Tag Archives: mortgage servicer

Alvarez v. BAC Home Loans Servicing: CA Court of Appeals Finally Finds Servicers Cannot Negligently Handle Your Loan Mod Application

There has been significant progress in the case law involving mortgage loan servicer negligence in the handling of loan modification applications.  Recently, in Alvarez v. BAC Home Loans Servicing, the California Court of Appeal (First Appellate District, Division Three) held — for the first time– that a mortgage loan servicer owes a duty of care to borrowers in reviewing their loan modification application.  Although another appellate decision in Jolley v. Chase Home Finance had issued a similar ruling, Jolley involved a construction loan and didn’t specifically discuss whether the holding would apply to a residential mortgage loan.

Prior to this case, there had been divergence in opinion at the trial court level– many finding that a duty of care could be found if a servicer was neligent in reviewing a loan mod application, and others finding that servicers could never be negligent in such circumstances because the servicer was acting in its “conventional role as a lender.”  By relying on the1991 case Nymark v. Heart Fed Savings & Loan Association, many trial courts concluded that reviewing a borrower’s loan modification application could be considered part of its role as a conventional role as a lender and therefore could not be negligent in its conduct related to the handling of the loan modification.

In Alvarez, the California Court of Appeal correctly held that the Nymark rule could not be read that broadly and effectively sheild servicers from neglience in every circumstance.  Instead, the court noted, “[e]ven when the lender is acting as a conventional lender, the no-duty rule is only a general rule. …Nymark does not support the sweeping conclusion that a lender never owes a duty of care to a borrower. Rather, the Nymark court explained that the question of whether a lender owes such a duty requires “the balancing of the ‘Biakanja factors.’ ”


Read on.


It is expected that Plaintiffs will seek leave to amend the Complaint to allege that Ocwen took over servicing from Litton Loan Servicing, L.P. (“Litton”) when the loan was in default. 

Here is the complaint. Click here.


Louisiana’s mortgage servicers now required to be licensed effective June 30

Louisiana’s mortgage servicers now required to be licensed effective June 30

Starting June 30 Louisiana’s mortgage servicers will be required to obtain a license to operate in the state.

Louisiana House Bill 807, signed into law by Governor Bobby Jindal on May 28, amends state law to require mortgage servicers to be licensed by the state. Previously, only residential mortgage lenders, brokers and originators were required to be licensed to do business in the state.

Under the newly adopted law, mortgage servicing is defined as “collecting or remitting payment for another, or the right to collect or remit payments for another, of any of the following: principal, interest, tax, insurance, or other payment under a mortgage loan.”

The text of the law says that it was designed to protect the citizens of Louisiana. “The Legislature of Louisiana does hereby declare that it is in the best interest of the citizens of the state to protect consumers in the most important financial investment most will make, the purchase of a home, by requiring the licensing and regulation of residential mortgage lenders, brokers, originators and servicers,” the text reads.


New Report Finds Ongoing Servicer Mistakes Push Homeowners to Foreclosure

New Report Finds Ongoing Servicer Mistakes Push Homeowners to Foreclosure

San Francisco, CA: – May 20, 2014 – (RealEstateRama) — A new survey of housing counselors and attorneys finds homeowners are facing unreasonable delays, numerous obstacles, and servicer run-arounds in seeking help from their mortgage servicers, despite new laws, programs, and settlements intended to protect homeowners. Housing counselors report that loan servicing transfers, Single Points of Contact not being available, and a lack of accountability prevent homeowners from accessing much-needed relief to avoid foreclosure. In conjunction with the survey (completed by 60+ counselors), eleven homeowners shared declarations that outline the many problems they and their nonprofit attorneys encountered in trying to obtain relief. Kevin Stein, Associate Director at the California Reinvestment Coalition (CRC), explained: “The foreclosure crisis is not over, in fact, it’s made worse and longer by servicers who refuse to abide by the rules. Servicers are incentivized, and in many cases, required to provide assistance, but what we see instead is incompetent servicing, homeowner run-arounds, improper denials, and unreasonable delays, all resulting in homeowners being pushed closer to foreclosure. We are especially concerned that promised relief is still not getting to the hardest hit communities. With the release of this report, we are urging regulators to more closely monitor and enforce existing rules; address the many obstacles faced by widowed homeowners; provide dedicated funding for counselors and attorneys; and increase transparency to verify if relief is getting to homeowners and communities equitably.” Lisa Sitkin, Managing Attorney at Housing and Economic Rights Advocates, worked with several of the homeowners whose declarations are included in the report, and commented on the specific challenges faced by widowed homeowners and other family members in similar situations: “When a borrower dies, the survivors – often a spouse or child – still face an uphill battle getting the servicer to speak with them, let alone help them resolve any delinquency or other problem with a mortgage account. The process drags on unnecessarily, the information provided to the borrower’s loved ones is incomplete, inconsistent or just wrong, and the survivors sometimes end up facing foreclosure while they are still grieving. The servicers can – and should – be doing a much better job for these families.” In addition to the survey results, the report also includes summaries and declarations from 11 homeowners located throughout California, who faced a range of problems when seeking help from their servicers. The declarations are included in the appendix of the report, as are links to individual declarations. 

Is there a contract between servicer, homeowner, & gov’t in HAMP?

I wrote this 3 years ago from my previous blog:

Written by Biloxi

I had posted this story a couple of days ago. But, it is worth posting. There has been so many lawsuits with banks by homeowners that applied for the Making Home Affordable Program and qualified for the three month plan but only to get rejected for a permanent modification after making the trial plan and then get threatend with foreclosure. Let’s review the case of Anthony and April Soper. From USA Today:

Bank of America, their mortgage servicer, put them on a HAMP trial payment plan in December that cut their monthly payment by more than half from almost $4,000 to about $1,826.

They say they made their reduced monthly payments early and did everything else that was asked of them. But they didn’t get a permanent modification, and they say they don’t know why.

Instead, according to a lawsuit they’ve brought against Bank of America, they are now more than $8,000 behind on a mortgage that had been current 12 months ago. Each of their credit scores has dropped by nearly 100 points. And, they allege, Bank of America has threatened them with foreclosure.

Now, Bank of America says that the Sopers don’t have a case because the trial plans are notcontracts:

Most of the lawsuits allege that the three- or four-month trial payment plans are contracts, and that Bank of America and other servicers broke them by not giving permanent modifications to homeowners who made their trial payments on time and provided the necessary documentation.

Servicers have asked courts to dismiss some of the cases, saying the trial plans are not contracts. 

Bank of America, which says it plans to seek dismissal of the Soper case, argues in a court filing in a similar case that it must consider borrowers for a HAMP modification, but that it has discretion in granting permanent modifications.

The bank also argues that homeowners have no case because courts have dismissed earlier HAMP-related lawsuits against mortgage servicers. Those cases claimed that in denying some homeowners modifications, the servicers had breached the contracts they made with the Treasury Department when they agreed to participate in HAMP. Courts said homeowners could not sue on those grounds because they weren’t parties to the contracts between the government and the servicers.

Lawyers for homeowners say they are now making a different legal argument: that Bank of America and others broke contracts made directly with homeowners.

“Borrowers have said we should be able to enforce the contract between Treasury and mortgage servicers, and many courts have rejected that. Our cases are the first filed that touch on a contract between servicers and borrowers,” says Kevin Costello, a lawyer with Roddy Klein & Ryan in Boston, which represents homeowners in cases against Bank of America, JPMorgan Chase and Wells Fargo.

One has to question from the Making Home Affordable Program: Is there a contractual agreement with servicer, homeowner, and government? Well, the answer is.. sort of. I looked at the Making Home Affordable Program guidelines. And it says:

Trial loan modifications consistent with these Guidelines may be offered to homeowners beginning on this date, March 4, 2009, and may be considered for acceptance into the Home Affordable Modification Program upon completion of the trial period and other conditions. These Guidelines, however, do not constitute a contract offer binding on the Department of the Treasury.

Now from this verbiage, it sounds like the guidelines don’t constitute a contract offer binding regarding the trial loan modification on the Treasury Dept. In addition, at the time, banks were encouraged to participate. It was an option. However, all servicers for loans owned or guaranteed by Fannie Mae and Freddie Mac are required to participate in theMaking Home Affordable Program. So, if the Sopers’ loan was owned by Fannie Mae and Freddie Mac, then Bank of America has a problem. And here is more of the guidelines on the Servicer Incentive Payments and Pay for Success Fees:

Servicers will receive an up-front Servicer Incentive Payment of $1,000 for each eligible modification meeting guidelines established under this initiative. Servicers will also receive Pay for Success payments –as long as the borrower stays in the program – of up to $1,000 each year for up to three years. 

Similar incentives will be paid for Hope for Homeowner refinances 

So, the servicers received an up-front Servicer Incentive Payment for each eligible homeowner’s meeting guidelines and a Pay for Success payments for each homeowner that stays in the program. Does this sound like a contractual agreement? I believe so. And this guideline of Program payment conditions:

No payments under the program to the lender/investor, servicer, or borrower will be made until the servicer has entered into the program agreement with the Treasury’s financial agent.

And the deadline for servicer to enter program agreement was December 31, 2009. By the way, the CEO of Bank of America at that time was Ken Lewis and not Brian Moynihan who is now the current CEO. The Sopers applied for the program in October 2009 which was under Ken Lewis’ leadership.

And here is the list of all of the servicers participating into Making Home Affordable Program. Click here.

Bank of America as well as all bank servicers who are participating in this program unfortunately are legally binded to this contract. Yes, according to the guidelines, the trial plan isn’t a contract. However, if Bank of America and other servicers took the Servicer Incentive Payments of each homeowners that met those modification guidelines and later denied those homeowners a modification, then the servicers would be a serious trouble. But, in the case of the Sopers and other similar cases, this is a contract because the guidelines including incentives for the homeowners who stayed on the program. This case will be interesting as Bank of America and other banks such as Wells Fargo, JP Morgan Chase, Citigroup, and so on try to toss out lawsuits by the homeowners claiming that the banks broke contracts. These are the same banks that took bailout money in the financial crisis. Yet, these same banks are participants and received incentives from the Making Home Affordable Program. All I can say is that the banks need to worry about the Fruit of the poisonous tree doctrine which is a legal metaphor used to describe evidence that is obtained illegally. What will bite the banks who participated in the Making Home Affordable Program with the U.S. Treasury since there was money exchange with the bank servicers and U.S. Treasury such as incentives, it is a contract regardless if it is verbal or written and the upfront fees given to the bank servicers.

The banks thought they can take the upfront fee incentives given by the U.S. Treasury and hoodwink the homeowners that applied for the program and made their three trial payment plans and later denied those homeowners a permanent modification with a reason. Unfortunately, the banks don’t realize that once they took the upfront fees that they are bind in a contract with the U.S. Treasury.


B of A, Chase, Citi Again Fail Fannie’s Servicer Test

B of A, Chase, Citi Again Fail Fannie’s Servicer Test

Three of the four largest mortgage servicers failed to meet Fannie Mae’s minimum servicing requirements in the first half of 2013, according to a Fannie report released Tuesday.

Bank of America (BAC), Citigroup (NYSE:C) and JPMorgan Chase (JPM) did not produce mortgage servicing results at or above a median level compared with their peers, so none were identified in a report on Fannie’s Star program. The three were also unranked in Fannie’s first-quarter report.

Fannie’s Star program ranks servicers based on certain metrics including improved performance of loans that are delinquent for 90 days or more, retention efforts that keep borrowers in their homes, and the efficiency of liquidating homes using short sales.


Sloppy Servicers

Sloppy Servicers

 | August 22, 2013

I have blogged about the Alice In Wonderland-like and Dickensian situations faced by defaulting homeowners, but now the CFPB has offered a broader look at the problems that borrowers confront when facing foreclosure. The CFPB’s Supervisory Highlights Summer 2013 profiles some of the problems in the loss mitigation field, including

  • Inconsistent borrower solicitation and communication;
  • Inconsistent loss mitigation underwriting;
  • Inconsistent waivers of certain fees or interest charges;
  • Long application review periods;
  • Missing denial notices;
  • Incomplete and disorganized servicing files;
  • Incomplete written policies and procedures; and
  • Lack of quality assurance on underwriting decisions. (14)

The CFPB also noted some serious violations in the transfer of loans between servicers: “For example, examiners found noncompliance with the requirements of the Real Estate Settlement Procedures Act (RESPA) to provide disclosures to consumers about transfers of the servicing of their loans.” (12)

They also found problems processing default-related fees: “Examiners identified a servicer that charged consumers default-related fees without adequately documenting the reasons for and amounts of the fees. Examiners also identified situations where servicers mistakenly charged borrowers default-related fees that investors were supposed to pay under investor agreements.” (13-14)