People sometimes ask me what I do for a living. I used to say that I am an attorney. They would then ask what area of practice I concentrated in wherein I would respond “foreclosure defense.” Their response would vary from “oh, you represent the deadbeat homeowners” to “you must be busy” to “that’s very interesting.”

A number of things happened in 2015 to influence my response to these queries. In one case a judge referred to servicers and banks as playing a “shell game.” In another instance the judge told the defendants (the bank) that he was going to make sure that my clients “got their day in court.” I was flying home that evening and sat next to someone who asked me what I did for a living. I really didn’t want to talk but felt I had to be polite. So I simply said “I sue banks.” My seatmate said “oh really, you must be an attorney. Good for you.”
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There is a pattern surfacing where homeowners, having survived the Great Recession, are now able to afford their homes if provided a HAMP or similar modification. The typical case involves middle class homeowners who lost jobs, income or both around 2011 or 2012, asked for but were improperly denied help under the HAMP program and waited for the foreclosure shoe to drop. They could not sell the property because it was underwater and the lender would not accept payments on account. At the same time the lender did not process the foreclosure because their paperwork was defective. The very same lenders who lacked the proper paperwork to foreclose were the same ones who improperly denied the HAMP applications. Many of these same lenders ceased their foreclosure activity while they attempted to get their paperwork act together.

In early 2012 the attorneys general for forty-nine states and the United States entered into a settlement for twenty-six billion dollars with five major lending institutions: Bank of America; Chase; Wells Fargo; CITI and GMAC. The settlement, known as the National Settlement Agreement, resulted from those institutions improper handling of foreclosures and requests for loan modifications.
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There is a pattern surfacing where homeowners, having survived the Great Recession, are now able to afford their homes if provided a HAMP or similar modification. The typical case involves middle class homeowners who lost jobs, income or both around 2011 or 2012, asked for but were improperly denied help under the HAMP program and waited for the foreclosure shoe to drop. They could not sell the property because it was underwater and the lender would not accept payments on account. At the same time the lender did not process the foreclosure because their paperwork was defective. The very same lenders who lacked the proper paperwork to foreclose were the same ones who improperly denied the HAMP applications. Many of these same lenders ceased their foreclosure activity while they attempted to get their paperwork act together.

In early 2012 the attorneys general for forty-nine states and the United States entered into a settlement for twenty-six billion dollars with five major lending institutions: Bank of America; Chase; Wells Fargo; CITI and GMAC. The settlement, known as the National Settlement Agreement, resulted from those institutions improper handling of foreclosures and requests for loan modifications.
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My last post, The High Cost of Mediation and Failure of the Maryland Courts, presented a hypothetical couple who were facing foreclosure. They were waiting for mediation and also hoping to get a modification to save their home. They had exhausted their saving. Their home was under water so selling it was not an option. The most frustrating thing was that they were both working and could easily keep their property if the note was modified.

Mediation is a method whereby all parties to a dispute meet and attempt to settle a dispute. Maryland basically requires mediation, when requested, in all foreclosures. However, in order to mediate all parties must proceed in good faith, and each party must have a financial benefit that would result if the case were settled. The Maryland Judiciary is generally providing that financial benefit to the lenders through litigation and therefore removing that incentive to mediate in good faith. Here is how it works.
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My last post, The High Cost of Mediation and Failure of the Maryland Courts, presented a hypothetical couple who were facing foreclosure. They were waiting for mediation and also hoping to get a modification to save their home. They had exhausted their saving. Their home was under water so selling it was not an option. The most frustrating thing was that they were both working and could easily keep their property if the note was modified.

Mediation is a method whereby all parties to a dispute meet and attempt to settle a dispute. Maryland basically requires mediation, when requested, in all foreclosures. However, in order to mediate all parties must proceed in good faith, and each party must have a financial benefit that would result if the case were settled. The Maryland Judiciary is generally providing that financial benefit to the lenders through litigation and therefore removing that incentive to mediate in good faith.
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Maryland adopted a law requiring all parties to a foreclosure to attend mediation if requested. “The goal of the law is to help homeowners get relief through a loan modification if they qualify or to find an alternative to foreclosure.” See Maryland’s Foreclosure Mediation Law. The problem in Maryland is that in many cases lenders do not proceed in good faith. Many of the lenders simply take a position of take it or leave it when they come to the table. Moreover, this “my way or the highway” attitude is mostly ignored by the courts. The result is fewer homes saved, more foreclosures, more foreclosed homes that are left vacant and ignored and the continued depressed values of homes and neighborhoods.

Three years ago judges, commentators and the general public took the attitude that “I pay the mortgage, why shouldn’t they? They simply bought more house then they could afford.” However, as the mortgage crises spread into middle and upper-middle class neighborhoods the public became more aware of the fact that few people were immune from foreclosure. Today many of those same nay-sayers have seen their own properties devalued because the a similar foreclosed home down the street can be purchased for forty percent less than they would get if they had to move.
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I recently received a permanent modification offer from Chase on behalf of one of my clients. I was quite happy for the client until I read the actual modification offer. The client had his interest rate reduced to 2% for the first five years, with 4.5% at the end of the adjustment period. What could be better? The answer is following the HAMP Guidelines.

HAMP (Home Affordable Modification Program) was started in 2009 and promised help for homeowners who were in danger of losing their homes. The HAMP program started on a basic premise – adjust the payments to 31% of the gross monthly income of the household by reducing the interest rate to as low as 2% and extending the loan for up to 40 years, and in some cases reducing the principal and placing it at the end of the loan as a balloon payment. Each homeowner had to meet certain criteria and then it was simply a matter documenting income, filling out some forms and submitting them to the servicer. The servicer was supposed to analyze whether they got more money through modification or foreclosure. If the servicer got more money through modification they had to modify the loan.
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The attorney’s signatures on the first case that XYZ filed looked “funny” – they were too neat! After I saw several other cases from the same attorney in XYZ I became curious – the signatures appeared to be inconsistent. Finally I reviewed one case where the signatures were so different that I compared all of the signatures side by side. They were different; so different that I hired a handwriting expert who confirmed that there were four different people signing for the attorney and two different people signing for one of the notaries.

I want to put this into prospective. Someone signed an affidavit for attorney Bernie Lawyer. Then a notary swore that Bernie Lawyer appeared in front of him/her and signed the affidavit in person. These affidavits were submitted as a condition of going forward with the foreclosure.

When confronted, XYZ dismissed the foreclosure case and allowed my client the opportunity to attempt to modify the loan. However in the middle of modification XYZ brought a second foreclosure action. The servicer for Two South Lender, Jones Servicer claimed that my client submitted a modification package that was illegible. That was not true. I submitted the package myself and it was pristine.
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The due process clause of the 14th Amendment did not always exist. Indeed, the only federal rights of due process are contained in the Fifth Amendment to the Constitution – “nor be deprived of life, liberty, or property, without due process of law. . .” The problem was that the Fifth Amendment only applied to the federal government. The states could freely violate citizens’ Fifth Amendment rights, that is – until the 14th Amendment. The part of the 14th Amendment pertinent to this article reads “nor shall any State deprive any person of life, liberty, or property, without due process of law.”

Due process rests upon notice and an opportunity to be heard. That is, you have a right to be notified when any action is taken against you and you have a right to be heard in court. The question in my mind is whether it will take another constitutional amendment to force the courts to recognize that homeowners have due process rights.
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Maryland Gov. Martin O’Malley recently signed a bill intended to cure defective Deeds of Trust thereby paying the way for Maryland’s foreclosure steamroller to crush the rights of individual homeowners. At the same time Governor O’Malley took no action to protect these same homeowners with minimum standards of due process.

When a homeowner in Maryland purchases a home they have clear title for about 15 seconds before they sign it away. The lender who made it possible for the homeowner to purchase the property wants their investment to be protected. The lender accomplishes this by having the new homeowner sign a Deed of Trust. Specifically, upon receiving the deed to their property the new homeowner signs a deed giving that property to someone else to hold in case the property owner defaults on their mortgage. If the homeowner defaults the lender would instruct the trustee named under the Deed of Trust to sell the property. In Maryland, the trustee had to be a natural person in order to sell the property.
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