Customers of Bank of America may have something to smile about finally as 200,000 delinquent Borrowers to Receive Principal Write-Down Offers. Bank of America is wasting little time in getting one of the most popular terms of its recent settlement with the federal government underway. Bank of America sent out more than 200,000 letters this week to delinquent borrowers who where “thought to be eligible for principal-reducing modifications.” The requirements are simply that the homeowner owe more on the mortgage than the property is worth and have been at least 60 days behind on payments at the end of January 2012. If monthly housing costs turn out to be more than a quarter of the homeowner’s gross household income, then they could qualify for savings of 30 percent according to Bank of America estimates. The lender has been working since March on trial modifications that hold the potential to forgive more than $700 million in mortgage debt. However, the trial modifications require three “timely trial payments” before a modification is eligible to become permanent. This has become customary in the industry anyway, so it is not much of a hurdle.
There is one major caveat to this initiative, however: if your loan is serviced by Bank of America but held by Fannie Mae, Freddie Mac, the Federal Housing Administration (FHA), or the Veterans Administration (VA), then it is not eligible for a write-down under the terms of the foreclosure fraud settlement. That represents a lot of loans, but this is still good news for many borrowers. I have several clients in the program, so we will see what happens. Bank of America committed to forgiving $11 billion in total mortgage debt under that settlement, but if all homeowners who receive these letters – and others like them in Q3 2012 – were to receive permanent loan modifications, the actual number might be closer to $30 billion. We can all believe it when we see it!!
Paddy Deighan J.D. Ph.D
Another review of Non Judicial Foreclosure. I have written previously that it is time to review the non-judicial foreclosure process in light of the many valid defenses to foreclosure that exist today. The deprivation of one’s home is the greatest personal financial loss that a person can have and how can we allow non-judicial foreclosure when there are so many home owners that have been harmed by their lender? Said another way, why should we allow banks to get away with the massive fraud that they are perpetrating on the public?
In judicial foreclosure, the distressed home owner has defenses and counter claims that can be heard as part of the foreclosure process. In a judicial foreclosure state (meaning the matter is heard before a judge), if a promissory note or recorded assignment naming the plaintiff is not attached to the complaint, the defendant can file a response stating the plaintiff has failed to state a claim. This can be followed with a motion called a demurrer to the complaint. Different forms of demurrers can be found in legal form books in most law libraries. In essence the demurrer states that even if everything in the complaint were true, the complaint would lack substance because it fails to set out a copy of the note, and it should therefore be dismissed. Ordinarily there is no need to cite much in the way of statutes or case law other than the authority reciting the necessity of showing the note proving the plaintiff is entitled to relief.
However, in non-judicial foreclosure states (such as California) foreclosure is done by a trustee without a court hearing, so the procedure is a bit trickier; but standing to foreclose can still be challenged. If the homeowner has filed for bankruptcy, the proceedings are automatically stayed, requiring the lender to bring a motion for relief from stay before going forward. The debtor can then challenge the lender’s right to the security (the house) by demanding proof of a legal or equitable interest in it. A homeowner facing foreclosure can also get the matter before a court without filing for bankruptcy by filing a complaint and preliminary injunction staying the proceedings pending proof of standing to foreclose. A judge would then have to rule on the merits. A complaint for declaratory relief might also be brought against the trustee, seeking to have its rights declared invalid.
Paddy Deighan J.D. Ph.D