Overview: Jim Porter is a business and real estate attorney who represents lots of upside down borrowers facing foreclosure and who are abused by big bank lenders that are difficult to work with on loan modifications and short sales; the Law Review column today expresses his anger at name brand big banks and highlights new California cases favoring borrowers over lenders.
Those of you who read the Law Review, if any, know I am passionate about how badly big banks like Chase, Wells, Citi, Ocwen and B of A, have treated their borrowers who are upside down in their loans. Foreclosure sales have lessened dramatically, and lenders have gotten better, but over the years I’ve counselled hundreds of homeowners who were unable to negotiate loan modifications or short sales with their big banks. Seeing my clients’ frustration in dealing with these cavalier and indifferent big-name banks drove me crazy. Crazier.
I frequently have occasion to contact Ocwen on behalf of my borrower clients, and every time — they answer the phone: “Welcome to Ocwen, where helping homeowners is what we do.” – to which I always say: “That’s a bald-faced lie. Now having gotten that off my chest, let’s talk about my client’s request for a loan modification.”
Big Bank Bad Behavior
For years the California courts seemed to uphold the big bank lenders no matter how abusive. I had several clients who were given the chance to participate in a loan modification program, and in fact they made their payments for three months at the agreed reduced amount. In all three cases, my clients timely made their payments, only to be told they did not qualify for a loan modification (no reason given); and “oh by the way, you are now delinquent two months because all of your payments went to late fees and penalties.” Those borrowers all lost their homes. One California Court of Appeal upheld that type of behavior.
The good news, if you are of my persuasion, is that the courts are finally gaining their senses and ruling against the big banks for some of their flagrant misconduct.
In Tsvetana Yvanova v. New Century Mortgage Corporation, the California Supreme Court recently ruled that the borrower had “standing to sue” to challenge the way the lender sold and resold the deed of trust it held from the borrower. For goodness sake, when a borrower alleges that the bank’s deed of trust is improperly transferred to some other bank or servicing company using murky unrecorded, missing documents, you would think the borrower would have the right to ask the court to look into the bank transaction. Good case.
And in another new case, Coker v. J.P. Morgan Chase Bank N.A., the Court of Appeal ruled that if a bank participates in a short sale and willingly accepts partial payment, it may not afterwards proceed against the borrower for any deficiency if the sale proceeds are not enough to pay the loan in full. That should be a “no brainer,” but it took a Court of Appeal decision to put J.P. Morgan Chase in its place.
In Orcilla v. Big Sur, Inc., the Orcillas, who are Filipino, didn’t really understand what they were getting into when they obtained a loan from Quick Loan. Quick Loan told the Orcillas they could afford a loan of $525,000 with monthly payments of $4,229.49. The Orcillas’ joint monthly income when they obtained the loan was $3,000. I call that fraud. The trial court amazingly ruled for Big Sur. The Court of Appeal overturned, the Orcillas got back their home of 18 years.
“Don’t Worry, We Won’t Foreclose”
Majd v. Bank of America, N.A. brought back nightmares of hundreds of clients who unsuccessfully attempted to negotiate loan modifications. In this case, B of A tried every trick in the book, including a “robo-signer,” “the paperwork is missing, “we never received your documents” and blatant misrepresentations. Even worse, after B of A confirmed receipt of the loan documents, the loan modification was denied “because you did not provide us with the documents we requested.” I can’t tell you how many of my clients received similar letters.
B of A told Mr. Majd they would not foreclose while he was working with the loan modification, and of course they promptly foreclosed. I heard those very facts at least two or three dozen times from my clients.
A typical response from the big bank lenders was something like this, “We can’t work with you on a loan modification as long as you’re current, so stop making payments, and don’t worry about a foreclosure as long as you are working with us to modify your loan.” Of course, three or four months later the foreclosure department started a foreclosure. I heard that story over and over.
It’s encouraging to see borrowers are getting their day in court – and a few are succeeding.
Jim Porter is an attorney with Porter Simon licensed in California and Nevada, with offices in Truckee and Tahoe City, California, and Reno, Nevada. Jim’s practice areas include: real estate, development, construction, business, HOA’s, contracts, personal injury, accidents, mediation and other transactional matters. He may be reached at firstname.lastname@example.org or www.portersimon.com.
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The content contained and opinions expressed in this blog are solely those of the author. This blog contains content and opinions concerning the law generally, and is not intended to constitute legal advice or to create any attorney‑client relationship with the reader. The reader should consult with an attorney about any specific legal issues prior to embarking on any course of action or inaction involving legal matters.