This is a weekly column by Sandusky attorney Dan McGookey, devoted to telling true stories of homeowners who have been victimized by a lending system that makes it profitable to foreclose.
Within the past two weeks, I’ve seen tremendous opportunities, but also serious potential pitfalls for homeowners with troubled mortgages in the $25 Billion Settlement reached between the five largest mortgage loan servicers (Bank of America, Wells Fargo, Chase, CitiBank aka CitiMortgage and GMAC), and the federal and state governments. Before getting to those however, one must be cognizant of the fact that the basic purpose of the settlement was a means for these servicers to apologize to the American people for employing fraudulent foreclosure practices which lead to millions of people losing their homes. Thus, like so many things about securitized mortgages, where it is profitable to foreclose, it is ironic that a settlement meant to both punish the banks for their misconduct, and reimburse victims of such misconduct, could itself be used in any way to further victimize unsuspecting homeowners.
First the good news; the opportunities for homeowners presented by the settlement. Residents in each participating state (49 in all, including Ohio) have the potential for relief on their mortgage in the way of lower interest rates, and even reduction in the principal balance owed on their mortgage. However, like other government programs meant to provide mortgage relief, (such as HAMP) however, the devil is in the details, or, more accurately stated; enhancing your chances of getting the relief which is supposed to be offered. For example, last week I wrote about the pathetic numbers for the Hardest Hit program, wherein over the past two years the State of Ohio has disbursed only 12% of the $578 million received for the federal government for mortgage relief directly to needy homeowners, while at the same time using up 18%, or 50% more, in administration costs.
My point is that having a tool and being able to use it effectively to reach an end goal are two completely different things. Which leads to the second big advantage of the settlement, at least for me in representing hundreds of homeowners in need of mortgage relief. That is the long dissertation (about ten pages worth) set forth in Exhibit A to the Settlement Entry wherein the banks commit, in graphic detail, how they will make sure they have their documents in order in proceeding with future foreclosures. In my experience, the banks never have their documents in order, since they were in such an all-fire rush to bundle mortgages together and sell them for billions of dollars of profit in the first place. This being so, when you compare the banks’ evidence in any given foreclosure case with the standard they have committed to in the settlement, serious flaws immediately appear, which in turn is a mechanism which can be used to motivate the banks to offer serious and long-lasting mortgage relief.
Now for the pitfalls: Just within the past week, I’ve had two clients come in with glowing letters from one of these offending banks effusing as to how they may be eligible for serious mortgage relief, including principal balance reductions. The bad news? At the same time that they received the letters, they also learned that they were being sued for foreclosure. One of these clients was point-blank told, not to worry about defending the foreclosure, as she was going to get a great loan modification. I have seen this same scenario played out dozens of times before -- once the bank files foreclosure, it means business, and that business is taking your home away. Don’t be duped!
Note from the author: If you have questions or comments regarding this or any Foreclosure Story article, please visit www.mcgookeylaw.com.
Next week: Bringing people together through education about their mortgages at Town Hall Mortgage Meetings.
Copyright 2012 Daniel L. McGookey