California Deficiency Judgment? Take Heart!

One of the less discussed negatives (after losing or short selling your home)is what's called a deficiency judgment. Simply described, this is when a homeowner sells his home short or loses it to foreclosure and the bank involved still ends up getting less than the amount of the outstanding mortgage. They go to court and get a judgment against the former owner for the difference--a deficiency judgment--which means that the owner hasn't suffered enough yet, but must also pay what's left that wasn't recovered in the sale or foreclosure of the home. California has had for years a law that partly shields the homeowner from this ignominious fate. It's called the One Action Rule, and basically says that in many cases (check your atty to see if you benefit), the lender gets "one bite of the apple" on a foreclosure--if the house doesn't cover the debt, the bank's stuck. It doesn't get to come back to you and hold out its hand for the difference. Well, this summer, California broadened this consumer protection. Previously, the courts in the Golden State ruled that although the rule didn't allow the lender to pursue the shortage, it didn't extinguish the debt. Bootstrapping onto that many lenders have handed out the deficiencies to credit collectors, or filed suit in court top get the amount they were left short of. Under new legislation, this is now banned. Many lenders and collectors have so far ignored the change in law, but all that does is potentially set up a cause of action for the former homeowner being pestered for the deficiency to sue whoever's chasing him/her for the harassment of trying to collect on the debt. SO, if you fit the situation of prior foreclosure with a deficiency in what the lender was able to collect and are being hounded, call your attorney. You may come up with some unexpected cash to soothe your aggravation. As always, good luck.

Short Sale Tax Liability Shield Extension Proposed

The law shielding homeowners from income tax liability of forgiven debt when doing a short sale expired December 31, 2013. No extensions yet, but Congressman Bill Foster of Illinois has written a bill to do just that. His proposed bill would extend the tax shield on amounts reduced by debt forgiveness from short sales up to $2 Million on primary residences from January 1, 2014 through January 1, 2016. As a way to cover the cost to the Treasury of the extension in lost tax revenue, his bill proposes the repeal of a tax break for oil and gas companies that he says is no longer necessary due to the vastly increased profits they are now receiving. This part of his bill could be an issue as the Republican-led House is anathema on any tax increases, no matter how reasonable they may appear. Knowing that, this might very well be a good time to get in touch with your Congressional representative (and your two Senators) and voice your support of the bill as written. As always, good luck.

CPFB Rules Working

In remarks made yesterday, the head of the Consumer Finance Protection Bureau (CFPB) noted that most of their new rules governing provision of credit and loans to the general consumer market appear to be working and working very well. While the CFPB is mostly known for its rules trying to help individual borrowers in regards to credit card and similar debt, they also have created rules for the safe and fair granting and administration of mortgages. The two rules most closely related to fair administration of mortgages are the Ability-to-Repay rule (ATR) and the Qualified Mortgage (QM) rule. The former specifically lays out guidelines for lenders to follow when making a loan to insure that the borrower is able to repay the loan. In the recent financial meltdown of the last few years, this was one rule that, due to its non-existence, allowed lenders to make loans and pay little attention to the likely ability of borrowers to ever be able to repay. This situation, of course, allowed many loans to be made that should never have been, with the result that many of them ended up in default and the underlying homes they financed being foreclosed upon. The QM mortgages are administered with new rules banning dual tracking and restricting the speed with which foreclosures may be initiated. Dual tracking, for those of you yet to suffer through it, is the now banned practice that allowed a lender to simultaneously commence foreclosure procedures for a defaulted loan at the same time that the borrower was supposedly being considered for a modification. Usually, the lender's employees working on both procedures for a specific loan never spoke to one another, with the frequent result that a borrower diligently working with his/her lender to gain a loan mod would be foreclosed with little or no warning. If you have any questions about your home mortgage, home credit line or other credit obligations, give a call to the CFPB or go to its web site: www.consumerfinance.gov . Good luck.

Ocwen Must Reimburse Owners

If you have/had a loan from Ocwen, then you may be in line for some Christmas-time cash from the mortgage servicer. In an consent agreement with the Consumer Finance Protection Bureau (CFPB) and 49 state attorneys general filed in Federal court, Ocwen has agreed to pay $2 Billion in loan principal reductions to borrowers whose homes are worth less than the amounts of the loans (underwater borrowers) and refund a further $125 million to 185,000 borrowers who were already foreclosed upon. The consent agreement covers claims by the CFPB that Ocwen at every stage of the loan servicing process the firm violated various areas of the law, including such things as misapplication of payments by borrowers, unauthorized fee assessments, and robo-signing of documents, to name a few of the violations. In a related regulatory filing, Ocwen claims it has already set aside a reserve to cover all of the settlement except $500,000. So, if you have had any connection to Ocwen regarding your mortgage loan and/or have been foreclosed on a loan they were servicing, you should call them regarding how much and/or if, you are covered in this agreement. If they can't, or won't provide satisfactory answers, call the CFPB directly and ask them. Their phone number is (855) 411-2372. Their web site is: www.consumerfinance.gov . Good Luck and Happy Holidays.

Possible Relief in New Jersey!

In an agreement between the state of New Jersey and PHH Mortgage company, PHH has agreed to pay the sum of $6.25 Million to cover allegedly misleading activities in processing/granting of loan modifications and other processes to help homeowners avoid foreclosure. Of this total, "the settlement includes $3.61 million in restitution for approximately 2,000 borrowers nationwide whose loans are serviced by PHH. For example, 44 borrowers whose homes were sold in sheriff’s sales while loan modifications were pending will receive $10,000 each." These payments will be made within thirty days of the effective date of the settlement. The balance of the settlement will be paid to the state of NJ. Additionally, PHH will have to make regular reports on all loan mod applications and foreclosures to the NJ Attorney General for the next two years. If you have, or had, a loan with PHH, or your loan was serviced by PHH, you can call them or the NJ Attorney General for more information as to how this settlement affects you. As always, Good Luck!

New Suits Against Banks in LA

In the past few days, the city of Los Angeles has filed suit against three major mortgage lenders: Wells Fargo, BofA and Citibank, alleging that their mortgage procedures had been at least partly to blame for over 200,000 foreclosures between 2008 and 2012 on mortgages made since 2004, costing the city over $1.2 Billion. The suit charges these lenders with various types of discrimination in making mortgages, including redlining. All three defendant banks denied any of the violations charged. If you borrowed a mortgage from any of these banks at any time since 2004, and have lost your home, or been threatened with the loss of your home, contact your attorney, or, if you cannot afford one, contact legal aid. Clearly, the charges have to be proven in court before any damages can be assessed, and that may take several years, as well as the fact that the existing suits are filed by the city of LA, but, if you feel you have valid claims under these alleged infringements, your attorney may feel it proper to join the suit in your behalf to cover any damages you may have incurred. As always, Good Luck.

Foreclosed by MERS? VERY IMPORTANT NEWS!!

If you are facing foreclosure, or have been foreclosed in the past 4 years via the lender(s) using MERS as the trustee to file and produce documents, you may have just gained a major weapon in your fight to void the foreclosure action. A Federal District judge, John J. McConnell, ruling in the case of Cosajay v. MERS, this week ruled that borrowers facing foreclosure DO have legal standing to bring a suit against the lender and all transferees or successors to the mortgage. This is VERY important as previously only a local case in Massachusetts had gained this type of decision in a local Massachusetts court. The fact that this case, tried in Federal court in Rhode Island only covers RI cases, doesn't preclude you and your attorney from citing it to try to get a court elsewhere in the USA to state the same rule. It is NOT legally binding precedent as it is NOT from an appellate court, but its very existence can make it a powerful tool to win a case when a doubtful or fraudulent transfer/foreclosure through or to MERS is involved. Previously, all such cases from homeowners were usually summarily dismissed with the claim that the homeowner had no standing to sue as he/she hadn't been involved in the transfer from their lender to/through MERS. This ruling goes a long way to putting that theory in the trashcan where it belongs! If you have any questions, call your attorney and tell him/her of this case. If you cannot afford an attorney, call Legal Aid. As always, Good Luck.