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Trustees for Investors in Securitized Mortgages Block Loan Modifications for Some

April 6, 2011

Our Moreno Valley loan modification lawyers know that securitized mortgages -- those that have been sold as investments -- face special challenges when they need to be modified. A March 31 story from ProPublica, a public-interest journalism project, lays out one of those obstacles in detail. According to the story, the trustee for the investors in the securities is often the holdup, not the investors themselves. The trustee is usually a bank, but the homeowners typically don't know that bank is involved in their loans at all, because they deal with a loan servicer instead. This makes it difficult to get a modification, even when the servicer and investors agree that it's in their best interests. It also makes it harder for borrowers to tell whether servicers are following HAMP rules requiring them to ask for permission to modify loans.

The article focuses on a homeowner, Pamela Jeter of Atlanta, who has been declared eligible for a loan modification through her servicer, OneWest. A large majority of the investors in her loan also agreed to a modification through a poll -- but the trustee, HSBC, refuses to allow it, citing contractual restrictions. Jeter is one of about 3,000 homeowners in this situation, and OneWest says 800 of them seem eligible for a loan workout. In an unusual move, OneWest sued HSBC last year, asking a court to declare that the modifications should be allowed. That lawsuit is pending, but unfortunately, OneWest was proceeding with a fifth foreclosure action against Jeter while they wait. One day after the ProPublica story was published, OneWest agreed to stop its foreclosure efforts for at least two months.

We're pleased to see that the story had a positive effect on Jeter's case , but as Santa Ana foreclosure defense attorneys, we wonder what's happening to the other 799 modification-eligible homeowners in the same pool of loans, or the thousands of others across the U.S. in her situation. Lenders attempting to foreclose while modification efforts are underway is a widespread problem, despite the fact that it is not permitted under HAMP rules. (The state of California is considering making the practice illegal.) HAMP has no accountability mechanism, and homeowners rarely have the knowledge or financial means to stand up for themselves, which is why servicers and lenders routinely violate that and other provisions of the program.

At Howard Law PC, we help borrowers fight back against these violations of their rights under HAMP and, when appropriate, state and federal law. Recently, we have handled a great many predatory lending cases involving borrowers who were denied a modification under HAMP for no reason or no good reason, including people whose servicers refused to convert trial modifications to permanent ones even though they made all of their payments. Our San Clemente foreclosure defense lawyers help clients sue over these blatant violations of the rules. We also represent clients whose servicers never spoke to them about alternatives to foreclosure before foreclosing, a violation of state law but also a common practice in the era of hasty foreclosures.

Howard Law offers free, confidential case evaluations, so you can speak to us about your case and your rights at no further risk or obligation. To set up a meeting, call us toll-free at 1-800-872-5925 or send us an email today.