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Sacramento Lawsuits Allege Lender Deliberately Pushes Borrowers Into Foreclosure

March 1, 2010

Our Redlands loan modification attorneys have believed for many months that mortgage lenders are not very interested in modifying loans. But according to a Feb. 22 article in the Sacramento Bee, at least 11 lawsuits in the region allege that one lender has actively tried to push its borrowers into foreclosures. The claims against OneWest Bank stem from its purchase of the failed IndyMac Bank from the FDIC. To sweeten a deal that would give OneWest a lot of troubled loans, the FDIC agreed to absorb some of the losses from those loans. The lawsuits allege that this makes it more profitable for OneWest to foreclose than to allow loan modifications, even though it is participating in the federal Home Affordable Modification Program.

Ten of the claims are in U.S. Bankruptcy Court for the Eastern District of California, and one is in state civil court. One of the attorneys for the bankruptcy cases said IndyMac bought the bad loans for 70% of their value, but can expect FDIC reimbursement for 80% or more of the losses on the loans, and can keep any proceeds from a foreclosure sale. He said this means OneWest can actually make more money on a foreclosure than it could by keeping the loan alive at a discount. He and another bankruptcy lawyer also said OneWest illegally increased mortgage payments after their clients filed for bankruptcy. In the state court case, the plaintiff claims OneWest violated the Truth in Lending Act by ceasing meaningful responses after it took over an IndyMac mortgage.

As Chino Hills loan modification lawyers, we have filed several lawsuits with similar claims about foot-dragging that violates the TILA. However, the claims about the FDIC reimbursement agreement are new to us, and disturbing. We have long since concluded that most lenders have a policy against making loan modifications, even if they claim they grant them and are participating in HAMP. Studies have repeatedly shown that lenders sometimes stand to make more money on a foreclosure. Other times, blind application of policy or balance-sheet trickery blocks loan modifications for borrowers who are willing and able to make payments. This applies to lenders without an FDIC reimbursement deal. Similarly, all creditors, no matter what their relationship with the government, are forbidden from trying to collect debts after a bankruptcy is filed.

Howard Law PC represents borrowers who need help negotiating a fair and timely loan modification. Like the Sacramento borrowers, many of our own clients come to us complaining that their lenders are not responding to letters and calls, have mixed up paperwork, give them contradictory instructions and otherwise seem disorganized. We find that these lenders rarely seemed incompetent when they originally signed loan papers with our clients. We believe our status as Cypress loan modification attorneys inspires banks to clear this backlog of red tape very quickly, because they know they could be sued. In fact, we will file claims similar to the Sacramento state-court lawsuit whenever we believe it's necessary to stop predatory lending or an unfair foreclosure.

If your lender has consistently refused to communicate about a loan modification application, Howard Law can help. To set up a free, confidential evaluation of your case, call us at 1-800-872-5925 or contact us through the Internet today.