Homeowners strike back at banks: The Daily Tribune

“None of the named defendants have the right or authority to foreclose under (state law) or by contractual right,” he says in the lawsuit.

Published: Tuesday, May 11, 2010

By Jameson Cook, Daily Tribune Staff Writer

Ziyad Kased, left, and May Brikho, both of the Michigan Loan Compliance Advisory Group in Troy, talk to client Mahir “Mark” Salmo, 47, of Sterling Heights, one of 88 plaintiffs in two lawsuits in Oakland and Macomb counties alleging deceptive lending practices against more than two dozen banks. (Craig Gaffield/Daily Tribune)

Lawsuits filed in maneuver to try to stop foreclosure, recover losses from alleged overpayments, improper approval.

About 90 homeowners in Oakland and Macomb counties have accused more than two dozen banks of deceptive lending and other wrongdoing by approving loans far exceeding the plaintiffs’ ability to pay and charging excessive fees, among other allegations.

The accusations are levied in two lawsuits filed in each county’s circuit court within the past two weeks through the Troy-based Michigan Loan Compliance Advisory Group Inc., created to help homeowners in trouble with their mortgages. A third lawsuit with about 10 plaintiffs is expected to be filed in Wayne County Circuit Court this week.

The lawsuits represent an emerging tactic nationwide for struggling homeowners in their attempt to fight off potential foreclosure and gain relief on stifling mortgages from some of the country’s largest banks.

The plaintiffs’ representatives say the banks benefited from federal bailout money while few homeowners are getting help through federal loan modification programs.

“They (the plaintiffs) are victims of deceptive lending. They just want to save their homes,” said May Brikho, senior consultant at Michigan Loan Compliance. “They have tried to reach out to the banks, but the banks just don’t care.”

“The banks created these problems. They should’ve known better. These were all subprime loans. The banks knew they weren’t going to last.”

She noted the ubiquitous effect of the housing crisis. “These are problems that affect everybody.”

Of four banks contacted Thursday, Citimortgage and Bank of America banks indicated they had not been served with one or both lawsuits, so declined comment. Wells Fargo and Chase banks did not respond to a media inquiry.

Joe Bosogno, who operates a similar organization to Michigan Loan Compliance in New Jersey, blames mortgage brokers who worked for banks and mortgage companies for inflating applicants’ income so the mortgages could be sold as an investment device. The sale of subprime loans as investment devices contributed to the nation’s economic collapse.

“This (deceptive lending) was going on all over the country,” Bosogno said. “A number of attorneys are stepping up right now and doing aggregate lawsuits. It’s become a nightmare for the banks.”

Michigan Loan Compliance’s attorney, Ziyad Kased, in the lawsuits calls the banks’ actions “intentional and malicious,” and says the plaintiffs “have suffered substantial economic losses, loss of title and slander of title to the credit rating.”

The lenders “and their underwriters of such loans intentionally deceived the mortgagors by conspiring to promote unaffordable mortgages by companies that had direct ties to investment banks that profited from promoting and selling such debt instruments to innocent investors at everyone’s expense,” Kased said.

The loans depicted in the lawsuits range from $100,000 to $388,000 in Macomb and $87,000 to $809,000 in Oakland, with the bulk ranging from about $150,000 to $350,000.

None of the 88 plaintiffs representing 78 loans in the two counties have yet lost their homes and all are trying to prevent foreclosure. The majority of plaintiffs in Macomb currently reside in homes in Sterling Heights, Warren and Shelby Township. A majority of the Oakland plaintiffs live in West Bloomfield, Commerce Township and Farmington Hills.

The plaintiffs, who obtained the loans between 1995 and 2008, are still making payments despite their struggles.

“We advise our clients to continue to make their payments, but it’s their choice,” Brikho said.

A majority of the plaintiffs emigrated here from the Middle East, and some don’t speak English. Brikho said that while the banks may have taken advantage of that situation, it is only a secondary issue, as many of the plaintiffs are U.S. born.

Michigan Loan Compliance charges clients a fee for services. The organization is also using the courts to help other clients already in a pre-foreclosure fight losing their homes, Brikho said.

Kased said he expects the banks will try to get the cases moved to federal court, where he said bank lawyers believe they can receive better treatment and “drag it out” via legal maneuvers. Kased said he will oppose the transfer. He said he believes the cases should remain in each county since each region’s real estate market differs.

Most of the plaintiffs had their incomes inflated by a substantial amount, Kased said. The industry standard for debt to income ratio is 31 to 38 percent. The ratios of the plaintiffs far exceed that range, going from 68 percent to 714 percent, with most being between 100 and 200 percent in Macomb, and 36 percent to more than 1,000 percent in Oakland, where the differences range wider, several below 100 percent and several above 400 percent, according to the lawsuit.

In many cases, the lender or broker added income of a borrower’s family member who was not part of the loan and/or failed to learn of underreported expenses, Brikho said.

The borrower’s financial situation in most cases has worsened since then, due to job loss or reduction, she said.

One of the plaintiffs is Mahir “Mark” Salmo, 47, of Sterling Heights, and his wife, Thaira. They are suing PNC Bank for the $100,000 loan they received in 1997 before PNC acquired National City Bank.

The bank OK’d Salmo’s loan based on him earning nearly $4,000 per month, he said. In fact, he was earning $1,218 per month, he said.

“They asked me a few personal questions and I answered them,” he said. “I didn’t think I would get it. I couldn’t believe when I got it a couple of days later.”

Salmo in 2003 was given a $250,000 line of credit based only on his high credit score and his home being appraised at $415,000, he said.

He used the money to buy two businesses — a Tubby’s shop in Oak Park and a Wireless Communications store in Sterling Heights. The businesses closed, and Salmo said he lost $300,000.

“I lost both of them because the economy went down,” he said. “I had high rent and couldn’t keep up. I tried to work the landlord, but they wouldn’t budge. Now I have nothing. Everything I have worked for, for 35 years, is gone.”

He is now saddled with an approximately $1,000 monthly payment on the original loan and $600 per month for the equity loan, which is interest-only.

His home value has dropped significantly. He owes $30,000 on the original loan and $230,000 on the second loan.

“I should never have gotten that money,” he said of the second loan. “It’s like a bad dream.”

He said it hurts him most that he can’t financially help his mother, a homeowner who also is a plaintiff.

Salmo is thankful that his wife and three children aged 21 to 24 are working and supporting him, allowing him to make payments.

Salmo, a Chaldean, has lived in the United States for 35 years and said he still loves America despite his problems.

“This is the greatest country in the world,” he said.

Salmo’s interest-only loan is an example of how the banks committed homeowners to mortgages they eventually wouldn’t be able to honor; the real estate bubble that was bound to burst, Sosogno said.

Bosogno said a worse option given to some homeowners, including at least one in the Macomb lawsuit, was “negative amortization” mortgages in which the balance actually increases despite payments.

On top of the original loans, 22 plaintiffs in the Macomb case and 26 in the Oakland case obtained second loans that also were awarded deceptively, the lawsuit says.

The lawsuits ask the judges to make the mortgages “null and void.” Kased argues that the courts have determined that the mortgages should not have been assigned, so the mortgage note holders “in reality own nothing.”

“None of the named defendants have the right or authority to foreclose under (state law) or by contractual right,” he says in the lawsuit.

The plaintiffs allege the banks charged “outrageous” fees for origination, loan discount, appraisal, document preparation, broker processing, lender underwriting and yield to premium, “to name a few,” the lawsuit says. APPRAISAL FRAUD??

The plaintiffs, according to the lawsuit, “were never advised of the split charges and excess interest rate differentials split between the broker and the original lender, they were not informed of various costs that were overinflated as shown on the HUD settlement statements.”

The plaintiffs also weren’t told details of variable rate loans, the lawsuit says.

In years after the mortgage was executed, the defendants failed to respond to the “qualified written request” complaint as required by law to do so, the lawsuit says.

The lawsuit seeks compensatory damages for actual loses and exemplary damages for experiences such as mental anguish and humiliation.

The Macomb case was assigned to Judge John Foster and the Oakland case was assigned to Judge Colleen O’Brien.

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