THIS IS GUERILLA WARFARE
THIS IS NOT LEGAL ADVICE
Preserve Equity and Investigate all Defenses and Counterclaims.These may give rise to rescission. There is a perception that few defenses exist to mortgage foreclosures. However, homeowners being foreclosed upon can raise defenses and affirmative matters. Aadditional relief for damages may offset the amount owed. Even if you don’t want to keep the property, all potential defenses and counterclaims should be evaluated because some defenses/counterclaims give rise to rescission—which means all payments made and all settlement costs are applied to principal and increase the equity (value) available to you upon sale or to offset what you may need to pay if you are in arrears.1. Do you want to sell or keep the property?
2. Is the mortgage a purchase money first mortgage or a refinanced mortgage?
Defenses and counterclaims differ depending on this.
3. Is the same lender servicing the loan, or if it has been sold?
Name on the original loan documents will not match the name on more recent documents. In servicing the loan you must think about the entire transaction. The escrows, check on payment dates and amount held. The interest rate adjustments if any. You must send a RESPA Qualified Written Request and they must respond in 20 days or it is an additional violation. Did they try to engage in any meaningful loss mitigation? Did you adjustments to an arm include all new disclosure required? Every contact with the lender should be analyzed.
4. Do you have the recorded deed or note?
If not demand one from the lender and also go to the courthouse and get a copy to compare. Compare the deed filed to one you signed. Look for the recordation tax paid and date filed. Look for the proper seals and signatures. Demand the lender produce the original signed deed.
This will have the stamps of recordation from the county.Notes are pledged, sold, bifurcated, and traded in various derivative transactions like bubblegum baseball cards and their transfers, sales, pledges etc., are not publicly recorded. As such, only possession of the actual original note can prove the actual owner and holder in due course of the note and who you can make an offer of payment to for purchase of the note by yourself, another family member or partner. You have a right to know the rightful owner of the note so an offer for payment of the note at a discount and at fair market value can be made. If the note has been pledged and encumbered, then that party must be made aware of the foreclosure and your right to negotiate with them a payment and release of the note by you, other lien holders or private parties.
5. Was the complaint to foreclose filed and do you need to answer the complaint?
Laws vary state to state. Check with you state to determine what you need to do.
8. How much is the total principal balance claimed of the loan?
What is the balance they are claiming you owe including any attorney fees?
9. What was the original principal balance when loan was made?
For rescission the lender would only be entitled to what you owed before you took the loan, minus any closing costs and offset for claims. Claims may exceed what lender is claiming you owe them.
10. What is the interest rate? If adjustable what are the adjustments based on?
It is important to analyze your interest rate and what it is based on if it is adjustable. More then likely if you are reading this you have an adjustable rate. Is the rate different then what was promised on the good faith estimate? Have adjustments been done within the law and accurately?
11. What is the APR? (Check the HUD 1)
This is crucial. The APR must be right –LEGALLY. If you are in foreclosure even a small mistake in the APR can warrant full loan rescission. The fees( finance charges) which should be included in the APR, and those, which are not, can determine if a mistake was made. Also the complex new loans make it hard to determine these facts. Lender can package loan to avoid including things in the APR. This is a bit complicated so I would advise having someone audit this if you can’t. In my loan I found a $966 overcharge in recordation tax. This was enough to push my APR over the $35 tolerance for rescission. I also analyzed the APR using multiple factors and found it to be totally false and the difference made my loan a HOEPA loan offering additional damages and protections. THIS IS IMPORTANT!
12. What are the Finance Charges? (Check the HUD 1)
Finance charges include many items—be sure to include all prepaid interest,
points, origination fees, services charges, and all compensation to lender or
broker (broker fees, processing fees, underwriting fees, prepaid interest,
application review fees, yield spread premiums, and fees no one ever heard of
"courier fees" and other junk fees.
13. What was the purpose of the obtaining the loan?
House purchase, cash out, refinance to lower interest rates or lower payments, etc.
The purpose of the loan is important. There are laws against refinancing someone with no benefit for doing so. Were you steered into a refinance promising non-existent benefits?
14. Are all terms and conditions clear and conspicuous or unclear and confusing?
This is what a TILA claim is all about. Terms must be clear as viewed from the perspective of an ordinary consumer. Good laws do exist under TILA to protect consumers from confusing terms and violations call for full loan rescission.
15. Was a broker involved in the transaction?
Note all of the payments to broker including any POC – YSP or SRF. The broker may or may not have had your best interest at heart. Analyze every part of your contact with broker including the initial way you were contacted by him. Did the loan start out with a "BAIT" of a low rate and end up with a "SWITCH" to a worse loan then promised. Did the advertisement that you were sent differ substantially from what your were offered. Did the broker get a YSP payment from the lender? If so you probably paid a higher rate then you needed to pay or other harsh terms like a prepayment penalty. Did the broker promise you things verbally that you didn’t get? Think about the entire transaction and how you may have been misled.
16. What advertising did you receive from the lender or broker?
Advertising a mortgage must be done within very specific guidelines. On my web site I have listed information on how lenders should legally advertise. They can’t state a low teaser rate and then state in a small disclaimer another rate. They must use the APR. This includes verbal promises. For instance if an ad says 1% it must say-1% introductory rate/ 7.468% APR. Side by side. It must explain that the 1% is a discounted rate and it only lasts for a period of time. In most of these loans it is not the interest rate at all but a payment rate. The difference is being negatively amortized into your loan. It took me three months to figure out what the 1% meant. They don’t like to explain it.
17. Did you get a disclosure of what interest rate you would pay or just a reference to indexes and margins?
This goes to how the rate was presented. Was it clear and accurate? Was it to confuse and mislead you to the actual interest rate? Were the adjustments made properly and what index and margin was used to figure the APR?
18. If you have a Pay Option Arm loan, how were the benefits of this loan presented?
On a lenders web site I analyzed their calculators promising benefits of pay option arm loans. They use default indexes that are lower then today’s indexes and go down over a period of five years. In fact indexes for year one would be much higher and have been trending up for over three years. They fail to tell you where to go to find the indexes or give them. They also state a savings rate based on a negative amortized payment and then fail to account for the increased pay off balance because of it. The worst defect in the calculators is the default to 6% appreciation at a time when properties are depreciating as recorded by many sources both in new home sales and median home prices across the nation.
19. Did you receive and when did you receive your notice of right to cancel?
Truth in Lending Act (TILA), 15 U.S.C. § 1600 et seq
., 1968, as amended, 1980, 1994.The Homeowner, when applying for credit, has a right to cancel the loan and void the mortgage for three business days after the loan has been signed. The homeowner can cancel for any reason or even no reason. The Homeowner must receive a Notice of Right to Cancel stating this.
Right to rescind is extended to three years (instead of three days) if the lender fails to provide the Notice of Right to Cancel or violates Federal laws TILA, RESPA, HOEPA, etc.
Notice of Right to Cancel
must include all of these, and failure to provide even one of the following gives rise to the three-year right to rescind:20. When did you receive your good faith estimate and loan terms?
The lender is legally required to give you this within 3 days of application. The reason is to give you time to shop for a better deal. For credit scoring if you are shopping for a mortgage loan they give you a two-week window in which multiple inquiries are treated as one credit inquiry. However outside of that two-week period each additional credit inquiry will ding your credit score. If you have a high credit score this might not affect you. But if an inquiry drops you score from one category to another it could cost you plenty. Also by delaying information to you the lender knows you are in a hurry to refinance or have a settlement on a house, you are less likely to bulk at the last minute changes at settlement. 70% of all Good Faith Estimates are incorrect.
21. Did you receive any information that you relied on to make your decision which you now know was false or misrepresented?
Common Law Fraud or Unconscionability
This is fraud or unconscionability as in any contract case. These theories are particularly helpful if you are missing just one element of a statutory cause of action. For some claims the statutory time limit is one year for affirmative action so you may have to look at common law claims.
Fraud occurs when the mortgage lender has done the following:
Unconscionability occurs when:
Several of the federal law violations also would qualify under common law fraud and almost every lender today controls the entire transaction through the use of their choice of appraisers, broker kickbacks, and affiliated settlement companies.
22. Did you receive your appraisal?
You will need to check everything including the finished square feet and check comparable sales for the same time frame. A realtor can help you with that. Your appraiser should have an "Errors and omissions" liability policy. So any blatant mistake is actionable. If an appraisal was inflated to entice to make you refinance or buy a property, then fraud and negligence has occurred. An Appraiser who does this for a broker or lender has breached his fiduciary responsibility to the borrower. On my appraisal he counted my unfinished basement as finished SF, added 200 additional SF to my main levels, and said I had 2 ½ baths when I had 3 ½ baths. Don’t assume anything is right.
23. Who conducted your settlement services? Was it an affiliate of the lender?
The fiduciary responsibility of the settlement officer is to the borrower. They are legally required to explain the entire transaction and all of the papers you are signing. They also are required to make sure the fees you are paying for recordation tax, title insurance and all other fees are correct. They are responsible for paying off you mortgages and releasing liens, and properly and promptly recording the deed. Don’t assume anything is correct. In my case the settlement "Notary" explained nothing and barely said a word, I was overcharged for recordation tax $966, overcharged for title insurance( they failed to give me a reinsurance rate for a refinance) and charged me for more then the amount borrowed, they recorded a deed I didn’t sign to hide this fact, they scratched out names and put in others as document preparers, there was no notarized seal next to my signature, and the title company and settlement service provider was the same company. Something I didn’t discover until I got a refund check for my $966 overcharge. My lender operates two captive reinsurance companies, a title abstract company and a vendor management company so surely they profited from this entire fiasco. Again the use of these affiliated arrangements corrupts the process and facilitates a way to funnel kickbacks for referral of business. Almost every lender, builder, and real estate companies uses these methods.
REMEDIES:
FULL LOAN RESCISSION
—releasing the security interest in the property and giving rise to an Order to Dismiss the Complaint for Foreclosure of Mortgage. All payments paid should be credited against the principal. Elimination of prepayment penalties.STATUTORY DAMAGES
Under TILA/RESPA– These tend to be minor, just a slap on the wrist for a lender, but can add a few thousand to damages.TREBLE DAMAGES
– If violations are deemed to be willful and unconscionable a judge can rule treble damages or three times of the amount owed.ACTUAL DAMAGES
– The lender must disgorge themselves of all payments and settlement cost paid by the borrower. This can be a substantial amount of money.YSP
– If the lender has violated laws associated with the payment of the YSP then the borrower could receive 3X the amount of the YSP. This can easily be in the tens of thousands of dollars.ECOA
– If you can prove an ECOA claim it is an automatic $10,000 in punitive damages. This can include targeting or reverse redlining, offering terms that differ based on race, sex, marital status, or just because they can. This can also include offering attractive terms and then switching to less favorable terms.PUNITIVES
– Of course in a case like this you will ask for a jury trial. Juries will not be sympathetic to the lenders and will probably by thinking as they learn all about the industry –that they can’t wait to go home and check their own loan documents. Almost everyone has refinanced in the last few years or bought a home. So good luck to the lenders who are trying to get a jury to favor them. When the truth comes out at trial, watch out, punitives are a wild card.
Remember there is many areas a lender is vulnerable in:
Individual Damages listed above can be obtained in state or federal court. Lawyers are chomping at the bit for class action complaints against lenders. This can be used as a bargaining tool. Settle with me and I go away or you may face a thousand complaints.
Federal agencies investigations have resulted in hundreds of millions in fines, criminal prosecutions, and injunctions against lenders. Forcing auditors on them to monitor activities.
State licenses can be revoked.
Stock market investors who buy mortgage backed securities have been held liable for aiding and abetting fraud so lenders have gone under when investors have refused to buy their loans.
Individual stock investors have sent stocks tumbling as bad news surfaces on lenders conduct. A number of lawsuits have begun against companies and their executives by shareholders accusing them of fraudulently inflating and misrepresenting the stocks worth.
As long as you can tie the matter up in court and still have your house you have a bargaining tool. They are holding a mortgage they can't collect on or sell off and have every reason to settle with you.
