Who is the DEADBEAT: Borrower or Bank?

Posted on June 20, 2013 by Neil Garfield

Many thanks to Danielle Kelley, Esq. for appearing on last night’s members’ teleconference. I forgot to give the number out for the firm: 850-765-1236

Just to cap it off, here is her Post from yesterday at Danielle Kelley Blog:

Danielle Kelley, Esq.

The propaganda from the banks has been far-reaching.   Even if they devised a scheme to fraudulently throw away a homeowner’s hope at a modification, they are still pursuing the “deadbeat” homeowner argument.  The essence is that the homeowner was not paying, so it doesn’t matter what happened after the homeowner defaulted.

That “deadbeat” argument is a myth.  Whenever I interview a client, I am careful not to lead them.  I simply ask the question, “What caused you to go into default?”.  Nine times out of ten I will hear, “The bank said I had to be so many months behind to help me.”  Or in the alternative, “My payments kept increasing and I didn’t know why.  I called the bank to ask and they told me that unless I was behind in payments they couldn’t help.”  After that the homeowner is left at the mercy of bank who is pretending to consider them for a modification, but yet fraudulently thwarting that process.

The first answer is the “stop payment” answer, which I have discussed in a previous blog.  The second answer is now what I call the “bait and switch” on escrow accounts.  Homeowners who pay monthly to the bank, unless agreed otherwise, expect the bank to take part of that payment and pay the taxes and insurance on the property with it.  If the bank does not, the escrow account goes into the negative and the homeowner has to make up the difference in the payment.  It is called an “escrow shortage”.  And no one is immune, not even those who pay every month, on time, and would not dare to consider themselves as people who would fall into foreclosure.

I have seen it time and again.  In one case, BOA inflated the escrow account $12,000 which resulted in a payment of $900 more per month.  That very case would become my own, with my father on our Note.  When he called to ask “why” the payments were going up he was given the script “To get that $900 off you need help.  We can’t help you because you are current on your payments.  You need to show us you need our help by making a partial payment.”  Later when the partial payment was not applied, BOA stated that to be considered for a modification we had to stop paying altogether.  Left with four years of modification attempts in bad faith, we were requested by BOA (in order to keep the modification file open) to record a quit claim deed to myself and my husband which came with a high price for documentary stamps.  We were told to submit letters to the bank, and then told we could not mention the “stop payment” language in them.  The letters had to be all about how we were suffering a “hardship” with no blame pointed towards the bank.  The reasoning?  They had to get Freddie Mac, the loan “owner”, to approve a modification, and Freddie wouldn’t dare approve a modification if BOA had done something wrong.  To this day, BOA wants to pursue a foreclosure, yet they have absolutely no explanation for what inflated the escrow account to begin with.

In another case, unrelated to me, other than my representation of my client, the bank stopped paying the insurance in full.  The homeowner had no idea that the insurance policy had lapsed until a year later when they were asked to make up for an escrow deficiency.  At a payment climbing hundreds of dollars more than they ever agreed to pay, when they had been making their payments in full and counting on the bank, per the mortgage contract, to pay the insurance, they were now faced with payments they should have never been liable for.  They were not a “deadbeat”.  They were paying in full all along.

Then the truth is brought to light, and the deadbeat argument fails because we learn that no one, not one person, is immune from this.  If a homeowner is making monthly payments and depending on a bank to pay the taxes and insurance, they are at the mercy of the bank. And often to a bank like BOA who is seeking to foreclose loans to get them off of their books, as their own employee declarations filed in the HAMP case in Massachusetts show us.

They have no incentive not to deliberately inflate a homeowner’s escrow account and cause the payment to rise to the point where the homeowner calls them and eventually ends up in default.  Their own employees have stated that they profit from foreclosures over modifications.

So before the argument is bought that the homeowner in foreclosure is a “deadbeat”, know this much, the bank can cause you to become a “deadbeat” too, even if every payment is made in full and right on time.

Filed under: CDO, Eviction, foreclosure, GARFIELD GWALTNEY KELLEY AND WHITE, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: , , , , , , | 137 Comments »

Winning Cases Against the Mega Banks

Posted on April 16, 2013 by Neil Garfield
If you are seeking legal representation or other services call our Florida customer service number at 954-495-9867 and for the West coast the number remains 520-405-1688. Customer service for the livinglies store with workbooks, services and analysis remains the same at 520-405-1688. The people who answer the phone are NOT attorneys and NOT permitted to provide any legal advice, but they can guide you toward some of our products and services.
The selection of an attorney is an important decision  and should only be made after you have interviewed licensed attorneys familiar with investment banking, securities, property law, consumer law, mortgages, foreclosures, and collection procedures. This site is dedicated to providing those services directly or indirectly through attorneys seeking guidance or assistance in representing consumers and homeowners. We are available to any lawyer seeking assistance anywhere in the country, U.S. possessions and territories. Neil Garfield is a licensed member of the Florida Bar and is qualified to appear as an expert witness or litigator in in several states including the district of Columbia. The information on this blog is general information and should NEVER be considered to be advice on one specific case. Consultation with a licensed attorney is required in this highly complex field.

Editor’s  Comment: It is hard to interpret what people mean when they say they are winning cases. In the example below the case is oversimplified. Wells Fargo, as usual, wanted to foreclose on the home of an 80-year-old woman regardless of whether she was in default or not. Her main defense was simply that she was never in default. Wells Fargo took the position that the payments they accepted could be allocated towards expenses of the foreclosure, which never should’ve happened in the first place.

It was quite clear that the homeowner had made all of her payments. It was quite clear that Wells Fargo had not applied the payments properly. And after three years of litigation, during which most people would have folded, judgment was entered in favor of the borrower and against Wells Fargo.

No big surprise except for the persistence of the homeowner in fighting off a big bad bank despite dwindling resources and a gaggle of people who were treating her as a leper because she was a deadbeat who didn’t pay her bills and was trying to get out of a legitimate debt.

Of course as it turns out, she was neither a deadbeat nor was she trying to get out of the debt even though it probably is not a legitimate debt and Wells Fargo is most probably not a legitimate creditor in relation to this homeowner.

I am happy that this woman got what she wanted. But some questions that linger on include why Wells Fargo failed to do the proper accounting to bring her loan account up-to-date? Why did Wells Fargo want that foreclosure regardless of whether she was in default or not? And what other payments received from third parties in the form of insurance or credit default swaps were not applied to the appropriate receivable account on the books of the real creditor?

My opinion is that in all probability there is still plenty of meat left on the bone. This homeowner  probably has several causes of action for slander of title, breach of contract, probably fraud, and abuse of process,  just to name a few.

And another thought comes to mind: would the result  or the timing have been different if the roles were  reversed? This particular case is so obvious as to whether or not money was actually paid and received that it is difficult to comprehend how it could possibly have stretched out to three years.

The only way I can think of is that the judge had a preconception of the relationship of the parties and assumed that the debt was real and was in default instead of forcing Wells Fargo to immediately prove lack of payment and their status as the real creditor. For those who complain that the courts are jammed up with foreclosure lawsuits, this case is instructive as to why that is happening.

If judges would simply take each case on its own merits and require each party to actually prove their position rather than rely on dubious and rebuttable presumptions, most of the foreclosures wouldn’t be filed and those that ended up in litigation would be over in just a few months.

 The bottleneck in the court systems across the country is not caused by volume. It is caused by bias. Judges assume that a big-name bank with 150 year old reputation on the line would never make a claim they couldn’t back up. If judges would stop making that assumption and require the backup at the beginning of the litigation the bottleneck would vanish.

Oregon Woman Wins 3-Year Fight Against Wells Fargo Foreclosure
http://abcnews.go.com/blogs/business/2013/04/oregon-woman-wins-3-year-fight-against-wells-fargo-foreclosure/

 

Filed under: foreclosure | Tagged: , , , , , | 51 Comments »

Zillow Raises Estimate Again: 16 Million Homes Underwater

Posted on June 1, 2012 by Neil Garfield

Featured Products and Services by The Garfield Firm

LivingLies Membership – Get Discounts and Free Access to Experts
For Customer Service call 1-520-405-1688

Editor’s Comment:

This is why I am re-starting my seminar tours. The information out there is disinformation and in this case sellers don’t realize how badly they have been screwed until they are walking toward the closing table. The “underwater” phenomenon represents a vast market inventory shadow that is not being counted by anyone — which is why my estimates of market activity and prices are so much lower than what you hear from everyone else. So far I have been right every year.

Zillow is at least making an effort. It is sharpening the definition of “underwater.” We have been saying for years that the number of homes “underwater” is both rising and vastly underestimated. The reason I knew was that just by putting pencil to paper and using all the factors that measure the amount of money one might get as proceeds from the sale of a home, the average PROCEEDS from the sale of residential property was substantially below the average VALUES that were being used. Zillow has now entered the world of reality by adding all the relevant mortgages and not just the last one allocated to that property.

Once upon a time when you sold a house you received a check for the proceeds of the sale. It was always lower than what you expected because of expenses and charges that you incurred and after you deducted the expenses that didn’t appear on the HUD 1 Settlement Statement (money that you spent preparing the house for sale).

Now the situation is different. Instead of getting a check, many if not most homeowners must bring a check if they want to sell their home. Most homeowners, in other words, must pay money out of their pocket if they want to sell their home. In some cases, the bank will allow a short-sale where they will accept a payoff less than the amount they say is owed, but even then, the hapless homeowner will still be unable to recover his down payment, all the money he put into the house in furnishings and improvements, and all the principal payments made on a house that was intentionally overvalued, using inflated appraisals that would  leave the homeowner screwed.  

When they start looking at “Seller’s Proceeds” from the standpoint of a real HUD 1 settlement sttements, the figure will be even lower than the current Zillow estimate. The disconnect between “prices”, “home values” and “proceeds” has never been greater. The question of whether or not a home is underwater is determined by proceeds of sale — without regard to price or value. Being underwater means to answer a question: “How much money will the seller need to spend in order to sell the property with free and clear title.”

Forgetting the whole issue of title corruption caused by the use of MERS which further affects prices, values and proceeds, the amount of money required from the seller in order to sell his/her home is nothing short of sticker shock and the fact remains that a majority of the people affected do not know what has happened to their wealth. They do not understand the extent to which they suffered damage by Wall Street schemes. And of course they don’t know that there is something they can do about it — like any rational businessman instead of the deadbeat bottom-feeders  portrayed by bank mythology.

Once all factors (other than MERS) are taken into consideration, the Zillow numbers will change again to more than 20 million homes and will probably reach 25 million homes that are really underwater, most of which are hopeless because values and prices will never get enough lift, even with inflation, to make up the difference between what they must pay as sellers to get out of the deal and what they can get from buyers who are willing to buy the home. Add the MERS’ factors in, now that title questions we raised 4 years ago are being considered, and it is possible that many homes cannot ever be sold at any price. Where the levels of “securitization” are limited to only 1, then perhaps it is possible to sell the property but not without spending more money to clear title. 

Nearly 16M Homes Are Now Underwater

by THE KCM CREW

Zillow just reported that their data shows nearly 16 million homes in this country are now in a negative equity position where the house is worth less than the mortgages on the home. This number is dramatically higher than the approximate 11 million reported by other entities. Why the huge difference? Zillow professes to take into consideration ALL loans on the property not just the most recent loan (purchase or refinance).

The key findings in the study:

▪       Nearly one-third (31.4 percent) of U.S. homeowners with mortgages – or 15.7 million – were underwater on their mortgage.

▪       A slower pace of foreclosures after the robo-signing issues of 2010 contributed to slower progress in working down negative equity. Foreclosures cause homes to come out of negative equity when a bank or third party takes ownership.

▪       Nine in 10 homeowners continue to make their mortgage and home loan payments on time, with just 10.1 percent of underwater homeowners more than 90 days delinquent.

▪       Nearly 40 percent of underwater homeowners, or 12.4 percent of all homeowners with a mortgage, owe between 1 and 20 percent more than their home is worth.

▪       An additional 21 percent of underwater homeowners, or 6.6 percent of all homeowners with a mortgage, owe between 21 and 40 percent more than their home is worth.

▪       About 2.4 million, or 4.7 percent of all homeowners with mortgages owe more than double what their home is worth.

How can negative equity impact the housing market? In the report, Zillow Chief Economist Stan Humphries explains:

“Not only does negative equity tie many to their homes, by making homeowners unable to move when they may want to, but if economic growth slows and unemployment rises, more homeowners will be unable to make timely mortgage payments, increasing delinquency rates and eventually foreclosures.”

Case Shiller: House Prices fall to new post-bubble lows in March NSA

by CalculatedRisk

S&P/Case-Shiller released the monthly Home Price Indices for March (a 3 month average of January, February and March).

This release includes prices for 20 individual cities, two composite indices (for 10 cities and 20 cities) and the National index.

Note: Case-Shiller reports NSA, I use the SA data.

From S&P: Pace of Decline in Home Prices Moderates as the First Quarter of 2012 Ends, According to the S&P/Case-Shiller Home Price Indices

Data through March 2012, released today by S&P Indices for its S&P/CaseShiller Home Price Indices … showed that all three headline composites ended the first quarter of 2012 at new post-crisis lows. The national composite fell by 2.0% in the first quarter of 2012 and was down 1.9% versus the first quarter of 2011. The 10- and 20-City Composites posted respective annual returns of -2.8% and -2.6% in March 2012. Month-over-month, their changes were minimal; average home prices in the 10-City Composite fell by 0.1% compared to February and the 20-City remained basically unchanged in March over February. However, with these latest data, all three composites still posted their lowest levels since the housing crisis began in mid-2006.
…
“While there has been improvement in some regions, housing prices have not turned,” says David M. Blitzer, Chairman of the Index Committee at S&P Indices. “This month’s report saw all three composites and five cities hit new lows. However, with last month’s report nine cities hit new lows. Further, about half as many cities, seven, experienced falling prices this month compared to 16 last time.”

Case-Shiller House Prices Indices

Click on graph for larger image.

The first graph shows the nominal seasonally adjusted Composite 10 and Composite 20 indices (the Composite 20 was started in January 2000).

The Composite 10 index is off 34.1% from the peak, and up 0.2% in March (SA). The Composite 10 is at a new post bubble low Not Seasonally Adjusted.

The Composite 20 index is off 33.8% from the peak, and up 0.2% (SA) from March. The Composite 20 is also at a new post-bubble low NSA.

Case-Shiller House Prices Indices

The second graph shows the Year over year change in both indices.

The Composite 10 SA is down 2.8% compared to March 2011.

The Composite 20 SA is down 2.6% compared to March 2011. This was a smaller year-over-year decline for both indexes than in February.

The third graph shows the price declines from the peak for each city included in S&P/Case-Shiller indices.

Case-Shiller Price Declines

Prices increased (SA) in 15 of the 20 Case-Shiller cities in March seasonally adjusted (12 cities increased NSA). Prices in Las Vegas are off 61.5% from the peak, and prices in Dallas only off 6.7% from the peak.

The NSA indexes are at new post-bubble lows – and the NSA indexes will continue to decline in March (this report was for the three months ending in February). I’ll have more on prices later

Filed under: foreclosure | Tagged: , , , , , , , , , , , , , , , , , | 11 Comments »

%d bloggers like this: