real estate lawyer before leaping into the jungle of real estate transactions in Ohio.

 

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Payday Lenders Must Be Stopped in Ohio- Ohio Supreme Court Holds That That the Legislature Never Really Intended to Stop Them

Almost every day at the Dann Law Firm we hear from clients who have been victimized by some form or payday lender or short term lender in somewhere in Ohio charging often desperate consumers upwards of 300% interest on loans that often compound to thousands of dollars.  This is particularly disturbing to me because as a member of the Ohio Senate and as Attorney General I worked very hard to persuade the legislature to pass comprehensive legislation to regulate payday lenders and in  2008 the Ohio General Assembly pretended to do so.

In 2007 Nadine Ballard, the Chief of the Ohio Attorney General’s Consumer Protection Division and I convened hearings throughout the state of Ohio about the devastation that these truly predatory lenders were causing to the lives thousands of working class and poor Ohioans.  We used a statutory provision that hadn’t been used in several decades that allowed us to use the power of subpoena and to take testimony under oath from victims of payday lenders and the industry. We held hearings in Cleveland, Columbus and Cincinnati and complied our findings into this comprehensive report to the Ohio General Assembly. Sadly, every practice identified in this report 7 years ago continues to take place today.

Shortly after we issued our report, the Ohio Legislature passed what it called comprehensive reform of Payday Lending, making substantial amendments to Ohio’s Short Term Loan Act. What they failed to do was make similar changes to other lender laws like the Mortgage Loan Act.  Predatory Payday Lenders simply switched their registration with the Ohio Department of Commerce and continued to gouge consumers.

Yesterday, the Ohio Supreme Court yesterday decided that it appears that was exactly what the Ohio legislature intended. Justice Paul Pfeifer asked the right questions in his dissent:

“I write separately because
something about the case doesn’t seem right.
 There was great angst in the air. Payday lending was a scourge. It
had to be eliminated or at least controlled. So the General Assembly enacted a
bill, the Short-Term Lender Act (“STLA”), R.C. 1321.35 to 1321.48, to regulate
short-term, or payday, loans. And then a funny thing happened: nothing.

It was as if the STLA did not exist. Not a single lender in Ohio is subject to the law.
How is this possible? How can the General Assembly set out to regulate a 
controversial industry and achieve absolutely nothing? Were the lobbyists
smarter than the legislators? Did the legislative leaders realize that the bill was
smoke and mirrors and would accomplish nothing?

While we continue to try to find ways to attack these loans in state court and in bankruptcy court on behalf of our clients, the Ohio Legislature needs to find a way to stand up to the strong lobby for the payday lenders and enact reasonable protection for consumers, limiting interest rates for all short term loans, limiting the number of loans that can be issued and clamping down on abusive collection practices.

 

Marc Dann

mdann@dannlaw.com

216-373-0539

 

 

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Best Real Estate Lawyers in Ohio

In Ohio, due to the complexity of even the most mundane real estate transactions, many experts recommend the use of a real estate attorney for both buyers and sellers.

But simply grabbing a passing attorney isn’t the best strategy. Buyers and sellers should do their homework before hiring a real estate attorney. To help with this decision, listed below are a few of the traits of the best real estate lawyers in Ohio:

Relevant real estate experience. Experience is crucial in real estate. But not all real estate experience is created equal. For example, an attorney who is well-versed in large commercial transactions may not be the right resource for a smaller real estate sale. Likewise, a lawyer experienced in home sales may not be best equipped to handle a larger commercial sale. Ask your attorney whether he has experience with your type of transaction before hiring him or her.

Knowledge of local transfer rules. As the old adage goes, the key to real estate is “location, location, location.” The same rule applies in real estate law. Different Ohio counties have different property transfer requirements, involving details like transfer taxes, water bills, and the like, so make sure your real estate lawyer knows the local rules of your particular county in Ohio.

Strong communication skills. In the midst of such complex transactions, some attorneys forget to communicate with their clients. The best real estate lawyers in Ohio keep their clients updated on the proceedings, especially if they encounter difficulties. In addition, good communicators are better able to deal with the various players in a real estate sale, like appraisers, inspectors, lenders, and title insurance company employees.

Comfort with negotiations. You will likely conduct several negotiations during your real estate transactions. First, and most importantly, you’ll negotiate the terms of the sale with the other party. And if you’re the buyer, you’ll also have to negotiate the terms of a home loan with a mortgage lender. These discussions can be perilous for the inexperienced. The best real estate lawyers in Ohio are able to hold their own during these negotiations.

The sale or purchase of a home in Ohio is accompanied by a litany of unforeseen difficulties, like recording deeds, inspecting homes, and title insurance complications. The best real estate attorneys in Ohio can help guide you through this complex process. 

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Abusive Loan Servicers Like Ocwen PNC and Bank Of America Now Demanding Borrowers Who Finally Obtain Loan Modifications Sign Non-Disparagment Clauses

Reuters today reports a phenomenon that has become a real problem for lawyers and homeowners who are serious about remaining involved in the public policy debate about abusive loan servicing practices. Major Servicers are asking homeowners and often their lawyers to agree not to “disparage” them or modifications and settlement agreements will be terminated.

The CFPB needs to address this abusive practice

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Allowing The Rationalization of Home Mortgages in Bankruptcy Court: An Idea who’s time should have come in 2009 Deserves A Serious Look by Members of Congress

            As many of you know, I’ve spent the last 6 years of my life representing homeowners in state court as they defended foreclosure actions against their homes.  While we have been successful in many cases in identifying technical legal issues that have delayed or often even stopped foreclosures, the primary goal of most of our firm’s clients has been to find a way to renegotiate the terms of their loan to return to becoming as one client put it to me yesterday, “ a regular boring mortgage paying homeowner”.

 

            If you believe the national financial press, the lawyers who represent the bondholders who purchased the bonds backed by the loans owed by my clients and the economists who study the housing market of all ideological stripes agree that the net present value of mortgages “marked to market”, meaning with the principal reduced to something near the value of the collateral real estate are more valuable to those who invested in them than homes that are liquidated by foreclosure and sold below market value.

 

            At the end of the day, in most cases the economic interests of homeowners who are in default but are currently employed are aligned with the ultimate beneficiaries of their payments (or those who ultimately suffer if they fail to pay or are foreclosed on).  Often the end investor is the United States Taxpayer who still holds the vast majority of stock in Fannie Mae and Freddie Mac by far the largest investors in American mortgage notes.

 

            Today New York Times columnist Joe Nocera reminds us that in 2009 U.S. Senator Richard Durbin, D-Illinois introduced legislation that would have changed the Federal Bankruptcy code to allow homeowners the right to modify their mortgage in Bankruptcy.  The only type of secured loan that cannot be rationalized to value in Bankruptcy court right now is a person’s home loan. Senator Durbin understood then, and it is just as true now, that this make no sense.

 

            President Obama both as candidate and as President and his lap dog for banks Secretary of Treasury Tim Geitner failed to support Senator Durbin’s efforts to amend this change in the Bankruptcy Code into several of the economic recovery and bank bailout bills which ultimately passed.

 

            Standing in the way of protecting homeowners and investors were  and remain the nation’s large banks and loan servicers who have benefitted from billions of dollars in default servicing fees and ancillary charges such as commissions on forced-place insurance and mark ups on foreclosure related costs.

 

            Unfortunately, the remedies available to lawyers and judges in state court, even those who have a passion to help homeowners, do not always match the needs and desires of the homeowners, or ironically the investors who the loan servicers and their foreclosure mill lawyers are supposed to be protecting. 

 

             The Bankruptcy court provides a perfect forum for negotiation and or imposition of principal reduction modifications that are fair to both lender and homeowner and designed to succeed based on a careful review and understanding of the homeowner’s finances and the economics of the local housing market. Bankruptcy judges in each Federal Judicial District are very local and the Judges and Chapter 13 trustees will have a firm understanding of local housing values aiding in the fair resolution of these. Bankruptcy judges and lawyers place a premium on resolution of conflict often providing swift resolution of complicated issues.

 

           Bankruptcy filings are currently down across the country but, Bankruptcy judgeships and courts are fixed by statute leaving capacity to handle an increased caseload that a change in federal law might generate.

 

           New Consumer Finance Protection Bureau Regulations streamline loan modification processes and create legal liability for loan servicers who fail to promptly and honestly review homeowners for available loan modification options.  Pairing the newer, legally enforceable  honest loan modification processes with a legally enforceable right to a fair principal reduction modification of one’s loan could actually allow most of these modifications to be accomplished outside of either bankruptcy court or the foreclosure process. 

 

            Our economy will not recover until the tens of millions of homeowners in this country who are underwater or in default can see a path to resume participating in the broader economy.  Reforming the bankruptcy code to create legally enforceable remedies for homeowner loan modification could be a huge step forward to bolster the economy, while at the same time providing a benefit to investors in mortgage backed securities.

 

Marc Dann

mdann@dannlaw.com

216-373-0539

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Searchable CFPB Regulations Available

The Consumer Finance Protection Bureau has published a searchable version of the rules surrounding loan servicing and loss mitigation including loan modification applications and short sales.  There is significant new protection under federal law for homeowners seeking to correct accounting on their home mortgage accounts or a loan modification, including the right to sue for failure to follow the CFPB regulations.

The Searchable database is here:

 

http://www.consumerfinance.gov/eregulations/

Marc Dann

mdann@dannlaw.com

216-373-0539

 

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Debt Buyer Claims Can And Should Be Defended

Just as we’ve begun to catch our breath from revelations of the predatory and fraudulent tactics of mortgage loan servicers who filed robo-signed and false affidavits, mortgage assignments and other documents in an attempt to defraud courts in Ohio and across the country to foreclose on homeowners, the national media and the Consumer Finance Protection Bureau have started to investigate the even bolder and more egregious tactics of firms that specialize in buying credit card debt.

 

            Yesterday’s Washington Post details one consumer’s fight against one of the nation’s largest and least ethical debt buying operations, Midland Mortgage.

 

            The Post reports:

 

“One Midland employee, Ivan Jimenez, testified in a 2009 civil lawsuit against the firm that he signed 200 to 400 affidavits a day. He said that “very few” documents were checked for accuracy, a claim that mirrors accusations of mortgage servicers “robo-signing” foreclosure documents.”

 

But unlike the evolving case law on foreclosures Ohio Courts have held debt buyers like Midland to a minimal standard of proving that they are actually entitle to enforce the debts that they are collecting and that those debts alleged are accurate.

 

We have had success in defending debt buyer claims in courts throughout Ohio and then pursuing claims against the debt buyers under the Fair Debt Collection Practices Act, The Ohio Consumer Sales Practices Act and The Telephone Consumer Protection Act and other consumer statutes. 

 

Despite theses defenses and potential claims against the debt buyers the vast majority of debt buyer lawsuits in Ohio go undefended.

 

If a debt buyer has sued you please call for a free evaluation of your claim.

 

 

Marc Dann

mdann@dannlaw.com

216-373-0539

 

www.dannlaw.com

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