Reverse-mortgage nightmare can start after borrower dies

Financial decisions can have consequences that outlive the people who make them.

In the case of three women, two in South Philadelphia and one in Delaware County, the decision to take out a reverse mortgage – a special kind of loan that allows borrowers 62 and older to convert a portion of their home’s equity into cash – has made their lives a nightmare.

All three were younger than their spouses and not yet 62, which meant they did not qualify for these mortgages and could not be co-borrowers. Their names were removed from the deeds so their husbands could qualify.

Once their husbands died, and, in some cases, even with their names back on the deeds, they faced foreclosure because the law allowed lenders that option.

Ruth Guerriero of South Philadelphia remembers the day she got the letter that “scared me to death” – the one threatening to foreclose because of a reverse mortgage she didn’t know existed.

She was sifting through the day’s mail at her dining room table in one of those postage-stamp-sized brick ranchers you can see from I-95. It had been 17 months since her husband, Alfred “Big Al” Guerriero, died at age 89, and she was still getting Mass cards from friends.

But this piece of mail in early October 2013 was from OneWest Bank, informing her that it was foreclosing on the house in the 2800 block of South Hutchinson Street that the couple had bought in 2006 for $200,000. Without her knowledge, Guerriero said, her husband – 23 years her senior – had taken out a reverse mortgage in September 2007.

To clear the way for the mortgage but without telling her the real reason, her husband asked her to remove her name from the deed, Guerriero said.

“He said if I did, our property taxes would be less since he was older.”

Because her name was neither on the title nor listed as a co-borrower on the reverse mortgage, OneWest insisted that Guerriero, now 69, had no claim to the house after his death.
Read more at http://www.philly.com/philly/business/real_estate/20150728_Reverse-mortgage_nightmare_can_start_after_borrower_dies.html#1jVewy6rD5kI0PMz.99

NY state senator convicted in foreclosure embezzlement scheme

New York State Senator John Sampson, D-Brooklyn, was convicted by a federal jury for one count of obstruction of justice and two counts of making false statements to federal agents related to his practice of embezzling foreclosure funds. (Technically, former Senator, as of today.)

The guilty verdicts follow evidence at trial and publicly filed documents establishing that, among other things, Sampson as an attorney practicing in Brooklyn embezzled funds he held in escrow from the sale of real estate properties.

Sampson vacated his senate seat on Friday after the conviction.

Concerned that his theft might be discovered by law enforcement, the Democrat lawmaker in 2006 asked an associate for $188,500 to replenish the stolen funds.

In exchange, Sampson used his position as a Senator to assist the associate’s real estate business interests.

Read on.

Utah AG Revives BofA Foreclosure Fight Tied to Corruption Case

Utah’s attorney general revived a potential billion-dollar battle with Bank of America Corp. over foreclosure practices after two of his predecessors were charged with corruption for abandoning the fight.

The lawsuit is deja vu for U.S. District Judge Bruce Jenkins, who last week allowed Utah Attorney General Sean Reyes to join a homeowner’s case accusing Bank of America unit ReconTrust Co. of illegally foreclosing on Utahans’ homes.

Jenkins expressed puzzlement when outgoing Attorney General Mark Shurtleff bowed out of a similar case two years ago — just months after the judge ruled the suit could head to trial.

Read on.

New foreclosure climate brings law firm casualties

 

Law.com (sub. req.):

Kevin McCarthy, founding partner in the San Diego office of McCarthy & Holthus, said that although his firm “certainly is not experiencing the same types of issues” as firms like Zucker Goldberg, a “barrage” of changes in state and federal law has presented more challenges. McCarthy & Holthus has about 75 lawyers, he said, in eight different states, and focuses on “all aspects of default.”

McCarthy said his firm is not experiencing problems from bank clients not paying their legal bills, but he said that increased notice requirements, more oversight and prohibitions to so-called “dual tracking”—restricting lenders from seeking foreclosure while simultaneously negotiating loan modification—have all made his job tougher.

 

Combine the active CFPB with the increase in Fair Debt Collection Practices Act litigation, and the nature of foreclosure practice has changed.

“There has been an explosion of these types of suits,” Maurice said. “What you’re seeing across the nation … is a consolidation of firms who do foreclosure or even consumer credit collections.”

FDCPA is sending malpractice premiums at those firms “through the roof,” he said.

“In no other area of the law are you subject to strict liability,” Maurice said. “You can be sued for filing a complaint.”

The reasons for the volume of FDCPA suits, according to Maurice, lie in statute and case law.

The FDCPA, as enacted in 1978, exempted attorneys, but that exemption was removed a few years later—at the behest of debt collectors and over the objection of the Federal Trade Commission, according to Maurice. Court decisions including a U.S. Supreme Court ruling in Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich have exposed attorneys to FDCPA liability and removed the protections afforded by litigation privilege in such actions, he said.

Valbuena v. Ocwen: Homeowner beats Ocwen on foreclosure appeal

The Soap Box:

California appeals court  slaps down servicer’s attempt to require payment of the entire mortgage loan a condition of homeowner protection.

Nice try, Ocwen.

But no, says an intermediate California appeals court.

Such an interpretation would gut theCalifornia Homeowner’s Bill of Rights.

Facing foreclosure

The facts in Valbuena v. Ocwen  are common:  Ocwen became the servicer of the Valbuena’s mortgage loan when the loan was in default.

Ocwen filed a notice of foreclosure sale and sent the homeowners a letter offering to consider a loan modification.  The homeowners submitted an application and supplemented it when Ocwen told them it was missing necessary documents.

Two days later, Ocwen foreclosed.

Dual tracking prohibited

California’s homeowners bill of rights forbids a foreclosure sale while the mortgage servicer is considering an application to modify the loan in default.

Nonetheless, Ocwen solicited a loan modification application and barreled right along to foreclosure.

Ocwen sent the homeowners a letter promising to consider a loan modification application on March 13;  the letter, received by homeowners March 18, required submission of an application by march 18.  An application was submitted March 21 and supplemented on March 22.

On March 25, Ocwen wrote that the modification was denied and conducted a foreclosure sale the same day.

Ocwen argues old law

The servicer attempted to import into HBOR a requirement of older California mortgage law requiring the complaining borrower to tender payment in full as a condition of getting legal relief.

No such tender requirement is found in HBOR, said the appeals court.

Such a requirement would completely eviscerate the remedial provisions of the statute.

Sixth Circuit rejects borrowers’ foreclosure challenges under Michigan statute, alleged HAMP violations

The U.S. Court of Appeals for the Sixth Circuit recently affirmed a district court’s dismissal of borrowers’ state law negligence and constitutional due process allegations arising from the foreclosure and sale of their home under Michigan’s foreclosure-by-advertisement statute.

A copy of the opinion is available at: Link to Opinion.

The plaintiff borrowers obtained a mortgage loan in 2008. The mortgage named Mortgage Electronic Registration Systems, Inc. (MERS) as the lender’s nominee and the mortgagee. The note was endorsed in blank to the original lender and was later transferred to a loan servicer. The assignment of mortgage to the loan servicer was recorded in 2011.

The borrowers defaulted and the holder of the note foreclosed the mortgage under Michigan’s foreclosure-by-advertisement statute. The borrowers failed to redeem the property within the six-month statutory redemption period allowed, and the loan owner purchased the property at the foreclosure sale.

The loan owner sued to evict the borrowers in state court and they answered and counterclaimed, challenging the foreclosure and eviction. The case was removed to federal court by the loan owner.  The district court entered judgment on the pleadings in favor of the loan owner defendants, and the borrowers appealed.

On appeal, the Sixth Circuit began by pointing out that under Michigan’s foreclosure-by-advertisement statute, the failure to redeem the property by paying the amount owed within an allowed six-month period results in the vesting of all right, title and interest of the mortgagor in the purchaser at the sheriff’s sale.

Read on.

NJ Foreclosure Firm, Nearing Bankruptcy, Furloughs Staff

New Jersey foreclosure firm Zucker, Goldberg & Ackerman, as it prepares to file for bankruptcy and ultimately close its doors in late August, has already turned away more than one-third of its employees and suspended benefits.

According to internal documents and the firm’s outside counsel, the Mountainside-based firm on July 17 told 115 employees that they had been indefinitely furloughed—suspended without pay for budgetary reasons. Health benefits for those employees are likely to terminate at the end of the month, and payouts for unused vacation time also are in jeopardy.

Zucker Goldberg, through its bankruptcy counsel, attributed the move to more of the same issues the firm has been experiencing for years now: mortgage-servicer clients refusing to pay.

“We had done projections based on normal rates of payment,” said Daniel Stolz of Wasserman, Jurista & Stolz in Basking Ridge. “That allowed us to get through the Aug. 24 [projected closing] date.”

Read more: http://www.njlawjournal.com/id=1202732716892/NJ-Foreclosure-Firm-Nearing-Bankruptcy-Furloughs-Staff#ixzz3geMT4GXe

OCC Approves OneWest Bank, N.A. – CIT Bank Merger; Terminates Foreclosure-Related Consent Order

NR 2015-105

FOR IMMEDIATE RELEASE
July 21, 2015

Contact: William Grassano
(202) 649-6870

WASHINGTON — The Office of the Comptroller of the Currency (OCC) today announced that it granted conditional approval to merge CIT Bank, Salt Lake City, Utah, into OneWest Bank, N.A., Pasadena, Calif. (OneWest). The combined bank will change its name to CIT Bank, N.A.

The approval follows consideration of numerous public comments submitted in writing and expressed during a public meeting conducted on February 26, 2015.

The OCC also determined that OneWest has satisfied the terms of the 2011 foreclosure-related consent order and the OCC has terminated that order. OneWest completed the independent foreclosure review in accordance with the requirements included in the original 2011 order and did not enter into a payment agreement with the OCC.

Related Links

• Decision Letter (PDF)
• Consent Order Termination (PDF)

# # #

Source: OCC.gov

Wayne, Oakland counties in Michigan sued over “unconstitutional” foreclosures

Michigan’s two largest counties areillegally foreclosing on thousands of properties for delinquent taxes,according to class-action lawsuits filed this month.

Wayne and Oakland counties have both foreclosed on thousands of properties for unpaid taxes in recent years.

But in doing so they’ve denied property owners their due process rights, according to the lawsuits filed in circuit courts for both counties.

Aaron Cox, an attorney for the plaintiffs, says the counties are simply not equipped with the proper infrastructure to deal with the soaring number of tax foreclosures in recent years, and comply with the 1999 state law that lays out how to deal with them.

Read on.

Bank Walkaways and Undead Foreclosures Continue to Haunt the Economy

There is broad agreement that predatory subprime lending – along with faulty securitization practices – were important causes of the recent financial crisis. Although the U.S. economy has improved significantly since 2008, it has not fully returned to normal, in part because the housing sector continues to lag. And while the foreclosure crisis been largely resolved in many states, other states – such as Florida, New Jersey and New York — continue to experience a high volume of foreclosures. The communities of color that were targeted for the worst subprime lending practices still experience their lingering effects. In addition, foreclosures remain cause for concern not only to immediately affected areas, but more broadly as well: they generate a host of adverse ripple effects, including declines in home prices and new home construction.

The stock of homes with mortgages in default, in foreclosure, or purchased by the lender after a foreclosure sale (REO, or real-estate-owned) and not put back on the market is called the shadow inventory. Economists generally believe that housing prices will not fully recover until the shadow inventory has been disposed of. Although investors have been purchasing foreclosed properties in more prosperous areas, driving down inventory and contributing to an upswing in housing prices, this has not occurred in many distressed markets.

Yet, in states like New York and New Jersey with judicial foreclosure systems and a large backlog of older cases, foreclosures are taking an average of more than two years to complete (though recent cases are taking considerably less time). Lately, judicial foreclosure regimes have been blamed: critics argue that judicial review creates lengthy processes that in turn only delay the inevitable. Since few borrowers can cure their arrears, some economists argue that costs outweigh benefits. Second, some blame borrowers who strategically default, although studies have found borrowers are averse to walking away, with the result that the percentage of strategic defaulters tends to be relatively low.

Read on.