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.

What documentation do I need to produce for a foreclosure mediation?

In our last blog post (Foreclosure Actions Down—Way Down—As Oregon’s New Foreclosure Mediation Program Ramps Up—Way Up), we talked about the success that Oregon’s new mediation program is having in bringing borrowers and lenders to the mediation table. There are already more mediations scheduled in November and December of this year than total mediations that occurred under the old mediation program last year. As we discussed, mediation was only required under the old program if the lender filed a non-judicial foreclosure. This turned out to be a loophole the size of Mount Hood because lenders simply stopped filing non-judicial foreclosures and started filing judicial foreclosures instead. Now in fairness to the good people of the Oregon legislature, for the past 50 years or so, almost all foreclosure in Oregon were non-judicial foreclosures. The legislature certainly did not expect lenders to completely abandon the long-established practice of foreclosing non-judicially. But hindsight, as they say, is 20/20. Large lenders did just that—virtually stopped all non-judicial foreclosures—so the Oregon legislature had to step in once again to amend the law.

Enter the new foreclosure mediation program.

Mediation is now required in cases that involve judicial and non-judicial foreclosures.

Loophole closed. Mediation numbers skyrocket. And that is a good thing.

It is too early to tell whether these face-to-face meetings will actually result in more loan modifications. Despite ongoing pressure from the Federal government, and not one but two major settlements involving improper foreclosure servicing practices, loan modifications are still not easy to come by for some homeowners. And the promise of a mediation should not be confused with the promise of a loan modification. For a modification to occur, a borrower still must qualify and a great deal of supporting documentation is required. The process is not terribly enjoyable for homeowners. But if you want a modification, it is a process that you will have to go through.

So if you have a mediation scheduled, or you think you might qualify for a mediation, here are the documents that you will generally have to produce and provide to the lender. For homeowners who have already received a mediation notice, these documents must be provided within 25 days after receipt of the notice. So advance preparation is critical.

First, you will be required to complete a Universal Intake Form. This form is available on the foreclosure mediation website. This form details information about you, your lender, and your current financial situation.

You will also be required to provide the following:

Any additional information about your current income, expenses, debts, and other obligations;

• A description of your financial hardship, if any;

• Documents that verify your income and expenses, including:

• Pay stubs confirming your income for the most recent full two months

• If self-employed, a profit and loss statement

• Bank statements from the most recent two full months

• If relying on social security, disability, unemployment, or other non-wage benefits, a benefits statement from the benefit provider showing the amount, frequency, and duration of the benefit

• A divorce decree judgment or separation agreement if you are relying on child

• Your most recent electric, heat, gas, or other utility bill

• Your most recent property tax statement or appraisal

• Your tax returns from the two most recent years

Providing accurate and complete information will greatly improve your chances of reaching an agreement with your lender during a mediation. This is a valuable opportunity that should not be wasted. Yes, accumulating all these documents takes time and involves no small amount of effort. But this effort may be well worth it if a mediation results in an agreement which will save your home.

So don’t delay. Time is of the essence. Start preparing now.

If you have any questions, please feel free to contact us at (503) 846-0707 or visit our foreclosure defense website garlandgriffiths.com.





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

Foreclosure Actions Down—Way Down—As Oregon’s New Foreclosure Mediation Program Ramps Up—Way Up

There is good news on the often gloomy foreclosure defense front.

Oregon’s new foreclosure mediation program is only a few months old, but lenders (yes, lenders!) have referred over 1,700 new cases to the Mediation Case Manager, the agency responsible for running the program for the state. Of that, more than 1300 cases were just received in the last few weeks.

Chase Bank is the largest bank participating so far with more than 600 requests. The four banks with the most mediation requests are Chase, Nationstar, Green Tree Servicing and US Bank. Bank of America and Wells Fargo—the state’s largest mortgage lender—have yet to submit mediation requests. However, B of A and Well Fargo are (purportedly) preparing to submit a large volume of cases “soon.”

If true, that is really, really good news.

The new mediation program requires the state’s large mortgage lenders to offer a meeting with homeowners before they can foreclose. Lenders must submit mediation requests to the Mediation Case Manager and homeowners are then contacted by a Mediation Case Manager representative notifying them of the request. Homeowner’s must then pay a fee—$50 or $175 depending on household income—to participate in the program and work with a HUD-approved housing counselor. Housing counselors will work with homeowners throughout the process and help homeowners obtain and complete the required documents and upload these documents to the mediation program online portal. Housing counselors will also be available to review the lender's documents once they are available in the online system. In some cases, housing counselors may attend the mediation conference with homeowners and serve as an advocate and aid in the discussion on foreclosure avoidance options.

At present, there are currently 100+ mediations scheduled for November and December.

Unsurprisingly, the success of the new mediation program has had a direct impact on the number of new foreclosure actions throughout the state. New foreclosure cases have virtually ground to a halt while the first wave of mediations make their way through the program. According to numbers compiled by Gorilla Capital, a Eugene company that buys and resells distressed properties, foreclosures in the state’s largest seven counties have fallen by 42 percent from a year ago and 80 percent from a month earlier month. While this might be a temporary reprieve, the opportunity for a struggling homeowner to have a face-to-face meeting with a lender is meaningful and should not be ignored. Our hope is that a large percentage of these mediations will result in some sort of agreement—whether that agreement is for a loan modification, a short sale or a deed-in-lieu of foreclosure.

Time will tell.

If you have any questions about the new mediation program, please visit the Oregon Foreclosure Avoidance Program website or call Garland, Griffiths Knaupp at (503) 846-0707. We’re here to help.