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State of Massachusetts Sues Five Major Lenders With Allegations of Fraudulent Foreclosures

December 22, 2011

The Rancho Cucamonga foreclosure defense attorneys at Howard Law, P.C., have written many, many times about the use of shoddy paperwork during the foreclosure crisis. This includes the admitted use of "robo-signed" documents in foreclosures; foreclosing without proof of ownership; and failing to offer genuine assistance to homeowners who come to the lenders for help, even if that means violating the rules of the Home Affordable Modification Program. So we were pleased to see the Dec. 1 announcement that the state of Massachusetts has sued five major lenders and the Mortgage Electronic Registration System, the private company they use to buy and sell loans, for foreclosure fraud. Massachusetts Attorney General Martha Coakley said she took action after waiting for more than a year for a settlement with the major lenders in the "robo-signing" investigation, who she said demand too much immunity for their actions.

The complaint (PDF) accuses the lenders of foreclosing on some homes without any right to do so; using false documents in foreclosures; deceiving borrowers about their loan modification programs and practices, including foreclosures while in modification; and failing to comply with the Massachusetts law requiring property to be registered with government offices. That last allegation is a reference to MERS, which was created in the 1990s expressly to allow lenders to avoid using local land offices when they bought and sold mortgages. The foreclosure crisis has exposed many cases in which the chain of title between the original lender and the foreclosing lender is broken. In some cases, lenders have been accused of falsifying the required documents, such as assignments, in order to meet legal requirements for foreclosure. Some of the foreclosures that went through with these shoddy documents were illegal, the lawsuit alleged, citing many pages of examples.

The fourth allegation was that the banks were deceptive, though their servicing arms, in offering and implementing loan modifications. It noted that each bank defendant has claimed since the beginning of HAMP to be actively helping customers qualify for loan modifications. In reality, it said, the lenders have modified only a fraction of the eligible loans; and approved for a permanent modification less than half of those that did win a trial modification. In rejecting so many borrowers, the suit said, lenders frequently miscalculated borrowers' income by more than 5 percent, an error the commonwealth said was unacceptable "when the homeowner's ability to stay in their home hangs in the balance." They also lied to customers about the need to be delinquent before they would be considered, or the need to have a steady income, the complaint said. And some modifications were rejected after months of steady payments, it said, with foreclosure begun immediately. The commonwealth sought an injunction against the practices, a declaratory judgment forbidding the use of MERS and $5,000 for each foreclosure that violated the law.

As Garden Grove foreclosure defense lawyers, we applaud this lawsuit, which reflects many of the problems we've seen firsthand here at Howard Law, P.C. For example, at the height of media coverage of the foreclosure crisis, it was well known that lenders were incorrectly telling borrowers they had to go into default to be eligible for a HAMP loan modification. This is not just a delaying tactic; it hurts the borrower's credit and credibility in later loan modification or foreclosure defense proceedings. So do many of the other illegal practices around HAMP alleged in the lawsuit. Our lead Gardena foreclosure defense attorney, Vincent Howard, has handled numerous HAMP lawsuits accusing the banks of breaking HAMP rules in their eagerness to deny loan modifications to people who meet eligibility requirements. If Massachusetts prevails in this lawsuit, it could change national foreclosure practices for the better.

If your loan servicer has given you nothing but contradictory messages, delays and excuses after you asked for a loan modification, you should stop calling them and call Howard Law, P.C. for help instead. To set up a consultation, send us a message through our website or call toll-free at 1-800-872-5925.

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