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Top State Attorneys Consider Fraud Lawsuits Against Recalcitrant Mortgage Lenders

November 9, 2009

Our Fontana loan modification attorneys work frequently with at-risk homeowners who are frustrated by the lack of responses or care in their interactions with lenders. So we were intrigued to see a Nov. 2 article in the New York Times suggesting that state attorneys general are also frustrated -- and are considering using their power as their states' top consumer protection officials to take action. Thanks to a Supreme Court decision from June, state attorneys general have regained the power to file legal claims against federally regulated banks, an ability they lost with new federal rules in 2004. Now, the Times says, some of the top prosecutors are considering suing certain banks for fraud, under the theory that they made exotic loans they knew couldn't be paid back.

The article focuses on Arizona attorney general Terry Goddard. He said his (and the federal government's) attempts at gently persuading banks to modify loans aren't working. After the Supreme Court's ruling in Cuomo v. Clearing House, Goddard and his colleagues got new powers to sue banks they believe are responsible for serious fraud against the people of their states. The new power brought lenders into Goddard's office, but he said most of them couldn't or wouldn't provide basic information about their loans. Meanwhile, his office is flooded with complaints from Arizonans who say their paperwork was lost and the banks are ignoring their calls. Unless he sees a more prompt solution, Goddard said, he will consider a consumer fraud lawsuit that would probably be a joint effort with other states.

As Corona loan modification lawyers, we're glad to see that attorneys general have and will use this tool, even if it's not their first choice. As Goddard told the Times, a lawsuit is not the prompt solution that homeowners and regulators would prefer. However, months of evidence shows that lenders aren't able or willing to address the problem on their own -- and meanwhile, foreclosures reached a record high in the third quarter of 2009. All of those foreclosures represent real people and families who paid thousands of dollars into homes that were lost. Unfortunately, studies continue to show that they also represent more profit for lenders than loan modifications could provide, regardless of the effect on individual homeowners or the wider market. If it takes a multi-state class-action lawsuit to salvage the salvageable loans, we support it.

Based in Anaheim, Howard Law LLP represents homeowners throughout California who need aggressive legal help to get fair treatment from their mortgage lenders. We are proud to say that we've been able to help many borrowers negotiate changes to their loans, including reductions in interest and changes to the loan's duration or type. Our San Pedro loan modification lawyers believe our status as attorneys makes a lasting impression on lenders and loan servicers, reminding them that our clients have legal rights -- and that we can enforce those rights with a lawsuit if necessary. In fact, we examine all of our new cases for evidence of predatory lending, which can allow us to have an unfair and illegal loan canceled.

Howard Law offers free, confidential case evaluations, so there's no risk in speaking to us about your rights and your options. To set one up or to learn more, please contact us through the Internet or call us toll-free at 1-800-872-5925.