By: Nathan Fransen, Esq.
I am an attorney practicing in California, representing consumers against lenders. I want to share a story that is unfortunately all too common.
A client came to me with what I expected would be a problem I could resolve relatively quick. Approximately two years ago they had refinanced their primary residence. They had applied for a 5 year fixed interest only loan. The notary came to their house to conduct the signing. During the signing the borrowers discovered that the note provided for a 2 year fixed, followed by an adjustable. Knowing that this was not in keeping with their financial plans, they immediately brought to the notaries attention and demanded the loan officer be contacted to resolve the issue.
The loan officer answered the phone call and apologized for the mistake, promising that first thing tomorrow a corrected 5 year note would be brought to them for their signing. The loan officer suggested they finish signing the remaining documents and if the note was not provided as he promised, they could execute their cancellation notice within 3 days. This seemed reasonable to the borrowers and they completed the signing.
The next day the loan officer appeared at their house with the 5 year note as promised. They were relieved, signed the note and continued on with their lives. Unbeknownst to them, the loan officer/mortgage broker destroyed the 5 year note and submitted the 2 year note to the lender.
The borrowers did not realize this travesty until they received a notice from their current servicing company, Litton Loan, notifying them of an upcoming adjustment at their 2 year anniversary. They immediately contacted Litton to inquire about the mistake. They were told nothing could be done. What’s more, the loan had a 3 year prepayment penalty, making refinancing very costly.
Unwilling to accept this result, they came to my office. The reason for my optimism in this case was based on several factors. First, the borrowers were prime candidate for loan modification, even if the fraud had not been committed. They simply could not afford the increase in the payment. Second, property values had decreased, leaving the lender with little incentive to foreclose on the house and face a long drawn out selling cycle. Third, and perhaps most compelling, was that the borrowers had a copy of the 5 year note! They were smart enough to insist on being left with a copy of their note they had signed.
Armed with these facts I sent, what I considered, a well crafted letter explaining the “mix-up”. I attached a copy of the note the borrowers had in their possession, and requested Litton take the appropriate step of modifying the term to reflect what the borrower had assumed they agreed to.
The first response I received from Litton was from the “Customer Assistance Response Team”, outright denying my claim. I assumed that the legal arguments I put forth and explanation I provided may have been overly complex for customer service. I contacted the 800 number provided and requested a supervisor or legal counsel. I was given a supervisor. I proceeded to explain the details of the case only to be told again that nothing could be done, but the borrowers could apply for a modification if they like. I assisted the borrowers in this process, figuring that as long as they get their desired results, who cares how we get there. The modification was denied. No real reason for it, just denied.
Figuring I still wasn’t getting through to the right person, I sent another letter, this time to every address for Litton I could find, detailing the events further, and including my experience thus far with Litton. Again, I was sent a 1 page general denial of my claims, signed “Customer Assistance Response Team”. I had also asked if they were willing to accept service of process for a complaint should we be forced to go that route. There only comment in the letter was that I should check with the Secretary of State for their agent’s information.
I am actually anxious to file this suit and look forward to bringing as much public attention to Litton as possible. These lenders continually disavow any responsibility for the conduct of brokers, despite their training, coaching and bribing (i.e. exorbitant yield spread premium) of the brokers. Lenders cannot have it both ways and this point needs to be brought to light. I believe that brokers, more often than not, act as agents for the lenders and as such, the lenders are responsible for the brokers actions.
My other point with this is that here is a case where even from a rational business standpoint, modifying my client’s loan makes sense. Unfortunately, logic is not the driving force at many of these lenders. Lets hope that being on the losing end of costly lawsuits moves them in the right direction.
Amazed but Anxious,
Nathan Fransen, Esq.
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{ 37 comments… read them below or add one }
I work for a non-profit and this is on of the best education tools I have ever came across in regards to helping homeowners deal with their lenders. I have been doing this for over a year and you taught me a few tricks that I can use to assist my clients. Great blog and I will share this website with as many people as I can!
What you are missing is that before a real workout can occur, the homeowner needs a complete written life of loan history to see all the bogus charges and fees included in their mortgage balance. Also, the homeowner should make sure that any inflated appraisal and/or loss of property value is calculated into the workout.
BTW, check out: the OPINION AND ORDER of the UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF OHIO, EASTERN DIVISION , IN RE FORECLOSURE CASES CASE NO. NO.1:07CV2282/ 07CV2532/07CV2560/ 07CV2602/ 07CV2631/ 07CV2638/ 07CV2681/ 07CV2695/ 07CV2920
/07CV2930/ 07CV2949/ 07CV2950/ 07CV3000
07CV3029 entered by JUDGE CHRISTOPHER A. BOYKO-dismissing 14 Deutche filed foreclosures for lack of standing for not owning/holding the mortgage loan at the time the lawsuit was filed.
WOW!!!!!!!!!!!!! That is such great information April! This is HUGE for homeowners and for what you have been fighting for all along.
Yes, the life of the loan. THAT IS VERY IMPORTANT! You are the true expert and I hope you can be a guest author on LoanWorkout.
I will make sure to edit my post and add this KEY ingredient in the loan workout process.
You are truly on the leading edge of this Ms. Charney and I appreciate the feedback!
Thanks for the kind words Mary Ann.
These are all great ideas, but i definately think homeowners need to consider their goals before approaching their lender. Loan modifications are needed, but that doesn’t mean they are always in the homeowners best interest. I have seen numerous times instances where the lender modified a loan that did little more than “allow” the homeowner to struggle through a couple more years. A true modification needs to be a long term solution. It needs to address the homeowners financial goals, and the only way to insure that is to know what those goals are. There is not much sense in modifying a loan from a payment of $2500 to $2000 when the homeowner can really only afford $1500. Especially if the true market value for the property is closer to $1200. I am by no means advocating foreclosure, but homeowners need a solid understanding of their financial situation. It will help avoid a feeling of being powerless against the lender and accepting any deal thats offered. Know your goals, have a plan and then follow steps #1 and #2 on this blog
That is so upsetting that there are people out there like that! Me and my staff work so hard to keep everything clear and honest and then people like this ruine it for us good guys out there that only do the RIGHT thing!
Nathan,
if you clients file a RESPA Written Request to Litton and request their loan files, which they are allowed to have, their loan app will be in the file. And if they didn’t sign a new one at settlement there will be proof of fraud.
I did this and got my loan file. I found my true lock in of 5.25%. Then lender charged me 2 points, jacked up my rate to 5.625% for a large YSP.
I am able to file a law suit next week –
laura
If a borrower needs copies of their payment history or life of loan history or other documents from the lender or servicer, here’s the applicable wording (the rest deleted) from RESPA…
§ 3500.21 Mortgage servicing transfers.
(a) Definitions. As used in this section:
Qualified written request means a written correspondence from the borrower to the servicer prepared in accordance with paragraph (e)(2) of this section.
e) Duty of loan servicer to respond to borrower inquiries —(1) Notice of receipt of inquiry. Within 20 business days of a servicer of a mortgage servicing loan receiving a qualified written request from the borrower for information relating to the servicing of the loan, the servicer shall provide to the borrower a written response acknowledging receipt of the qualified written response. This requirement shall not apply if the action requested by the borrower is taken within that period and the borrower is notified of that action in accordance with the paragraph (f)(3) of this section. By notice either included in the Notice of Transfer or separately delivered by first-class mail, postage prepaid, a servicer may establish a separate and exclusive office and address for the receipt and handling of qualified written requests.
(2) Qualified written request; defined. (i) For purposes of paragraph (e) of this section, a qualified written request means a written correspondence (other than notice on a payment coupon or other payment medium supplied by the servicer) that includes, or otherwise enables the servicer to identify, the name and account of the borrower, and includes a statement of the reasons that the borrower believes the account is in error, if applicable, or that provides sufficient detail to the servicer regarding information relating to the servicing of the loan sought by the borrower.
- Paul J. Molinaro
Nathan,
go to the URL below, it is AHM’s bankruptcy info and click docket #282, Exibit A & B, page 34 to 42, it lists the contents of a mortgage file -
Also under TILA Sec. 1641(f)(2)
http://chapter11.epiqsystems.com/clientdefault.aspx?pk=dc09b15b-9fb2-4473-b1f3-8951788bde5b&l=1
Laura,
Thanks for the feedback on this. I should clarify something in my post. The borrower DID sign the 2 year note. They realized AFTER signing it that it was incorrect. In hindsight they should have requested the signed 2 year note be left with them, but unfortunately they did not. For this reason, I am certain Litton only has a 2 year note signed by my client (although i did send them a copy of the 5 year note). My case will at least in part turn on the whether or not i can argue that the broker who made the misrepresentations was acting as an agent of the lender. Given the fact that the broker had the ability to change the terms of the contract on behalf of the lender, i think it is a good argument to make.
Jules,
I understand your frustration. I have said many times that part of our efforts to clean up this industry requires us as consumer advocates to compliment brokers and lenders who do the right thing. There are many out there who have not taken advantage of borrowers and truly work for their clients best interest. Unfortunately i believe they are in the minority now, but nonetheless they deserve our recognition.
Boy, after reading a story like that I truly thought this was an Ameriquest horror story! As a license loan officer I vowed to do good since I was somewhat of a bad kid when I was in my youth and early twenties. I’m glad I’ve upheld my end of the deal since getting my license over 4 plus years ago. I serve the client first, not the lender. This shows my clients I’m in their corner working with them to ultimately free them of paying any mortgage and choose the right loan program to achieve their goal.
I hope as an attorney you can go after the loan officer and mortgage company!
Nathan great story and keep up the good work.
I would like to pose to question to any and all..I was told by the title company that the lender told them I had to sign the mortgage note because I was the wife of the loan applicant although all of the documents(loan application and income docs were based on my husband’s info and not mine.)Does that constitute any wrong doing on the lenders part?
Hurricane deferral. told me it would not be due in 3 mts, but was. Have been passing me from one ‘loan resolution’ person to another. Each said information I presented would be ok, and then don’t hear anything. Last guy said approval would be in a week, then nothing. I then talk to a guy who says these other 4 people were wrong, and my self declared income is not enough. I resumed payments after 3 mts, and they put me in default by not crediting payments properly. Started sending my payments back in 06, and won’t work at all. The latest guy says if I can come up w %5000 and pay $1600/mt(was 900/mt)for a year, he will approve that, but not a modification for less. What can I do to stop this illegal theft of my house..Gave me 48 hours to come up w 2000 dollars, and some ridiculous amount just hoping I’ll not be able to make it.
Have written to respa, occ, fcc fdic,etc, with no help. Can’t afford much. Would be so grateful for any sound advic anyone could give me.
Thanks so much.
cynthia:
What you are describing does not necessarily sound like wrong doing, although there could be other details that would change my view. Having you sign the note without technically considering you for the approval of the loan is not necessary “wrong”. More typical is the lender having you sign an interspousal grant deed giving your husband sole control of the subject property. This may have been a mere precaution on the lenders part, but again other facts could change that.
Jw:
Sounds like you are in need of some immediately legal assistance. This is a great example of these servicing companies and/or lenders ignoring their duties. From your brief discussion I would look first at potential RESPA violations. I have heard numerous people say how writing letters to all the relevant government organizations was an exercise in futility. Fortunately, in some cases, these statutes allow for private remedies, that is, you can bring suit and recover damages. Your best bet is to find an attorney practicing in this area in your state. I know thats easier said than done, but the right lawyer could make all the difference. Unfortunately i am limited to California but tell me your state and i will see if i can refer you to someone.
Jesus, smells like Countrywide.
Thank you for your swift reply. I live 45 min nw of New Orleans. I sent a 30 pg file showing e-mails, 23 request for same information, documents from govt. agencies telling lenders to work w us, etc.to OCC, FCC, HUD, FBI, FDIC and did my RESPA letter. A few sent letters saying they would check into it, but have heard nothing. The bank has stalled, lied, and are now giving me this ridiculous ransom amount, but say I don’t make enough to qualify for modification, after 4 other people said it would be enough. I am going to call the Gov.’s office tomm. but just don’t know if I will find anyone who can intervene in time to meet the ransom demands.
How do these people break the law, while the people who make these laws just look the other way? Are they getting paid off by the lenders? I would love to join law suits w others who are being mauled by their mortgage companies- if you know of any. I don’t think they will stop until enough people make enough of a fuss to stop this. If you know of an attorney who could solve this in the Baton Rouge, Prairieville area, I would love to give them a call.
Also, do you know how I would be able to find out how much I need to make in order to ‘quality’ for their modification, since they won’t give me any figures.
I am far from a lawyer, but I am not stupid, and know these people are more than able to work something out that could have been workable 2 years ago, and would be within reasonable amounts. Why would they rather steal your house than work something out?
Bless you for your help. I just found out I might have breast cancer, so I need to get this resolved now, before I have to be out of work for treatments.
If it don’t kill ya, it makes you stronger…I’m sure I was a serial killer or something in my last life..had to be.
I’m Very grateful for your input. I pray for all who are victims of mortgage servicing fraud, and that we all find a miracle before the bad guys win another one.
Thanx,
JW
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Aloha,
Like you, we have been spinning our wheels trying to get Option One to work with us. We exercised MORE than due diligence in seeking loan modification from our lender even prior to the resetting of our ARM. They would not return phone calls, let alone our certified mailings and faxes. We’ve even filled out and provided the “loan workout financial analysis worksheet” which we downloaded from their Home Retention Team website. Still no response. We felt like you sound here – exasperated — in a country like America, isn’t there something that can be done for honest homeowners just trying to hold onto their homes? We’ve paid faithfully for 2 years, and have never been late. Doesn’t that count for anything?
After spending way too much energy trying to seek loan modification, we finally consulted with numerous, numerous mortgage brokers and foreclosure attorneys. The consensus is this: most of these companies simply no longer have the staff to do loan modification, and that they will not get back to their borrowers. Their best advice is to stop paying our mortgage, and prepare to walk away from the home when the foreclosure proceeding is finished.
They also advised us to go into “pre-foreclosure planning mode.” If you need to purchase a car in the next 3-4 years, do it now because you won’t be able to make any large purchases on credit for at least that long.
Also, save up for a large down payment on rent because your credit will be terrible – we’ve been advised to offer to pre-pay 6 mo’s rent (when the time comes for us to move out) in order to get around our bad credit. We’ve also printed out a copy of our credit report prior to the “dings” for nonpayment of mortgage so we can show that the “dings” were truly SINCE we got caught up in the mortgage meltdown…
As one attorney told us, “There are thousands of good people like you facing foreclosure. I have spoken with dozens of people about it, and they end up just letting the property get foreclosed and go on with life.”
I know that it easier said than done, but this Thanksgiving, we’ve resolved to be thankful for everything and every moment we have together as a family – God is truly good.
Keeping all of us in prayer,
alohajai
JW,
My family and I are praying for you.
Nathan,
I am not an attorney and this is not legal advice but I would suggest the following. I would contact the notary and see if he/she rememebers this signing — most keep journals and this notary may have noted this in the journal. The notary might just be the witness these people need. Also I would think the bar codes on the 5 yr note would not be right as once closing docs go out, they can’t be modified — really look at that note, somewhere on it there is identifing numbers on it– these numbers would not “jive” with the 2 year. The fact that your client has this will prove fraud. I would also consider having the client send in a notice to cancel as there definitely is a TILA violation here. With such violations, the right to rescind is extended to 3 years — Huge thing there for your client. You really have no choice but to file suit, Litton is very well known to be hard to deal with, you will never get anywhere with them but I would really look into them sending in the recission/notice to cancel. Best Of Luck
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everyone here should go to http://www.msfraud.org and see what’s really going on. Litton should be put out of business for being so crooked.
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