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More Homeowners File Lawsuits After Loan Modification Negotiations Fail to Work

October 4, 2010

Our Ontario loan modification lawyers were interested to see a recent USA Today article about foreclosure lawsuits, because it profiled exactly the kind of case we typically handle. The Sept. 13 report focused on April and Anthony Soper, a couple from Washington state who are suing Bank of America for going back on their three-month trial loan modification agreement, without explanation. In fact, the Sopers are part of a proposed class-action lawsuit being heard in Nashville, which brings together many borrowers with similar complaints about Bank of America. Similar class-action claims are pending against JP Morgan Chase and Wells Fargo, two other major lenders. The article does not say how many borrowers are involved overall, but it does say that only a third of the 1.3 million trial modifications have resulted in a permanent modification.

In essence, the lawsuits argue that lenders are intentionally delaying decisions and denying permanent modifications because they stand to profit from doing so. When a trial modification is not made permanent, the borrowers are immediately responsible for the difference between their original mortgage payments and the reduced payments they have made during the trial, plus any other amount in default. They may also be charged late fees, even when they weren't late before the trial. If they can't pay right away, they can be foreclosed and the "default" can be reported to credit bureaus. In addition, the lawsuits argue, this practice denies borrowers an opportunity to pursue more helpful ways to stay out of foreclosure. And the lawsuits allege a variety of other unethical or illegal behavior, such as requiring fees for considering a loan workout, requiring homeowners to go into default and foreclosing during a trial modification.

The class-action lawsuits argue that all of this is an intentional, cynical way for lenders to maximize profits. In the Sopers' filings, they say Bank of America has instructed employees to lie to people calling about a loan modification. Citing unnamed former employees, they say the lender told employees to pretend paperwork had not been received when it had, or had been received late even when it was on time. Their claim and many others allege that a trial modification is a contract between them and the lender, and that lenders breach that contract by denying loan workouts for no good reason. Courts have already decided that homeowners may not enforce the contract between their lenders and the federal government, but they have not specifically addressed the issue of whether a trial loan modification is a contract.

This sort of outrageous behavior is unfortunately familiar to our Placentia loan modification attorneys, because we deal every day with homeowners in similar situations. In fact, that's likely why these are class-action rather than individual lawsuits -- because these are not isolated incidents. We agree with the claims outlined in this article that lenders are deliberately stringing along borrowers in order to make more profit. Presumably, these lenders believe they can make more profit by misleading borrowers into a foreclosure and ruined credit than by giving those borrowers a chance to make reduced mortgage payments on the same loan. We think borrowers should be innocent until proven guilty -- that is, lenders should give fair, serious consideration to their requests for loan workouts. When lenders refuse to do this, we help borrowers hold them legally responsible for the personally and financially devastating results.

If you've been struggling with your lender for months for a fair loan modification, you should call Howard Law PC right away. Since the beginning of the financial crisis, we have represented borrowers who are working to hold on to their homes in the face of indifference, incompetence or apparent opposition from their lenders. Many of our clients come to us after spending months waiting for replies that don't come, submitting the same paperwork multiple times or getting multiple contradictory answers from lenders' representatives. Our Costa Mesa loan modification lawyers do not believe these problems stem from lenders being overwhelmed by demand, because lenders have had plenty of time to hire more people and can choose from plenty of qualified workers in this economy. We work hard to defend clients from the massive negative consequences of this unethical behavior.

Howard Law offers free, confidential case evaluations, so you can learn more about your rights and your legal options at no further risk. To set up a meeting and tell us about your situation, call us toll-free at 1-800-872-5925 or send us an email.