Are Mortgage Company's Stealing Your Money?

Just finished drafting a lawsuit today for woman, I'll call her Mary Lou. She's a single woman who lost one of her two jobs she needed to make ends meet and got behind on her mortgage. She contacted her mortgage company and asked if they could do a modification. They said "no problem" we'll just roll the past due payments into the modified loan. So, she filled out the loan applicaton and sent them 27 pages of documents. A few days later she confirmed with them that they'd received the documents. Nothing happened for 45 days so she contacted them again and ended up talking to their India office and was told they couldn't find the application. She faxed it again and confirmed with them the next day that they got it. They told her it would take 30 more days to process. In the meantime she's getting farther behind on her mortgage.

Forty five days later she contacts them and she gets the same story---we can't find your paperwork. So, she faxes them 37 pages again. This time they say it will take 60 days to process. She confirms they got the fax and waits. A month later she contacts them again and can't get through to a person so she leaves several messages. Several weeks later she finally gets a later acknowledging her request for a modification and assuring her that it will be processed expeditiously.

There weeks later she tries to contact them again and they direct her to another agent in India. After many attempts she finally talks to a woman and is told they need more documentation. The client has trouble finding these documents but manages to send them in two weeks later. In the meantime she receives an acelleration letter and notice of foreclosure from a lawfirm. She tries to call the mortgage servicer to see what's up but only gets messages. A few weeks later she breathes a sigh of relief when she gets a letter from the mortgaging servicer assuring her everything is okay and they won't foreclose.

On the first Tuesday of the following month the mortage company forecloses and the home she's lived in for 23 years is sold for $50,000 more than the note. Mary Lou doesn't find out about it until a man walks up with eviction papers---she has 3 days to vacate!

Devastated, Mary Lou moves out to an apartment and has to trash two thirds of her belongings because they won't fit into her small apartment. She's broke, depressed, angry, humilitated and can't focus on anything. Her life has been ruined and she doesn't feel like even getting off the sofa.

What she doesn't realize, in addition to all the horrible injustices that have been inflicted on her, is that she's just been ripped off for $50,000. The lender had a duty to write her a check for the money they received from the foreclosure in excess of the loan principle plus the cost of foreclosure, but instead someone pocketed her money!

I wish this were an uncommon experience, but it happens every day, and it's not always simply gross incompetence, sometimes, if not many times,it's intentional.

Mortgage Companies Circumventing Bankruptcy Laws and Forcing Debtors into Foreclosure

This week we discovered a new and ingenious way that mortgage lenders are circumventing the bankruptcy laws and forcing Chapter 13 debtors into foreclosure. Typically when a consumer gets behind on their mortgage and are faced with foreclosure they can file Chapter 13 bankruptcy. This allows them to cure the default under the mortgage, cure property tax defaults, and pay out what is delinquent over three to five years.

Mortgage companies don't like this obviously because they'd prefer to foreclosure and take the consumers equity in the property, or, if they don't have any equity, to liquidate the collateral and get their money into a performing loan. Additionally, there's a lot of extra bookkeeping, legal expenses involved in monitoring a case in bankruptcy, not to mention the danger of violating the automatic stay and getting sanctioned.

This week we noticed two different mortgage companies use the same trick to force our chapter 13 clients into a default situation. What they did was to pay the delinquent property taxes that were included in the debtor's chapter 13 plan. Then they notified the debtor that there was an escrow shortage in the account so their monthly payments had to be increased. For one of our clients their mortgage payment would have doubled for the next year until the delinquent property taxes were paid.

The chapter 13 trustee involved fell right into the trap set by the mortgage company. When they received a letter from the taxing authority that the taxes had been paid, they quit making the monthly payments provided in the plan. We almost fell for the scam too thinking there was nothing we could do about it, until we realized the mortgage companies had violated the confirmation order by forcing the debtor to pay the property taxes prematurely and causing a post petition default of their deed of trust.

If the debtor can't pay the increased mortgage payment then, of course, the mortgage company will file a motion to lift the automatic stay or notice the debtor for default, if an agreed order is in effect. Eventually the debtor may find his house up for foreclosure again, despite the protections of Chapter 13 and his diligent compliance with the terms of his plan.

Hopefully, when we bring this to the courts' attention the judges will put a stop to this practice.

Don't Throw Away The Evidence

One of the big problems consumer attorneys face when they try to make creditors obey the bankruptcy discharge or properly report a consumer’s credit after bankruptcy, is that much of the evidence has disappeared. Unfortunately, to prevail in a lawsuit you have to produce credible evidence to the court or jury and without it a remedy that should be available is not. This is tragic as creditors often get away with flagrant violations of the law!

Persons who have filed bankruptcy should be aware that creditors are not allowed to contact them once the case is filed. If contact does occur it should documented carefully and reported to your bankruptcy attorney. We often are called upon to file adversary proceedings to stop creditors from violating the automatic stay or the discharge injunction. In order to prevail in these actions we must prove the creditor contacted the debtor in an effort to collect the debt. So, it’s important that letters received are kept, telephone calls recorded or, at least the pertinent information about the call written down. So, often when a client calls about a violation they can’t tell me who they talked to, the date and time of the call, or what exactly was said.

It’s even worse in credit reporting cases. To prove damages here we need specific information about damages such as credit denials, increased interest rates charged, as well as documentation of mental distress suffered on account of the creditor’s illegal behavior. So often we have to settle a case for far less than it’s worth simply because a consumer has thrown away critical evidence or neglected to keep track of all the damages that has been suffered on account of the creditor’s malicious conduct.

Here are some simple things that every consumer who files bankruptcy should do once their case is filed:

1. Keep all correspondence from creditors received after bankruptcy
2. Record all telephone calls from creditors after the case is filed. Simple recording equipment can be purchased at Radio Shack.
3. If creditors call after the case is filed get their name, name of their company, the identity of the creditor they represent, how much they say is due, and the reason for the call. Note the date and time of the call. Don’t argue with them or hang up on them until you have this information. Once you have this information tell them you’ve filed bankruptcy and give them your attorney’s name.
4. If a creditor calls a second time get all this information again so you can testify with confidence if the need arises. Also, note anything they say that is untrue, argumentative, slanderous, threatening, rude, or profane.
5. If you apply for credit and are denied, keep the denial letters that come in the mail. Also, try to get the creditor to tell you specifically what caused them to deny you credit. Often it will be the erroneous information on your credit report. Ask them what would have to be removed from your credit report for them to extend you the credit you requested.
6. If you receive offers of credit upon favorable terms but when you apply they want to charge you more interest or give you less favorable terms, keep the documentation of the original offer so you can prove what you lost when the original deal was lost.
7. Often consumers suffer extreme mental anguish, embarrassment, fear and humiliation when credit is denied. This can result in insomnia, headache, muscle ache, high blood pressure and a wide variety of other ailments. To get mental anguish damages, however, requires proof. Documentary evidence from doctors, medical providers, and pharmacist is needed if the consumer seeks medical attention. Even more critical, however, is a daily diary of all of the emotions, anxieties and physical symptoms suffered each day from the date the creditor's misconduct occurs. If a consumer has this information at his fingertips it will provide him much confidence and add credibility when he tries to explain how he has been damaged by the creditors violation of the law.

Creditors are often angry when they have to write off a debt and often try to take advantage of debtors who may not understand the law. Understand your rights and make your ex-creditors obey the law. If you need help contact us.