Banks are bracing themselves for lawsuits as legislators pass homeowner protection laws designed to stop deceptive practices. Your legislators are telling you that they have seen enough fraud committed by the mortgage banking industry. In response, they are passing legislation which gives homeowners some distinct advantages in legal battles with their mortgage lender.
Regulating Loan Modification
When this mortgage crisis first began, no one really knew how it would all play out. The bottom line was that a huge bubble had popped, and someone was going to have to take some losses. The “who” and “how” were yet to be determined, and the loan modification industry was born.
Legislators first acted to regulate a rapidly growing “loan modification” industry, in order to ensure proper protection of consumers. Most state legislation erred on the side of caution, and quickly eliminated most of the quick buck artists.
Ultimately, the Federal Trade Commission’s MARS rules made the industry an unpalatable business proposition to anyone but an attorney. So, the “loan modification” folks began to work under the “supervision” of an attorney in order to remain compliant. These law offices perform foreclosure defense and loss mitigation services, designed to negotiate a settlement before going to court. Many of the these firms use a “pre-litigation” retainer, which authorizes them to negotiate on your behalf as a homeowner. The reputable and experienced foreclosure defense firms provide a valuable service in negotiating lasting settlements for homeowners. But, even these firms are ultimately asking the bank for assistance. If your lender wrongly denies you assistance, filing a lawsuit may just become necessary. That is when hiring a litigation attorney can becomes your best alternative.
Foreclosures Hit the Courts
In the beginning, most judges were quick to side with the banking industry. From a judge’s point of view, the situation amounted to a proverbial Pandora’s Box. If judges sent a message that homeowners could stop paying their mortgages without consequence, chaos could erupt. As a result, judges routinely dismissed RESPA and TILA violations. The foreclosure machine marched on. That is, until some aggressive attorneys started to challenge the rampant fraud and deceptive practices.
Following a few victories for homeowners against the MERS system and other legal issues, foreclosures stalled. Shortly thereafter, the “robo-signing” scandal was splashed across America’s television screens in a CBS 60 Minutes expose. It was revealed that banks had brazenly resorted to spending billions of dollars on operations to fabricate fraudulent mortgage documents. Many of these banks are the same lenders that created the mortgage crisis. So, legislators pass homeowner protection laws to address this brazen behavior
In addition, lenders promoted propaganda campaigns designed to undermine consumer trust in mortgage relief assistance providers. To this day, some lenders sponsor campaigns designed to discourage homeowners from retaining foreclosure defense attorneys. The idea of getting “free” help with a troubled mortgage sounds enticing to a distressed homeowner. However, if your bank is offering you a seemingly generous offer, you should ask yourself why!
New Homeowner Protection Laws
The fact is that many mortgages do not have the legitimate documentation to prove the lender’s standing to foreclose. In addition, many homeowners have been mistreated in the mitigation process to a degree that is now illegal. In response, some states have adopted a Homeowner Bill of Rights (HBOR). HBORs make an attempt to foreclose on a property without the proper documentation a potentially costly proposition for a lender. Let’s say, for example, you had a refinance loan from the mid 2000’s. Now say that was sold and transferred through the MERS system, and the original lender is no longer in business. In this scenario, it is quite possible that the current holder of the loan will not be able to prove their standing and right to foreclose. In California, attempting to foreclosure without proper documentation subjects a lender to fines and penalties of multiple enforcement agencies.
The HBOR’s also give homeowners rights to proper treatment by lenders and servicers, and make “dual-tracking” illegal. Dual-tracking is the deceptive practice of engaging a homeowner in mortgage relief negotiations, while simultaneously moving forward with foreclosure. In the past six years, many homeowners watched their home sold at auction. This is precisely why legislators pass homeowner protection laws.
What it All Means
And so, as legislators pass homeowner protection laws, new causes of action give homeowners recourse against their lenders. Listen, foreclosure defense and loss mitigation through an attorney is still your best first step to prevent foreclosure. However, these days it is your first option but not your last. When appropriate, you can now hold your lender accountable through litigation. While this proposition is much more expensive, it does have a greater upside. In cases of Federal violations, a prevailing plaintiff can seek attorney’s fees. Foreclosure attorneys are able to obtain an “injunction” in most cases where the causes of action are substantial enough to file suit. The injunction stops the foreclosure process. This aggressive approach can give you the upper hand in negotiations with your lender. Reputable foreclosure attorneys offer a free initial consultation and should have a list of questions regarding your loan.