Flagstar Bank fined by CFPB, and must help affected homeowners

Yesterday, September 29, 2014, the Consumer Financial Protection Bureau announced in a press release (click here) regulatory action taken against Flagstar Bank, FSB a federal savings bank. The announcement details a consent order between the CFPB and Flagstar. You can read the full consent order here: (click to view consent order).

In summary, Flagstar "took excessive time to process borrowers’ applications for foreclosure relief, failed to tell borrowers when their applications were incomplete, denied loan modifications to qualified borrowers, and illegally delayed finalizing permanent loan modifications." (Press Release linked above 9/29/2014.)

The consent order requires Flagstar to compensate affected homeowners in an amount up to $20 million. This means direct payments to homeowners who were harmed, estimated to be 6,700 distressed homeowners with residential loans serviced by Flagstar between 2011 and 2013. This includes up to 2,000 homeowners who's homes were foreclosed prior to September 4, 2014. The consent order specifies that Flagstar must pay $27.5 million to the CFPB, of which $20 million is to be used by the CFPB to compensate "foreclosed consumers."

In the course of our representation of homeowners going through foreclosure, we have heard many stories of this kind of treatment from major servicers. Unfortunately, until recently, there were no state or federal laws requiring loan servicers to treat borrower applications for assistance with anything more than mere lip service. There is also usually a lack of evidence since most of the communications between borrowers and servicers is verbal, and servicer employees tended to disappear ever time a borrower got close to finding out the truth.

In the past few years, there have been similar consent orders entered against Bank of America, Wells Fargo, Citibank, JP Morgan Chase, and some others. However, in my opinion and experience, the practical benefit to the homeowners where were most negatively affected has been minimal, because prior consent orders did not require the servicers to contact homeowners and alert them of the order. Also, homeowners with pending legal actions or foreclosures have not been able to use the consent orders as evidence of wrongdoing in their specific case.

The Flagstar consent order is very similar to prior servicer consent orders, but it does have some terms that leave me more hopeful. For example, the order makes specific findings of servicer errors involving violations of the 2014 CFPB servicing requirements for delinquent mortgages. Examples include improper denial of requests for modifications, and improper prolonging of trial modifications that should have been made permanent. These are two of the biggest common complaints we encounter every day with homeowners.

In light of prior ineffective consent orders and settlement agreements with various servicers, if you were foreclosed on by Flagstar bank in 2011 or after, or if your request for modification was denied, you may be eligible for a compensatory damage award. Prior consent order damage claims (for ex. Bank of America) have been between $300 - $1,200. You can apply directly to the CFPB, but we recommend contacting a qualified licensed attorney to make sure your claim is recognized, and to have a better chance of getting the relief you need. New federal regulations allow homeowners to bring private actions against Flagstar for damages, even if the CFPB pays you compensation.

If you are a homeowner in Oregon, contact the attorneys at Garland Griffiths Knaupp directly at (503) 846-0707 or visit our website for more information about legal representation.

CFPB Releases New Resources for Consumers

The Consumer Financial Protection Bureau (CFPB) recently released additional resources for consumers as part of its campaign to educate the public about the new protections provided by the CFPB’s new mortgage rules which went into effect on January 10, 2014.

The CFPB’s new mortgage rules protect consumers by requiring that mortgage lenders evaluate whether borrowers can afford to pay back the mortgage. The rules also establish new, strong protections for struggling homeowners, including those facing foreclosure, and ensure that borrowers are protected from costly surprises and delays by lenders.

The CFPB Bureau has released a number of educational materials to improve consumer understanding of the new rules and their protections. These materials include:

• Sample Letters: The CFPB has released sample letters that consumers can send to lenders when problems arise.

• Mortgage Tips: The CFPB provides a number of different tips on new rights under the new rules for homebuyers and homeowners at every stage of the mortgage process—from taking out a loan to paying it back. The tips also include recommendations for troubled borrowers facing foreclosure.

• Answers to Consumer Questions: The CFPB provides answers to mortgage-related questions through AskCFPB, an interactive online tool designed to answer consumers’ most frequently asked questions in plain language.

• Consumer Tools: The CFPB website offers a tool to help consumers find local housing counseling agencies to answer their questions or address their concerns. Consumers that have an issue with consumer financial products or services, such as a mortgage, can also submit a complaint.

• Fact sheets on the Rules: The CFPB offers a fact sheet with an overview of the new consumer protections in the CFPB’s mortgage rules. The CFPB also offers a summary of the new procedures to facilitate borrowers’ access to foreclosure avoidance options.

Print copies of the mortgage materials will be available in seven languages: Spanish, Tagalog, traditional Chinese, Haitian Creole, French, Korean, and Vietnamese. English language materials can be found at consumerfinance.gov/mortgage.

Over the next year, the CFPB will continue to produce materials to educate consumers about the new mortgage rules and we will keep you informed about these changes. Or if you have any questions, please feel free to contact Garland Griffiths Knaupp at (503) 846-0707  for a one-hour consultation.

CFPB Releases New Mortgage Rules Resources for Consumers

On January 10, 2014, the Consumer Financial Protection Bureau (CFPB) released new mortgage rules designed to provide homeowners and consumers with new rights and greater protections from many of the harmful lending practices that led to the recent mortgage crisis and attendant financial collapse.

Virtually every mortgage a lender makes must now be evaluated, first and foremost, on the borrower’s ability to repay the loan. This means that the borrower must be able to repay the loan for years, not just during the first few months when a “teaser” interest rate keeps monthly payments low.  These new mortgages will be referred to as “Qualified Mortgages” or “QMs.” QMs are designed to be safer and easier to understand than the loans that lead to the recent financial crisis. New CFPB rules also limit the points and fees lenders can charge for making a QM.

There are a number of other rules designed to safeguard consumers from predatory lending practices. These rules include, but are not limited to, the following:

• Mortgage lenders and servicers are required to send you a clear monthly statement so you can see how they are crediting your payments.

• Mortgage lenders and servicers are required to fix mistakes promptly.

• Mortgage lenders and servicers are required to credit payments the day they get them.

• Mortgage lenders and servicers are required to give you early notice if you have an adjustable rate mortgage and your interest rate is about to change.

• Mortgage lenders and servicers are required to call or contact borrowers by the time they are 36 days late on their mortgage.

• With limited exceptions, mortgage lenders and servicers cannot initiate a foreclosure until the borrower is more than 120 days delinquent.

• Mortgage lenders and servicers cannot start a foreclosure while they are also working with a homeowner who has submitted an application for a loan modification or other alternative for help.

• Mortgage lenders and servicers are required to advise borrowers who fall behind on their mortgages of all of the workout options available to them.

• Mortgage lenders and servicers are required to explain to a borrower why a mortgage modification was denied.

Taking out a mortgage is arguably one of the most important decisions a consumer will make. The new CFPB rules are designed to make sure that consumers have the knowledge and protections necessary in order to make sound decisions about their financial futures.

If you feel that your lender or servicer has violated any of these rules, please feel free to contact Garland Griffiths Knaupp at (503) 846-0707  for a one-hour consultation or visit the CFPB website at http://www.consumerfinance.gov for more information.

It is very important to contact an attorney as early in the process as possible to protect your rights as a consumer.  If you think you have been harmed, you may have as little as 1 year from the harm to file suit to enforce the rules in court.

The Price of Justice

Why do we do what we do?

Foreclosure defense is a challenging area of the law. We almost always find ourselves standing in opposition to large lenders with deep pockets who retain large law firms with deep pockets. Many of our clients, in turn, are individual homeowners of limited means. The task is often daunting; difficult.

So why do we do it?

We must make one thing perfectly clear. We are not on a crusade. This is not like Don Quixote tilting at windmills. We do what we do for one principal reason—we believe that the law should be evenly and fairly applied to all irrespective of size, wealth or status. We believe in justice, not “just-us.” Unfairness, inequity and unlawful conduct deserve redress. We give the little guy a chance, a voice, and a day in court.

Consider for a moment the recent settlement agreement reached by the Consumer Financial Protection Bureau against the country’s largest non-bank mortgage loan servicer, Ocwen Financial Corporation. Ocwen was found to have engaged in “significant and systemic” misconduct at every stage of the mortgage servicing process. Under the terms of the agreement, Ocwen must provide $2 billion in principal reduction to underwater borrowers. Ocwen must also refund $125 million to the nearly 185,000 borrowers serviced by Ocwen or its subsidiaries whose homes have already been foreclosed. Finally, Ocwen will be subject to greater regulatory scrutiny going forward.

Sounds great, right? Justice was served, right?

We’re not so sure.

Let’s recap for a moment.

Over the past 3 years, a number of banks including Citibank, Chase, and Bank of America were found to have engaged in a systemic pattern of mortgage servicing abuse which resulted in millions of homeowners being unfairly treated. During the financial crash that began in 2008, most of these banks were supported with economic stimulus funds through the TARP program. Even those who didn’t receive direct TARP funds were supported with easy credit from the federal reserve system.  The least they could do is work in good faith with struggling homeowners (the taxpayers) on reasonable loan modifications. But did the big banks do even that? In many cases, no. They took the money, regrouped financially and are now swimming in profits while many homeowners were left to twist in the wind waiting on loan modification programs.

So let’s move on to Chapter 2.  The same banks that agreed to a $25 Billion National Mortgage Settlement as a result of serial and systemic mortgage servicing abuses are now trying to pass the buck.  Recently we have observed several of the largest banks divesting themselves of much of their mortgage servicing portfolios to companies like Ocwen.  So what does Ocwen do? As explained in Part I of this entry, the same thing that the big banks were accused of doing!

Ocwen was found to have charged unauthorized fees, forced homeowners to buy unnecessary insurance policies; lied in response to borrower complaints about excessive and unauthorized fees; lied about loan modification services when borrowers requested them; misplaced documents, ignored loan modification applications and illegally denied eligible borrowers a loan modification.  Here’s the proof.

Pretty wicked stuff. And caught in the middle? The real victim? You. The consumer. And traditional notions of justice.

As a part of the Ocwen settlement, (which looks good on paper), Ocwen was not required to admit any wrongdoing—thereby insulating Ocwen and Ocwen executives from legal exposure. The settlement calls for payments of $125 Million as compensation for approximately 185,000 borrowers who were affected by the misconduct; some of whom have already lost their homes. How much is the loss of your home worth?

Far more than they are being asked to pay.

As young law students we are taught that justice is blind. No....we are not crusaders, but we do believe in the law. Laws have been broken. The aggrieved deserve their day in court.

That is why we do what we do.

Because it is the right thing to do.

But time is of the essence, and you should contact us immediately before your legal claims are barred by time.  The law that limits your right to bring a legal action is called the statute of limitations, and there are many different limitations statutes with different time limits.  The most common legal claims that we litigate in foreclosure and loan servicing problems are breach of contract, trespass, negligence, bad faith, fraud, and unfair trade practices.  Breach of contract and trespass actions have a 6 year statute of limitations.  Negligence, fraud, and bad faith have a 2 year statute of limitations, and unfair trade practices have a 1 year statute of limitations.

Determining when the statute of limitations begins ticking down on your claims is not easy to do, even for experienced attorneys, so do not delay.  Please call one of our attorneys at (503) 846-0707 for a consultation. The help you need, and deserve, is just a telephone call away.

Bankruptcy 101: The Difference Between Chapter 7 and Chapter 13

Hundreds of thousands of Americans file for bankruptcy each year. But filing for bankruptcy does not mean that your debts are simply wiped away in one easy step. You must first be eligible to file a bankruptcy, and the duration and outcome of your bankruptcy case will depend on the type of bankruptcy filing for which you qualify.

And so this is where we will begin.

The two most common types of bankruptcy filings for consumers (as opposed to bankruptcies for businesses which work a little differently) are a Chapter 7 and a Chapter 13 bankruptcy. Under Chapter 7, consumers may have some of their assets sold, but are able to escape liability for most of their debts. The process usually takes just a few months. Under Chapter 13, consumers pay part or all of their debts under a tightly controlled budget plan overseen by a court-appointed bankruptcy trustee. The Chapter 13 process, also called reorganization bankruptcy, generally takes three to five years.

If you're considering filing for bankruptcy, your first step is to attend a credit counseling session run by a government-approved organization. Then you'll receive a certification confirming that you completed the course and then can file your case. During the session you'll be asked about your financial situation -- income, expenses, assets, debts and goals, and the counselor will help you figure out how to proceed.

If you make more than the median income for your state, you must complete a means test, which compares your monthly income and expenses to certain baseline costs set by a formula. If the means test shows that you have enough money left at the end of the month to pay at least part of your unsecured debts, such as credit cards, you must generally file under Chapter 13.

Many clients, at least initially, would prefer to file a Chapter 7 because they do not want to be in bankruptcy for years. That is understandable. However, there are some distinct advantages to a Chapter 13. First and foremost, Chapter 13 only requires you to pay back as much as you can afford.  It gives you a chance to stop any foreclosure proceedings, catch up on your mortgage payments, and possibly strip off unsecured second and third mortgages.

If you are considering a bankruptcy and have questions about how to proceed, please call our new associate attorney James Edmunds, at Garland Griffiths Knaupp, Attorneys, (503) 846-0707.

The help you need, and deserve, might be a telephone call away.

CONSUMER FINANCIAL PROTECTION BUREAU ORDERS OCWEN FINANCIAL CORPORATION TO PROVIDE $2 BILLION IN RELIEF TO HOMEOWNERS FOR SERVICING VIOLATIONS

The Consumer Financial Protection Bureau (CFPB), together with authorities in 49 states and the District of Columbia recently reached a $2.1 billion settlement agreement with the country’s largest non-bank mortgage loan servicer, Ocwen Financial Corporation.  The settlement is the result of the investigation of numerous complaints arising out of Ocwen’s alleged “significant and systemic” misconduct at every stage of the mortgage servicing process. Under the terms of the agreement, Ocwen must provide $2 billion in principal reduction to underwater borrowers. Ocwen must also refund $125 million to the nearly 185,000 borrowers serviced by Ocwen (or its subsidiaries Homeward Residential Holdings and Litton Loan Servicing) whose homes have already been foreclosed. Finally, Ocwen will be subject to greater regulatory scrutiny going forward.

“Deceptions and shortcuts in mortgage servicing will not be tolerated,” said CFPB Director Richard Cordray. “Ocwen took advantage of borrowers at every stage of the process. Today’s action sends a clear message that we will be vigilant about making sure that consumers are treated with the respect, dignity, and fairness they deserve.”

What does this settlement mean for you?

If you had or have a loan serviced by Ocwen, Homeward Residential Holdings (formerly American Home Mortgage Servicing) or Litton Servicing, you may be entitled to a refund or other legal action which could include a lawsuit against these servicers for wrongful foreclose. Garland Griffiths Knaupp Attorneys have represented clients in successful actions against American Home Mortgage (now Homeward Residential) in the past two years. We would like to help you if you suffered the loss of your home due to these predatory lending practices.

But time is of the essence, and you should contact us immediately before your legal claims are barred by law.  The body of laws which puts a time limit on your right to bring a legal action is called the statute of limitations, and there are many different limitations statutes with different time limits.  The most common legal claims that we litigate in foreclosure and loan servicing problems are breach of contract, trespass, negligence, bad faith, fraud, and unfair trade practices.  Breach of contract and trespass actions have a 6 year statute of limitations.  Negligence, fraud, and bad faith have a 2 year statute of limitations, and unfair trade practices have a 1 year statute of limitations.

Determining when a statute of limitations starts and other exceptions is not easy to do, even for experienced attorneys, so do not delay.  Please call one of our attorneys at (503) 846-0707 for a consultation. The help you need, and deserve, is just a telephone call away.

Alternative Exit Strategies—Deed in Lieu of Foreclosure

In our prior two posts, (What documentation should I receive from my lender prior to a foreclosure mediation? and What documentation do I need to produce for a foreclosure mediation?) we addressed the documents that lenders and borrowers have to produce as a part of Oregon’s new mediation program. However, there is an old adage that “numbers never lie.”  After collecting all of the required documents, it will sometimes become abundantly clear that the numbers simply do not add up and a loan modification is not likely. There can be a number of reasons—from significantly reduced property values to loss of income due to job loss—but sometimes the best strategy (if not the only strategy) is to consider an exit strategy.

We have all heard about people who just “walked away” from their mortgage. Just to be very clear, walking away from your mortgage is NOT an exit strategy. The fact that you have walked away from your home does not mean you have walked away from the legal liability for your home. Quite the contrary. What you might have done by walking away is walk right into a very large money judgment. To draw an analogy, walking away from your home is just like refusing to pay that annoying parking ticket. Just because you ripped it up and threw it in the trash (don’t ever do that by the way), does not mean that the fine is not still out there waiting...waiting...waiting....

Just.

For.

You.

So what is a viable exit strategy? Two of the most commonly used exit strategies are short sales and deeds in lieu of foreclosure. In this blog, we will explain what a “deed in lieu of foreclosure” is, how it works, and whether or not this is a strategy you should consider.  

Simply put, a deed in lieu of foreclosure is a transaction where a homeowner voluntarily transfers title (the deed) to the property to the lender in exchange for a release from the mortgage obligation. Before accepting a deed in lieu of foreclosure, lenders usually require that homeowners try to sell the home first. If the home sells for the mortgage amount (or more), then problem solved. If not, then a deed in lieu of foreclosure might provide a quick, relatively straightforward resolution that avoids the time and expense associated with a foreclose action.

If your lender agrees accepts a deed in lieu of foreclosure, there are legal documents that the parties will have to execute. These documents generally include: (1)  a deed that will transfer legal ownership of the property to the lender and (2) an affidavit that memorializes the terms of the parties agreement. This agreement should explicitly include language that the deed in lieu of foreclosure fully satisfies the debt and the lender has no right to seek a deficiency judgment against the homeowner. The “deficiency” in this case is the difference between the current fair market value of the home and the total debt.

Once this process is completed, the homeowner can then walk away from the home with no further legal liability to the lender. (There may be tax ramifications however, so you should also seek the advise of a tax advisor before finalizing any documents). One case where this might be the best option is if your home value is hopelessly upside down. But that is just one such scenario. If you have questions about whether or not a deed in lieu of foreclosure is the right option for you, please call Garland Griffiths Knaupp at (503) 846-0707.

We’re here to help.

What documentation should I receive from my lender prior to a foreclosure mediation?

Participation in Oregon’s new mediation program is required for lenders who initiated 175 or more foreclosure actions in the preceding calendar year. In our prior post (What documentation do I need to produce for a foreclosure mediation?), we itemized the documents that the homeowner must provide to the lender prior to a mediation. In this post, we address the documents that the lender must provide to the homeowner.

After a homeowner has paid the required fee ($175.00 but a fee reduction waiver is available for households making 200% or less of the federal poverty level) and submitted the required documents (see prior post), a lender is required to provide the homeowner with the following documents:

•      Copies of the residential trust deed and the promissory note that is evidence of the obligation that the trust deed secures;

•      The name and address of the person who owns the obligation secured by the trust deed;

•      A record of your payment history for the preceding 12 months or since you were last current on your loan obligation;

•      The amount you currently owe on the loan and the amount due to cure the default;

•      Input and output values for each Net Present Value model that your lender uses;

•      The most recent appraisal or price opinion your lender used to determine the value of your property;

•      The pooling or servicing agreement your lender entered into with another agency;

•      A description of any additional documents your lender needs to evaluate your eligibility for a foreclosure avoidance measure.

The documents the parties provide should provide both lender and borrower with a pretty good idea of whether or not a modification is likely under the circumstances. In some cases, it will be fairly clear that a modification is appropriate. In other cases, less so. In some cases, it will become fairly obvious that a modification is not likely (usually due to financial or affordability reasons). If this is the case, we would encourage homeowners to discuss possible exit strategies prior to mediation and to make sure that the lender will have someone present or available during the mediation that has actual authority to agree to an exit plan. If that person is not there, the parties may be required to come back for another resolution conference.

If you have any questions about the mediation process, whether you think you qualify for a mediation, or possible alternative exit strategies, please do not hesitate to contact Garland Griffiths Knaupp at (503) 846-0707.

We’re here to help.