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Category Archives: Fraud

Mortgage Application Fraud!

10 Thursday Feb 2022

Posted by BNG in Fraud, Mortgage fraud, Mortgage loan

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Fraud, Mortgage Application Fraud, Mortgage fraud

Video Transcript

Hello. I’m a special agent with the FBI. And this is A Mortgage Minute for the Average Joe. Today’s topic—making sure the mortgage application you sign is complete and accurate. More than half of the mortgage fraud cases we work at the FBI involve fraud on the mortgage application.

There are lies about how much income the borrower makes, where they work and how much debt they already owe. They also lie about who will occupy the house. Income fraud occurs when the borrower overstates his income in order to qualify for a mortgage. This was very common during the past few years as home values dramatically increased and people bought homes they couldn’t afford.

Employment fraud occurs when the borrower lists his employer as a company he doesn’t really work for. In some cases, it’s a fake company all together.

Another type of fraud occurs when the borrower does not disclose all of his financial obligations, including other existing mortgages, car loans or credit card debts on the application.

Occupancy fraud occurs when the borrower states on the application that they intend to live in the home they are buying when it’s actually an investment property.

So before you sign a mortgage application or any other loan documents, carefully review them to make sure they are complete and accurate. If you become aware of mortgage fraud, you are encouraged to contact your local FBI office and report it.

This segment of A Mortgage Minute for the Average Joe has been brought to you by the FBI.

When Homeowner’s good faith attempts to amicably work with the Bank in order to resolve the issue fails;

Home owners should wake up TODAY! before it’s too late by mustering enough courage for “Pro Se” Litigation (Self Representation – Do it Yourself) against the Lender – for Mortgage Fraud and other State and Federal law violations using foreclosure defense package found at https://fightforeclosure.net/foreclosure-defense-package/ “Pro Se” litigation will allow Homeowners to preserved their home equity, saves Attorneys fees by doing it “Pro Se” and pursuing a litigation for Mortgage Fraud, Unjust Enrichment, Quiet Title and Slander of Title; among other causes of action. This option allow the homeowner to stay in their home for 3-5 years for FREE without making a red cent in mortgage payment, until the “Pretender Lender” loses a fortune in litigation costs to high priced Attorneys which will force the “Pretender Lender” to early settlement in order to modify the loan; reducing principal and interest in order to arrive at a decent figure of the monthly amount the struggling homeowner could afford to pay.

If you find yourself in an unfortunate situation of losing or about to lose your home to wrongful fraudulent foreclosure, and need a complete package that will show you step-by-step litigation solutions helping you challenge these fraudsters and ultimately saving your home from foreclosure either through loan modification or “Pro Se” litigation visit: https://fightforeclosure.net/foreclosure-defense-package/

If you have received a Notice of Default “NOD”, take a deep breath, as this the time to start the FIGHT! and Protect your EQUITY!

If you do Nothing, you will see the WRONG parties WITHOUT standing STEAL your home right under your nose, and by the time you realize it, it might be too late! If your property has been foreclosed, use the available options on our package to reverse already foreclosed home and reclaim your most prized possession! You can do it by yourself! START Today — STOP Foreclosure Tomorrow!

If you are a homeowner already in Chapter 13 Bankruptcy and needs to proceed with Adversary Proceeding to challenge the validity of Security Interest or Lien on your home, Our Adversary Proceeding package may be just what you need.

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What Borrowers Must Know About Voiding Liens in a Mortgage

06 Sunday Oct 2019

Posted by BNG in Appeal, Bankruptcy, Banks and Lenders, Borrower, Case Laws, Case Study, Federal Court, Foreclosure, Foreclosure Crisis, Foreclosure Defense, Fraud, Judicial States, Legal Research, Litigation Strategies, Loan Modification, Mortgage fraud, Mortgage Laws, Non-Judicial States, Note - Deed of Trust - Mortgage, Pro Se Litigation, Real Estate Liens, State Court, Trial Strategies, Your Legal Rights

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enforceability of judgment lien, Foreclosure, foreclosure defense, homeowners, involuntary liens, Lien, lien stripping, lien voidance, liens, Loan, Loan servicing, Mortgage loan, Mortgage modification, Mortgage servicer, Pro se legal representation in the United States, Property Lien Disputes, property liens, Real Estate Liens, Removing Liens, Types of Real Estate Liens, Unperfected Liens, voluntary liens

There are numerous methods for voiding questionable liens in any given mortgage. In this post, we’ll discuss an interesting decision by the U.S. Court of Appeals for the Ninth Circuit in Bankruptcy Adversary Proceeding.

This decision from the U.S. Court of Appeals for the Ninth Circuit poses a serious threat to mortgage companies that service mortgages of chapter 13 debtors. Mortgage servicers should be aware of the case’s implications and adjust their internal case monitoring procedures as necessary.

Consider a common situation. A borrower files a chapter 13 bankruptcy case, and her mortgage servicer files a proof of claim for the mortgage balance. The borrower then objects to the proof of claim based on some purported technicality: the signature was forged, the endorsement was improper, the servicer lacks standing to enforce the note, etc. For whatever reason, the mortgage servicer does not respond to this objection, and the claim is disallowed by default.

When this happens, the borrower will often attempt to leverage a favorable settlement, like a mortgage modification, by filing a lawsuit to void the mortgage under 11 U.S.C. § 506(d). This provision allows a bankruptcy court to void a lien if the lien secures a claim that is not “allowed.” Because the mortgage was “disallowed” by default due to the mortgage servicer’s failure to respond, this statute theoretically allows the court to void the mortgage altogether.

Courts generally do not void mortgages that are substantively valid but were disallowed because of a default. The most common solution in these situations is a settlement and a motion to reconsider the disallowance under 11 U.S.C. § 502(j). Bankruptcy courts may grant these motions for “cause” at their discretion, which is typically satisfied if the mortgage servicer can prove the substantive validity of the mortgage. See generally In re Oudomsouk, 483 B.R. 502, 513-14 (Bankr. M.D. Tenn. 2012). This works to everyone’s advantage: the mortgage servicer gets paid through the bankruptcy, and the debtor avoids the risk of post-bankruptcy foreclosure if the lien’s validity is ultimately upheld after the case concludes.

The decision of the U.S. Court of Appeals for the Ninth Circuit in In re Blendheim may change this result. 2015 WL 5730015 (9th Cir. Oct. 7, 2015). In Blendheim, the debtors owned a condominium with two mortgages. After filing chapter 7 and obtaining a discharge of their unsecured debts, the debtors immediately filed a chapter 13 case to restructure their mortgages on the condominium (this process is known as a “chapter 20”). HSBC, the senior servicer, filed a proof of claim for the senior mortgage, but the debtors objected because (a) HSBC attached only the deed of trust, and not the promissory note, to the proof of claim, and (b) one of the signatures on the note was purportedly forged.

For reasons unknown, HSBC did not respond to the objection, and the bankruptcy court entered an order disallowing HSBC’s claim by default. Five months later, the debtors brought an adversary proceeding to void the mortgage under 11 U.S.C. § 506(d). Almost eighteen months after the bankruptcy court disallowed HSBC’s claim, HSBC filed a motion to reconsider the disallowance. HSBC also challenged the debtors’ attempt to void the mortgage because the disallowance was not actually litigated; it was the result of a default. The bankruptcy court disagreed, finding that (a) HSBC had no good reason for failing to respond to the claim objection, and (b) the statute plainly permitted lien avoidance in these circumstances. After the bankruptcy court confirmed the debtors’ plan, which provided for payment of only the junior mortgage, HSBC appealed.

On appeal, HSBC raised three primary issues. First, it argued that Section 506(d) should not operate to void its mortgage, notwithstanding the plain language of the statute, when the order disallowing the claim was not actually litigated but was based on a default. Second, it argued that even if the lien were properly voided under Section 506(d), the result could not be permanent because the debtors, having recently received a discharge in their chapter 7 case, were not eligible for a discharge in their chapter 13 case. Third, it argued that by losing its lien because of a default order in the bankruptcy case, as opposed to a formal lawsuit, it was denied due process.

The court disagreed with HSBC on each issue. First, it held that lien avoidance was appropriate. HSBC cited cases where courts refused to void a mortgage when a claim was disallowed for being filed late. The court distinguished these cases, holding that a creditor who files a late proof of claim is not “actively participating in the case” and therefore cannot have its state law lien rights impacted. See generally Dewsnup v. Timm, 502 U.S. 410, 418-19. But when a creditor timely files a proof of claim then willfully fails to respond to the debtors’ objection to the claim, the situation is fundamentally different. According to the court, the Bankruptcy Code plainly allows permanent lien avoidance when a creditor, like HSBC, “just sle[eps] on its rights and refuse[s] to defend its claim.” Blendheim, 2015 WL 5730015, at *11.

Next, the court addressed HSBC’s second argument and held that lien avoidance was appropriate even though the debtors were not eligible for a discharge. Acknowledging a split of authority, the court clarified that discharge affects only personal liability, not the in rem rights of creditors, so the cases on which HSBC relied were distinguishable. Nothing in the Bankruptcy Code prohibits lien avoidance just because a borrower has no right to a discharge.

Finally, the court held that HSBC’s due process was not offended. HSBC received notice of the claim objection and had ample time to respond.  Its failure to do so, while fatal to its lien, did not violate its due process rights.

What This Means for Mortgage Creditors

The Blendheim case may have serious implications for mortgage creditors. This situation is not an outlier: mortgage servicers commonly fail to respond to claim objections. his may be because of the quick deadline to respond to these objections or the use of separate legal counsel for handling administrative functions in bankruptcy versus defending adversary proceedings. Historically, when a claim is disallowed based on a creditor’s failure to respond to a claim objection, bankruptcy courts will grant a reconsideration motion under Section 502(j) if the creditor can prove the substantive validity of the mortgage.

After Blendheim, the result may be different. The Blendheim court, after all, did not seem to care about the underlying validity of HSBC’s claim. Instead, it focused on HSBC’s failure to respond without a good reason.

How does this Affect Mortgage Creditors

Mortgage servicers should be aware of this decision and should make sure that they are closely following the dockets of cases involving their borrowers in bankruptcy. If they don’t, they risk losing their mortgage lien, if any, altogether.

CASE STUDY:  HSBC v. BLENDHEIM

[The views expressed in this document are solely the views of the Author. This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance]

When Homeowner’s good faith attempts to amicably work with the Bank in order to resolve the issue fails;

If you are a homeowner already in Chapter 13 Bankruptcy with questionable liens on your property, you needs to proceed with Adversary Proceeding to challenge the validity of Security Interest or Lien on your home, Our Adversary Proceeding package may be just what you need.

Homeowners who are not yet in Bankruptcy should wake up TODAY! before it’s too late by mustering enough courage for “Pro Se” Litigation (Self Representation – Do it Yourself) against the Lender – for Mortgage Fraud and other State and Federal law violations using foreclosure defense package found at https://fightforeclosure.net/foreclosure-defense-package/ “Pro Se” litigation will allow Homeowners to preserved their home equity, saves Attorneys fees by doing it “Pro Se” and pursuing a litigation for Mortgage Fraud, Unjust Enrichment, Quiet Title and Slander of Title; among other causes of action. This option allow the homeowner to stay in their home for 3-5 years for FREE without making a red cent in mortgage payment, until the “Pretender Lender” loses a fortune in litigation costs to high priced Attorneys which will force the “Pretender Lender” to early settlement in order to modify the loan; reducing principal and interest in order to arrive at a decent figure of the monthly amount the struggling homeowner could afford to pay.

If you find yourself in an unfortunate situation of losing or about to lose your home to wrongful fraudulent foreclosure, and need a complete package that will show you step-by-step litigation solutions helping you challenge these fraudsters and ultimately saving your home from foreclosure either through loan modification or “Pro Se” litigation visit: https://fightforeclosure.net/foreclosure-defense-package/

If you have received a Notice of Default “NOD”, take a deep breath, as this the time to start the FIGHT! and Protect your EQUITY!

If you do Nothing, you will see the WRONG parties WITHOUT standing STEAL your home right under your nose, and by the time you realize it, it might be too late! If your property has been foreclosed, use the available options on our package to reverse already foreclosed home and reclaim your most prized possession! You can do it by yourself! START Today — STOP Foreclosure Tomorrow!

 

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How Homeowners Can Set Aside Foreclosure Sale

06 Sunday Oct 2019

Posted by BNG in Banks and Lenders, Borrower, Federal Court, Foreclosure, Foreclosure Crisis, Foreclosure Defense, Fraud, Judgment, Judicial States, Litigation Strategies, Mortgage fraud, Mortgage Laws, Non-Judicial States, Note - Deed of Trust - Mortgage, Pleadings, Pro Se Litigation, State Court, Trial Strategies, Your Legal Rights

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federal courts, Foreclosure, foreclosure defense, homeowners, Judicial States, Non-Judicial States, overture a foreclosure sale, Pro se legal representation in the United States, setting aside foreclosure sale, State Courts, wrongful foreclosure, wrongful foreclosure appeal, Wrongful Mortgage Foreclosure

What are the Reasons a Foreclosure Sale May Be Set Aside

Generally, to set aside a foreclosure sale, the homeowner must show:

– irregularity in the foreclosure process that makes the sale void under state law
– noncompliance with the terms of the mortgage, or
– an inadequate sale price that shocks the conscience.

Sometimes homeowners are not aware that a foreclosure sale has been scheduled until after it has already been completed. Even if your home has been sold, there are some instances where you might be able to have the foreclosure sale invalidated, though this is uncommon. This post will discuss how to set aside a foreclosure sale and the circumstances that might warrant it.

Irregularity in the Foreclosure Process

State statutes lay out the procedures for a foreclosure. If there are irregularities in the foreclosure process—meaning, the foreclosure is conducted in a manner not authorized by the statute—the sale can potentially be invalidated.

Some examples of irregularities in the foreclosure process are:

  • The loan servicer does not send notice to the borrower.
  • A state statute requires notice by advertising the sale in a newspaper, but the servicer does not place the advertisement.
  • The foreclosing lender did not get an assignment of the mortgage.

Example. In U.S. Bank v. Ibanez, the Massachusetts Supreme Judicial Court invalidated two foreclosure sales where the mortgages were assigned to the lender after the completion of the foreclosure sale. The court decided that the foreclosures were void because the lenders lacked legal authority to foreclose.

However, in some states, courts are reluctant to set aside a foreclosure sale based upon violations of foreclosure statutes unless the violation resulted in actual prejudice (harm) to the homeowner. For instance, the homeowner may have to show that the lender’s failure to follow the statutory requirements chilled the bidding at the foreclosure sale and, as a result, the homeowner was liable for a larger deficiency judgment.

Noncompliance With Terms of the Mortgage

If the lender or servicer fails to comply with the terms of the mortgage contract, this may constitute sufficient reason to set aside a foreclosure sale.

Example. Many mortgages and deeds of trust require that the lender or servicer send the borrowers a breach letter giving them 30 days to cure the default before starting a foreclosure. If the servicer doesn’t send a breach letter, this may provide grounds for invalidating the foreclosure.

Inadequacy of Sale Price

Inadequacy of sale price might justify setting aside a foreclosure sale if the price is so low that it “shocks the conscience” of the court. It is often difficult to get a sale set aside on this basis. Usually to get a sale invalidated for inadequacy of sale price, you will also need additional circumstances that warrant voiding the sale.

For instance, courts are more likely to set aside a sale if there is an inadequate sales price combined with:

  • some irregularity (such as if the sale was advertised to take place at 3:00 p.m., but was actually held at 11:00 a.m.), or
  • unfairness (like if the lender re-sold the property for a much higher price right after the foreclosure sale, which demonstrates that it could have received a higher price at the foreclosure sale).

Though keep in mind that some courts might be hesitant to void the sale unless the violation resulted in actual prejudice to the homeowner.

How to Set Aside the Foreclosure Sale

The procedures to set aside a foreclosure sale depend on whether the sale was judicial (where the lender forecloses through the state court system) or nonjudicial (which means the lender does not have to go through state court to get one).

Setting Aside a Sale in a Judicial Foreclosure

Attempting to invalidate the sale in a judicial foreclosure can typically be done in the following ways, depending on state law:

  • If the foreclosure case stays open through completion of the sale process, then you can raise an objection to the legitimacy of the sale in that case.
  • If the state judicial process terminates once the foreclosure judgment is entered (and not appealed), then you must either file a motion to reopen the case or file a separate action to void the sale.

The actual process is generally determined by statute, rule, or case law.

Setting Aside a Sale in a Nonjudicial Foreclosure

If the property was foreclosed non-judicially, the homeowner will usually have to file a lawsuit in state court to void the sale. It may also be possible in some instances to file bankruptcy and ask that the sale be set aside as part of the bankruptcy case.

There are a few nonjudicial foreclosure states that require a court to confirm the sale. In those states, the homeowner can sometimes raise objections to the sale in the confirmation process. However, in some states the confirmation process is limited to determining whether or not the property sold for fair market value at the foreclosure sale and the court will not review other issues.

What Happens if the Sale Is Set Aside?

If the foreclosure sale is set aside as void, title to the property is typically returned to the homeowner while the mortgage and other liens generally are re-established. However, if the property has been resold to another party following an invalidated sale, some state statutes provide that the subsequent sale to a good faith purchaser eliminates the foreclosed homeowner’s right to challenge the sale on procedural grounds. In these types of cases, the homeowner might be able to seek damages against the lender or servicer.

The reasons that justify, as well as, the procedures for, invalidating a foreclosure sale are complicated. So, if you are considering trying to set aside a foreclosure sale, the earlier you begin the fight using the content found within our package, the better chance of succeeding.

[The views expressed in this document are solely the views of the Author. This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance]

When Homeowner’s good faith attempts to amicably work with the Bank in order to resolve the issue fails;

Home owners should wake up TODAY! before it’s too late by mustering enough courage for “Pro Se” Litigation (Self Representation – Do it Yourself) against the Lender – for Mortgage Fraud and other State and Federal law violations using foreclosure defense package found at https://fightforeclosure.net/foreclosure-defense-package/ “Pro Se” litigation will allow Homeowners to preserved their home equity, saves Attorneys fees by doing it “Pro Se” and pursuing a litigation for Mortgage Fraud, Unjust Enrichment, Quiet Title and Slander of Title; among other causes of action. This option allow the homeowner to stay in their home for 3-5 years for FREE without making a red cent in mortgage payment, until the “Pretender Lender” loses a fortune in litigation costs to high priced Attorneys which will force the “Pretender Lender” to early settlement in order to modify the loan; reducing principal and interest in order to arrive at a decent figure of the monthly amount the struggling homeowner could afford to pay.

If you find yourself in an unfortunate situation of losing or about to lose your home to wrongful fraudulent foreclosure, and need a complete package that will show you step-by-step litigation solutions helping you challenge these fraudsters and ultimately saving your home from foreclosure either through loan modification or “Pro Se” litigation visit: https://fightforeclosure.net/foreclosure-defense-package/

If you have received a Notice of Default “NOD”, take a deep breath, as this the time to start the FIGHT! and Protect your EQUITY!

If you do Nothing, you will see the WRONG parties WITHOUT standing STEAL your home right under your nose, and by the time you realize it, it might be too late! If your property has been foreclosed, use the available options on our package to reverse already foreclosed home and reclaim your most prized possession! You can do it by yourself! START Today — STOP Foreclosure Tomorrow!

If you are a homeowner already in Chapter 13 Bankruptcy and needs to proceed with Adversary Proceeding to challenge the validity of Security Interest or Lien on your home, Our Adversary Proceeding package may be just what you need.

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What Homeowners Should Know About Foreclosure Defense

10 Friday May 2019

Posted by BNG in Banks and Lenders, Case Study, Credit, Federal Court, Foreclosure, Foreclosure Crisis, Foreclosure Defense, Fraud, Judicial States, Loan Modification, Mortgage fraud, Mortgage Laws, Non-Judicial States, Pro Se Litigation, State Court, Your Legal Rights

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adversary proceeding, affidavits, Bankruptcy, bankruptcy adversary proceeding, Banks and Lenders, Consequences of a Foreclosure, Court, Deed of Trust, defaulting on a mortgage, False notary signatures, Forbearance, Foreclosure, foreclosure defense, foreclosure defense strategy, Foreclosure in California, foreclosure in Florida, foreclosure process, homeowners, judicial foreclosures, lender, Loan Modification, MERS, mortgage, Mortgage Electronic Registration System, Mortgage fraud, Mortgage law, Mortgage loan, Mortgage note, mortgages, non-judicial foreclosures, Promissory note, Robo-signing, Securitization, securitized, UCC, Uniform Commercial Code

Over the past few years, a growing number of homeowners in the foreclosure process have begun to fight back, by stalling foreclosure proceedings or stopping them altogether. The legal strategy employed by these homeowners is known as foreclosure defense.

Since 2007, nearly 4.2 million people in the United States have lost their homes to foreclosure. By early 2014, that number is expected to climb to 6 million. Historically, the legal process of foreclosure, one that requires a homeowner to return his or her house to a lender after defaulting on a mortgage, has tilted in favor of the banks and lenders — who are well-versed in the law and practice of foreclosure.

The simplest way to avoid foreclosure is by modifying the mortgage. In a mortgage modification, the homeowner convinces the lender to renegotiate the terms of the mortgage in order to make the payments more affordable.

A mortgage modification can include:

  • A reduction or change in the loan’s interest rate.
  • A reduction in the loan’s principal.
  • A reduction or elimination of late fees and penalties for non-payment.
  • A reduction in your monthly payment.
  • Forbearance, to temporarily stop making payments, or extend the time for making payments.

The goal of the foreclosure defense strategy is to prove that the bank does not have a right to foreclose. The chances of success rest on an attorney’s ability to challenge how the mortgage industry operates. The strategy aims to take advantage of flaws in the system, and presumes illegal or unethical behavior on the part of lenders.

Foreclosure defense is a new concept that continues to grow alongside the rising tide of foreclosure cases. While some courts accept foreclosure defense arguments, others find them specious and hand down decisions more beneficial to banks than to homeowners.

A growing number of victories by homeowners in state and federal courts have altered the foreclosure landscape dramatically, giving optimism to tens of thousands of other homeowners in similar situations. And because many of America’s large banks have acknowledged unorthodox, unaccepted or even illegal practices in the areas of mortgages, loan modifications and foreclosures, they inadvertently have given homeowners additional ammunition with which to fight.

Foreclosure Defense Varies by State

A major strategy of foreclosure defense is to make a bank substantiate clear chains of title for a mortgage and a promissory note. If any link in either chain is questionable, it can nullify a lender’s ability to make a valid claim on a property.

The foreclosure process varies somewhat from state to state, depending on whether your state uses mortgages or deeds of trust for the purchase of real property. A mortgage or deed of trust outlines a transfer of an interest in a property; it is not, in itself, a promise to pay a debt. Instead, it contains language that gives the lender the right to take the property if the borrower breaches the terms of the promissory note.

If you signed a mortgage, it generally means you live in a state that conducts judicial foreclosures, meaning that a lender has to sue in court in order to get a judgment to foreclose. If you signed a deed of trust, you live in a state that conducts non-judicial foreclosures, which means that a lender does not have to go to court to initiate a foreclosure action.

In a judicial state, homeowners have the advantage because they can require that the lender produce proof and perfection of claim, at the initial court hearing. In a non-judicial state, the lender does not have to prove anything because the state’s civil code gives it the right to foreclose after a notice of default has been sent. So in non-judicial states, a homeowner must file a civil action against the lender to compel it to provide proof of claim.

Regardless of whether you signed a mortgage or a deed of trust, you also signed a promissory note — a promise to pay back a specified amount over a set period of time. The note goes directly to the lender and is held on its books as an asset for the amount of the promised repayment. The mortgage or deed of trust is a public record and, by law, must be recorded in a county or town office. Each time a promissory note is assigned, i.e. sold to another party, the note itself must be endorsed with the name of the note’s new owner. Each time a deed of trust or mortgage is assigned to another entity, that transaction must be recorded in the town or county records office.

Foreclosure Defense and Chain of Title

Here is where foreclosure defense can begin to chip away at a bank’s claim on your property. In order for a mortgage, deed of trust or promissory note to be valid, it must have what is known as “perfection” of the chain of title. In other words, there must be a clear, unambiguous record of ownership from the time you signed your papers at closing, to the present moment. Any lapse in the chain of title causes a “defect” in the instrument, making it invalid.

In reality, lapses occur frequently. As mortgages and deeds began to routinely be bought and sold, the sheer magnitude of those transfers made it difficult, costly and time-consuming for institutions to record every transaction in a county records office. But in order to have some method of record-keeping, the banks created the Mortgage Electronic Registration System (MERS), a privately held company that tracks the servicing rights and ownership of the nation’s mortgages. The MERS holds more than 66 million American mortgages in its database.

When a foreclosure is imminent, MERS appoints a party to foreclose, based on its records of who owns the mortgage or deed of trust. But some courts have rejected the notion that MERS has the legal authority to assign title to a particular party in the first place. A court can decide MERS has no “standing,” meaning that the court does not recognize its right to initiate foreclosure since MERS does not have any financial interest in either the property or the promissory note.

And since MERS has essentially bypassed the county record-keeping system, the perfection of chain of title cannot be independently verified. This is where a foreclosure defense can gain traction, by questioning the perfection of the chain of title and challenging MERS’ legal authority to assign title.

Promissory Notes are Key to Foreclosure Defense

Some courts may also challenge MERS’ ability to transfer the promissory note, since it likely has been sold to a different entity, or in most cases, securitized (pooled with other loans) and sold to an unknown number of entities. In the U.S. Supreme Court case Carpenter v. Longan, it was ruled that where a promissory note goes, a deed of trust must follow. In other words, the deed and the note cannot be separated.

If your note has been securitized, it now belongs to someone other than the holder of your mortgage. This is known as bifurcation — the deed of trust points to one party, while the promissory note points to another. Thus, a foreclosure defense claims that since the relationship between the deed and the note has become defective, it renders the deed of trust unenforceable.

Your promissory note must also have a clear chain of title, according to the nation’s Uniform Commercial Code (UCC), the body of regulations that governs these types of financial instruments. But over and over again, borrowers have been able to demonstrate that subsequent assignments of promissory notes have gone unendorsed.

In fact, it has been standard practice for banks to leave the assignment blank when loans are sold and/or securitized and, customarily, the courts have allowed blank assignment to be an acceptable form of proof of ownership. However, when the Massachusetts Supreme Court in U.S. Bank v. Ibenez ruled that blank assignment is not sufficient to claim perfection, it provided another way in which a foreclosure can be challenged.

In their most egregious attempts to remedy these glaring omissions, some banks have actually tried to reverse-engineer chains of title, using fraudulent means such as:

  • Robo-signing of documents.
  • False notary signatures.
  • Submission of questionable, inaccurate or patently counterfeit affidavits.

Exposure of these dishonest methods halted many foreclosures in their tracks and helped increase governmental scrutiny of banks’ foreclosure procedures.

Other Foreclosure Defense Strategies

Another option for a homeowner who wishes to expose a lender’s insufficient perfection of title is to file for bankruptcy. In a Chapter 7 filing, you can declare your home an “unsecured asset” and wait for the lender to object. This puts the burden of proof on the lender to show a valid chain of assignment. In a Chapter 13 bankruptcy, you can file an Adversary Proceeding, wherein you sue your lender to compel it to produce valid proof of claim. The Bankruptcy Code requires that your lender provide evidence of “perfected title.”

Another foreclosure defense argument explores the notion of whether the bank is a real party of interest. If it’s not, it doesn’t have the right to foreclose. For example, if your loan has been securitized, your original lender has already been paid. At that point, the debt was written off and the debt should be considered settled. In order to prove that your original lender has profited from the securitization of your mortgage, it is advised that you obtain a securitization audit. The audit is completed by a third-party researcher who tracks down your loan, and then provides you with a court-admissible document showing that your loan has been securitized.

A foreclosure defense can also argue that once a loan has been securitized, or converted to stock, it is no longer a loan and cannot be converted back into a loan. That means that your promissory note no longer exists, as such. And if that is true, then your mortgage or deed of trust is no longer securing anything. Instead of the bank insisting that you have breached the contract specified in the promissory note, foreclosure defense argues that the bank has actually destroyed that agreement itself. And if the agreement doesn’t exist, how can it be enforced? A corollary to this argument states that your loan is no longer enforceable because it is now owned by many shareholders and a promissory note is only enforceable in its whole entirety. How can thousands of people foreclose on your house?

While the foreclosure defense strategy is legal in nature, and can be handled differently by different courts, it should not be ignored when preparing a case.

The tactic of attacking a lender’s shoddy or illegal practices has proven to be the most successful strategy of foreclosure defense, since most courts are loathe to accept unlawful or unethical behavior, even from banks. If a homeowner can present clear instances of lost or missed paperwork, demonstrate that notes were misplaced or improperly endorsed, or prove that documents were forged, robo-signed, or reversed-engineered, the more likely a court will rule in his or her favor.

If you are considering a foreclosure defense, you have two options, you can either represent yourself in the Court as a Pro Se Litigant, (USING OUR FORECLOSURE DEFENSE PACKAGE), if you cannot afford to pay Attorneys Fees, as foreclosure proceeding can take years while you are living in your home WITHOUT PAYING ANY MORTGAGE. Or You may retain a Legal Counsel to Defend you. If you chose the second option, it is imperative that you retain the services of professional legal counsel. Regardless of how educated you are about the process, this is an area of law that requires a well-thought-out, competent presentation in a State or Federal court. Nonetheless, the Attorneys fees for foreclosure defense can accumulate over the years to thousands and even tens of thousands of dollars, that is why most homeowners, opt to represent themselves in the proceedings which can take anywhere between 1-7 years, while homeowners are living in their homes Mortgage-Free. The good news is that most foreclosure defense Attorneys equally use the same materials found in our foreclosure defense package to defend homeowner’s properties, and with these same materials, you can equally  represent yourself as a Pro Se (Self Representing), litigant.

A successful foreclosure defense may prohibit or delay the foreclosure process or it simply may induce a lending institution to negotiate a loan modification that allows you to stay in your home — which, of course, was the goal in the first place. You can equally be awarded damages by the courts for mortgage law violations by the lenders, in addition to loan modification.

When Homeowner’s good faith attempts to amicably work with the Bank in order to resolve the issue fails;

Home owners should wake up TODAY! before it’s too late by mustering enough courage for “Pro Se” Litigation (Self Representation – Do it Yourself) against the Lender – for Mortgage Fraud and other State and Federal law violations using foreclosure defense package found at https://fightforeclosure.net/foreclosure-defense-package/ “Pro Se” litigation will allow Homeowners to preserved their home equity, saves Attorneys fees by doing it “Pro Se” and pursuing a litigation for Mortgage Fraud, Unjust Enrichment, Quiet Title and Slander of Title; among other causes of action. This option allow the homeowner to stay in their home for 3-5 years for FREE without making a red cent in mortgage payment, until the “Pretender Lender” loses a fortune in litigation costs to high priced Attorneys which will force the “Pretender Lender” to early settlement in order to modify the loan; reducing principal and interest in order to arrive at a decent figure of the monthly amount the struggling homeowner could afford to pay.

If you find yourself in an unfortunate situation of losing or about to lose your home to wrongful fraudulent foreclosure, and need a complete package that will show you step-by-step litigation solutions helping you challenge these fraudsters and ultimately saving your home from foreclosure either through loan modification or “Pro Se” litigation visit: https://fightforeclosure.net/foreclosure-defense-package/

If you have received a Notice of Default “NOD”, take a deep breath, as this the time to start the FIGHT! and Protect your EQUITY!

If you do Nothing, you will see the WRONG parties WITHOUT standing STEAL your home right under your nose, and by the time you realize it, it might be too late! If your property has been foreclosed, use the available options on our package to reverse already foreclosed home and reclaim your most prized possession! You can do it by yourself! START Today — STOP Foreclosure Tomorrow!

If you are a homeowner already in Chapter 13 Bankruptcy and needs to proceed with Adversary Proceeding to challenge the validity of Security Interest or Lien on your home, Our Adversary Proceeding package may be just what you need.

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How Homeowners Can Avoid Mistakes During Bankruptcy

22 Friday Mar 2019

Posted by BNG in Bankruptcy, Federal Court, Fraud, Judicial States, Non-Judicial States, Pro Se Litigation, Your Legal Rights

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Avoid Mistakes During Bankruptcy, Avoid Mistakes in Bankruptcy, Bankruptcy, Bankruptcy Attorney, bankruptcy court, bankruptcy mistakes, bankruptcy process, Bankruptcy Trustee, Borrower, Creditor, debtor, federal bankruptcy laws, filing for bankruptcy, fresh financial start, homeowners, Plan for Bankruptcy

Homeowners must do their very best to avoid making mistakes during Bankruptcy Proceedings.

The federal bankruptcy laws promise a fresh financial start for the honest but unfortunate debtor. Bankruptcy balances the interests of the debtor to obtain a fresh start and the interests of the creditor to see that the debtor pays back whatever he or she can afford. But all too often, a debtor makes mistakes in bankruptcy, seriously compromising his or her case before it’s even filed.

In order to help homeowners avoid those unnecessary complications, we’ve prepared this list of the 7 biggest mistakes in bankruptcy:

1. Paying an Insider Creditor

The bankruptcy laws attempt to ensure that all creditors receive fair treatment during the bankruptcy process. One concern is that the debtor will pay loans to family or friends before filing bankruptcy, and therefore deprive other creditors from receiving payment.

Family, friends, business partners, and other creditors who have close relationships with the debtor are called “insider creditors,” and transfers to insider creditors can be avoided by the bankruptcy trustee if the transfer occurred within one year before the bankruptcy filing.

For instance, if you gave your mother $1,000 from your income tax refund as payment for a debt, and then filed bankruptcy two months later, the bankruptcy trustee can sue your mother to recover the $1,000. To make matters worse, often the debtor could have protected the cash money during the bankruptcy and paid the debt without difficulty after the case was filed.

2. Incurring Debt After Deciding to File

Some people decide to charge up credit cards or take payday loans just before filing bankruptcy. If you have decided to file bankruptcy, do not incur additional debt. Taking loans with no intention to repay the creditor could be fraud, which is a crime.

3. Transferring Property Before Bankruptcy

Anytime an individual transfers property for less than full value shortly before a bankruptcy filing, the transfer seems “suspicious.” The bankruptcy trustee scrutinizes all property transfers before bankruptcy, and if a property transfer was not a fair and honest exchange, the trustee may avoid the transfer and get the property back.

One common bankruptcy mistake is transferring property to a friend or family member in an effort to hide it from the bankruptcy court. This is a very bad mistake that can result in: (1) losing the property anyway; (2) denial of your bankruptcy discharge; and/or (3) criminal prosecution for bankruptcy fraud.

If you need to sell or transfer property before your bankruptcy, contact an experienced Bankruptcy Attorney and discuss your options!

4. Paying Off Loans Before Bankruptcy

If you pay off a loan shortly before filing for bankruptcy, the bankruptcy trustee will be very interested in that payment. If you paid a large sum of money to one creditor just before filing, the trustee may ask the creditor to return the money.

Also, paying off an unsecured debt that is otherwise dis-chargeable (like a credit card or payday loan) is like throwing your money away. You need that money to help rebuild your finances after your case is completed.

And even paying off a secured debt can cause you problems. Bankruptcy exemptions commonly apply only up to a certain amount of equity. Your equity in some property is the difference between the fair market value of the property minus any secured loans.

When you pay off a secured loan, you increase your equity in the property. If that causes your equity to exceed the exemption limit, the bankruptcy trustee may ask you for the property or the cash difference between the equity and the exemption amount.

Bottom line: don’t pay off loans before bankruptcy!

5. Cashing out Retirement

Most retirement funds are fully protected from creditors and the bankruptcy trustee. That means if you file bankruptcy, you keep your retirement money. Congress wants you to have money for your retirement.

Unfortunately, some people are unaware of these broad protections and cash out their retirement savings out of fear that it will be taken during the bankruptcy. Along with the obvious problems associated with losing your future retirement money, cashing out retirement funds is also a huge mistake because:

Your attorney may no longer be able to protect available retirement money converted into cash; and
If you used your retirement funds to pay off an unsecured loan, the bankruptcy trustee may be able to undo those payments. Money paid to creditors before bankruptcy does not improve your financial situation or help you recover from bankruptcy.
In short, always discuss cashing out 401(k) or IRA retirement funds with your attorney prior to your filing bankruptcy.

6. Failing to Plan for Bankruptcy

The federal bankruptcy process is full of traps for the unwary—or the hasty. Most of these problem areas can be avoided with careful planning and a thorough pre-bankruptcy investigation.

When a client needs to file a bankruptcy quickly, the attorney relies heavily on the client to provide complete and accurate financial information. In some cases the client is not able to obtain those important records. To compound the issue, sometimes financial transactions are forgotten or overlooked.

Mistakes like these in hastily-filed bankruptcy cases can lead to big problems. For instance, a debtor who rushes into bankruptcy may forget an employment bonus that was paid or that is owed or underestimate an income tax refund. Under-reporting income can disqualify the debtor from receiving a discharge at the conclusion of his or her case, undermining the entire point of bankruptcy.

Many bankruptcy mistakes can be avoided by consulting a bankruptcy attorney early. Preparing a bankruptcy petition does not take long, but your attorney needs time to analyze your case, review your financial documents, and ask the right questions to avoid problems with your case.

7. Being Dishonest

This is the worst mistake of all because the bankruptcy laws do not protect a dishonest debtor. Failure to truthfully list all of your assets, debts, income and expenses is grounds for dismissal of your case, or you may have to answer allegations of bankruptcy fraud (a federal crime).

The Best Way to Avoid Mistakes in Bankruptcy

If you are experiencing financial difficulty and are considering bankruptcy, discuss your case with an experienced bankruptcy attorney.

If you are a homeowner already in Chapter 13 Bankruptcy and needs to proceed with Adversary Proceeding to challenge the validity of Security Interest or Lien on your home, Our Adversary Proceeding package may be just what you need.

When Homeowner’s good faith attempts to amicably work with the Bank in order to resolve the issue fails;

Home owners should wake up TODAY! before it’s too late by mustering enough courage for “Pro Se” Litigation (Self Representation – Do it Yourself) against the Lender – for Mortgage Fraud and other State and Federal law violations using foreclosure defense package found at https://fightforeclosure.net/foreclosure-defense-package/ “Pro Se” litigation will allow Homeowners to preserved their home equity, saves Attorneys fees by doing it “Pro Se” and pursuing a litigation for Mortgage Fraud, Unjust Enrichment, Quiet Title and Slander of Title; among other causes of action. This option allow the homeowner to stay in their home for 3-5 years for FREE without making a red cent in mortgage payment, until the “Pretender Lender” loses a fortune in litigation costs to high priced Attorneys which will force the “Pretender Lender” to early settlement in order to modify the loan; reducing principal and interest in order to arrive at a decent figure of the monthly amount the struggling homeowner could afford to pay.

If you find yourself in an unfortunate situation of losing or about to lose your home to wrongful fraudulent foreclosure, and need a complete package that will show you step-by-step litigation solutions helping you challenge these fraudsters and ultimately saving your home from foreclosure either through loan modification or “Pro Se” litigation visit: https://fightforeclosure.net/foreclosure-defense-package/

If you have received a Notice of Default “NOD”, take a deep breath, as this the time to start the FIGHT! and Protect your EQUITY!

If you do Nothing, you will see the WRONG parties WITHOUT standing STEAL your home right under your nose, and by the time you realize it, it might be too late! If your property has been foreclosed, use the available options on our package to reverse already foreclosed home and reclaim your most prized possession! You can do it by yourself! START Today — STOP Foreclosure Tomorrow!

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What Homeowners Should Know About the National Mortgage Settlement for Borrowers in Bankruptcy and Case Trustees

19 Thursday Jul 2018

Posted by BNG in Bankruptcy, Banks and Lenders, Foreclosure Crisis, Foreclosure Defense, Fraud, Judicial States, Mortgage fraud, Mortgage Laws, Mortgage Servicing, Non-Judicial States, Pro Se Litigation, Your Legal Rights

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Bank of America, Bankrupcty, Bankruptcy, bankruptcy court, Bankruptcy Trustee, Borrower, Borrowers in Bankruptcy, Case Trustees, Citi, Foreclosure, foreclosure defense, homeowners, J.P. Morgan Chase, Loan servicing, Mortgage loan, Mortgage servicer, National Mortgage Settlement, Pro se legal representation in the United States, Trustee, United States, Wells Fargo

The National Mortgage Settlement (the “Settlement”) is an agreement among the federal government, 49 states, and the five largest mortgage servicers and their affiliates (the “Banks”).

The Banks are:
Ally Financial, Inc. (formerly GMAC)
Bank of America Corporation
Citigroup, Inc.
J.P. Morgan Chase & Co.
Wells Fargo & Company

The Settlement provides benefits to borrowers, including borrowers in bankruptcy, whose residential mortgage loans are serviced by the Banks.

Information concerning the Settlement and its impact on borrowers in bankruptcy can be found at a dedicated page on the United States Trustee Program’s website at http://www.justice.gov/ust/eo/public_affairs/consumer_info/nms

In addition, the website http://www.nationalmortgagesettlement.com provides resources about the Settlement, including a copy of the Settlement, an executive summary of the Settlement, a fact sheet, and FAQs. The FAQs on that website discuss general issues, including:

• What Bank conduct is covered by the Settlement?

• What loans are covered by the Settlement?

• What are the financial provisions of the Settlement?

• How will the Settlement be enforced?

Finally, the Settlement requires the appointment of an independent monitor to oversee the Banks’ compliance with the Settlement. The website for the monitor is: www.mortgageoversight.com

Question 1: What do these FAQs cover?

The United States Trustee Program, the component of the Department of Justice responsible for overseeing the administration of bankruptcy cases and private trustees, has prepared these FAQs primarily for borrowers in bankruptcy or borrowers who are considering filing bankruptcy, including those who have lost their homes in foreclosure. These FAQs also address questions that trustees who administer bankruptcy cases may have.

These FAQs are provided as a basic resource and should not be considered legal advice. The United States Trustee Program is prohibited from providing legal advice. If you have any questions, you should consult an attorney.

Question 2: What bankruptcy issues did the Settlement address?

The Settlement addresses misconduct by the Banks in bankruptcy cases, including:

• Inflated or inaccurate claims.

Some of the Banks filed inflated or inaccurate documents in bankruptcy courts. When a borrower files for bankruptcy relief, the Bank may file a proof of claim or motion for relief from the automatic stay. These documents tell a bankruptcy court how much the Bank claims the borrower owes the Bank. The proof of claim also governs what a borrower in bankruptcy must pay through a chapter 13 repayment plan, and the motion for relief can determine whether the Bank may seek to commence to foreclose upon a home even if the borrower is in bankruptcy.

The accuracy of these documents is crucial. A number of parties, including the borrower in bankruptcy, the bankruptcy court, the trustee administering the case, the United States Trustee, and other creditors, rely on these documents.

When a Bank inflates or misstates what a borrower in bankruptcy owes in these documents, the consequences can be severe. For example, the Bank may be paid too much and other creditors may not receive amounts they are owed. At worst, the borrower in bankruptcy is unable to propose a repayment plan that can be approved and the bankruptcy case is dismissed, or the Bank improperly obtains relief from the automatic stay and is permitted to foreclose on the borrower’s home. As a result, the borrower in bankruptcy loses the ability to keep the home and obtain a fresh start in bankruptcy.

• Improper accounting of mortgage payments made by borrowers in bankruptcy.

Some of the Banks misapplied payments made by borrowers in bankruptcy. When a Bank does this, it appears on the Bank’s books as if the borrower has failed to make regular monthly payments and the Bank can file a motion seeking relief from the automatic stay to foreclose upon the borrower’s home. This misapplication of payments also results in the Bank improperly asserting that the borrower is behind on mortgage payments and can lead to the Bank imposing loan default fees and other charges.

• Adding improper fees and charges to the mortgage accounts of borrowers in bankruptcy.

Some of the Banks charged borrowers in bankruptcy for services not warranted, or in amounts not allowed. For example, some of the Banks sought to recover escrow payments twice, and conducted unnecessary or excessive property inspections and appraisals.

• Charging “hidden fees” to the mortgage accounts of borrowers in bankruptcy.

Some of the Banks also imposed “hidden fees” – fees that are assessed during the bankruptcy case but are not disclosed until after a borrower in bankruptcy receives a discharge. This can result in borrowers believing they are current on their mortgages, only to have a Bank claim the borrowers owe additional amounts. This deprives borrowers in bankruptcy of the “fresh start” promised by the bankruptcy discharge. These hidden fees also often violate bankruptcy court orders finding that borrowers are current on their mortgages.

• Seeking relief from stay to foreclose while borrowers in bankruptcy have pending applications for loan modifications.

Some of the Banks separated their bankruptcy operations from other aspects of their mortgage servicing business, so they did not have a clear picture of the status of a borrower in bankruptcy’s mortgage.

For example, the Banks sometimes provided borrowers in bankruptcy the opportunity to modify the terms of their home loans. Modification has benefits for both the Bank, which continues to receive payments, and the borrower, who receives a more manageable monthly payment.

However, while applications for loan modifications were being processed by one group of the Bank, its bankruptcy operations might move forward with requests for relief from the automatic stay so the Bank could commence foreclosure.

Question 3: Will the Settlement impact borrowers in bankruptcy?

Yes. The Settlement requires the Banks to collectively dedicate approximately $20 billion toward various forms of financial relief for borrowers including principal reduction, forbearance of principal for unemployed borrowers, short sales and transitional assistance, and specific benefits for service members.

The Banks must also make payments to state and federal authorities exceeding $5 billion. Of this amount, $1.5 billion has been set aside to establish a “Borrower Payment Fund” administered by Rust Consulting LLC (the “Settlement Administrator”).

Much of this relief is available to borrowers in bankruptcy. A borrower should contact the appropriate Bank (see question 4) to determine eligibility for relief. A borrower should contact the Settlement Administrator regarding the Borrower Payment Fund (see question 5).

Additionally, the Banks must implement extensive new mortgage servicing standards, including provisions specific to borrowers in bankruptcy. These standards address what occurs when borrowers fall behind on their mortgage payments, including when borrowers file for bankruptcy relief. As explained in these FAQs (see questions 7 through 11), the servicing standards require, among other things:

• A single point of contact at each Bank for borrowers in bankruptcy, who want information or assistance when they fall behind on their mortgage payments;

• New processes to ensure that the Banks provide accurate information about the amount that borrowers in bankruptcy owe on their mortgages;

• Better dispute resolution processes;

• Clear itemization of the principal, interest, fees, expenses and other charges incurred prior to bankruptcy that the Banks claim in bankruptcy cases;

• Prompt posting of payments and proper designation of pre-and post- petition payments and charges;

• Timely disclosure of fees, expenses, and charges incurred after a ` borrower files for chapter 13 bankruptcy.

Question 4: How will borrowers in bankruptcy know if they are eligible for financial assistance under the Settlement?

The Banks may directly contact borrowers, including borrowers in bankruptcy. However, borrowers should not wait to be contacted. To determine eligibility, a borrower or their attorney should contact the appropriate Bank:

Ally/GMAC: 800-766-4622

Bank of America: 877-488-7814

(Available Monday – Friday, 7:00 a.m. – 9:00 p.m. (CT),
and Saturdays, 8:00 a.m. – 5:00 p.m. CT))

Citi: 866-272-4749

J.P. Morgan Chase: 866-372-6901

Wells Fargo: 800-288-3212
(Available Monday – Friday, 7:00 a.m. – 7:00 p.m. (CT))

A borrower should not use these phone numbers for questions concerning payments from the Borrower Payment Fund. See question 5 for information concerning these payments.

Question 5: Who can a borrower contact for information concerning payments from the Borrower Payment Fund?

The Settlement required the Banks to pay $1.5 billion to a “Borrower Payment Fund” that will be used to make payments to borrowers who lost their homes through foreclosure between and including January 1, 2008 and December 31, 2011. The Settlement Administrator has mailed Notice Letters and Claim Forms to eligible borrowers.

If you believe that you are eligible for relief and have not received a Notice Letter or Claim Form or have other questions concerning the Borrower Payment Fund, please contact the Settlement Administrator at 866-430-8358, Monday through Friday, 7:00 a.m. – 7:00 p.m. (CT).

Question 6: What if a borrower in bankruptcy already has a claim against a Bank?

The Settlement includes a release of liability by the federal government and the participating states for certain conduct by the Banks that occurred prior to the Settlement. The Settlement does not release claims a borrower, including a borrower in bankruptcy, may have under state or federal law, and a borrower does not need to choose between accepting relief under the Settlement and pursuing those claims.

Question 7: Can borrowers in bankruptcy participate in the Settlement and receive financial assistance from other sources?

Yes. Borrowers, including borrowers in bankruptcy, may participate in the programs offered under the Settlement and other programs. For example, borrowers may be eligible for a separate restitution process administered by the federal banking regulators, including the Office of the Comptroller of the Currency (the “OCC”). For more information about the federal banking regulator claims process, please visit www.independentforeclosurereview.com or call 1-888-952-9105.

Question 8: Is there someone at the Banks whom borrowers in bankruptcy can contact with questions concerning their mortgage?

Yes. Each Bank has a single point of contact for borrowers (a “SPOC”), including borrowers in bankruptcy, who want information or assistance when they fall behind on their mortgage payments. The SPOCs for borrowers in bankruptcy must be knowledgeable about bankruptcy issues. Also, the Banks must have adequate staff to handle the calls.

Question 9: Do the Banks have special contacts that chapter 13 trustees can utilize to address trustee inquiries?

Yes. The Settlement requires that each Bank establish a toll-free hotline staffed by employees trained in bankruptcy to respond to inquiries from chapter 13 trustees.

Trustees should have received information regarding these hotlines. Any chapter 13 trustee who has not received this information should contact their local United States Trustee office.

Question 10: How does the Settlement address the Banks’ filings in bankruptcy courts going forward?

The Settlement imposes new standards on the Banks to ensure the accuracy of information they provide to bankruptcy courts. These standards are designed to ensure that the Banks provide accurate information about the amount that borrowers in bankruptcy owe on their mortgages.

Moreover, under the new servicing standards, the Banks must implement better dispute resolution processes. If a Bank files inaccurate or misleading documents in a bankruptcy case, a borrower can use these new procedures and make a complaint with the Bank.

In addition, with respect to proofs of claim and certain affidavits attached to documents filed in bankruptcy courts, the Banks must correct any significant inaccuracies promptly and also provide notice of the correction to the affected borrower or counsel to the borrower.

Question 11: What kind of information must the Banks provide concerning a mortgage when a borrower files for bankruptcy?

For a borrower in a chapter 13 (repayment) case, if a Bank files a proof of claim, the Bank must include an accurate and clear statement of exactly what the Bank claims the borrower owes. That statement must itemize the principal, interest, fees, expenses, and other charges that the Bank claims is owed as of the filing of the bankruptcy case.

Question 12: How does the Settlement affect how the Banks apply mortgage payments made by borrowers or a trustee in bankruptcy?

The Banks must promptly post payments received from a borrower or trustee while a borrower is in bankruptcy and accurately designate payments between any arrearage owed before the bankruptcy filing and what is owed for regular mortgage payments after the filing. The Banks must also reconcile accounts, including funds held in suspense accounts, at the end of each bankruptcy case and update their records so they are consistent with the account reconciliation.

Question 13: How does the Settlement affect what the Banks charge after a borrower files for bankruptcy?

The Banks must timely disclose fees, expenses, and charges incurred after a borrower files a chapter 13 bankruptcy case. A Bank waives fees, expenses, and charges of which the Bank has not given timely notice to the Borrower. The Banks must also timely give notice to a borrower of any changes in payments the borrower will have to make due to, for example, interest rate adjustments or changes in the escrow amount.

Question 14: Should a trustee administering the case of a borrower in bankruptcy seek to recover funds received by the borrower under the Settlement?

Eligible borrowers in bankruptcy may receive payments from the Banks as a part of the Settlement. A trustee should consider all relevant circumstances when deciding whether to seek turnover of the payments in a particular case. Factors to consider include:

• The payment amount and any interest of a non-debtor spouse or other person in the payment;

• The cost of recovering and administering the payment, including litigation with a borrower in bankruptcy who may seek a judicial determination regarding whether the funds are subject to administration;

• The extent to which recovering the payment will enable creditors to receive a meaningful distribution; and

• The applicability of state and federal exemptions.

The United States Trustee Program will not seek to compel a trustee to recover payments that the trustee, in the exercise of discretion, decides not to recover.

Question 15: How does the Settlement affect the trustees’ review of the Banks’ proofs of claim?

Generally, the Settlement will not alter a trustee’s review of claims filed by the Banks. If a trustee concludes, based on a review of a Bank’s bankruptcy filings, that a Bank violated the Settlement, the trustee, usually will contact the United States Trustee’s office in the jurisdiction in which the case was filed.

When Homeowner’s good faith attempts to amicably work with the Bank in order to resolve the issue fails;

Home owners should wake up TODAY! before it’s too late by mustering enough courage for “Pro Se” Litigation (Self Representation – Do it Yourself) against the Lender – for Mortgage Fraud and other State and Federal law violations using foreclosure defense package found at https://fightforeclosure.net/foreclosure-defense-package/ “Pro Se” litigation will allow Homeowners to preserved their home equity, saves Attorneys fees by doing it “Pro Se” and pursuing a litigation for Mortgage Fraud, Unjust Enrichment, Quiet Title and Slander of Title; among other causes of action. This option allow the homeowner to stay in their home for 3-5 years for FREE without making a red cent in mortgage payment, until the “Pretender Lender” loses a fortune in litigation costs to high priced Attorneys which will force the “Pretender Lender” to early settlement in order to modify the loan; reducing principal and interest in order to arrive at a decent figure of the monthly amount the struggling homeowner could afford to pay.

If you find yourself in an unfortunate situation of losing or about to lose your home to wrongful fraudulent foreclosure, and need a complete package that will show you step-by-step litigation solutions helping you challenge these fraudsters and ultimately saving your home from foreclosure either through loan modification or “Pro Se” litigation visit: https://fightforeclosure.net/foreclosure-defense-package/

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What Homeowners Must Know About Fake Mass Joinder & Other Lawsuits

09 Wednesday May 2018

Posted by BNG in Foreclosure Crisis, Foreclosure Defense, Fraud, Loan Modification, Mortgage fraud, Non-Judicial States, Your Legal Rights

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Fake Mass Joinder & Other Lawsuits

“You’re eligible to join our lawsuit”

On average, complaints that allege some type of attorney involvement have produced greater losses per homeowner than all other complaints. While attorneys can be involved in any type of foreclosure rescue fraud, they are uniquely capable of tricking homeowners into believing they can get involved in fake mass joinder or other lawsuit against a lender. The lawsuit schemes can prove to be even more painful for homeowners because they often involve two parts: first a fee for a “forensic audit” to see if the homeowner is eligible to join the suit, then another fee to join the suit.

Most promise very impressive results, like the homeowner who was told she could “join a class action lawsuit against her lender. Once this was settled she was guaranteed $75,000.” The final selling point for many of these lawsuits is the assurances made to homeowners that nothing can happen to their homes as long as they are part of the suit. Some attorneys advise homeowners to stop paying their mortgage and instead pay monthly retainer fees to them. Month after month, homeowners pay the fee, believing the attorney is fighting for them. In the worst cases, the homeowner doesn’t realize the attorney is actually providing no service at all until a foreclosure notice arrives.

One senior citizen from Williamstown, New Jersey, was contacted by a group of attorneys who guaranteed him a loan modification for just over four thousand dollars. After they allegedly reviewed his documents and made “headway” with the bank regarding a loan modification, they informed him that he was eligible to join a lawsuit against his lender. The suit included over twenty thousand homeowners and they assured him that the lender would settle. At that point the homeowner began making monthly retainer payments of just over a thousand dollars, for eleven months, for a suit that never happened. On top of all of that, the attorneys advised him to stop making his mortgage payments.

When Homeowner’s good faith attempts to amicably work with the Bank in order to resolve the issue fails;

Home owners should wake up TODAY! before it’s too late by mustering enough courage for “Pro Se” Litigation (Self Representation – Do it Yourself) against the Lender – for Mortgage Fraud and other State and Federal law violations using foreclosure defense package found at https://fightforeclosure.net/foreclosure-defense-package/ “Pro Se” litigation will allow Homeowners to preserved their home equity, saves Attorneys fees by doing it “Pro Se” and pursuing a litigation for Mortgage Fraud, Unjust Enrichment, Quiet Title and Slander of Title; among other causes of action. This option allow the homeowner to stay in their home for 3-5 years for FREE without making a red cent in mortgage payment, until the “Pretender Lender” loses a fortune in litigation costs to high priced Attorneys which will force the “Pretender Lender” to early settlement in order to modify the loan; reducing principal and interest in order to arrive at a decent figure of the monthly amount the struggling homeowner could afford to pay.

If you find yourself in an unfortunate situation of losing or about to lose your home to wrongful fraudulent foreclosure, and need a complete package that will show you step-by-step litigation solutions helping you challenge these fraudsters and ultimately saving your home from foreclosure either through loan modification or “Pro Se” litigation visit: https://fightforeclosure.net/foreclosure-defense-package/

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How Homeowners Can Avoid Foreclosure Rescue Fraud Scams

25 Wednesday Apr 2018

Posted by BNG in Foreclosure Crisis, Foreclosure Defense, Fraud, Judicial States, Loan Modification, Mortgage fraud, Mortgage mediation, Non-Judicial States, Scam Artists, Your Legal Rights

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Tags

avoid foreclosure, Foreclosure, Foreclosure Crisis, foreclosure defense, Foreclosure Rescue Fraud, fraud prevention, HAMP, homeowners, Loan Modification, loan modification specialists, Making Home Affordable, Mortgage Coupon, Scam Artists

The most devastating foreclosure rescue fraud scams are those that not only promise a modification, but also trick homeowners into believing the lender has agreed to the terms. The party then instructs the homeowner to pay the “new” modified mortgage payments to them, and they will forward the payment to the lender. In reality, the third party takes the payments and the money never reaches the lender. Homeowners are often blindsided by foreclosure notices after many months of believing they are paying the “new” payments to the lender. The scammers often use copies of government logos and have names that are similar to real government programs.

“Your modification is approved! Send us your new payments”
Operation asserts the homeowner has been approved for a modification then steals the homeowner’s “new” mortgage payments.

In one heartbreaking example, a woman from Lindenhurst, New York, received a flyer in the mail in early 2013 with the header “NOTICE OF HUD RELIEF.” Believing the flyer came from the government, she called the number on the flyer, and explained that she had tried working with her lender, but had no success. The third party told her that the lender was not being cooperative because they really just wanted to foreclose on her.

After sending the third party personal financial information, the homeowner quickly received a call back with some good news: they told her she was qualified for “HAMP through Making Home Affordable.” The homeowner was told she now had a mortgage that was a thousand dollars less than her current one, but this was a lie. Then the party told her there was one other thing she had to do before paying the new mortgage payment – pay a “reinstatement fee” of $6,000 that her lender required. Believing it was the final hurdle to reach relief, she sent in the $6,000. Then in March, April and May 2013, she made her new “trial payments” to the third party. They encouraged the homeowner to let them know when she sent the check so they could contact her lender with a tracking number.

Each month the homeowner received a “Mortgage Coupon” with what appeared to be various government logos on it, including the Making Home Affordable and Treasury logos. The homeowner stayed in close contact with the third party, diligently sending the checks.

In May 2013, the homeowner received a call from her lender, telling her she owed almost $30,000. She explained that she had received a loan modification and had already paid the reinstatement fee along with three mortgage payments. The lender representative told the homeowner that she may have gotten caught in a scam. Frantically, the homeowner called her main contact at the operation to which she had been sending her checks. The phone number was disconnected.
After losing almost $12,000, the homeowner is now facing foreclosure.

STATE LAWS

Ensure that Homeowners Are Covered Under State Laws Targeting Foreclosure Rescue Fraud: Many states have passed new laws to address foreclosure rescue scamming. However, some of these laws defined “homeowners” that the law was designed to protect too narrowly. For example, some state laws limit coverage to homeowners who are in default or foreclosure, and fail to reach many homeowners who are defrauded seeking to refinance their mortgage or are seeking mortgage relief because loss of job or unexpected medical costs. It is therefore important that state laws targeting foreclosure rescue fraud define homeowners broadly to cover fraud at any stage of the process.

As the foreclosure crisis grew, foreclosure rescue fraud – scams designed to capitalize on homeowners facing foreclosure by extracting thousands of dollars in exchange for empty promises of assistance – exploded and increased the pain of these homeowners. The proliferation of this type of fraud is not surprising. Homeowners with financial difficulties desperately need to find help to keep their homes and are vulnerable to scam artists posing as loan modification specialists, for example. Scam operators blanket television, radio, newspapers, and the internet with advertisements in English and Spanish, and also rely on street flyers, signs, billboards, and direct mail solicitation.

This saturation marketing, often filled with lies and exaggerations, plays on the trust of distressed homeowners. Scammers use high-pressure sales tactics and false guarantees of success to attract homeowners and to extract large upfront cash payments from homeowners, and then typically do little or no work to obtain the relief promised, essentially abandoning these homeowners. The homeowners not only lose the money they paid to the scam operation, but fall deeper into default and lose valuable time that could have been spent negotiating directly with their mortgage servicer or by going to free a HUD-approved housing counseling agency with true expertise in assisting homeowners in trying to save their homes.

As the foreclosure crisis was peaking, these scams replaced predatory lending as a major problem in the housing finance industry and scams resulted in what was known as the “second wave” of the foreclosure crisis. Indeed, many predatory lending operations morphed into foreclosure rescue scam entities.

“We volunteer all our hours with no payment.”

Alleged “Non-profits” Referring Homeowners to “Law Groups”

Attorney involvement in scams is growing and appears to be an effective means of ensnaring victims, but some homeowners still approach attorneys with skepticism. Attorneys, or someone pretending to be affiliated with an attorney, attempt to ease this skepticism by involving a “non-profit.” Anyone involved in preventing foreclosure or foreclosure rescue fraud knows the best resource for homeowners is a FREE, HUD – approved housing counseling agency.

The problem is that not every organization who claims to fit that description actually does. Some “non-profits” operate as lead generation agencies, gaining the trust of vulnerable homeowners. A search for “.org” in the Database produces over 1400 complaint hits. Homeowners meet with these “non-profits” and things appear to be in order. They aren’t asking for any money, the people seem very nice, and they begin to look over various mortgage documents, free of charge. Providing what appears to be a free service, the “non-profit” can make the homeowner feel at ease and also invested in the process. Once the homeowner is invested, the next level of the scam begins.

One homeowner from Rosedale, New York, began working with one of these “non-profits” in early 2013. She had received a flyer in the mail with the headline, “Economic Stimulus Mortgage Notification” that read, in part: “You are hereby notified that the property at (her address) has been pre-selected for a special program by the Government Insured Institutions. In addition, this property is pre-qualified for an Economic Advantage Payment or Principal Reduction Program, designed to bring your house payments current for less than you owe or your principle balance down. There are no restrictions on equity, credit ratings, or mortgage delinquencies.” The flyer said to contact “Your National non-profit representative” because this is the “last attempt to assist you with your financial situation.”

The homeowner was in need of a modification, so she called the “non-profit” listed on the top of the flyer. After working with the “non-profit” for a while, they told her that they did “all that they could,” and she needed to talk to “(Name withheld) Law Group.” This “Law Group” advertised that they “fight the bank.” They assured her that nothing could happen to her home as long as they were defending her, saying “(her lender) will not take her case until 2016,” giving her some much needed breathing room. After paying four thousand dollars to the “Law Group” and following weeks of empty promises, she was blindsided by a letter telling her that her mortgage was put into foreclosure just a few months after she began working with the “non-profit.”

To keep skeptical homeowners on the hook, the “non-profit” will stay involved throughout the process, assuring the vulnerable homeowner everything is fine. The “Law Group” extracts numerous fees from the homeowner, often saying, “the bank can’t do anything as long as we represent you.” Often in the end, the “non-profit” was started by the same attorney (or non-attorney) who started the “Law Group.” The homeowner loses thousands of dollars and is left wondering, if a “non-profit” will scam them, is there anyone they can trust?

“You’re eligible to join our lawsuit”
Fake Mass Joinder & Other Lawsuits

On average, complaints that allege some type of attorney involvement have produced greater losses per homeowner than all other complaints. While attorneys can be involved in any type of foreclosure rescue fraud, they are uniquely capable of tricking homeowners into believing they can get involved in fake mass joinder or other lawsuit against a lender. The lawsuit schemes can prove to be even more painful for homeowners because they often involve two parts: first a fee for a “forensic audit” to see if the homeowner is eligible to join the suit, then another fee to join the suit. Most promise very impressive results, like the homeowner who was told she could “join a class action lawsuit against her lender. Once this was settled she was guaranteed $75,000.”

The final selling point for many of these lawsuits is the assurances made to homeowners that nothing can happen to their homes as long as they are part of the suit. Some attorneys advise homeowners to stop paying their mortgage and instead pay monthly retainer fees to them. Month after month, homeowners pay the fee, believing the attorney is fighting for them. In the worst cases, the homeowner doesn’t realize the attorney is actually providing no service at all until a foreclosure notice arrives.

One senior citizen from Williamstown, New Jersey, was contacted by a group of attorneys who guaranteed him a loan modification for just over four thousand dollars. After they allegedly reviewed his documents and made “headway” with the bank regarding a loan modification, they informed him that he was eligible to join a lawsuit against his lender. The suit included over twenty thousand homeowners and they assured him that the lender would settle. At that point the homeowner began making monthly retainer payments of just over a thousand dollars, for eleven months, for a suit that never happened. On top of all of that, the attorneys advised him to stop making his mortgage payments.

Attorneys Engaged in Foreclosure Rescue Fraud
Results in Higher Homeowner Losses

These “Law Groups” or “Law Networks” claim to include hundreds of lawyers from around the country and claim that they will connect homeowners to lawyers in their home state.

The Domino Effect of Foreclosure Rescue Fraud

The average dollar figure a homeowner loses in Attorney involved Scam is around $3600, and $2850 on non-Attorney Scams. This dollar figure does not take into account the potential domino effect of foreclosure and homelessness these foreclosure rescue scams can have.

Homeowners may lose over $3,200 in cash payments to a scammer, but then can end up losing hundreds of thousands of dollars more because their homes fall into foreclosure as a direct result of the scam.

At Reno Nevada Foreclosure Prevention Event: One story was particularly memorable.

It involved a homeowner named Bill, and his Dad. After the Lawyers’ Committee’s presentation, Bill’s father, who is in his 80’s, came to the Lawyers’ Committee’s table and asked that we speak to his son, who has medical issues and has difficulty walking. Bill opened his rolling filing cabinet, where he kept his mortgage documents meticulously categorized, and pulled out a large stack of papers from the section labeled “Name Withheld Law Center.”

Bill described his experience as follows: Towards the end of 2009, he received a flyer in the mail with the subject line, “RE: Obama Administration’s Homeowner Affordability and Stability Plan.” This “Modification PROGRAM” said he may be eligible for the “Governmental Economic Stimulus Act of 2009.” The flyer contained Bill’s name, address, and exact loan amount. There was a place for him provide his email address and phone number so the group responsible for the flyer could contact him.

After receiving the flyer, Bill began talking to the “Name Withheld Law Center” associated with it. He pulled out the contract that was sent to him, which contained a recognized attorney’s name because several state Attorneys General had obtained cease and desist orders against that attorney. The attorney doesn’t appear to have ever been licensed in Nevada, and while he had been licensed in California, his license was suspended in early 2013 for misconduct in three loan modification cases.

Bill paid just under two thousand dollars for a loan modification that he never received.

Bill’s Dad sat behind him and watched closely as Bill spoke about his experience with the “Name Withheld Law Group,” and about his life in general. Bill’s Dad’s eyes would well up from time to time.

This story is so moving because it accurately describes the effects of the foreclosure crisis and foreclosure rescue frauds on struggling homeowners. The vast majority of people looking for help to modify their mortgages don’t have an exploding rate mortgage. They, like Bill, have a normal 30 year fixed mortgage that they could afford pre-recession. Bill bought his home for around $280,000 in 2005, putting down a full 20%, which now is worth somewhere between $130,000 and $160,000. When he bought the home, like many Americans, he couldn’t foresee the worst recession since the Great Depression and the simultaneous housing collapse.

These homeowners became prime targets for foreclosure rescue scammers, having been blindsided by the recession and believing the guarantees of success by those who promised to save their homes.

Military Scams

Fake Military Discounts in Foreclosure Rescue Fraud

“We have a discount for military members & their families”

With more than three years of data in the Database – including over thirty-eight thousand complaints and over eighty-four million dollars in total reported losses – sadly there is no shortage of disturbing stories. From the dying cancer patient who was scammed out of thousands of dollars while he was trying to make sure his widow could afford the mortgage when he was gone, to the single woman who took in her sister’s four children after she passed away who was scammed into believing she was part of a fake lawsuit, then threatened by the same attorneys who scammed her after she complained. One type of troubling scam appearing over the past few years is the “Military Discount” targeted to active military service members and their families.

One man, a senior citizen from Fort Worth, Texas, had hit a rough patch when he was solicited by a third party. At that point, he was one month behind on his mortgage payments and was working hard to keep up. The company guaranteed him a loan modification for $1,600. He was hesitant to pay so much money when he was already struggling to stay current on his mortgage. Sensing his hesitation with the original price, the third party asked if he, or anyone in his family, was currently serving the country. After he explained that his daughter was currently serving the country in Iraq, the third party thanked him for his daughter’s service and told him that he was eligible for a military discount of $300. Lowering the price just enough to make it bearable for him, he paid the fee. Months went by with no results and no refund. The damage was not done there. The company advised him that he needed to stop making his mortgage payments in order to get the loan modification, so he did. He went from being just one month behind on his mortgage when he started working with this operation, to his home being sold in foreclosure.

State laws targeting foreclosure rescue fraud should define covered homeowners broadly, as those who seek foreclosure relief services can easily be defrauded before an actual foreclosure or mortgage payment default, thereby excluding them from the coverage of otherwise applicable consumer protection laws. Homeowners who are not yet in foreclosure and who have not fallen behind on mortgage payments should be encompassed in laws regulating third-party services in this area.

Some state and federal laws prohibiting foreclosure rescue fraud directly or indirectly (including through prohibitions on deceptive business practices) are only enforceable by government entities.

When Homeowner’s good faith attempts to amicably work with the Bank in order to resolve the issue fails;

Home owners should wake up TODAY! before it’s too late by mustering enough courage for “Pro Se” Litigation (Self Representation – Do it Yourself) against the Lender – for Mortgage Fraud and other State and Federal law violations using foreclosure defense package found at https://fightforeclosure.net/foreclosure-defense-package/ “Pro Se” litigation will allow Homeowners to preserved their home equity, saves Attorneys fees by doing it “Pro Se” and pursuing a litigation for Mortgage Fraud, Unjust Enrichment, Quiet Title and Slander of Title; among other causes of action. This option allow the homeowner to stay in their home for 3-5 years for FREE without making a red cent in mortgage payment, until the “Pretender Lender” loses a fortune in litigation costs to high priced Attorneys which will force the “Pretender Lender” to early settlement in order to modify the loan; reducing principal and interest in order to arrive at a decent figure of the monthly amount the struggling homeowner could afford to pay.

If you find yourself in an unfortunate situation of losing or about to lose your home to wrongful fraudulent foreclosure, and need a complete package that will show you step-by-step litigation solutions helping you challenge these fraudsters and ultimately saving your home from foreclosure either through loan modification or “Pro Se” litigation visit: https://fightforeclosure.net/foreclosure-defense-package/

 

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What Homeowners Must Know About Mortgage Fraud & Restitution

10 Tuesday Apr 2018

Posted by BNG in Banks and Lenders, Case Laws, Case Study, Foreclosure Crisis, Foreclosure Defense, Fraud, Judicial States, Legal Research, Litigation Strategies, Mortgage fraud, Mortgage Laws, Non-Judicial States, Pro Se Litigation, Restitution, State Court, Your Legal Rights

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Foreclosure, homeowners, Law, Lawsuit, Loan, Monetary Restitution, Mortgage fraud, Nevada, Ninth Circuit, Pro se legal representation in the United States, Restitution

During the peak of the housing boom in Las Vegas, Russell, a mortgage loan processor for a large bank, reviewed a mortgage application. Everything appeared to be in order: this particular type of mortgage loan required no income verification because the buyer had excellent credit and the home would be an owner-occupied property. Russell approved the loan for the bank.

Unbeknownst to Russell and the bank, the applicant was actually a “straw buyer,” using his name and credit to buy the house at the insistence of his business partner, but not actually intending to live in the house. All the applicant had to do was sign a few documents and both the applicant and his business partner would profit from exploding housing prices. The applicant’s credit would allow the pair to purchase a single-family residence for $295,000, and then, before the first mortgage payment came due, they would flip the property, that is, immediately sell the home, and profit from the home’s extraordinary short-term appreciation. The applicant never planned on living in the house nor making any mortgage payments, despite his execution of loan documents to the contrary.

Unfortunately, housing prices did not continue their fantastic escalation and the pair were unable to sell the home. Not surprisingly, neither the applicant nor his business partner made any mortgage payments and the home went into foreclosure. At the time of the home’s foreclosure, the house had a fair market value of $265,000. However, the bank that relied on the applicant’s information had too many similarly situated properties at the time of the foreclosure and decided to keep the home in inventory until it could sell the home at a later date.

Meanwhile, the financial institution became suspicious of the applicant and realized he never even moved into the house, despite claiming on his Uniform Residential Loan Application that this would be an “owner-occupied” property.

Concerned with an increase in mortgage fraud, the lender tipped off authorities, who subsequently investigated and arrested the straw buyer and his business partner. Almost a year later, the partners pled guilty and were sentenced, inter alia, to pay restitution to the financial institution. At the time of sentencing, the home had a fair market value of $145,000.

The court ordered restitution based on the Mandatory Victims Restitution Act (MVRA) concerning fraud and property. The victim, in this case the bank, argued its amount of loss equaled $295,000 (the amount originally borrowed) less the current fair market value of the property returned, $145,000; thus, the court should order the defendants to pay restitution of $150,000. On the other hand, the defendants argued that at the time the property was returned to the financial institution, the value of the home was $265,000. And because the bank had control over the property since that point in time, and had the ability to sell it any time, the defendants should not be liable for the further declining
market conditions. Thus, the defendants argued they only owed restitution of $30,000. Alternatively, the judge could consider a third possibility: recent  recommendations from US Sentencing Guidelines. Under these new guidelines,
the court determines the fair market value of the home on the defendants’ sentencing
date.

But, if the bank had not sold the home by that date, that fair market value would be based on the county’s assessed value of the property. In Clark County, where Las Vegas is situated, the Assessor’s Office updates property values annually and, depending on the specific time frame in this hypothetical, the assessment value can range from a lagging property assessment valuing the home at $280,000 to a more current assessment valuing the home at $125,000.

Which measure of restitution and subsequent calculation is best? That is, which value most adequately compensates the injured victim without unfairly burdening the defendants? The Ninth Circuit would side with the defendants in this case, having previously held that the value of the home on the date the bank gains control is the proper measure of restitution. Accordingly, the defendants in this case would be ordered to pay only $30,000 in restitution. On the other hand, the Seventh Circuit would hold that the “property” stolen was the money used to finance the home purchase, and not the actual home.

Subsequently, the “property” is not returned to the victim until the bank sells the
house and gets the entire amount it loaned to the defendants back. For that reason, if the bank sold the home by the sentencing date for $145,000, the defendants would be ordered to pay $150,000 in restitution. And if a judge considered the US Sentencing Guidelines, she would look to the local assessor’s office to determine the correct value. Thus, the amount of restitution a defendant pays depends on where the mortgage fraud takes place and whether the presiding judge considers the US Sentencing Guidelines. Accordingly, mortgage fraud restitution is not uniform throughout the United States.

This note discusses the circuit split in applying the Mandatory Victims Restitution Act of 1996 to mortgage fraud crimes—specifically, the difference in the mortgage fraud restitution formula. In Part I, I provide an introduction to mortgage fraud. In Part II, I provide background on the Mandatory Victims Restitution Act of 1996, which established a directive to courts to order restitution to identifiable victims. Further, the Act indicated, albeit imprecisely, that the restitution amount is based on the property’s value on the sentencing date, less the property’s “value” on the date the property is returned. Regrettably, the Act does not provide a definition of the word property,” which has resulted in a circuit split. Three circuit courts calculate the mandatory restitution as the property’s “value” based on the date the property is returned—that is, the property’s fair market value on that date. On the other hand, four circuits insist that the “value” of the property can only be determined when the bank actually sells that property. In Part III, I will discuss the circuit split where courts disagree on the “appropriate” restitution calculation.

In an effort to provide a uniform calculation, last year the US Sentencing Commission proposed changes to the US Sentencing Guidelines. While the Guidelines are only advisory and not mandatory, these recent amendments result in a third possible calculation that I discuss in Part IV.

Finally, in Part V, I critique each of the three imperfect approaches. In addition, I provide comparisons to various state foreclosure deficiency statutes as an illustration of alternative calculations. I conclude by proposing an amendment to the Mandatory Victim Restitution Act that, in the cases of collateralized loans obtained by fraud, defines “property” as the actual property fraudulently obtained: cash. In addition, I propose an additional “good faith” clause to the amendment to prevent banks from holding onto a foreclosed property longer than necessary. The sooner a property is sold, the sooner the bank recuperates some of its lost funds and the sooner a defendant knows the restitution
amount he must pay.

A. What is Mortgage Fraud?

In the hypothetical above, the partners executed mortgage fraud by using the applicant’s name and credit as a “straw buyer.” That is, a person who allows his name to be used in the loan process but has no intention of actually making any mortgage loan payments. Mortgage fraud comes in a variety of forms. For example, a person commits loan origination fraud when he misrepresents or omits information on a loan application upon which an underwriter ultimately relies to write a loan. Mortgage fraud can also occur with illicit programs aimed at current homeowners who are having trouble with their payments. Lately, this type of foreclosure rescue fraud is increasing. These types of scams focus on homeowners on the verge of foreclosure. Criminals promise to “stop or delay the foreclosure process,” and, in return, homeowners sign over their property to the criminals.

Mortgage fraud can also include “flopping.” Flopping occurs when a bank agrees to a short sale with the homeowner who then attempts to get the lowest price possible by purposefully damaging the soon-to-be-sold house. The house is then bought by an accomplice, cleaned up, and immediately flipped for a profit of upwards of 30 percent. In 2011, Nevada ranked second to Florida in the Mortgage Fraud Index (MFI), a ranking of states based on reported fraud and misrepresentation investigations. The FBI investigates mortgage fraud through Suspicious Activity Reports (SARs) filed by financial institutions.

The number of mortgage fraud SARs filed in 2011 was 93,508. To put this in perspective, in 2003 the number of reports filed was less than 7,000. However, mortgage fraud may be decreasing: 2012 SARs are down 25 percent compared to the previous year.

B. Why Does Mortgage Fraud Matter?

Mortgage fraud is a “significant contributor” to our economic crisis. Mortgage fraud has contributed to an increasing number of home foreclosures, decreasing home prices, and tightening of credit because of investor losses attributable to mortgage-backed securities. Further, “[t]he discovery of mortgage fraud via the mortgage industry loan review processes, quality control measures, regulatory and industry referrals, and consumer complaints lags behind economic indicators—often up to two years or more, with the impacts [of the fraud] felt far beyond these years.” Undeniably, reports of mortgage fraud persist and are continually emphasized in the news.

Lenient underwriting standards and a booming housing market have shaped a perfect backdrop for fraud to thrive. However, “[b]y 2007, real estate values began to fall and mortgage lenders began experiencing large losses due to fraud, reducing their ability to fund new mortgage loans.” The economic implications of mortgage fraud are staggering. The actual dollar amount attributed to mortgage fraud is unknown, however in 2010 alone “more than $10 billion in loans originated with fraudulent application data.”

Moreover, in fiscal year 2012, 70,291 SARs were filed with losses of $2.69 billion. And while the number of mortgage fraud instances has decreased, the dollar amounts involved in instances of fraud has increased.

C. Why Restitution?

Until the early 1980s, courts did not habitually consider restitution as part of sentencing guidelines. In fact, if a court ordered restitution, it was usually based on the defendant’s ability to pay. The passage of the Victim and Witness Protection Act (VWPA) in 1982, its subsequent revision in 1986, and later the Mandatory Victims Restitution Act (MVRA) in 1996 empowered federal judges to order restitution to victims of certain crimes without consideration of the defendant’s ability to pay. Unfortunately, victims receive only a fraction of the costs from crimes through restitution, as not all defendants have the resources to pay the restitution and their income potential diminishes significantly once they are in jail. However, as courts consider both the MVRA and the frequently cited public policy argument for restitution (making the victim whole), courts consequently order restitution awards to mortgage fraud victims. Indeed, “[v]ictims in mortgage fraud cases are statutorily entitled to restitution.

D. The Split

When a court convicts a defendant of mortgage fraud, and the defendant’s return of the property alone is not enough to fully restore the identified victim, the court will try to offset this deficiency in one of two ways. The Second, Fifth, and Ninth Circuits determine restitution based on the property’s fair market value the day the victim receives title to the property. The Third, Eighth, Tenth, and, most recently, Seventh Circuits hold the shortage is calculated based on the actual sale of the collateral real estate. Thus, the value of the property is unknown until the property has been sold and the lender receives the net proceeds. Consequently, this split “sets up a potential case for the U.S.
Supreme Court to decide whether the MVRA requires a court to determine restitution based on the fair market value of collateral real estate on the date it is returned to a victim . . . or the cash value upon foreclosure sale.”

II. THE MANDATORY VICTIMS RESTITUTION ACT OF 1996

Congress first enacted legislation in support of victims’ rights with the Victim and Witness Protection Act of 1982 (VWPA). The act included a broad provision for victim restitution. In considering the bill, the Committee on the Judiciary indicated that [t]he principle of restitution is an integral part of virtually every formal system of criminal justice, of every culture and every time. It holds that, whatever else the sanctioning power of society does to punish its wrongdoers, it should also insure that the wrongdoer is required to the degree possible to restore the victim to his or her prior state of well-being.

However, while this report indicated the importance of requiring restitution,
the Act only provided that a Court may order the defendant to pay restitution. Congress expanded and amended legislation for victims in future legislation, most notably in the Mandatory Victims Restitution Act of 1996. Congress identified one of the primary purposes of the Act as “requiring Federal criminal defendants to pay full restitution to the identifiable victims of their crimes.” In addition, Congress specifically made mandatory restitution applicable to fraudulent crimes against property. Moreover, Congress explicitly identified the legislation’s purpose:

This legislation is needed to ensure that the loss to crime victims is recognized, and
that they receive the restitution that they are due. It is also necessary to ensure that
the offender realizes the damage caused by the offense and pays the debt owed to the
victim as well as to society. Finally, this legislation is needed to replace an existing
patchwork of different rules governing orders of restitution under various Federal
criminal statutes with one consistent procedure.

If restitution is appropriate, a court may only award it to identifiable victims. A
federal crime victim is defined as “a person directly and proximately harmed as
a result of the commission of a Federal offense or an offense in the District of Columbia.” Further, restitution is only applicable to crime victims when the
defendant is actually convicted. In addition, “[a] ‘victim’s’ participation in a
fraudulent mortgage scheme . . . will generally exclude the victim from
restitution.”

It should also be remembered that restitution, “like all criminal sanctions . . . is a sanction of limited application.” Restitution is only complete, then, when payment of the obligation is complete. In jurisdictions that allow “extended or nominal payment mechanisms,” which can prolong the repayment, the variable time value of money may cause any restitution to be technically incomplete, even once the balance is repaid in full. Unfortunately, only 17.4 percent of measured property offenses resulted in criminal charges. Where convictions of mortgage fraud do result, however, courts consider the language of the MVRA in awarding restitution:

The court may also order restitution . . . . The order may require that such defendant
. . . return the property to the owner of the property . . . or . . . if return of the property . . . is impossible, impractical, or inadequate, pay an amount equal to the greater of . . . the value of the property on the date of the damage, loss, or destruction, or . . . the value of the property on the date of sentencing, less the value (as of the date the property is returned) of any part of the property that is returned . . . .

Accordingly, when the return of the property is inadequate restitution, the MVRA states that the offset value must be determined as of the date the property is returned. However, the statute is silent as exactly how to measure the value of the property on that date. Consequently, in the absence of clear guidelines, three possible formulas have arisen.

III. THE CIRCUIT SPLIT

With a lack of clarity in defining “property” in the MVRA, the circuit courts have split in their interpretations of restitution. Two circuits have followed the Ninth Circuit in determining that the value of the property is the fair market value on the date of the property’s return, arguing that once the property is returned to the victim, the victim has control over the property and may dispose of the property whenever it chooses. Accordingly, these courts calculate the fair market value of the property based on the date the property is returned rather than waiting for a later sale. Conversely, four circuits hold that the “property” can only be valued when the house is eventually sold and the proceeds are provided to the victim because cash, not real estate, was the actual
property the defendants took from the victim.

A. The Ninth Circuit Method

A bank would say a restitution calculation can only be determined when the property is sold, but a defendant would argue that if a bank holds on to the property in a declining market, it is unfair for the defendant to pay more in restitution than what the property was worth when the victim regained control of it. The Ninth Circuit method considers the fairness of a bank refraining from selling a property immediately, and ultimately agrees with the defendant’s argument.

After the passage of the Victim and Witness Protection Act in 1982, the Ninth Circuit became the first circuit court to consider mortgage fraud restitution. The court turned to an earlier decision in a timber theft case for property valuation guidance. In United States v. Tyler, the defendant was ordered to pay restitution for his theft of timber from a national forest. However, the victim, the federal government, did not sell the timber upon its seizure and in fact purposefully held onto the timber, claiming it needed the timber for evidentiary purposes in its case against Tyler. During the period between the
arrest and sentencing, timber prices declined. The district court found that the
amount of restitution equaled the difference of the timber’s value from sentencing
date and the higher value when defendant actually stole the timber. The Ninth Circuit disagreed with the District Court and held that the defendant should not have an increased restitution when the victim decides to retain the property. The court reasoned that the defendant’s conduct did not cause the subsequent loss the government experienced and therefore restitution was properly calculated as the property’s value on the date the victim regained control of the timber.

The Ninth Circuit subsequently applied this logic to a mortgage fraud context in United States v. Smith, where the defendant obtained loans secured by speculative real estate. The court determined that the credit against restitution should be based on the value of the property on the date title is transferred to the victim. The court noted, “[a]s of that date, the new owner had the power to dispose of the property and receive compensation.” Because the victim has control over the property’s sale once the property is returned, “[v]alue should therefore be measured by what the financial institution would have received in a sale as of that date.”

The Smith decision served as the “keystone for all of the subsequent decisions.”
The Ninth Circuit reinforced this valuation method in later cases. Further, in United States v. Gossi, the court elaborated on its prior decisions that value should be based on the date the victim has control over the property. Specifically, the court noted that what comes with control of the property is the power to dispose, which allows the victim to sell the property anytime and provides no immediate calculation of restitution. Subsequently, the court cited Smith, stating the “[v]alue should therefore be measured by what the financial institution would have received in a sale as of that date.” Finally, this past year, the Ninth Circuit upheld its mortgage fraud restitution calculation in United States v. Yeung. In Yeung, the defendant enlisted five people in a scheme involving false information on straw buyers’ loan applications in order to purchase and refinance homes in Northern California during the booming housing market. The district court considered a sentencing memo indicating that Yeung should pay restitution in the amount of the “outstanding principal balance on the defaulted loans less any money recovered from a sale of the properties used as collateral for the loans.”

Applying the US Sentencing Guidelines, rather than the MVRA, the district court ordered a restitution award in excess of $1.3 million. The Court of Appeals, however,
indicated that a financial institution has control of the property either when the
property is sold or when, citing Smith, the lender “had the power to dispose of
the property and receive compensation,” and therefore restitution should be
based on the fair market value on the date the property is returned. One distinction in Yeung, however, involved a loan purchased on the secondary market. One of the loans had been sold from the originating lender to a loan purchaser at a discount. The court indicated that the “property” in such circumstances is the actual loan, and not the original real property. The court determined that the restitution calculation in this type of circumstance must consider how much the loan purchaser paid for the loan, “less the value of the real property collateral as of the date the victim took control of the collateral property.”

Further, the court disagreed with the district court’s calculation of one property’s value. The district court determined the value of one of the properties as $363,863—the amount the victim received from the property’s sale. However, this sale did not occur until sixteen months after the victim took control of the property. Accordingly, the court found the actual value should be determined from the date the victim took control of the property. Two circuits follow the Ninth Circuit’s restitution calculation. In both United States v. Reese and United States v. Holley, the Fifth Circuit maintained that a property’s value is determined based on the date the collateral property is returned to the lender. Further, in Holley, the Fifth Circuit specifically analogized the facts of Holley to the Smith case in subscribing to the Ninth Circuit calculation

Relatedly, in United States v. Boccagna, the Second Circuit performed an extensive analysis of how property value should be measured, ultimately agreeing with the Ninth and Fifth Circuits. The Boccagna court noted that the MVRA does not define how to determine the value of property. Instead, the court stated, the “law appears to contemplate the exercise of discretion by sentencing courts in determining the measure of value appropriate to restitution calculation in a given case.” The court found the property’s sale price was lower than the fair market value and remanded the case to determine this value as part of the restitution calculation.

B. The Seventh Circuit Method

In contrast, four circuit courts presume the fair market value is determined only by the actual sale of the property. I have referred to this calculation as the Seventh Circuit method because of that court’s recent decision in which it analyzed all circuit holdings to date. However, these decisions begin outside of that circuit. The Third Circuit, in United States v. Himler, observed that the return of the property would be inadequate to compensate the victim, and explicitly disagreed with the Ninth Circuit’s view that value of the property is “as of the date the victim took control of [it].” The court noted instead that real estate is an illiquid asset, and “is only worth what you can get for it.” Thus, the court held that restitution would equal the original loan amount, less the eventual amount recovered from a sale. Surprisingly in this case, waiting until the sale actually
occurred resulted in the defendant paying less restitution than he would have if the fair market value had been used. The condominium in Himler sold for significantly more than its presumed value when title was transferred, due to favorable market conditions.

The Tenth Circuit, in United States v. James, also concluded that value is based on the actual foreclosure sales price and not an appraised value when the property is returned to the mortgage holder. The court noted that the MVRA “generally uses the term ‘value,’ and does not limit calculation of ‘value’ only to the use of the ‘fair market value’ of the property at issue.” Further, because the statute does not specifically mention value as being fair market value, there are other examples of value that may be appropriate, such as foreclosure sales price and replacement price. The court subsequently noted that
value can be a flexible concept, and a court with discretionary powers should keep in mind the purpose of restitution—to make the victim whole. The court concluded, therefore, that the foreclosure sale price in that case reflected a more accurate measure of the victim’s loss. Similarly, the Eighth Circuit, in United States v. Statman, used the foreclosure sale price of a fraudulently purchased bakery business in calculating the restitution award to a state’s small business-funding agency. While the defendant wanted the court to consider the appraised value of the bakery, the court cited James and determined that a foreclosure sale price was a permissible calculation method. The court also agreed with the Tenth Circuit; its decision aligns with the public policy concerns, which justify the existence of restitution in the first place—the need to make victims whole for the actual loss. While this case involved financial fraud, and not mortgage fraud per se, the chosen calculation method aligns this circuit with the sale-price camp.

Most recently, in United States v. Robers, the Seventh Circuit joined the Third, Eighth, and Tenth Circuits concluding “it is proper to determine the offset value [of property that is returned] based on the eventual amount recouped by the victim following sale of the collateral real estate.” The court observed that because the victim loaned cash to the defendants to purchase the property, the cash was therefore the “property” taken, not a home. Basing its opinion on the plain language of the MVRA, the Seventh Circuit decided that “ ‘property’ must mean the property originally taken from the victim,” the value can only be determined by the amount of cash returned to the victim from a sale.

IV. YET ANOTHER PERSPECTIVE—US SENTENCING GUIDELINES

The US Sentencing Guidelines are advisory rules that set out uniform sentencing guidelines for various offenses. The Guidelines are not mandatory,
and while judges have discretion in sentencing, courts must consider the Guidelines
in determining a defendant’s sentence. Moreover, a court of appeals reviewing a sentence that follows the Guidelines will consider the sentencing reasonable per se. Under these Guidelines, the factors considered when imposing a sentence include restitution to the victim. Further, the Guidelines state that, “[i]n the case of an identifiable victim, the court shall . . . enter a restitution order for the full amount of the victim’s loss, if such order is authorized under 18 U.S.C. . . . § 3663.”

The US Sentencing Commission annually reviews the current Guidelines and proposes amendments to reflect inadequacies in recent sentences. Recent revisions to the Guidelines, however, are not consistent with the latest Seventh Circuit decision in Robers. In the Dodd-Frank Wall Street Reform and Consumer Protection Act, Congress issued a directive to the US Sentencing Guideline Commission to review and amend federal sentencing guidelines related to “persons convicted of fraud offenses relating to financial institutions or federally related mortgage loans and any other similar provisions of law.” The amendment subsequently attempts to address the inconsistencies with Application Note 3(E) and “credits against loss rule,” which offsets a victim’s
loss by any credit the victim has already received. In general, the rule deducts the fair market value of the property returned to the victim from the amount of restitution the defendant is required to pay. In other words, the restitution is offset by the collateral’s fair market value. The Commission specifically addressed the situation that the circuit courts have wrestled with—when the victim gets the collateral back but has not disposed of the property, resulting in a problematic value calculation. The Commission noted this and, in an attempt to provide uniform guidelines, it proposed two changes. The first change established a specific date of the fair. market value determination: “the date on which the guilt of the defendant has been established.” The second change “establishes a rebuttable presumption that the most recent tax assessment value of the collateral is a reasonable estimate of the fair market value.” The Commission suggests that a court may consider the accuracy of this measure by examining factors such as how current the assessment is and the jurisdiction’s calculation process. In sum, a court ordering restitution following these Guidelines would establish the value of the property based on the official date of the defendant’s guilt. In addition, if the property has been returned to the victim but remains unsold, a court will use the local tax assessor’s value of the property to determine the property’s value.

V. CRITIQUE OF THE THREE CALCULATIONS

The absence of a definition for the term “property” in the MVRA is the root of the different applications of the statute throughout the country. “When the court defines ‘property,’ the question is whether the statute refers to the property stolen or the property returned. They are not necessarily equivalent, particularly in the context of complex financial instruments . . . .” However, as stated previously, the Act’s purpose is to make the victim whole, and no matter which formula is used, each calculation has the potential to not achieve this goal.

A. The Ninth Circuit Method: Control as the Impetus

There are several advantages to the Ninth Circuit mortgage fraud restitution calculation method, which holds that the fair market value should be calculated based on the date the property is returned to the financial institution victim. First, the date reflects the date that control over the property has been returned to the victims. Accordingly, the bank then has the power to dispose of the property at its discretion without additionally penalizing the defendant if the victim refrains from selling the property on that date. For example, a victim may decide to hold on to the property, as in United States v. Tyler or United States v. Smith, coincidental with a declining market. A victim may have too
many properties in inventory to immediately put a particular property up for sale. Or a victim may be making a calculated business decision to retain the property for a certain period of time for accounting purposes. No matter the purpose behind the retention, it is unfair to place the additional penalty that coincides with declining real estate prices on the defendant who had no control or even influence over the property’s sale.

Second, this specific date requires no guesswork when attempting to calculate the amount of restitution, which results in better efficiency. On the date the bank gets the property back, an appraisal can determine the property’s fair market value. The court can immediately calculate the restitution amount with this figure. Waiting until the property actually sells could result in a delay of months or years to determine how much the actual proceeds from the sale are. As a result, the court has an almost immediate figure to apply to the calculation and can order the restitution award right away. On the other hand, the Ninth Circuit calculation method has some considerable weaknesses. First, real estate is an illiquid asset, and determining fair market value of an illiquid asset is difficult. An appraisal only suggests what the house could sell for, not what the house actually will sell for. In addition, appraisals are based on historical data of home sales, and during sharp market increases or decreases an appraisal will not reflect the most up-to-date real estate prices.

Second, the recent housing bubble created an economic environment where home prices decreased at a radical rate. Traditionally, such sharp declines are not a concern with real estate over the long run because, while real estate prices fluctuate, they eventually trend upward. However, in situations like the recent drops in home values, the victim-lender can be punished for the market decline, despite the fact the victim was actively trying to sell the property. In addition, amidst tightening credit conditions, fewer buyers may qualify to purchase a home. This results in too much supply, not enough demand, and
consequently puts further downward pressure on home prices. The victimlender
is therefore penalized for market conditions beyond its control and consequently
does not receive complete restitution. Further, a victim financial institution is not in the business of selling homes; it is in the business of making collateralized mortgage loans for qualified buyers. Not only will the lender have costs associated with selling the
home (for example, carrying costs or realtor commissions), the lender cannot make a sale magically happen, especially if the home is situated in a market flooded with other foreclosure sales. Thus, when the lender eventually sells the home, it can potentially face a greater loss, an inequity beyond its control.

B. The Seventh Circuit Method: Cash Proceeds are the “Property”

As discussed in Part II, the Seventh Circuit, along with three other circuits, requires a sale of the property in order to establish the net proceeds offsetting a restitution award. These circuits distinguish that the property fraudulently obtained was the cash proceeds to finance a real estate purchase, not the actual home. Thus, this method recognizes the illiquidity of real estate and instead requires cash proceeds from a property’s sale; therefore, no return of the property for restitution purposes occurs with just the transfer of title or “control” over the property.

In addition, this method provides a more exact amount to the restitution calculation. With an appraisal, a court only has an approximation of what the house is worth. With an actual sale, the court knows specifically what the home sold for, and also has information on the true net proceeds to the lender.

Finally, this method also provides a buffer of protection for a victim trying to sell a property in a declining housing market. If the victim is unable to sell the property immediately, and home prices continue to plummet, the victim will not be financially punished by an ensuing lower sales price of the property. Thus, by treating the property as cash proceeds and not calculating the restitution award until there is a sale of the property, this allows the victim to come closer to achieving full restitution because the funds returned are the original amount that was taken.

This calculation method, however, has some distinct disadvantages. First, calculating the amount of time a home will be on the market is a challenge. For example, in a downturn economy, is it appropriate for the defendants to wait for the home to sell for months or years? At what point should the restitution award sentence be official? Without an established time period for a requisite sale, there will be a decrease of both efficiency and certainty as the defendant will have to wait longer to find out what the value of the property is and therefore how much restitution is necessary. In addition, what if the lender purposely holds on to the property longer than necessary? Indeed, victim banks could make a “business decision” to hold onto a property for years before attempting to sell. This type of allowance does not encourage an efficient method of asset redistribution, which can delay economic recovery in a down economy. Further, what if the victim holds an improper foreclosure auction—for example, by failing to advertise the foreclosure sale—and subsequently purchases the home itself for an amount far lower than fair market value because of a (not surprising) lack of buyers? Should the
lender be rewarded for its misbehavior? On the other hand, some would argue
that between the two parties—a convicted criminal who attempted to defraud a
financial institution and a more innocent lender who trusted the criminal borrower—
the defendant should absorb the risk.

Further, it is possible in a booming housing market that a defendant will owe no restitution. For example, if the defendant fraudulently obtained a home loan for $200,000 and the victim lender subsequently sold the property for $205,000, the defendant will be absolved from restitution. However, if part of the goal of restitution is to make the victim whole, the victim is more than compensated in a booming housing market.

Moreover, this type of calculation can have an adverse effect on other types of property. Knowing that the value of the property is not calculated until the item is actually sold, a criminal has little incentive to actually return the property. This would not be a concern for real property, but the same legal framework could be applied to other forms of collateral that can be moved and hidden, like cars. Thus, a thief can choose to hold on to the property or never return the property because of a lack of incentive to return it immediately. Accordingly, “[t]he decision is focused on the statute’s goal of making victims whole but potentially interferes with the statute’s goal of returning property to
victims.” Consequently, “[i]f a defendant is going to be on the hook for the offset amount regardless of when the property is sold, then why return the property? Also, the decision may have the unintended consequence of interfering with the marketplace . . . .”

Finally, the loan in question in these circumstances is for a collateralized asset. The actual home provided security to the lender. As such, the lender bore the risk when it made the loan; however, the lender also understood it could foreclose on the home in case of default. Thus, this cost of doing business is already accounted for and a victim lender understands this type of risk when providing mortgage loans.

C. US Sentencing Guidelines: Local Property Assessment is the Real
“Value”

As discussed in Part IV, the US Sentencing Guidelines establish the date of valuation as the conviction date of the defendant. In addition, if the property has not sold by that date, the local property tax assessor’s value of the home is the value of the property for restitution calculation purposes. There are several advantages to this approach. First, if every circuit applied this approach, these guidelines would result in a uniform application throughout the country and would eliminate the conflicting restitution awards. In addition, this approach sets a number that can be calculated and independently verified. An individual could easily confirm the tax assessor’s value of the property and calculate the restitution.

Moreover, the Guidelines allow flexibility. For example, if a court determines that an assessed value is too divergent from a property’s fair market value, the court has discretion to address these differences and assign a fair market value.

The Guideline method, however, has potential disadvantages. First, as previously
noted, the assessed value may not be near the fair market value of the property, and a battle of experts may ensue as both the defendant and the victim claim otherwise. In addition, this discrepancy may afford too much discretion to judges when the goal of the Guidelines is to set a uniform policy.

In addition, this approach disregards the Seventh Circuit method recognizing that the property taken was the actual cash for the home loan. Instead, by relying on a tax assessor’s value if the home remains unsold, the Commission determined that the “property” is the tangible real estate, and not the cash that was lent. Again, if the victim were unable to sell the home in a declining housing market, the restitution award would fail to compensate the victim for its true loss.

D. Alternative Methods of Calculation – State Deficiency Statutes

The problematic issue of fair market assessment is not unique to restitution.
Every state and the District of Columbia have a deficiency statute, whereby a lender can obtain a deficiency judgment to recover the difference between a foreclosure sale price and the current outstanding balance owed on the mortgage loan. Not every jurisdiction, however, calculates this deficiency in the same way. For example, Nevada calculates the home value based on the actual sale price, not the fair market value when the property is returned to the lender. However, the court may also consider the home’s appraised
value in its determination.

Some states maintain that a foreclosure sale price determines the value of the home when calculating a deficiency judgment. In other words, these states determine that a property’s value is only determined at the time of the property’s sale. Therefore, this calculation is similar to the Seventh Circuit method whereby a property’s value can only be determined following a sale of the real estate.

Other states consider the fair market value of the property when considering a deficiency judgment. States that consider the fair market value at the time the property is returned coincide with the Ninth Circuit calculation method. Notably, some of these states are states that have had a high number of foreclosures and are within the Ninth Circuit: for example, Arizona and California. Other states provide that the courts have discretion to determine the appropriate value of the property. This discretion is analogous to the alternative offered by US Sentencing Guidelines. This alternative is available when a court deems the property’s assessed value is inappropriate and provides that a court has authority to consider other evidence in its determination of a property’s value.

Thus, just as there is a lack of uniformity in the restitution calculation depending on which state you live in, there is a corresponding lack of uniformity regarding deficiency judgments. While most states follow the foreclosure sale approach recognizing the property’s value can only be determined with an actual sale, this approach does not account for the amount of time a financial institution can choose to hold onto the property. It further fails to account for the lack of control a mortgagor has over the sale process. On the other hand, while the fair market approach recognizes the importance of the control aspect, this approach does not consider a mortgagee’s potential inability to sell in a down economy.

E. Analysis

Restitution is founded primarily on the idea that the victim should be made whole for his property loss. The actual property that was defrauded from a victim in mortgage fraud is the money lent as part of the real estate transaction.
Therefore, until the actual money is returned, equity has not been restored to the victim. However, equity also demands that a victim not take advantage of the criminal defendant and hold on to the returned real estate property longer than necessary to sell the real estate property. Therefore, there should be a limitation to ensure a victim does not unreasonably allow the property to languish. Accordingly, a “good faith” requirement should be included in any amendment to the MVRA, requiring a victim to sell the property to recoup funds with good faith. Thus, a defendant who believes a victim unfairly held onto a property for too long may petition the court to reduce the amount of restitution owed if the victim did not commence the sales process with good
faith.

If Congress were to amend MVRA, it should provide a definition of the term “property” to help distinguish between properties at the different phases of a financial transaction. Because of the diverse types of financial fraud—e.g. mortgage fraud compared with securities fraud—the term “property” may have more than one meaning within these contexts, and may also change throughout the transaction. For instance, consider a scheming debtor who fraudulently obtained a margin loan to purchase both mortgage backed securities and corporate bonds. The property “stolen” initially in this case is the fraudulently obtained cash used to purchase the assets. However, after the margin loan is received, the property now consists of two types of financial instruments within
the debtor’s portfolio. Indeed, the property in its current form (financial assets)
can be converted back to the form of the original property (cash). However, with the current definition of property, it is unclear if that conversion is even required.

The definition of property should state that “property” is defined as the specific or particular type of asset (such as cash) that the defendant secured from the victim. This way, the “property” returned to the victim (money) will be the same type of property stolen (money used to purchase the home). In addition, similar to many state statutes prohibiting insurance companies from operating in bad faith, the Act should prohibit victim-lenders from operating in bad faith.

VI. CONCLUSION

Defendants, like the partners in the fictional story in the introduction, could face varied restitution awards depending on which state they commit the mortgage fraud in. This lack of a uniform approach results in inadequate restitution to victims. If the goal of the MVRA is to make victims whole, a more standardized and consistent calculation of restitution is required. Providing a definition of property in the MVRA would provide this uniformity. Further, requiring victims to act in good faith as they attempt to convert property back to the type of asset they were deprived of will help ensure defendants aren’t unfairly punished.

When Homeowner’s good faith attempts to amicably work with the Bank in order to resolve the issue fails;

Home owners should wake up TODAY! before it’s too late by mustering enough courage for “Pro Se” Litigation (Self Representation – Do it Yourself) against the Lender – for Mortgage Fraud and other State and Federal law violations using foreclosure defense package found at https://fightforeclosure.net/foreclosure-defense-package/ “Pro Se” litigation will allow Homeowners to preserved their home equity, saves Attorneys fees by doing it “Pro Se” and pursuing a litigation for Mortgage Fraud, Unjust Enrichment, Quiet Title and Slander of Title; among other causes of action. This option allow the homeowner to stay in their home for 3-5 years for FREE without making a red cent in mortgage payment, until the “Pretender Lender” loses a fortune in litigation costs to high priced Attorneys which will force the “Pretender Lender” to early settlement in order to modify the loan; reducing principal and interest in order to arrive at a decent figure of the monthly amount the struggling homeowner could afford to pay.

If you find yourself in an unfortunate situation of losing or about to lose your home to wrongful fraudulent foreclosure, and need a complete package that will show you step-by-step litigation solutions helping you challenge these fraudsters and ultimately saving your home from foreclosure either through loan modification or “Pro Se” litigation visit: https://fightforeclosure.net/foreclosure-defense-package/

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How Homeowners Can Use Ibanez Case to Fight a Wrongful Foreclosure

26 Monday Mar 2018

Posted by BNG in Bankruptcy, Banks and Lenders, Case Laws, Case Study, Federal Court, Foreclosure Crisis, Foreclosure Defense, Fraud, Judicial States, Legal Research, Litigation Strategies, Loan Modification, MERS, Mortgage Laws, Mortgage mediation, Mortgage Servicing, Non-Judicial States, Pro Se Litigation, Securitization, State Court, Your Legal Rights

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bank forecloses, bankruptcy court, Foreclosure, homeowners, Ibanez Case, Loan, Massachusetts, MERS, Mortgage Electronic Registration System, Pro se legal representation in the United States, US Bank, wrongful foreclosure

Many homeowners who found themselves in wrongful foreclosure situation may have a valid defense, against the perpetrators of these crimes.

How much does it cost to get justice, when a bank forecloses on your house illegally? Thousands of ex-homeowners don’t pursue their rights to a financial settlement because they assume they couldn’t pay the legal fees.

In fact, it costs less than you fear. Consumer lawyers take a few cases at no charge. More likely, you’ll pay fees — upfront or on a monthly plan — tied to the lawyer’s estimate of the time it will take and your ability to pay. If they win your case, they’ll collect from the financial institution, too.

Before readers attack the “greedy lawyers” for defending “deadbeat” clients who couldn’t repay their mortgage loans, let me quote from a groundbreaking decision of 2011 by the Massachusetts Supreme Court. The court reversed two foreclosures because the banks — Wells Fargo and U.S. Bancorp, acting as trustees for investors — couldn’t prove that they actually owned the mortgages. Judge Robert J. Cordy excoriated them for their “utter carelessness.” The fact that the borrowers owed the money was “not the point,” he wrote. The right to deprive people of their property is a powerful one and banks have to prove they have the legal standing to do so.

American law cannot allow property seizures based on backdated, incomplete, or fraudulent documentation, no matter what the circumstances are. Otherwise, no one’s home is safe. Courts enforce private property rights through the cases brought before them. In other words, lawyers.

The Massachusetts case began not with consumers, but with the banks themselves. They asked the courts to affirm that the foreclosures were valid so they could get title insurance. That pulled the borrowers — Antonio Ibanez and Mark and Tammy LaRace — into the fray. When the horrified courts looked at how the foreclosures had gone down, they said, “no way,” and gave the former owners their property back.

Ibanez, a special ed teacher, bought the home for investment in 2005 and defaulted in 2007 on a $103,500 loan, according to the court papers. Even since, the house has been boarded up. Ibanez filed a Chapter 7 bankruptcy, so he now has title to the home and no obligation on the debt. The mortgage investors will take the loss.

The LaRaces borrowed $103,200 to buy their home in 2005 and also defaulted in 2007. They had an offer on their home, but the servicer foreclosed anyway. (During the trial, the foreclosing law firm admitted that servicers are graded on how quickly they can liquidate a mortgage.)

The LaRaces have moved back into their long-unattended home, but first they had to clean up mold, fix plumbing, and make other repairs. They would gladly resume payments on the mortgage, their lawyer Glenn Russell says. But the trustee bank doesn’t own the loan. The investors don’t own it because the mortgage was never transferred properly. The original lender, Option One, no longer exists. So whom do they pay?

This important case opens the door to thousands of foreclosure do-overs in Massachusetts at the time, and continuing and equally influenced courts in other states, as well. But there hasn’t been a rush by lawyers to get involved, probably because the field is complex and not especially remunerative. No class actions have been certified, as at that time or shortly thereafter, so the cases proceeded one by one. The financial trail can be hard to track (the Massachusetts documents were unwound by mortgage-fraud specialist Marie McDonnell).  The lawyer — often, a sole practitioner — is up against the awesome resources of major financial institutions.

Neither Ibanez nor the LaRaces were charged for their lawyer’s services. Collier had file a claim for wrongful foreclosure and was paid from any settlement. Russell did the same. At the time, Russell also thinks the LaRaces are owed something for the cost of repairing their home.

Very few cases start as pro bono, however. Lawyers who defend consumers have bills to pay, just as the banks’ corporate attorneys do. You may opt to fight it Pro Se using the package from our website, or if you want to fight an unfair foreclosure, you might be offered one of several arrangements:

An upfront fee. “Many of my clients were formerly very successful individuals,” Russell says. On average, the value of the homes of the people who contact him is “somewhat north of $500,000.” He suggests a fee based on their means.

Monthly payments. If you’re not making monthly mortgage payments, some portion of that money could be applied to legal expenses. Collier says he puts the payments into escrow and retains them if he gets the house back (he says he always does, in predatory lending cases).

Bankruptcy payment plans. The clients of North Carolina bankruptcy attorney Max Gardner are usually in a Chapter 13 monthly repayment plan. Each state sets the maximum attorney’s fee, payable as part of the plan.

Mostly, the attorneys get paid by suing the financial institutions, who settle claims or suffer court judgements due to their own illegal activity. People who beat up on consumer lawyers scream that they bring frivolous cases just for the fees. But consumer lawyers only get paid if their case is good, so they’re pretty rigorous about whom they choose to represent. “I was called crazy for practicing in this area of law, as in ‘I would be broke’ by not getting enough fees,” Russell says. “Three years later, I am still here and still living my motto of helping people first.”

Most homeowners are successful fighting there case Pro Se using the package we offer for fighting Foreclosure, as your interest is at stake, and you have the most to lose, not Attorneys. They gets paid whether you win or lose. However, homeowners equally have options when fighting wrongful foreclosure.

If you think you have a case, your toughest challenge isn’t fees, it’s finding a lawyer with the expertise to press your claim successfully, Gardner says. If you don’t have a personal reference for a qualified lawyer, the best place to look is the website of  the National Association of Consumer Advocates. Next best: the National Association of Consumer Bankruptcy Attorneys. In either case, ask if the lawyer has won other securitization, mortgage servicing, and foreclosure cases. “They have to know what documents to ask for,” Gardner says. That’s what wins.

When Homeowner’s good faith attempts to amicably work with the Bank in order to resolve the issue fails;

Home owners should wake up TODAY! before it’s too late by mustering enough courage for “Pro Se” Litigation (Self Representation – Do it Yourself) against the Lender – for Mortgage Fraud and other State and Federal law violations using foreclosure defense package found at https://fightforeclosure.net/foreclosure-defense-package/ “Pro Se” litigation will allow Homeowners to preserved their home equity, saves Attorneys fees by doing it “Pro Se” and pursuing a litigation for Mortgage Fraud, Unjust Enrichment, Quiet Title and Slander of Title; among other causes of action. This option allow the homeowner to stay in their home for 3-5 years for FREE without making a red cent in mortgage payment, until the “Pretender Lender” loses a fortune in litigation costs to high priced Attorneys which will force the “Pretender Lender” to early settlement in order to modify the loan; reducing principal and interest in order to arrive at a decent figure of the monthly amount the struggling homeowner could afford to pay.

If you find yourself in an unfortunate situation of losing or about to lose your home to wrongful fraudulent foreclosure, and need a complete package that will show you step-by-step litigation solutions helping you challenge these fraudsters and ultimately saving your home from foreclosure either through loan modification or “Pro Se” litigation visit: https://fightforeclosure.net/foreclosure-defense-package/

 

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