CALIFORNIA: NEW BILL SB 1275 May allow homeowners to REVERSE FORECLOSURE SALES due to SERVICER’S ERRORS

Carrie Bay 6/4/2010 DSNEWS

The California Senate approved a new foreclosure bill on Thursday with a 21 to 12 vote and sent it on to the Assembly for review. The legislation lays out two major provisions intended to deter lax behavior on the part of servicers and prevent avoidable foreclosures in the state, which continues to post one of the nation’s highest foreclosure rates.

The bill would provide a means of recourse to homeowners whose homes were lost to foreclosure due to serious servicer errors, and it would prohibit servicers from starting the foreclosure process until a homeowner has received a final decision on their modification.

According to a statement from the Center for Responsible Lending (CRL), confusion and errors that cost Californians their homes, are devastating to the state’s housing market, but are avoidable.

If a borrower’s home is sold in foreclosure due to servicer error, there is currently no means by which to seek recourse. The bill, SB 1275, authored by Sen. Mark Leno (D-San Francisco) and Senate President Pro Tem Darrell Steinberg (D-Sacramento), seeks to change this by providing recourse through what is known as a private right of action.

This would allow eligible homeowners to seek limited damages which are directly related to the severity of the servicer’s errors, or, in some cases, would allow the homeowner to reverse the foreclosure sale.

During earlier committee hearings for SB 1275, servicers acknowledged that confusion and errors are commonplace. According to CRL, Bank of America executive Jack Schackett even admitted during a conference call that they “have not handled [their] customers to the standards Bank of America is accustomed to.”

“It’s unacceptable that when servicers lose faxes and lose payments, some Californians lose their homes,” said Caryn Becker, policy counsel with the CRL California office. “At nearly 1 million foreclosures and counting, we need to prevent every unnecessary foreclosure we can.”

Speaking in support of the bill’s passage, CRL said homeowners who have been wronged deserve the opportunity to make it right, but the organization says the legislation continues to face some opposition from Assembly members who oppose allowing California homeowners to pursue claims against their lenders and servicers.

SB 1275 would also prohibit servicers from foreclosing on homeowners who have requested modifications until a decision has been made, and the homeowner has been notified.

CRL says currently, servicers are initiating the foreclosure process even when borrowers are working to reach a resolution, including when homeowners are following all the rules to seek a loan modification, or are already making payments on a trial modification.

“Simple fairness dictates that no one should lose their home while they are in the middle of trying to save it,” said Paul Leonard, director of the California office of the Center for Responsible Lending. “A foreclosure that starts because a servicer’s left hand doesn’t know what the right hand is doing is the most preventable foreclosure of all.”

SB 1275 will be heard by the Assembly Banking Committee before it goes to the full Assembly for a vote. Assembly members are currently considering a separate bill, AB 1639, that would mandate foreclosure mediation through a new Facilitated Mortgage Workout (FMW) program, which would require lenders to meet with delinquent borrowers to try and devise an alternative plan of action before proceeding with foreclosure.

DO YOU HAVE A FANNIE MAE LOAN?

Fannie Mae Announces its Own Foreclosure Prevention Plan Under HAFA

by AUSTIN KILGORE HousingWire

Tuesday, June 1st, 2010, 5:07 pm

[Update 1: Corrects current cash incentives for Treasury HAFA]

Fannie Mae (FNM: 0.94 -2.08%) announced its version of the Making Home Affordable Foreclosure Alternatives (HAFA) program Tuesday, implementing the program for all conventional mortgages that are held in Fannie’s portfolio, that are part of an mortgage-backed security (MBS) pool with a special servicing option, or that are part of a shared-risk MBS pool for which Fannie Mae markets the acquired property.

The Fannie Mae program takes effect August 1, 2010 and is designed to mitigate the impact of foreclosures on borrowers who are eligible for a loan modification under the Home Affordable Modification Program (HAMP) but were unsuccessful in obtaining one, Fannie said. Like the Treasury Department‘s HAFA program, servicers cannot consider a borrower for HAFA until the borrower is evaluated and eliminated from eligibility for a Making Home Affordable Modification Program (HAMP) workout plan.

Also like the Treasury program, Fannie Mae will offer servicers cash incentives for completed HAFA transactions, $2,200 for short sales and $1,200 for deed-in-lieu of foreclosure agreements. Borrowers are also eligible for $3,000 in incentives.

That’s more than in the Treasury’s HAFA program, where servicers are eligible for $1,500. Under the Treasury program, borrowers receive $3,000. In addition, the investor is also eligible for a maximum of $2,000 incentive.

Participating servicers will be required to report on their Fannie Mae HAFA activities to both Fannie and the Treasury and the program sunsets on December 31, 2012.

After announcing the program in October 2009, Treasury’s HAFA program began in April. The Fannie Mae HAFA program is the latest in a string of programs designed to help borrowers avoid foreclosure. In addition to HAFA and HAMP workouts, Fannie Mae is letting some distressed borrowers stay in their homes as renters, under the deed for lease (D4L) program.

Under D4L, the homeowner-turned-renter is required to pay fair market rent to stay in their home for up to 12 months. The renter must have enough income to sustain a 31% income-to-rent ratio and rental payments are not subsidized by Fannie Mae, but could include renters eligible for Section 8 payments.

Also, in March 2010, Fannie Mae instructed its servicers to consider an “alternative modifications” for all mortgages that did not qualify for a permanent conversion under HAMP. That “Alt Mod” program, which sunsets on August 31, 2010, is similar to HAFA.

Write to Austin Kilgore.

The author held no relevant investments.

U.S. Banks WILL BE ‘Toast’ If Struggling Homeowners Keep Walking Away (VIDEO)

Huffington Post | Sherry Shen First Posted: 06- 2-10 05:11 PM | Updated: 06- 2-10 05:11 PM

click for video

Reuters blogger Felix Salmon believes that if more and more struggling homeowners continue walking away from their homes, U.S. banks could be “toast.”

As strategically defaults continue to rise, some homeowners are using their inability to pay their mortgage to live rent free — often for more than a year, the New York Times reported.

“Trying to renegotiate your mortgage is not a morally reprehensible thing to do,” Salmon said, pointing out that mainstream media organization’s like the New York Times magazine has been publishing columns about this trend and how it makes so much “financial sense.” Corporations walk away from commercial mortgages, Salmon said. “It’s not clear to me why an individual should behave any different,” Salmon said.

Wells Fargo is most exposed to the trend, affecting the bank’s livelihood. “Sand state” banks such as those in Florida and California are also far more exposed. Here’s more from Salmon:

“From the bank’s point of view, if this catches on, there’s a very large number of banks in this country who are just toast. And in hindsight they were just much better off dealing in a realistic way with these borrowers a year ago or two years ago when the problem first reeled its head instead of extending and pretending. Now they are in a pickle.”

“If this trend continues, then the banking system is probably insolvent,” he said.

RUN DON’T WALK AWAY! THE BANKS ARE BEGINNING TO FEEL IT!

If they had listened to us from the very beginning they would not have this problem. The FACT is that they suck and they don’t give a whoots ass about it’s customers. So one has to stand up to them and tell them… We are sick entired of being sick entired!

Maybe this will make you think twice about approving short sales and modifications much faster in the future. Regardless people READ what they put in front of you and DO NOT sign away any waiver to sue!

BofA: Mortgage Walkaways Have Huge Incentive

Published: Wednesday, 2 Jun 2010 | 1:14 PM ET

By: Diana Olick
CNBC Real Estate Reporter

This morning executives at Bank of America [BAC  15.90   0.46  (+2.98%)   ] rolled out their new “Principal Reduction Enhancement” program, which is an earned principal forgiveness plan for borrowers behind on their mortgages and whose loans are at least 20 percent underwater in value.

The plan is in conjunction with the government’s Home Affordable Modification Program, but the government’s principal reduction plan isn’t in place yet.

What makes BofA’s plan so proactive is that it employs, “a principal reduction as the first step toward reaching HAMP’s affordable payment target of 31 percent of household income when modifying certain NHRP-eligible mortgages — ahead of lowering the interest rate and extending the term.”

Why are they getting more aggressive on modifications?

Because more borrowers are walking away. Yes, I know we’ve talked about this forever on this blog and on CNBC, and the New York Times did a piece yesterday on it, and 60 Minutes did a piece on it a few weeks ago. The fact of the matter is it’s getting worse, and B of A execs are acknowledging that openly.

On the conference call to announce the program this morning, BofA’s credit loss mitigation executive, Jack Schakett, said the amount of strategic defaulters (those who can pay their loans but opt not to) are “more than we have ever experienced before.” He went on to say, “there is a huge incentive for customers to walk away because getting free rent and waiting out foreclosure can be very appealing to customers.”

Schakett says the foreclosure process is still taking 13 to 14 months (and by my estimates that’s an optimistic assessment), and so there’s over a year of free rent. While the banks are trying to improve the time, they’re just not there yet. DinSFLA: Perhaps because the longer it takes, the more the servicer makes! Even longer to have had a short sale approved.

31 percent of foreclosures in March were deemed to be “strategic default” by researchers at University of Chicago and Northwestern University.

That’s up from 22 percent in March of 2009.

We already know that mortgage walkaways are more prevalent among borrowers whose neighbors or friends have done the same thing.

We also learn from those same researchers that the likelihood of walking away increases by 23 percent when homeowners learn that a neighbor got some principal forgiveness.

I’ll let you all argue that one.

© 2010 CNBC, Inc. All Rights Reserved

Mandelman on LPS, DJSP Ent. & Altisource – Nina Easton’s HOT Stocks for Homeowners Losing Homes

Via: Mandelman Matters

(Only in America… Nina Easton.  More on that in a moment.)

The New York Post is reporting that a new gold rush is sweeping the country and it’s all about… are you ready for this… “people looking to get fat off of the $4 billion home foreclosure industry”.

Apparently, in the last two years four companies have either gone public or are about to go public, and each is looking to raise the cash they need to become a “national powerhouse” in the business of providing “streamlined and low-cost methods” for kicking people out of their homes.

According to the Post, “there are currently 6 million homeowners 60 days or more delinquent on their mortgage,” which makes these companies very attractive to investors.

These companies, DJSP Enterprises, whose revenues have increased by 31% over the last year, Altisource Portfolio Solutions, with its 182 percent increase in profits last year, and of course, Lender Processing Services, a company with $2.4 billion in revenue up 29 percent last year — all offer technology linking lenders with law firms in order to reduce the cost and streamline the process of foreclosing on homes and evicting their ex-owners.

Oh, and let’s not forget Prommis Solutions, which turned a $7.9 million profit in 2009 and has filed to go public.

Now, Lender Processing Services is the parent company of DocX, a company that one of the companies under investigation by the Florida Attorney General’s office for being in the business of creating fraudulent documents used in foreclosure proceedings when the servicer doesn’t have any paperwork showing that the trust actually holds the mortgage.

But, LPS doesn’t seem terribly concerned about that investigation, or any of the others that threaten to expose this company for wrongdoing.  They say it’s all just a mix-up… funny story, that sort of thing.  Here’s the company’s CEO on May 20th:

LPS’ CEO Jeffrey Carbiener said “our earnings are quality earnings. They translate into cash flow.  LPS generated $349 million in cash last year.”

LPS provides all levels of mortgage default services services for when a loan goes bad.  “Because we have a strong business model, we’re able to weather economic challenges,” Carbiener said.  LPS’s growth is continuing into 2010, with first-quarter revenue up 11.8 percent and adjusted earnings up 26.5 percent.

“We’ve had good success and we expect that success to continue into the future,” Carbiener said.

These types of companies get fees from the lenders on each property, and from the law firms that file the foreclosure actions. So, their prospectuses warn investors:

“A turnaround in the housing market or additional mortgage-modification plans from Washington may negatively impact our profits.”

Well, there’s not much to worry about in either of those regards, at this point anyway.  But, I suppose there is always the risk that there could be an outbreak of competence in Washington.  Still… I’d probably go long at this point.

As long as our economy continues to sink into an abyss, any of these companies is poised to become the next Microsoft, but God forbid our elected representatives actually figure something out and we start to see stabilization in the housing market, leading to a real recovery, well… better sell these stocks short and fast, ‘cause the better things get the worse they’ll do.

The whole thing got me to thinking… this must be awfully confusing to John Paulsen and the guys at Goldman.  They want to short the housing market in every possible way, but to do that in this case, they have to go long.  I’ll bet some traders have become dizzy and maybe even passed out just thinking about that.

A Goldman Trader: “What do I do again?  I need 3.5 million shares short… no, long… no, short… no, damnit!”

So, if you’re a homeowner at risk of losing your home to foreclosure, or even if you’re not looking at foreclosure, but just can’t stand the thought of watching another hundred grand in equity go up in smoke, I have some important investment advice for 2010 and 2011 that you’ll want to hear.

Why not consider strategically defaulting on your underwater mortgage in order to start dollar cost averaging into this brand new and exciting offering:

Nina Easton’s

Empty Homes Hi-Yield Bond Fund

To learn more about Nina’s role in the foreclosure crisis, click where her name appears in orange above.

The fund’s objective is to acquire significant positions in bonds issued by growth companies that are positioned to capitalize on the emerging and exciting multi-billion dollar foreclosure industry.  The fund’s investment strategy focuses on:

• Technologies that enable faster, high-quality document forgeries.
• Property preservation companies that throw people out first time, every time.
• Title insurance companies that don’t care who owns the property.
• Lock-Box and REO-FOR-SALE sign manufacturers.
• Home auction companies.
• Firms that lobby on behalf of the banking industry.
• And, of course, the makers of Xanax and Ativan.

People, this is a once in a lifetime investment opportunity to place a bet on our growing foreclosure industry, supported by the total and ongoing incompetence of our government!  And that’s not all…

In order to hedge your position in Nina’s Empty Homes Hi-Yield Bond Fund, or for those of you who think the administration and other branches government may at some point actually start getting something right, I’m also working on getting the Obama Administration to agree to be a counterparty in credit default swaps related to certificate holders in Nina Easton’s Empty Homes Hi-Yield Bond Fund.

Nothing is definite at this point, but I think it’s important that dumb money be able to short our multi-billion dollar foreclosure industry, so for those that think the foreclosure crisis will be ending soon, stand by because my soon to be available Obama Competence Credit Default Swaps should be available soon.  That’s right, you can sell the foreclosure industry short when you invest in Obama Competence Credit Default Swaps.

Plenty of Upside Remaining…

Some have said…

“But Nina… we’ve already lost 7 million homes to foreclosure.  Haven’t I already missed out on my chance to profit from this exciting opportunity?”

No, no… silly human… there’s plenty of upside remaining in the foreclosure market.  Housing prices are still in a free fall, foreclosures are still coming in at over 300,000 a month, and we’re on the fifteenth straight month at those levels.

There are 6 million people more than 60 days delinquent on their mortgages right now, and Goldman Sachs forecasts 14 million more foreclosures in the next five years!  And don’t forget… the good news is that the ALT-A and Option ARM loans that haven’t even started adjusting yet!

Unemployment?  Fuggetaboutit!  I mean, no one is even trying to fix that anymore!  We’ve got more people unemployed for more than 30 weeks than since before I was born, and at this point our only strategy is to report made up numbers generated by the Bureau of Labor Statistics.  I think it’s pretty safe to say that it’s all downhill from here!

So, worry not.  It’s not at all too late for you to get involved and make your fortune in the fast-paced and exciting foreclosure industry, because there’s plenty of upside left in the American foreclosure market.  Let’s see the Chinese beat us at this!  No chance… they won’t even try.

And the people trying to stop this foreclosure thing… please.  Here’s what Nina Easton wrote in her blog about a demonstration near her home:

Now this event would accurately be called a “protest”; if it were taking place at, say, a bank or the U.S. Capitol. But when hundreds of loud and angry strangers are descending on your family, your children, and your home, a more apt description of this assemblage would be ‘mob.’

You tell ‘em Nina!

Others ask…

“Nina, I heard HAMP was doing better at modifying loans lately.  Is this something I should be concerned about?”

I wouldn’t be the least bit concerned, and here’s why…

First of all, you’d have to believe that the government’s program will actually continue to show improvement, and at this point, there’s very little evidence upon which to base that sort of assumption.

As of right now, there have been about the same number of homeowners kicked out of HAMP as have received permanent modifications, and don’t forget there are still more than 600,000 homeowners stuck in the purgatory that the government refers to as a “trial modification,” so look for at least a few hundred thousand more foreclosures there, for sure!

It really is an exciting time to be investing in the foreclosure industry in this country, and there’s no better way than through Nina Easton’s Empty Homes Hi-Yield Bond Fund.

Now, it is true that HAMP, as of June 1^st, will start requiring homeowners to verify their incomes prior to being placed into a trial modification, and the early indications are that a much higher percentage of homeowners will ultimately be granted permanent modifications in future months as a result of this new requirement.

Big deal… The numbers of homeowners entering the program declined dramatically as soon as the servicers started asking for proof of income in advance of being granted a trial modification, so even if this does make HAMP incrementally better, it won’t come close to touching the more than 300,000 new foreclosures occurring each month in this country!  How could you ask for better fundamentals than that?

And the best part is… you can still rely on the fact that HAMP is “VOLUNTARY” as far as the banks and servicers are concerned!

So, relax… you don’t think the banks and servicers are going to do anything to stop foreclosures, do you?  Of course not!  And it’s still… ALL UP TO THEM!

If there’s one thing you can depend on, it’s that the banks and servicers will continue to fuel the foreclosure industry’s growth, so with the government allowing the banks total discretion on all foreclosure decisions, investing in Nina Easton’s Empty Homes Hi-Yield Bond Fund is a safe bet and a sure winner.  It’s like we’ve got Colonel Sanders guarding the chickens, if you know what I mean.

Barring some totally unforeseen change in the administration, like Paul Volker being taken seriously, Bernanke allowing us to audit the Fed, Tim Geithner turning on his banking buddies on Wall Street, or Liz Warren being given teeth, there’s no way Obama’s Making Home Affordable program is going to address the millions more homes that will be lost as a result of the foreclosure crisis.

And come on… I understand that past performance is no assurance of future results, but Volker taken seriously?  Geithner turning on Wall Street?  Liz Warren being given teeth?  Bernanke letting anyone inside the Fed?  HAHAHAHAHA… I know… anything can happen, but come on… it’s like thinking that maybe the banksters are going to wake up one morning afraid of Obama.  Come on… you’re killing me… not in this lifetime, baby!

No, folks… the good news for our emerging foreclosure industry, and for Nina Easton’s new Empty Homes Hi-Yield Bond Fund, is that our government has failed at every single turn in trying to stem the tide of foreclosures in this country, and there’s no reason to believe they’re going to be any more competent in the future!

Some say that America has lost its leadership position in the world, but I don’t believe that for a second, and I think we’re already proving it with our clear dominance in the foreclosure industry.  There’s no other country on the globe that has anywhere near as vibrant a foreclosure industry as we do here in the good old U.S.A.

We’re the dominant world leader in foreclosure production, and with nothing in place to stimulate economic growth, nothing even on the drawing board to reverse the trends in unemployment, and all of our money and then some going to prop up failed financial institutions that remain insolvent, how can anyone not think that we will maintain our leadership position as the foreclosure capital of the free world?

And don’t worry about all these pesky demonstrations by homeowners.  Like Nina wrote in her blog last week about the unwashed masses that were demonstrating in front of her house, just because her neighbor works for some bank:

Waving signs denouncing bank ‘greed,’ hordes of invaders poured out of 14 school buses,” childishly putting “greed” in quotes as if referring to unicorns, hobbits, or some other imaginary entity.

Ooooh, snap!  We love you Nina!

So, don’t miss out on the opportunity to go long on the promise of our government’s ongoing incompetence by investing in Nina Easton’s Empty Homes Hi-Yield Bond Fund today!

Disclaimer: Past incompetence is no assurance of continued ineptitude, or future ineffectiveness.

Don’t worry about not having any money left in your IRA or 401(k), many of our investors simply stop making mortgage payments and then invest those amounts in the fund each month.  We even offer direct deposit, so you can just call your bank where your mortgage payments are automatically going now, and have them redirected toNina Easton’s Empty Homes Hi-Yield Bond Fund!

It’s that simple!  Why not start rooting for more foreclosures today?

Isn’t it time to get on the right side of this foreclosure crisis thing, by investing on the winning side!  Sure you may lose a house or two, but so what?  You’re so far underwater that the only difference between you and a renter is that a renter has more rights and can’t be evicted as quickly.

Besides with the money you’ll make investing in my new Empty Homes Hi-Yield Bond Fund, soon you’ll not only be able to buy the home across the street for half the price, you’ll be able to pay  cash!

For more information, call:

1-800-4-EMPTY-HOMES

Or send email to:

invest@throwthemouttoday.com

Operators are standing by to take your call.

~~~~~~~~~~~~

IMPORTANT DISCLAIMERS:

The Empty Homes Hi-Yield Bond Fund is not registered with FINRA or the SIPC, but so what, neither are trillions in derivatives.

Although current personnel working for the administration can be counted on as entirely lacking in ability or skill, theEmpty Homes Hi-Yield Bond Fund makes no assurances pertaining to the stupidity or utter uselessness of those who may work for the administration in the future.

In the event of an outbreak of competence in Washington D.C. investors should recognize that they could lose their investment in the Empty Homes Hi-Yield Bond Fund, although at this point, the FUND’s management believes that statistically this risk falls somewhere between the risk of shark attack in Indiana, and being killed by falling airplane parts while shopping at an indoor mall.

Nina Easton’s

Empty Homes Hi-Yield Bond Fund

Your Ticket to Winning Our Nation’s Race to the Bottom

Fictional Securities Not Offered by Mandelman Matters.  This, of course, was a joke.  Except for the stuff at the top about the companies like Lender Processing Services… that stuff is real, and should make you want to throw up.  Oh, and the stuff about Nina Easton was real too, and I can’t decide whether to ignore her, or write something about her every single day for the rest of my life.

Bank of America RECORDED CALL regarding FORECLOSURE FRAUD *MUST LISTEN*

I think this is what WE all go through!

jwerner79 — April 25, 2009 — This call happened 4/24/09 whereas a Countrywide representative called me, Jason Werner, literally while I was driving home from a pre-mediation conference. The loan amount is less than $50,000. This is a good example of a crime trying to be covered by the Treasury. Please see my comments to follow. Thank you.

FORECLOSURE…THE NEW “IT” THING? OWNERS STOP PAYING THE MORTGAGE…FANTASTIC!

Can you imagine if everyone just stopped paying that thing called mortgage but kept up with homeowners/condo associations (because these can foreclose faster than you can blink) Oh what a wonderful world!

This article really does not portray the majority. Some don’t have a job period! If you can… get a great attorney, a loan audit and the lender to the table!

Owners Stop Paying Mortgage … and Stop Fretting About It

Chip Litherland for The New York Times Wendy Pemberton, a barber in Florida, with a customer, Howard Cook. She stopped paying her mortgage two years ago.

By DAVID STREITFELD NYTIMES
Published: May 31, 2010

ST. PETERSBURG, Fla. — For Alex Pemberton and Susan Reboyras, foreclosure is becoming a way of life — something they did not want but are in no hurry to get out of.

Foreclosure has allowed them to stabilize the family business. Go to Outback occasionally for a steak. Take their gas-guzzling airboat out for the weekend. Visit the Hard Rock Casino.

Chip Litherland for The New York Times Alex Pemberton and Susan Reboyras stopped paying the mortgage on their house in St. Petersburg, Fla., last summer.

“Instead of the house dragging us down, it’s become a life raft,” said Mr. Pemberton, who stopped paying themortgage on their house here last summer. “It’s really been a blessing.”

A growing number of the people whose homes are in foreclosure are refusing to slink away in shame. They are fashioning a sort of homemade mortgage modification, one that brings their payments all the way down to zero. They use the money they save to get back on their feet or just get by.

This type of modification does not beg for a lender’s permission but is delivered as an ultimatum: Force me out if you can. Any moral qualms are overshadowed by a conviction that the banks created the crisis by snookering homeowners with loans that got them in over their heads.

“I tried to explain my situation to the lender, but they wouldn’t help,” said Mr. Pemberton’s mother, Wendy Pemberton, herself in foreclosure on a small house a few blocks away from her son’s. She stopped paying her mortgage two years ago after a bout with lung cancer. “They’re all crooks.”

Foreclosure procedures have been initiated against 1.7 million of the nation’s households. The pace of resolving these problem loans is slow and getting slower because of legal challenges, foreclosure moratoriums, government pressure to offer modifications and the inability of the lenders to cope with so many souring mortgages.

The average borrower in foreclosure has been delinquent for 438 days before actually being evicted, up from 251 days in January 2008, according to LPS Applied Analytics.

While there are no firm figures on how many households are following the Pemberton-Reboyras path of passive resistance, real estate agents and other experts say the number of overextended borrowers taking the “free rent” approach is on the rise.

There is no question, though, that for some borrowers in default, foreclosure is only a theoretical threat for a long time.

More than 650,000 households had not paid in 18 months, LPS calculated earlier this year. With 19 percent of those homes, the lender had not even begun to take action to repossess the property — double the rate of a year earlier.

In some states, including California and Texas, lenders can pursue foreclosures outside of the courts. With the lender in control, the pace can be brisk. But in Florida, New York and 19 other states, judicial foreclosure is the rule, which slows the process substantially.

In Pinellas and Pasco counties, which include St. Petersburg and the suburbs to the north, there are 34,000 open foreclosure cases, said J. Thomas McGrady, chief judge of the Pinellas-Pasco Circuit. Ten years ago, the average was about 4,000. “The volume is killing us,” Judge McGrady said.

Mr. Pemberton and Ms. Reboyras decided to stop paying because their business, which restores attics that have been invaded by pests, was on the verge of failing. Scrambling to get by, their credit already shot, they had little to lose.

“We could pay the mortgage company way more than the house is worth and starve to death,” said Mr. Pemberton, 43. “Or we could pay ourselves so our business could sustain us and people who work for us over a long period of time. It may sound very horrible, but it comes down to a self-preservation thing.”

They used the $1,837 a month that they were not paying their lender to publicize A Plus Restorations, first with print ads, then local television. Word apparently got around, because the business is recovering.

The couple owe $280,000 on the house, where they live with Ms. Reboyras’s two daughters, their two dogs and a very round pet raccoon named Roxanne. The house is worth less than half that amount — which they say would be their starting point in future negotiations with their lender.

“If they took the house from us, that’s all they would end up getting for it anyway,” said Ms. Reboyras, 46.

One reason the house is worth so much less than the debt is because of the real estate crash. But the couple also refinanced at the height of the market, taking out cash to buy a truck they used as a contest prize for their hired animal trappers.

Chip Litherland for The New York Times Mark P. Stopa is a lawyer who says he has 350 clients in foreclosure, each paying him $1,500 a year in fees.

It was a stupid move by their lender, according to Mr. Pemberton. “They went outside their own guidelines on debt to income,” he said. “And when they did, they put themselves in jeopardy.”

His mother, Wendy Pemberton, who has been cutting hair at the same barber shop for 30 years, has been in default since spring 2008. Mrs. Pemberton, 68, refinanced several times during the boom but says she benefited only once, when she got enough money for a new roof. The other times, she said, unscrupulous salesmen promised her lower rates but simply charged her high fees.

Even without the burden of paying $938 a month for her decaying house, Mrs. Pemberton is having a tough time. Most of her customers are senior citizens who pay only $8 for a cut, and they are spacing out their visits.

“The longer I’m in foreclosure, the better,” she said.

In Florida, the average property spends 518 days in foreclosure, second only to New York’s 561 days. Defense attorneys stress they can keep this number high.

Both generations of Pembertons have hired a local lawyer, Mark P. Stopa. He sends out letters — 1,700 in a recent week — to Floridians who have had a foreclosure suit filed against them by a lender.

Even if you have “no defenses,” the form letter says, “you may be able to keep living in your home for weeks, months or even years without paying your mortgage.”

About 10 new clients a week sign up, according to Mr. Stopa, who says he now has 350 clients in foreclosure, each of whom pays $1,500 a year for a maximum of six hours of attorney time. “I just do as much as needs to be done to force the bank to prove its case,” Mr. Stopa said.

Many mortgages were sold by the original lender, a circumstance that homeowners’ lawyers try to exploit by asking them to prove they own the loan. In Mrs. Pemberton’s case, Mr. Stopa filed a motion to dismiss on March 17, 2009, and the case has not moved since then. He filed a similar motion in her son’s case last December.

From the lenders’ standpoint, people who stay in their homes without paying the mortgage or actively trying to work out some other solution, like selling it, are “milking the process,” said Kyle Lundstedt, managing director of Lender Processing Service’s analytics group. LPS provides technology, services and data to the mortgage industry.  DinSFLA: WHAT AN IDIOTIC THING TO SAY! Who is exactly milking what??

These “free riders” are “the unintended and unfortunate consequence” of lenders struggling to work out a solution, Mr. Lundstedt said. “These people are playing a dangerous game. There are processes in many states to go after folks who have substantial assets postforeclosure.” DinSFLA: I invite you Mr. Lundstedt to look over this blog and see your “Free Riders”. SIR!

But for borrowers like Jim Tsiogas, the benefits of not paying now outweigh any worries about the future.

“I stopped paying in August 2008,” said Mr. Tsiogas, who is in foreclosure on his house and two rental properties. “I told the lady at the bank, ‘I can’t afford $2,500. I can only afford $1,300.’ ”

Mr. Tsiogas, who lives on the coast south of St. Petersburg, blames his lenders for being unwilling to help when the crash began and his properties needed shoring up.

Their attitude seems to have changed since he went into foreclosure. Now their letters say things like “we’re willing to work with you.” But Mr. Tsiogas feels little urge to respond.

“I need another year,” he said, “and I’m going to be pretty comfortable.”

Tracking Loans Through a Firm That Holds Millions: MERS

Kevin P. Casey for The New York Times: Darlene and Robert Blendheim of Seattle are struggling to keep their home after their subprime lender went out of business.

By MIKE McINTIRE NYTimes
Published: April 23, 2009

Judge Walt Logan had seen enough. As a county judge in Florida, he had 28 cases pending in which an entity called MERS wanted to foreclose on homeowners even though it had never lent them any money.

GraphicInto the Mortgage Netherworld

MERS, a tiny data-management company, claimed the right to foreclose, but would not explain how it came to possess the mortgage notes originally issued by banks. Judge Logan summoned a MERS lawyer to the Pinellas County courthouse and insisted that that fundamental question be answered before he permitted the drastic step of seizing someone’s home.

Daniel Rosenbaum for The New York Times R. K. Arnold, MERS president, said the company helped reduce mortgage fraud and imposed order on the industry.

“You don’t think that’s reasonable?” the judge asked.

“I don’t,” the lawyer replied. “And in fact, not only do I think it’s not reasonable, often that’s going to be impossible.”

Judge Logan had entered the murky realm of MERS. Although the average person has never heard of it, MERS — short for Mortgage Electronic Registration Systems — holds 60 million mortgages on American homes, through a legal maneuver that has saved banks more than $1 billion over the last decade but made life maddeningly difficult for some troubled homeowners.

Created by lenders seeking to save millions of dollars on paperwork and public recording fees every time a loan changes hands, MERS is a confidential computer registry for trading mortgage loans. From an office in the Washington suburbs, it played an integral, if unsung, role in the proliferation of mortgage-backed securities that fueled the housing boom. But with the collapse of the housing market, the name of MERS has been popping up on foreclosure notices and on court dockets across the country, raising many questions about the way this controversial but legal process obscures the tortuous paths of mortgage ownership.

If MERS began as a convenience, it has, in effect, become a corporate cloak: no matter how many times a mortgage is bundled, sliced up or resold, the public record often begins and ends with MERS. In the last few years, banks have initiated tens of thousands of foreclosures in the name of MERS — about 13,000 in the New York region alone since 2005 — confounding homeowners seeking relief directly from lenders and judges trying to help borrowers untangle loan ownership. What is more, the way MERS obscures loan ownership makes it difficult for communities to identify predatory lenders whose practices led to the high foreclosure rates that have blighted some neighborhoods.

In Brooklyn, an elderly homeowner pursuing fraud claims had to go to court to learn the identity of the bank holding his mortgage note, which was concealed in the MERS system. In distressed neighborhoods of Atlanta, where MERS appeared as the most frequent filer of foreclosures, advocates wanting to engage lenders “face a challenge even finding someone with whom to begin the conversation,” according to a report by NeighborWorks America, a community development group.

To a number of critics, MERS has served to cushion banks from the fallout of their reckless lending practices.

“I’m convinced that part of the scheme here is to exhaust the resources of consumers and their advocates,” said Marie McDonnell, a mortgage analyst in Orleans, Mass., who is a consultant for lawyers suing lenders. “This system removes transparency over what’s happening to these mortgage obligations and sows confusion, which can only benefit the banks.”

A recent visitor to the MERS offices in Reston, Va., found the receptionist answering a telephone call from a befuddled borrower: “I’m sorry, ma’am, we can’t help you with your loan.” MERS officials say they frequently get such calls, and they offer a phone line and Web page where homeowners can look up the actual servicer of their mortgage.

In an interview, the president of MERS, R. K. Arnold, said that his company had benefited not only banks, but also millions of borrowers who could not have obtained loans without the money-saving efficiencies it brought to the mortgage trade. He said that far from posing a hurdle for homeowners, MERS had helped reduce mortgage fraud and imposed order on a sprawling industry where, in the past, lenders might have gone out of business and left no contact information for borrowers seeking assistance.

“We’re not this big bad animal,” Mr. Arnold said. “This crisis that we’ve had in the mortgage business would have been a lot worse without MERS.”

About 3,000 financial services firms pay annual fees for access to MERS, which has 44 employees and is owned by two dozen of the nation’s largest lenders, including Citigroup, JPMorgan Chase and Wells Fargo. It was the brainchild of the Mortgage Bankers Association, along with Fannie Mae, Freddie Mac and Ginnie Mae, the mortgage finance giants, who produced a white paper in 1993 on the need to modernize the trading of mortgages.

At the time, the secondary market was gaining momentum, and Wall Street banks and institutional investors were making millions of dollars from the creative bundling and reselling of loans. But unlike common stocks, whose ownership has traditionally been hidden, mortgage-backed securities are based on loans whose details were long available in public land records kept by county clerks, who collect fees for each filing. The “tyranny of these forms,” the white paper said, was costing the industry $164 million a year.

“Before MERS,” said John A. Courson, president of the Mortgage Bankers Association, “the problem was that every time those documents or a file changed hands, you had to file a paper assignment, and that becomes terribly debilitating.”

Although several courts have raised questions over the years about the secrecy afforded mortgage owners by MERS, the legality has ultimately been upheld. The issue has surfaced again because so many homeowners facing foreclosure are dealing with MERS.

Advocates for borrowers complain that the system’s secrecy makes it impossible to seek help from the unidentified investors who own their loans. Avi Shenkar, whose company, the GMA Modification Corporation in North Miami Beach, Fla., helps homeowners renegotiate mortgages, said loan servicers frequently argued that “investor guidelines” prevented them from modifying loan terms.

“But when you ask what those guidelines are, or who the investor is so you can talk to them directly, you can’t find out,” he said.

MERS has considered making information about secondary ownership of mortgages available to borrowers, Mr. Arnold said, but he expressed doubts that it would be useful. Banks appoint a servicer to manage individual mortgages so “investors are not in the business of dealing with borrowers,” he said. “It seems like anything that bypasses the servicer is counterproductive,” he added.

When foreclosures do occur, MERS becomes responsible for initiating them as the mortgage holder of record. But because MERS occupies that role in name only, the bank actually servicing the loan deputizes its employees to act for MERS and has its lawyers file foreclosures in the name of MERS.

The potential for confusion is multiplied when the high-tech MERS system collides with the paper-driven foreclosure process. Banks using MERS to consummate mortgage trades with “electronic handshakes” must later prove their legal standing to foreclose. But without the chain of title that MERS removed from the public record, banks sometimes recreate paper assignments long after the fact or try to replace mortgage notes lost in the securitization process.

This maneuvering has been attacked by judges, who say it reflects a cavalier attitude toward legal safeguards for property owners, and exploited by borrowers hoping to delay foreclosure. Judge Logan in Florida, among the first to raise questions about the role of MERS, stopped accepting MERS foreclosures in 2005 after his colloquy with the company lawyer. MERS appealed and won two years later, although it has asked banks not to foreclose in its name in Florida because of lingering concerns.

Last February, a State Supreme Court justice in Brooklyn, Arthur M. Schack, rejected a foreclosure based on a document in which a Bank of New York executive identified herself as a vice president of MERS. Calling her “a milliner’s delight by virtue of the number of hats she wears,” Judge Schack wondered if the banker was “engaged in a subterfuge.”

In Seattle, Ms. McDonnell has raised similar questions about bankers with dual identities and sloppily prepared documents, helping to delay foreclosure on the home of Darlene and Robert Blendheim, whose subprime lender went out of business and left a confusing paper trail.

“I had never heard of MERS until this happened,” Mrs. Blendheim said. “It became an issue with us, because the bank didn’t have the paperwork to prove they owned the mortgage and basically recreated what they needed.”

The avalanche of foreclosures — three million last year, up 81 percent from 2007 — has also caused unforeseen problems for the people who run MERS, who take obvious pride in their unheralded role as a fulcrum of the American mortgage industry.

In Delaware, MERS is facing a class-action lawsuit by homeowners who contend it should be held accountable for fraudulent fees charged by banks that foreclose in MERS’s name.

Sometimes, banks have held title to foreclosed homes in the name of MERS, rather than their own. When local officials call and complain about vacant properties falling into disrepair, MERS tries to track down the lender for them, and has also created a registry to locate property managers responsible for foreclosed homes.

“But at the end of the day,” said Mr. Arnold, president of MERS, “if that lawn is not getting mowed and we cannot find the party who’s responsible for that, I have to get out there and mow that lawn.”

No Penalties for Mortgage Company with Worst Loan Mod Backlog

by Paul Kiel, ProPublica – May 28, 2010 1:53 pm EDT

Jeanenne Longacre said she received a letter from Saxon Mortgage saying she was approved for a loan mod, but the final terms never came. She says she lost her home because of Saxon’s errors.

Last week, the government released data [1] showing that there’s a big problem at Saxon Mortgage, a subsidiary of Morgan Stanley. Of all the mortgage companies participating in the administration’s mortgage modification program, Saxon has the largest proportion of homeowners caught in modification limbo.

The program, which provides incentives for mortgage companies to modify loans to an affordable level, has been plagued by delays and disappointing results. About 1.2 million homeowners have begun a “trial” modification, which is supposed to last three months. But less than a quarter of them have emerged with a real, lasting modification. (Here’s our backgrounder on the program and problems with it [2].)

As of April, about 265,000 homeowners [3] were caught in trials that had lasted more than six months. Nowhere is that backlog worse than at Saxon, a mid-sized subprime servicer based in Texas that was acquired [4] by Morgan Stanley in 2006 and has had long-running customer service problems [5].

Few of Saxon’s trials have converted into lasting modifications. As of the end of April, Saxon had put 40,000 homeowners into trials, but only about 11,000, or 27 percent, had received a permanent modification. Far more had either been dropped from the program (16,000) or were still waiting for a final answer after being in the trial for longer than six months (10,000).

The Four Mortgage Servicers with The Biggest Trial Backlogs

Servicers	Est. # “Aged” Trials	% of Active Trials that are “Aged”
Saxon Mortgage Services	9,839	76%
JPMorgan Chase	85,678	72%
U.S. Bank	2,064	58%
CitiMortgage	26,375	48%
Total for Program	265,015	42%

A close look at Saxon provides a window into problems with the program itself, in particular a glaring lack of oversight from Washington. While the government set up the program, it relies on mortgage companies to actually perform modifications. So far Washington has shied away from penalizing those servicers that have failed to follow the program’s rules or underperformed. Indeed, despite widespread problems [3] among mortgage servicers and frequent tough talk [6] from Treasury officials, who have often threatened penalties, the government has yet to issue a single one.

A spokeswoman for Saxon said that the company has been regularly audited, as have other participants in the government’s program, and that the reviews had uncovered no “material issues.”

For homeowners, on the other hand, the consequences of servicer problems can be all-too-real. Some homeowners say they lost their home because of errors by Saxon.

The country’s largest mortgage servicers are attached to the biggest banks like Bank of America, JPMorgan Chase and Wells Fargo, but a number of mid-sized servicers like Saxon are stand-alone companies or subsidiaries of other banks. As of 2008, Saxon serviced over 340,000 loans.

According to the Better Business Bureau, Saxon Mortgage Services requests that consumers with a complaint contact Robin Chrostowski, Assistant Vice President of the Customer Solutions and Innovation Team, at 817-665-7862 or email CSIteam@saxonmsi.com to resolve the issues prior to filing a complaint with the Better Business Bureau.

 

The company already had problems before the administration launched its mortgage modification program in April 2009. As the Wall Street Journal reported last July [7], Saxon ranked last among 20 servicers in a Credit Suisse analysis of how many subprime loans each had modified. The Better Business Bureau had given the company an “F” [5] rating, based on a profusion of consumer complaints.

But the company was among the first to sign up for the government program when it launched in April, 2009. In the first few months, Saxon put tens of thousands of homeowners into trial modifications. In a November press release, Saxon CEO Anthony Meola boasted [8] that Saxon was leading all other servicers in the number of trials it had begun.

The Treasury Department had set the rules of the program [9] to encourage servicers to rapidly enroll homeowners. Servicers were allowed to accept homeowners on the basis of their “stated” income, what a Treasury official described [9] as “a wing and a prayer.” The financial information would be verified later, after the trial began. While well-intentioned, the policy resulted in an enormous backlog of trials—homeowners who had been given temporary modifications and were waiting months for a final answer — and Treasury changed the program rules this spring to require verified income information up front.

Consumer advocates say that homeowners who are denied modification after making several months of trial payments are often worse off than if they’d never started the trial at all [9], because the process damages their credit and they’re prevented from saving for the possibility of foreclosure.

At Saxon, many homeowners seem to be caught in that limbo because of mistakes and delays at the company. John Riggins, the CEO of the Fort Worth Better Business Bureau, said that the biggest complaints about Saxon are that the company has misapplied payments or lost documents sent as part of the modification process. Saxon employees often blame computer problems or a lack of staffing, according to the complaints, which number 208 in the past year.

Jennifer Sala, a spokeswoman for Saxon, said the backlog was not caused by a lack of capacity, but resulted from a “careful review process” that “can take a considerable amount of time.” She added, “We want to afford our customers every opportunity to avoid foreclosure.”

Saxon has hired about 330 new full-time employees in the past year, she said, increasing the staff by 50 percent. Riggins of the Better Business Bureau said that the complaint volume had improved since last year, but that major problems remained. Saxon has improved only from an “F” to a “D-.” rating [10].

There are other signs Saxon has been struggling to handle the volume. In April, it transferred the servicing rights [11] for about 38,000 loans to Ocwen, which specializes in servicing troubled loans. “Normally the reason for selling loans to Ocwen is you don’t want to hassle with them anymore and they’re delinquent,” said Guy Cecala, the publisher of Inside Mortgage Finance. Some of the loans transferred were in the middle of the modification process.

Sometimes the communications from Saxon can be bewildering. Barbara Niederstein of Fayetteville, Ga., said she has twice received letters saying she was being dropped from the program. Both letters cited missing documentation as a reason, but she says she was never told it was missing. Saxon has threatened to pursue foreclosure. Niederstein says that hours spent on the phone with a housing counselor and Saxon employees has at least postponed that for a month, even if the confusion has yet to be cleared up.

 

Jeanenne Longacre and her husband Robert.

Jeanenne Longacre says she lost her home because of Saxon’s errors. She says Saxon wrongly set the trial payments at a level Longacre and her husband could only muster for a few months, and then booted her from the program when she couldn’t keep up the payments. Her house was ultimately sold out from under her after she says she received an assurance the sale would be delayed.

For months, her husband had been struggling to find steady employment when Longacre lost her job with California Blue Cross in February 2009. They were behind on their mortgage payments and faced foreclosure.

The pair, in their 50s with grown children, had been in the house for 10 years, but had refinanced in 2006 into an adjustable-rate loan with New Century, the now-defunct subprime lender. The Longacres were underwater on their mortgage, with their Los Angeles home worth about half as much as they owed.

Longacre says Saxon’s first error with her modification came with the level of the couple’s payments. The modified mortgage payment was set at $3,400, about $1,400 lower than the couple’s payments had been, but at a level they could maintain only with the help of temporary severance she was receiving. That severance would run out in August, just two months after her trial began in June.

Sala, the spokeswoman for Saxon, said she could not discuss Longacre’s case because company policy prohibited discussing customer information.

Trials are supposed to test the homeowner’s ability to make the reduced payments for a prolonged period of time. But Longacre says she always knew they would be able to make the payments only for a few months. By the time August, September came around, we started struggling,” she said. “It’s ridiculous paying that kind of money when you don’t have it.”

Still, Longacre kept paying. After August, the third month of the trial, came and went with no news, Longacre began calling Saxon regularly to find out what was happening. For months, she says she couldn’t get an answer. She was occasionally asked to send in a new document, but then the wait would continue.

Finally, she spoke to a negotiator in January this year, the eighth month of her trial. He told her she’d be approved for a permanent modification and that the payment, based on her family’s verified income, would be much lower, just $1,300 a month.

“I was so excited,” Longacre said. “I thought a miracle had happened.”

But her excitement was short-lived. She received a letter from Saxon in early February [12] saying she’d been approved for the modification, but the final terms never came. When she called to ask about that, she says she was told she had to make the trial payments for January and February or she’d face foreclosure.

The couple had missed those payments because their money had finally run out, she says. But even though Saxon had set their permanent modification at a level far below her trial payments, she was dropped from the program for not making all of her trial payments.

In March, she received a notice that Saxon would auction her home on April 1. She hired a lawyer to negotiate on her behalf, and it seemed like foreclosure had been temporarily avoided when a Saxon employee said the sale would be postponed until May in order to provide more time to work out another solution.

Longacre thought the auction had been deferred until a man knocked on her door in early April, saying that he represented the new owners of her home and was offering her money to vacate. The home had sold for $302,000, less than half of what the Longacres owed on the mortgage.

“That home was the only thing we had. I put it everything that I own into that home.” She currently lives in an apartment with her husband.

As we reported earlier this month, mistaken foreclosures can result from a lack of communication within the servicer itself [13]. In Longacre’s case, she says she was not provided a denial letter or given an opportunity to otherwise avoid foreclosure, as the federal program’s guidelines require.

Consumers advocates say the program does not offer an effective recourse for homeowners to redress servicer wrongs. Treasury officials say [13] that homeowners in Longacre’s position should call the HOPE Hotline, which is staffed with housing counselors, for help. Advocates say that’s been ineffective, and have long complained [14] about the lack of a formal appeals process for homeowners.

Longacre’s case also reflects on a problem faced by the hundreds of thousands of homeowners who’ve been caught in prolonged trials: whether they must keep paying after the three-month period expires, and whether mortgage companies can deny modifications if homeowners miss payments while they’re in limbo.

The Treasury Department has given conflicting answers for that question.

The program’s guidelines say [15] that borrowers remain eligible for a permanent modification “regardless of whether the borrower failed to make trial period payments following the successful completion of the trial period.”

Despite that apparently clear meaning, a Treasury spokeswoman told ProPublica homeowners were required to continue the payments “even if the period was extended to allow additional processing.”

Cohen, of the National Consumer Law Center, said that’s not how consumer advocates have understood the program’s rules. “The program rules are clear: a homeowner is required to make trial payments only until the effective date of the permanent modification, which is three months after the beginning of the trial period.”

Four other Saxon customers told ProPublica that they’d been disqualified for missing the extended trial payments. Sala, Saxon’s spokeswoman, said the company follows the program’s guidelines. It’s unclear if there will be any consequences for Saxon for any errors or rule violations. The Treasury has hired [16] Freddie Mac [17] to audit the servicers participating in the program, and so far, as Saxon’s spokeswoman has said, auditors have not flagged any “material issues” at the company. The Treasury spokeswoman said some information from the compliance reviews will eventually be made public, but none was available now.

 Write to Paul Kiel at paul.kiel@propublica.org

Mortgage holders sue bank in CLASS ACTION:

From: b.daviesmd6605

BY STAFF,  CITY NEWS SERVICE OCLNN.com
Wednesday, May 19, 2010

SANTA ANA – Distressed homeowners packed an appellate court hearing Tuesday as their attorney tried to persuade justices a 2008 California law should force banks to work harder to ease the terms of their mortgages.

Attorney Moses S. Hall argued before the three appellate court justices in the Fourth District’s Santa Ana courtroom that banks holding the loans of his clients are not complying with a state law compelling them to try to negotiate modified mortgages.

Attorney Justin D. Balser, representing the RPI Quality Loan Service Corp., argued the homeowners cannot bring the class-action lawsuit to the courts and must rely on the California Attorney General’s Office to enforce the law.

The appellate court justices appeared skeptical of that claim and queried him why people could not sue to have their rights enforced in the courts.

Balser argued that letting residents try to enforce the law in the courts would lead to a “flood of lawsuits.”

“This is the only statute of its kind in the nation,” Balser said.

Attorney Melissa Coutts, who also represented RPI, said she was looking for the appellate justices to provide guidance on the law, which she argued was too vague.

“If there was a specific remedy (in the law), we wouldn’t be here,” Hall responded. “There’s nothing to help keep people in their homes.”

Terry and Mike Mabry filed their class-action lawsuit after they said their lenders refused to help them save their home in Corona.

The two had invested in 13 properties, which they rented, but when the economy soured their found themselves struggling to keep up with mortgage payments as renters left or demanded lower rent, they said. They ended up losing some of the properties and others were lost in short sales, they said.

However, when it looked like they wouldn’t be able to afford the adjustable rate mortgage on their own home they contacted their lender and were told they could not renegotiate the terms unless they missed at least two payments, Terry Mabry said. The couple had not missed any payments, she said.

“When we reached out for help we were hit with one wall after the other,” Terry Mabry said. “The bankers led us to believe they were working with us, but they weren’t. All we wanted was to be helped.”

Terry Mabry argues that all the state law was meant to do was give homeowners a chance to work with the lenders to save their houses and is not a guarantee.

“The law was meant to create a discussion, not to guarantee a solution,” Terry Mabry said. “But we never even got to the discussion point. That’s the most frustrating part.”

The Mabrys thought they were in serious negotiations until they returned home one day to find a notice to sell their home floating around the front lawn.

Carlos and Maria Hernandez of Lake Forest also thought they were going to save the home they bought 5 years ago after they were put in a home-loan modification program for eight months.

“The next thing we know we were given a notice that the house was already sold,” Carlos Hernandez said.

“We put all of our savings in that house,” Hernandez said. “We want to stay in it because it’s for the future of our kids.”

Carlos Hernandez had trouble making mortgage payments because he lost his job, but was able to keep up with the new payments, he said.

The Mabrys and Hernandezes remain in their homes as appellate court justices consider the lawsuit.

Read more: http://www.oclnn.com/orange-county/2010-05-19/business/mortgage-holders-sue-bank-in-class-action#ixzz0p84ayuW5