Borrowers Increasingly Sue Mortgage Lenders for Bad Faith in Loan Modifications

October 28, 2010

We recently made a brief post to note that our partner, Damian Nassiri, was quoted in a Los Angeles Times article. We'd like to discuss that article in more detail now, because it describes some of the issues and frustrations we deal with frequently as Chino loan modification attorneys. The article says mortgage servicers and lenders are seeing an increasing number of lawsuits from borrowers who claim lenders used the loan modification process to stretch out foreclosures, with the goal of extracting the maximum amount of money. These lawsuits claim lenders never intended to grant permanent loan modifications, and in fact intentionally lost or destroyed paperwork in order to delay decisions. Lenders are now facing numerous such lawsuits, including a class action in Boston federal court against Bank of America.

The article goes into detail about the situation faced by Jean Wilcox of Irvine, who is not a Howard Law client. Wilcox claims EMC Mortgage Corp. made several temporary loan workout offers with no intention of granting a permanent modification, in order to keep the payments coming over three years. She made all her payments on time, she says, but EMC employees kept changing the conditions for granting a permanent modification. She also claims EMC intentionally inflated what she owed by misapplying and delaying payments, allowing it to tack on extra fees and interest. During her second loan modification, EMC allegedly recorded a notice of default and then denied a permanent loan modification on the grounds that an investor in her securitized mortgage would not agree to modify it. She says she would have sold the home if EMC had been honest about not granting any loan modifications, but has now lost most or all of the equity.

The article says Wilcox is a real estate attorney, which has undoubtedly armed her with knowledge of her rights and EMC's responsibilities. Unfortunately, many of the clients seen by our Seal Beach foreclosure lawyers are not lucky enough to have her professional background. In many cases, that means they are slow to recognize behaviors like those described above as fraudulent, misleading or even out of the ordinary. Nonetheless, we can promise our clients that well-run businesses do not lose paperwork multiple times or constantly change their requirements of borrowers. This kind of incompetence is always restricted to the department that grants loan modifications -- because that's the department that needs to kill time while draining borrowers' savings.

As Damian Nassiri told the Times, most of the foreclosure lawsuits at Howard Law PC have shifted from claims of predatory lending to claims of bad faith by the lenders. This partly reflects a change in the reasons for foreclosure -- by now, most victims of unfair lending practices have resolved their cases, for better or worse. But after seeing case after case where lenders didn't behave like they were interested in actually modifying the loan, it was easy to conclude that they actually aren't. Our Vista foreclosure attorneys prefer to resolve cases through negotiations with lenders, but when negotiations don't work, we are more than happy to sue the lender for negligence, breach of contract, fraud or deceptive business practices. We find that lawsuits tend to get the lender's attention, even when less drastic measures did not.

If you believe your mortgage servicer or lender has not dealt with you fairly and you're facing foreclosure because of it, you should talk to Howard Law for help. To learn more or set up a free consultation, contact us through the Internet or call 1-800-872-5925 toll-free.

 
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