CFPB Brings First Enforcement Action under Regs X and Z

In the first of what should be many The Consumer Finance Protection Bureau entered into a $37.5 Million settlement with Flagstar Mortgage today.

The CFPB outlined conduct that our office has attacked on behalf of our clients since the new Federal Servicing Regulation went into effect on January 10 of this Year.

Flagstar was cited for the following conduct that violates Federal TILA and RESPA laws.

  • Closed borrower applications due to its own excessive delays: Flagstar took excessive time to review loss mitigation applications, often causing application documents to expire. To move its backlog, Flagstar would close applications due to expired documents, even though the documents had expired because of Flagstar’s delay.
  • Delayed approving or denying borrower applications: Under the new CFPB mortgage servicing rules, Flagstar must evaluate a complete loss mitigation application within 30 days, if it receives the complete application more than 37 days before a foreclosure sale. Flagstar also failed to adhere to these timelines.
  • Failed to alert borrowers about incomplete applications: Flagstar is responsible for reviewing borrowers’ initial loss mitigation applications to determine what documents are missing. It must then tell borrowers what documents are missing, usually by sending a “missing document” letter. Flagstar failed to send, or delayed sending, missing document letters to borrowers.
  • Miscalculated incomes: Eligibility for some loss mitigation programs, such as a loan modification, is highly dependent on borrower income. If borrowers have too much or too little income, they do not qualify. Flagstar routinely miscalculated borrower income and wrongfully denied loan modifications.
  • Denied applications for unspecified reasons: Under the CFPB’s new rules, mortgage servicers must provide the specific reason a complete loan modification application is rejected. Flagstar’s policy was to say only “not approved for loss mitigation options by the investor/owner of the loan,” even though Flagstar’s internal systems contained the true reason for the denial.
  • Misinformed borrowers about their appeal rights: Under the CFPB’s new rules, Flagstar must provide certain borrowers the right to appeal the denial of a loan modification. But Flagstar failed to provide this notice, and it wrongly stated that borrowers have an appeal right only if they reside in certain states.
  • Put borrowers in trial period purgatory: Flagstar needlessly prolonged trial periods for loan modifications. This caused some borrowers’ loan amount under the modified note to increase and, in some cases, jeopardized borrowers’ permanent loan modification.

Consumers and Homeowners who encounter such conduct from their own loan servicer have a right under the new CFPB regulations to bring an action in Federal Court for Damages against their mortgage company. The Dann Law Firm has been on the forefront of bringing claims under Regulations X and Z.

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Pro Publica Reports: Wage Garnishments Becoming All Too Common

Over the weekend Pro Publica published, “Unseen Toll, Wages of Millions Seized to Pay Past Debts” reporting on an analysis of data from payroll service ADP showing one out of 10 american workers between the ages of 35 and 44 had their wages garnished in 2013.

Just as our economy improves and  American workers are regaining lost financial footing and moving into better paying jobs, millions are facing garnishment of up to a quarter of their net wages that pull them back down and reduce their spending power.

This is an astounding finding in light of the fact that in so many cases, lawsuits brought on old credit cards, pay day loans and other bills can often be successfully defended in state court or easily addressed in Bankruptcy court.

Further, we have had success turning debt collection case against our clients into Fair Debt Collection Act Claims, and claims under state law against those who sought to sue them. These same faulty debt collection filings may also lead to claims against lenders under the Federal Fair Credit Reporting Act.

The Pro Publica details the problem that creditors in these cases are always represented by attorneys, but debtors rarely appear in court to fight them:

“When these creditors and collectors go to court, they are almost always represented by an attorney. Defendants — usually in tough financial straits or unfamiliar with the court system — almost never are. In Clay County, Missouri, where Capital One brought its suit against Evans in 2011, only 7 percent of defendants in debt collection cases have their own attorneys, according to ProPublica’s review of state court data. Often the debtors don’t show up to court at all: The most common outcome of a debt collection lawsuit in Missouri (and any other state) is a judgment by default.”

The Dann Law Firm regularly represents debtors in these lawsuits and can evaluate each person’s individual situation to determine if they have potential claims against a creditor or options in bankruptcy court

Marc Dann

mdann@dannlaw.com

http://protectyourassetsohio.com/

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Bank Of America Settlement Looks Impressive But Maybe Its Time To Take One Of These Cases To Trial

I should be excited about the nearly $17 Billion Settlement agreement between Bank of America and the U.S. Department of Justice announced yesterday. I am happy for our clients here in Ohio facing foreclosure because according to initial press reports, the agreement, like previous agreements with Citibank ($7 Billion) and Chase ($13 Billion) contains language that allows Bank of America to liquidate part of its obligation under the agreement by reducing principal on mortgage loans fraudulently originated by BOA and its predecessor Countrywide in the alleged origination and securitization fraud scheme.

 

Anyone facing difficulty paying their Bank of America, Countrywide or America’s Wholesale Lender originated mortgage or who is in foreclosure currently, even though those companies are no longer involved as an investor or servicer of their loan should wait if possible until this new settlement agreement takes hold to see if there is an opportunity to negotiate a better outcome. If this agreement is anything like the National Mortgage Settlement it may require persistence and the assistance of a lawyer to access the benefits that the government has negotiated for you in this settlement.

 

My guess is that as in prior settlements DOJ left too much discretion in the hands of the Defendant in the case Bank of America to pick and choose who they will help.

 

But despite the good news, I have some serious concerns about these settlements. These pacts are about the origination and securitization of hundreds of thousand of fraudulent and unsuitable mortgages to American Consumers and their sale to unsuspecting investors throughout the world that nearly caused the collapse of the US economy in 2008. The illegal and possibly criminal conduct of these bad actors left millions of Americans financially insecure, caused a depression of the housing market that continues to this day and have cost investors and homeowners billions of their hard earned dollars.

 

What disturbs me the most is that theses settlements have been reached before a lawsuit was filed against the banks. If a complaint laying out the government’s case against Chase, and Citi and BOA had been filed before settlement, the public and future generations would have had a chance to see the unfiltered findings about the conduct of these bad actors by the Department of Justice and 5 State Attorneys General who participated in the settlement. If any of these cases had actually gone to trial, whether the government had won or lost, the adversary process would have revealed a much more realistic picture of what actually happened between 2001 and 2008 that caused the apocalyptic collapse in 2008.

 

For the agreements to come to fruition, a formal complaint and consent judgment entry will have to be filed but that complaint will be carefully drafted with the consent of Bank of America. Just as the complaints and agreements in the Chase and Citi cases were drafted jointly by lawyers for the DOJ and those banks. Historians, legal scholars and future market participants trying to determine the parameters of proper conduct will be left without the guidance that a contested trial, judgment and decision of a court of appeals could provide to how such market participants acted to incur such massive liability and how they should act in the future to avoid causing such pain and hardship to future consumers and investors. The New York Times addressed this risk of the Bank of America Settlement and other settlement on the eve of yesterday’s announcements.

 

In defending individual homeowners in foreclosure, bringing claims under state and federal consumer protection laws and civil tort claims we are taking cases to trial in Ohio every day setting standards for everything for who has standing to enforce a note and mortgage to what kind evidence a lender is required to proffer to establish a default on a mortgage or compliance with federal regulations that govern the enforcement of FHA or VA loans. These trials, decisions and appeals will provide a chronicle of the abuses of the past and a roadmap for proper conduct for mortgage lenders for the future.

 

We should expect no less from the United States Department of Justice and the State Attorney General Partners.

 

Marc Dann

mdann@dannlaw.com

877-475-8100

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Homeowners Mistreated By Banks Often Mistreated a Second Time By a Modification Mill or Out Of State Law Firm

It is bad enough that most people facing foreclosure who reach out to our law firm have been badly mistreated by their banks, but over the last few weeks it seems like almost every new client who has called us has also been victimized a second time by a predatory loan modification mill or out of state law firm making illusory promises to stop an Ohio foreclosure and obtain a loan modification.

Several of these well meaning clients find themselves on the brink of a Sheriff’s Sale only to learn that these firms they have been paying are not licensed to practice law in Ohio and therefore can do nothing to “Stop a Foreclosure” as they promise and do nothing more than pass the homeowner’s paperwork onto a loan servicer without providing any advice or expertise that adds any value whatsoever to likelihood of obtaining a loan modification.

Apparently this is happening all over the country. Last month Federal and State Regulators intiated “Operation Mis-Modification” cracking down on firms that took large upfront fees and guaranteed results. The Director of the Consumer Finance Protection Bureau Richard Cordray had this to say about these operations:

These companies pocketed illegal fees, taking millions of hard-earned dollars from distressed consumers, and then left those consumers worse off than they began,” said Richard Cordray, the bureau’s director. “These practices are not only illegal, they are reprehensible.”

The CFPB issued an advisory with specific advice about what people looking for help when facing foreclosure should look for and look out for.

Just last week my friend Martin Andelman reported in his blog Mandleman Matters that several State Attorneys General took action against lawyers promotion “Mass Joinder” lawsuits taking millions from homeowners who they fooled into thinking were part of a class action.

We are doing our part. For our clients who have been scammed by modification mills or out of state lawyers we are bringing lawsuit under Ohio’s strong Consumer Protection Laws on their behalf and stepping into their Ohio state court proceedings raise issue when possible to slow or stop foreclosure efforts. We are counseling our clients on new Federal Law Protections that make loan servicers more accountable in the loan modification process and can work to keep homeowners in their homes.

Sadly once burned, homeowners who need legal representation the most are twice shy about retaining experienced aggressive local lawyers to bring the necessary motions and raise appropriate arguments in court and to create real leverage to get loans modified or who can counsel those homeowners about bankruptcy options that allow them to stay in their homes.

Marc Dann

mdann@dannlaw.com

216-373-0539

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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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