Are You Kidding? AIG to Join Suit Against Goverment for Bailout Terms

Posted on January 8, 2013 by Neil Garfield

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Editor’s Comment: It is a total farce. Companies that were supposedly saved from the brink of bankruptcy and shame, who played a part in defrauding investors and homeowners across the world are now suing their savior and protector. The people who sit on the Board of Directors of these companies are sitting in a bubble of pure fiction. Yet AIG is now considering the lawsuit as a channel by which they can get even more money from the U.S. Taxpayers and cause even more damage to the U.S. economy.

Greenberg, the head of AIG has had the lawsuit going on for a while now saying, on behalf of himself as a shareholders and on behalf of other shareholders that the onerous terms placed on AIG deprived shareholders of value without due process!

Now AIG itself is thinking of joining the lawsuit because if Greenberg wins then the Board could be liable for failure to act.

“Thank you America” has been advertised by AIG since the bailout. I would now add THANK YOU to Greenberg and AIG for bringing up the one thing that Judges don’t want to hear from investors or shareholders — due process under the 5th and 14th Amendment to the U.S. Constitution.

Besides being spectacularly hypocritical, ungrateful and greedy, Greenberg and AIG have become the new poster boy for Wall Street arrogance. They have also opened the door to consideration of non-judicial foreclosure, as applied, and judicial foreclosure, as applied, in the absence of any proof of payment and standing as a creditor with rights to submit a credit bid at auction.

In the non-judicial states the “private contract” has allowed actions of controlled trustees on deeds of trust appointed by non-creditors in a document common to all loans subject to false claims of securitization (substitution of trustee). The notice of default and notice of sale take the place of a judicial foreclosure — but they are false and we know they are false. The same parties filing a judicial foreclosure would lose.

In both judicial states and all judicial actions the courts have made the assumption that the debt is valid (not true as to the party filing) the default is real (not if the payment isn’t due to the actual creditor who continues receiving payments after notice of default), the note is proper and presumptive evidence of payment or funding of the loan by the payee (almost never true) and that an assignment is presumptive evidence of the sale without proof of payment. The requirement that the party seeking affirmative relief (the forecloser) actually prove a case rather proffer it has been discarded.

There is nothing wrong with the statutes in the judicial states but the non-judicial states have opened a hole of moral hazard the size of the Grand Canyon. And where moral hazard is present, the banks are not far behind. In this case AIG took advantage of the receipt of fees for insurance of bogus mortgage bonds; their failure to perform due diligence and verify the validity of the bonds and the non-existent mortgages that “backed” the bonds was either intentional or negligent. They had insured more than they were worth and that was either intentional or negligent. The government came in, paid off the insurance contracts, and then gave the company back to AIG shareholders when it was “healthy.”

AIG has already sued Goldman on the same facts. The insurance contracts expressly waived any right to go after the borrowers. In most insurance contracts subrogation it is expressly assumed and allowed. The reason for this anomaly was that the banks were able to get 100 cents on the dollar of a loss they never had and they refused to give up a penny of it to the investors they had defrauded or the borrowers whose loan balances would have and should have been correspondingly reduced. What a deal! The investors lose their money, the insurers lose their money, the borrowers don’t get credit for the pay-down of their loans and the bank, claiming the loss to be their own, get the insurance, federal bailout money and the proceeds of credit default swaps.

When I practiced law I learned the hard way that demanding and getting more than your client should get will get you reversed on appeal on the basis that the evidence doesn’t support the verdict or judgment. In lay language, if you are going to be a pig about it, expect to be cooked.

These developments are upside down. AIG should be thanking the American people for the next 100 years and perhaps learning a few things of the due diligence expected of them. Instead, in our litigious society, the lawyers think they have created a long shot of getting billions of dollars more FROM the American taxpayer instead of FOR the American taxpayer.

Many of us were taught as children that there is no free ride. Now we hear there will not be a free house for homeowners whose loan balance has been paid in full. The assumption is that debt is correctly stated and the creditor is correctly identified when neither assumption is true. But the bigger assumption is that all borrowers are either deadbeats or potential deadbeats and that just isn’t true either.

And worst of all, you have AIG et al tying up the government process with a discovery demand of 16 million documents — opening yet another door for those practicing under the rubric of Deny and Discover. Don’t shy away from asking for what you want and nail down the money trail with demands for canceled checks, wire transfer and ACH receipts. And where a judge accepts a proffer instead of proof, call him or her out on it. That’s where due process comes in. Due process doesn’t promise justice but it does promise a hearing in accordance with required notice and an opportunity to be heard. At that hearing the burden is always on the party seeking affirmative relief (foreclosure). Once it comes down to real proof instead of proffers, it is the banks who reveal themselves as pigs to be cooked.

Deny the whole transaction because there was no payment or funding alleged and no payment or funding proven. That is because investors supplied the money thinking that they were buying into REMICs. They didn’t. Investor money was commingled from all investors in accounts that were layered over with false documentation to give the investor the impression he was the owner of a bona fide mortgage backed bond issued by a REMIC trust. In fact the pension fund investor owned nothing and had merely loaned the money to the investment banker who played with it and created the appearance of trading profits and fees and expenses and then funding bad mortgages in REMIC tranches where the investment banker could torpedo the whole thing, collect insurance, CDS proceeds and federal bailouts.

The government has been reluctant to get into the complexity of these fictitious transactions. Now that they are being sued, they might well be forced to do the digging they should have done in the first place. So Thank You again Mr. Greenberg!

Rescued by a Bailout, A.I.G. May Sue Its Savior

By BEN PROTESS and MICHAEL J. DE LA MERCED
NY Times

Fresh from paying back a $182 billion bailout, the American International Group Inc. has been running a nationwide advertising campaign with the tagline “Thank you America.”

Behind the scenes, the restored insurance company is weighing whether to tell the government agencies that rescued it during the financial crisis: thanks, but you cheated our shareholders.

The board of A.I.G. will meet on Wednesday to consider joining a $25 billion shareholder lawsuit against the government, court records show. The lawsuit does not argue that government help was not needed. It contends that the onerous nature of the rescue — the taking of what became a 92 percent stake in the company, the deal’s high interest rates and the funneling of billions to the insurer’s Wall Street clients — deprived shareholders of tens of billions of dollars and violated the Fifth Amendment, which prohibits the taking of private property for “public use, without just compensation.”

Maurice R. Greenberg, A.I.G.’s former chief executive, who remains a major investor in the company, filed the lawsuit in 2011 on behalf of fellow shareholders. He has since urged A.I.G. to join the case, a move that could nudge the government into settlement talks.

The choice is not a simple one for the insurer. Its board members, most of whom joined after the bailout, owe a duty to shareholders to consider the lawsuit. If the board does not give careful consideration to the case, Mr. Greenberg could challenge its decision to abstain.

Should Mr. Greenberg snare a major settlement without A.I.G., the company could face additional lawsuits from other shareholders. Suing the government would not only placate the 87-year-old former chief, but would put A.I.G. in line for a potential payout.

Yet such a move would almost certainly be widely seen as an audacious display of ingratitude. The action would also threaten to inflame tensions in Washington, where the company has become a byword for excessive risk-taking on Wall Street.

Some government officials are already upset with the company for even seriously entertaining the lawsuit, people briefed on the matter said. The people, who spoke on the condition of anonymity, noted that without the bailout, A.I.G. shareholders would have fared far worse in bankruptcy.

“On the one hand, from a corporate governance perspective, it appears they’re being extra cautious and careful,” said Frank Partnoy, a former banker who is now a professor of law and finance at the University of San Diego School of Law. “On the other hand, it’s a slap in the face to the taxpayer and the government.”

For its part, A.I.G. has seized on the significance and complexity of the case, which is filed in both New York and Washington. A federal judge in New York dismissed the case, while the Washington court allowed it to proceed.

“The A.I.G. board of directors takes its fiduciary duties and business judgment responsibilities seriously,” said a spokesman, Jon Diat.

On Wednesday, the case will command the spotlight for several hours at A.I.G.’s Lower Manhattan headquarters.

Mr. Greenberg’s company, Starr International, will begin with a 45-minute presentation to the board, according to people briefed on the matter. Mr. Greenberg is expected to attend, they added.

It will be an unusual homecoming of sorts for Mr. Greenberg, who ran A.I.G. for nearly four decades until resigning amid investigations into an accounting scandal in 2005. For some years after his abrupt departure, there was bitterness and litigation between the company and its former chief.

After the Starr briefing on Wednesday, lawyers for the Treasury Department and the Federal Reserve Bank of New York — the architects of the bailout and defendants in the cases — will make their presentations. Each side will have a few minutes to rebut.

While the discussions are part of an already scheduled board meeting, securities lawyers say it is rare for an entire board to meet on a single piece of litigation.

“It makes eminent good sense in this case, but I’ve never heard of this kind of situation,” said Henry Hu, a former regulator who is now a professor at the University of Texas School of Law in Austin.

It is unclear whether the directors are leaning toward joining the case. The board said in a court filing that it would probably decide by the end of January.

Until now, the insurance giant has sat on the sidelines. But its delay in making a decision, some officials say, has drawn out the case, forcing the government to pay significant legal costs.

The presentations on Wednesday come on top of hundreds of pages of submissions that the government prepared last year, a time-consuming and costly process. The Justice Department, which assigned about a dozen lawyers to the case and hired outside experts, told a judge handling the matter that Starr was seeking 16 million pages in documents from the government.

“How many?” the startled judge, Thomas C. Wheeler, asked, according to a transcript.

Struck just days after the collapse of Lehman Brothers in September 2008, the bailout of A.I.G. proved to be among the biggest and thorniest of the financial crisis rescues. The company was on the brink of collapse because of deteriorating mortgage securities that it had insured through credit-default swaps.

Starting in 2010, the insurer embarked on a series of moves aimed at repaying its taxpayer-financed bailout, including selling major divisions. It also held a number of stock offerings for the government to reduce its stake, which eventually generated a roughly $22 billion profit.

Overseeing that comeback was a new chief executive, Robert H. Benmosche, a tough-talking longtime insurance executive. Mr. Benmosche has won plaudits, including from government officials, for his managing of A.I.G.’s public relations even as he helped nurse the company back to financial health.

But he and the rest of A.I.G.’s board must now confront an equally pugnacious predecessor in Mr. Greenberg.

In the case against the government, Mr. Greenberg, through his lead lawyer, David Boies, contends that the bailout plan extracted a “punitive” interest rate of more than 14 percent. The government’s huge stake in the company also diluted the holdings of existing shareholders like Starr, which at the time was A.I.G.’s largest investor.

“The government has been saying, ‘We’re your friend, we owned and controlled you and we let you go.’ But A.I.G. doesn’t owe loyalty to the government,” a person close to Mr. Greenberg said. “It owes loyalty to its shareholders.”

The government, Starr argues, used billions of dollars from A.I.G. to settle credit-default swaps the insurer had with banks like Goldman Sachs. The deal, according to the lawsuit, empowered the government to carry out a “backdoor bailout” of Wall Street.

Starr argued that the actions violated the Fifth Amendment. “The government is not empowered to trample shareholder and property rights even in the midst of a financial emergency,” the Starr complaint says.

The Treasury Department declined to comment. A spokesman for the Federal Reserve Bank of New York, Jack Gutt, said, “There is no merit to these allegations.” He noted that “A.I.G.’s board of directors had an alternative choice to borrowing from the Federal Reserve, and that choice was bankruptcy.”

A federal judge in Manhattan agreed, dismissing the case in November. In an 89-page opinion, Judge Paul A. Engelmayer wrote that while Starr’s complaint “paints a portrait of government treachery worthy of an Oliver Stone movie,” the company “voluntarily accepted the hard terms offered by the one and only rescuer that stood between it and imminent bankruptcy.”

The United States Court of Appeals for the Second Circuit recently agreed to review the case on an expedited timeline. The judge in the United States Court of Federal Claims in Washington, meanwhile, has declined to dismiss the case and continues to await A.I.G.’s decision.

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CFPB Safe Harbor Rule Would Allow Homeowners to Fight Bad Mortgages

Posted on September 21, 2012 by Neil Garfield

Editor’s Comment: The practice of disregarding normal loan underwriting standards creates a claim that homeowners were tricked into loans that they could never repay. The Consumer Financial Protection Bureau, built by Elizabeth Warren under Obama’s direction is about to pass a rule that addresses that very issue. The new Rule would allow homeowners contesting foreclosure to introduce evidence challenging whether the “lender” correctly determined a borrower’s ability to repay the loan.

The details of the test for the “safe harbor” provision that is being contested are not yet known. The objective is to separate those who are using general knowledge of bad practices in the industry from those who were actually hurt by those practices. It would provide the presiding judge with a simple, clear test to determine whether the evidence submitted (not merely allegations — so the burden is still on the homeowner) are sufficient to determine that the “lender” wrote a loan that it knew or should have known could not be repaid.

The game being indirectly addressed here is that the participants in the fake securitization scheme intentionally wrote bad loans and then were successful at entering into contracts that paid insurance, credit default swap and federal bailout proceeds to the participants in the scheme even though they neither made the loan nor did the forecloser actually buy the loan (no money exchanged hands).

Those who do not meet the test would have “frivolous” claims dismissed summarily by the Judge. But they would have other grounds to sue the “lender” or the party making false claims of default and foreclosure. Those who do meet the test, would defeat the foreclosure leaving the loan in a state of limbo.

The net legal effect of the rule could be that the mortgage is void and the note is no longer considered evidence of the entire transaction — because the risk of loss on the homeowner shifts to the lender, at least in part. This would clear the path for principal reduction and new loans that would correct the corruption of title in the county title records.

The rule is coming at the behest of the Federal Reserve, which has is own problems on how to account for the trillions they have advanced for “bad” mortgages or worthless bogus mortgage bonds.

The question remains whether the purchase of these bonds conveys some right of action to collect money that the investors advanced, and who would receive that money. It also leaves open the question of whether a mortgage bond purportedly owned by the Federal reserve or even sold by the the Federal Reserve changes the players with standing to bring lawsuits or other foreclosure proceedings.

This rule, when it is finally written and passed, won’t solve all the problems but it could have a cascading effect of restoring at least some homeowners to at least a better financial condition than the one in which they find themselves.

The issue that would be interesting to see litigated is whether the homeowners who meet the test now have a claim to recover part or all of the money they paid on the mortgage thus far or if they are given an additional credit for the overage they paid — another way of reducing principal.

The bottom line is that there is recognition at all levels of government agencies —Federal and State — that there are problems with the origination of the loans and not just with the robo-signed assignments, allonges endorsements and fake powers of attorney. This recognition is going to be felt throughout the regulatory and judicial system and will redirect the attention of Judges to the reality that Wall Street banks wanted bad loans so they could make millions on each bad loan through multiple sales of the same loans using insurance, credit default swaps, TARP and other schemes to cover it all up.

http://www.housingwire.com by John Prior

Consumer Financial Protection Bureau Director Richard Cordray told a House committee Thursday that mortgage lenders would still not be safe if the bureau elects to grant a safe harbor provision to the upcoming Qualified Mortgage rule.

“The safe harbor versus rebuttable presumption is a mirage,” Cordray said. “Even safe harbor isn’t safe. You can always be sued for whether you meet the criteria or not to get into the safe harbor. It’s a bit of a marketing concept there. The more important point is are we drawing bright lines? If someone were to say to me safe harbor or anything else, I would go with a safe harbor. But I don’t think safe harbor is truly safe. And I think it oversimplifies the issue.”

Rep. Michael Grimm, R-N.Y. then right away pressed Cordray on which he would choose: a safe harbor or rebuttable presumption. The director was forced to remind him the rule was still under development and would be finalized in January.

“I have not taken a position. I have discussed the issue,” Cordray said.

Mortgage industry lobbyists have been pressing the bureau since it overtook QM rulemaking responsibility from the Federal Reserve last year to install “clear, bright lines” and a legal safe harbor that protects lenders from future homeowner suits during foreclosure.

A rebuttable presumption provision allows homeowners to introduce evidence in court challenging whether the lender correctly determined a borrower’s ability to repay the loan before it was written. But a safe harbor allows a simple test for a judge to find if the mortgage met the QM rule, and frivolous suits could be dismissed early.

The Mortgage Bankers Association even showed the CFPB that attorney fees go up to an average $84,000 for a summary judgment from $26,000 if it’s dismissed. The risk of this increased cost would be passed on to borrowers, they claim.

Some consumer advocacy groups previously said such suits are rare, and a safe harbor could clear lenders from risks down the road rule makers cannot anticipate now.

Cordray repeatedly said in the hearing Thursday that his goal on QM and upcoming rules for the mortgage market is to protect consumers but not cut off access to credit. Forcing courts to define areas left gray by regulators is not something he would permit.

“As a former attorney general in Ohio, gray areas of the law are not appreciated,” Cordray said. “They’re difficult for people trying to comply. If we write rules that are murky, they’ll end up getting resolved in courts and it will take years and be very expensive. We are making real efforts to draw very bright lines.”

jprior@housingwire.com

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Foreclosure Prevention 1.1

Posted on April 22, 2010 by Neil Garfield

Nobody ever thought that returning a lady’s purse to her after a purse snatcher ran away with it was a gift. So why is anyone contesting returning the purse to homeowners who had their lives snatched from them?

The baby steps of the Obama administration are frustrating. Larry Summers, Tim Geithner and those who walk with Wall Street are using ideology and assumptions instead of reality and facts.

First they started with the idea of modifications. That would do it. Just change the terms a little, have the homeowner release rights and defenses to what was a completely fraudulent and deceptive loan transaction (and a violation of securities regulations) and the foreclosure mess would end. No, it doesn’t work that way.

The reality is that these homeowners are being drained every day and displaced from their lives and homes by the consequences of a scheme that depended upon fooling people into signing mortgages under the false assumption that the appraisal had been verified and that the loan product was viable. All sorts of tricks were used to make borrowers think that an underwriting process was under way when in fact, it was only a checklist, they were even doing title checks (using credit reports instead), and the viability of the loan was antithetical to their goals, to wit: to have the loans fail, collect on the insurance and get the house too without ever reporting a loss.

Then it went to modification through interest rate reduction and adding the unpaid monthly payments to the end of the mortgage. Brilliant idea. The experts decided that an interest rate reduction was the equivalent of a principal reduction and that everything would even out over time.

Adding ANYTHING to principal due on the note only put these people further under water and reduced any incentive they had to maintain their payments or the property. Reducing the interest was only the equivalent of principal reduction when you looked at the monthly payments; the homeowner was still buried forever, without hope of recovery, under a mountain of debt based upon a false value associated with the property and a false rating of the loan product.

Adding insult to injury, the Obama administration gave $10 billion to servicing companies to do modifications — not even realizing that servicers have no authority to modify and might not even have the authority to service. Anyone who received such a modification (a) got a temporary modification called a “trial” (b) ended up back in foreclosure anyway (c) was used once again for unworthy unauthorized companies to collect even more illegal fees and (d) was part of a gift to servicers who were getting a house on which they had invested nothing, while the real source of funds was already paid in whole or in part by insurance, credit default swaps or federal bailout.

Now the Obama administration is “encouraging” modifications with reductions in principal of perhaps 30%. But the industry is pushing back because they don’t want to report the loss that would appear on their books now, if a modification occurred, when they could delay reporting the “loss” indefinitely by continuing the foreclosure process. The “loss” is fictitious and the push-back is an illusion. There is no loss from non-performance of these mortgages on the part of lending banks because they never lent any money other than the money of investors who purchased mortgage-backed bonds.

You want to stop the foreclosures. It really is very simple. Stop lying to the American people whether it is intentional or not. Admit that the homes they bought were not worth the amount set forth in the appraisal and not worth what the “lender” (who was no lender) “verified.” Through criminal, civil and/or administrative proceedings, get the facts and change the deals like any other fraud case. Nobody ever thought that returning a lady’s purse to her after a purse snatcher ran away with it was a gift. So why is anyone contesting returning the purse to homeowners who had their lives snatched from them?

Filed under: bubble, CDO, community banks, CORRUPTION, credit unions, currency, education, Eviction, expert witness, Fannie MAe, foreclosure, foreclosure mill, foreign relations, Forensic Analysis Workshop, GTC | Honor, HERS, Investor, MODIFICATION, Mortgage, Motion Practice and Discovery, Obama, politics, securities fraud, Securitization Survey, Servicer, taxes, workshop | Tagged: , , , , , , , , , , , , , , , , , , , | 9 Comments »

BAC assigned a note in 2010 that they sold in 2003

Posted on March 25, 2010 by Neil Garfield

Editor’s Note: Recontrust appears to be wholly owned by Bank of America. This particular deal looks like a “reconstituted” mortgage backed security comprised of new securities which are “backed” by old mortgage backed securities which in turn are backed by a list of “loans” which may or may not exist, and which certainly have at least in part been paid in whole or in part through insurance, credit default swaps and federal bailout.

From the comment Section of the Blog:

ReconTrust filed a NOD on behalf of BAC “servicer” for GRS Mort. Trust 2003-9, seven days later filed an assignment to GSR Mort. Trust of the deed of trust and note dated 8-13-03. I had no notice of GRS or Recontrust until seven years later. It looks like BAC assigned a note in 2010 that they sold in 2003. It also appears a pattern of fraud is occuring with all of us as their victims. If anyone knows what GSR Mortgage stands for please inform. I any one is interested in exposing the pattern let me know. I have 40 days before the notice of sale. I’m also pursuing this pro se.

Filed under: bubble, CORRUPTION, credit unions, currency, education, Eviction, expert witness, foreclosure, foreclosure mill, Forensic Analysis Workshop, GTC | Honor, HERS, Investor, MODIFICATION, Mortgage, Motion Practice and Discovery, securities fraud, Securitization Survey, Servicer, STATUTES, workshop | Tagged: , , , , , , , , , , , , , | 20 Comments »

A Thought About Bankruptcy Petitions: Creditor ID

Posted on March 16, 2010 by Neil Garfield

Upon finding that a portion of those payments should be applied to the subject loan, the declaration of default would be invalid because it would either be wrong inasmuch that the third party payments would at least be prepayments of future monthly payments, or wrong because the third party payments reflected an inaccurate accounting of the principal due.

OK let’s be clear that I don’t know bankruptcy well enough to even have an opinion, but I do have an idea and I would like this post forwarded to bankruptcy attorneys to get their reaction.

Here is the proposition: A Petitioner files for bankruptcy where one of the issues is a securitized loan. My idea is that the schedules NOT show the any of the known parties as creditors, because they are not. Especially if you have an expert opinion that describes the creditors as being unnamed but readily identifiable investors if the servicer will respond properly to the Qualified Written Request.

Upon reflection I don’t see why we would name the pretender lenders as creditors at all. I would leave them off the list of creditors (on any new cases filed) because they are not creditors. Maybe file amended schedules removing them. I would disclose the non-judicial foreclosure attempt wherever you can do that of course. Show the house as an asset with undetermined value. Wouldn’t that force them into being proactive? They would have to say “Hey! We are creditors secured by this property.” That would force the burden of proof onto them even as to standing, wouldn’t it?

Can someone who is not a creditor on the schedules file a proof of claim? What happens if you deny the claim and deny they are creditors? Do THEY have to file the adversary? Your position would be that you have this Expert Declaration that identifies the creditors, at least by description, and these would-be foreclosers don’t meet the description. So you disclosed the fact that they were claiming a default but you deny they are even creditors, much less secured.

It would seem that this would force them into proving to a bankruptcy court that they actually have authority which in turn would require them to produce all the documents granting them that authority. It also seems to me that they would have to come up with a full accounting for all payments from all parties, including from credit default swaps, insurance and Federal bailouts.

In the course of the proceedings, your allegation would be that they did in fact receive third party payments as has been widely reported by the press. They would probably answer something like those payments are irrelevant.

Your response to their assertion is to ask the court, who decides whether third party payments are relevant or not — the court or the creditor? The court would most likely order them to disclose all such third party payments along with documentation thereon so that the court could determine whether the payments should be applied to the pools in which the subject mortgage loan is Located” (assuming the assignments are valid), and then in turn determine what percentage of the payment should be allocated to the subject loan.

Upon finding that a portion of those payments should be applied to the subject loan, the declaration of default would be invalid because it would either be wrong inasmuch that the third party payments would at least be prepayments of future monthly payments, or wrong because the third party payments reflected an inaccurate accounting of the principal due.

Comments?

Filed under: bubble, CDO, CORRUPTION, currency, Eviction, expert witness, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud, Servicer | Tagged: , , , , , , , , , , , , | 32 Comments »

Don’t Get “HAMP”ED Out Of Your Home!

Posted on September 3, 2009 by Neil Garfield
By Walter Hackett, Esq.
The federal government has trumpeted its Home Affordable Modification Program or “HAMP” solution as THE solution to runaway foreclosures – few things could be further from the truth.  Under HAMP a homeowner will be offered a “workout” that can result in the homeowner being “worked out” of his or her home.  Here’s how it works.  A participating lender or servicer will send a distressed homeowner a HAMP workout agreement.  The agreement consists of an “offer” pursuant to which the homeowner is permitted to remit partial or half of their regular monthly payments for 3 or more months.  The required payments are NOT reduced, instead the partial payments are placed into a suspense account.  In many cases once enough is gathered to pay the oldest payment due the funds are removed from the suspense account and applied to the mortgage loan.  At the end of the trial period the homeowner will be further behind than when they started the “workout” plan.   

In California, the agreements clearly specify the acceptance of partial payments by the lender or servicer does NOT cure any default.  Further, the fact a homeowner is in the workout program does NOT require the lender or servicer to suspend or postpone any non-judicial foreclosure activity with the possible exception of an actual trustee’s sale.  A homeowner could complete the workout plan and be faced with an imminent trustee’s sale.  Worse, if a homeowner performs EXACTLY as required by the workout agreement, they are NOT assured a loan modification.  Instead the agreement will include vague statements that the homeowner MAY receive an offer to modify his or her loan however there is NO duty on the part of the servicer or lender to modify a loan regardless of the homeowner’s compliance with the agreement. 
 
A homeowner who fully performs under a HAMP workout is all but guaranteed to have given away thousands of dollars with NO assurance of keeping his or her home or ever seeing anything resembling an offer to modify a mortgage loan. 
While it may well be the case the government was making an honest effort to help, the reality is the HAMP program is only guaranteed to help those who need help least – lenders and servicers.  If you receive ANY written offer to modify your loan meet with a REAL licensed attorney and ask them to review the agreement to determine what you are REALLY agreeing to, the home you save might be your own.
 
 
 
 
 
 

 

 

 

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