Home > Avid Law Center, Foreclosure, Loan Restructuring > Homeowners fight and win against the banks to avoid foreclosure

Homeowners fight and win against the banks to avoid foreclosure

Fed up with bank procedures, more homeowners are turning to legal action in court to get the mortgage debt relief they need.

In 2008, Jewel Miser and her husband Jack began trying to get Bank of America to modify their mortgage. Jack had lost his job and the couple was a month behind in their mortgage payments. Fed up with getting the run around by the bank and running into dead ends, the couple sought legal aid to help them in their quest to get a loan modification and avoid foreclosure.

As MSNBC reports, more and more homeowners are finding success taking their case to court to get new loan terms as the Misers did. Their lawyer successfully challenged the shaky paper trail on which the lender relied on to prove it owned the Miser’s note. In the resulting settlement, the bank agreed to new loan terms that cut the Miser’s monthly payments by roughly 15 percent, paid their legal fees and stopped the foreclosure.

According to MSNBC:

“When these homeowners get to court, they find a laundry list of shoddy practices that undercut lenders’ legal claim to foreclose, say consumer attorneys who have pursued these cases. Many cases are tainted by “robo-signers” who failed to properly review files, despite swearing under oath they had done so. Other title claims are undone by improper accounting, including unwarranted fees, and payments that were not credited.

Consumer attorneys also are attacking lenders’ effort to paper over missing links in the chain of documents required to prove that a bank owns a loan and has the right to foreclose. Some of those defective paper trails date to the sloppy underwriting that accompanied the frenzy of mortgage lending in the 2000s, when hundreds of now-defunct lenders churned out a blizzard of notes that were instantly offloaded to investors.

Lenders’ disregard for the law is still rampant, according to consumer advocates and regulators. Last month, a survey of 260 consumer attorneys in 45 states by the NCLC found that thousands of homeowners were improperly foreclosed on in just the past year. In more than 80 percent of the cases, the lender scheduled a foreclosure sale while processing a loan modification. In four out of five cases, the attorneys reported, lenders failed to properly credit payments or wrongly claimed homeowners owed bogus fees.”

While it’s not a new practice for borrowers to take their disputes with lenders to court, rising frustration with other means of trying to get a loan modified is a major deciding factor in the current housing crisis. Banks encourage homeowners to work directly with lenders through government-sponsored programs, aimed at providing mortgage relief to millions of borrowers which have fallen far short of promises.

One program that has severely underperformed expectations is the government’s Home Affordable Modification Program (HAMP) which leaves the final decision to modify a loan entirely with the lender. Because the government does not enforce HAMP on lenders, homeowners are being denied modifications that should have been made under government guidelines, forcing homeowners to take legal action.

MSNBC reports:

“That often means a trip to bankruptcy court for a Chapter 13 proceeding, which allows people with a regular income to adjust their debt. Once in court, a foreclosure is typically halted automatically, placing the burden on the lender to have the process re-instated. That forces the lender to prove it owns the mortgage and to account fully for any disputed back payments. When the lender is unable to do so, consumer lawyers say, it is more likely to agree to settle by modifying the loan terms, often by simply lowering the interest charged to current market rates.

Lenders rarely forgive principal, even on homes that are deep underwater, say consumer attorneys. But while bankruptcy law prevents a judge from writing down the primary mortgage on residential property, other loans don’t enjoy that protection.”


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