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Federal Bank Bailout Forces Victims of Mortgage Fraud to File Predatory Lending Lawsuits

April 22, 2009

The New York Times recently ran an article exposing an unintended consequence of the federal bailouts of mortgage lenders -- extra problems for victims of mortgage fraud. People who were deceived into making bad mortgages are now facing roadblocks from federal regulators who took over their lenders, the article said, who don't always believe their claims that they were misled or outright lied to. As a result, some of these homeowners face default and repossession when they cannot make payments on the fraudulent mortgages.

The article centers on Brooklyn homeowner Waver Brickhouse, a retired mother of four. Brickhouse had trouble making her mortgage payment in 2005, so a neighbor connected her to an organization called Home Savers Consulting. Brickhouse said Home Savers told her it would refinance her mortgage and use the proceeds to make payments for a year, giving her time to catch up financially. Instead, it sold the house to a "straw buyer," who allowed Home Savers to draw out $150,000 in equity. The mortgage was provided by IndyMac bank, which was later taken over by the Federal Deposit Insurance Corporation.

IndyMac had an agent at a crucial meeting, Brickhouse's predatory mortgage lending lawyers argue, and knew it was helping commit mortgage fraud. The lawyers argue that the fraudulent contract is worthless, which means Brickhouse shouldn't be held responsible for payments on the refinancing deal. But the FDIC has not agreed, even though the straw buyer in this fraudulent deal has sworn to an affidavit saying Brickhouse had no idea what was really happening. The FDIC has even retained a defense lawyer in the case.

As Westminster mortgage loan modification lawyers, we are less surprised than we could be that the FDIC refuses to commit to helping Brickhouse. Thanks to many months of trying to help homeowners caught up in the foreclosure crisis, we know that each new layer of bureaucracy attached to a loan makes it harder to change that loan in a meaningful way. Each organization with a financial interest in the loan has a profit to protect -- and substantial changes to the loan could hurt that interest, or expose one part of the chain to lawsuits from another. Federal regulators are not supposed to have this profit motive, but banking bailouts make them the de facto leaders of a formerly private business, responsible to customers.

Howard Law's Southern California predatory mortgage lending attorneys are proud to help people like Brickhouse hold exploitive lenders responsible for their illegal actions. We represent homeowners in lawsuits over violations of the federal Truth in Lending Act and many other California and federal laws requiring honest dealing. If you believe you were lied to when you bought or refinanced your home, especially if you have an "exotic" or unnecessary loan, you may be a victim. To learn more, we invite you to schedule a free, confidential consultation with our Garden Grove predatory mortgage lending lawyers. To set one up, you can call us toll-free at 1-800-872-5925 or contact us online.