How the new RESPA Federal Rules can help you stop a foreclosure in Alabama
How the new RESPA Federal Rules can help you stop a foreclosure in Alabama
The companies that send you bills, take your payments, figure (or mis-figure) escrow, and the companies that handle loan modifications and foreclosures. These include Bank of America, Chase, CitiMortgage, Ocwen, and Wells Fargo as well as smaller companies.
These new rules fundamentally change the whole situation with your mortgage company.
These new rules give you a chance to stop a foreclosure.
How can RESPA help stop a foreclosure?
Either the mortgage servicer will obey the rules and give you a fair shake on loan modifications — which they have not done in the years since the housing disaster — or you can sue your mortgage company in federal court for actual damages (including mental anguish), statutory damages of up to $2000 per violation (even when you have no actual damages), and your attorney fees can be paid.
This can be some powerful incentives for the mortgage company to do the right thing and not foreclose if doing so will violate these new laws.
So, what are some of the points of the new RESPA laws?
For purposes of stopping wrongful foreclosures, we will look at several.
First, if you are more than 37 days out from the foreclosure, and you properly request a loan modification, then normally the mortgage servicer will be required to review your situation for a loan modification and stop the foreclosure proceedings.
Second, there can be no foreclosure activity of any type during the first 120 days you allegedly have missed payments.
Third, the mortgage companies are very limited in what they can do with “forced placed” insurance which is where abuse ran wild — now the rules are very common sensical which will cut down on the number of foreclosures because the mortgage company “accidentally” forced placed insurance and then “accidentally” misapplied your payments.
Finally, you have the right to send a RFI (Request for Information) and a NOE (Notice of Error) which the mortgage company has to properly and timely respond to which should help stop foreclosures that are wrongful. These are wonderful to force the mortgage company to explain why it is doing certain things (denying your loan modification, for example) and to make sure you are receiving accurate information about being past due, how much you owe, etc.
We will focus only on the first point — loan modifications — and we will cover the other areas in different articles.
To appreciate these new rules, let me tell you a typical story of how companies such as Wells Fargo and Bank of America have handled matters up through the time of the new rules.
The typical story of Bobby and Susie before the new rules….
We’ll take Bobby and Susie who own a home in Birmingham, Alabama.
It is a $200,000 mortgage and with the bad housing market the value is now dropped to $180,000. Bobby and Susie have struggled with medical bills and a job loss so they have fallen behind on their mortgage. Bank of America has said they will foreclose soon if the past due balance is not paid.
But Bank of America also says it will look at “loss mitigation” but nothing will slow down the foreclosure — this is known as “Dual Track” — imagine one railroad track leading to a loan modification and the other track leading to foreclosure.
Companies like Bank of America have been very adamant and proud that they travel both tracks at the same time.
But they do tell Bobby and Susie “We will work with you to save your home.”
So they send out a package for Bobby and Susie to fill out and return via FedEx.
Bobby and Susie do this.
Bank of America receives it.
But when Bobby and Susie call in, they get a different person each time who has no idea what is happening. So Bobby and Susie have to fill in the backstory every time.
Oh, and Bank of America says it never received the documents. When it is pointed out the FedEx package/envelope Bank of America sent to Bobby and Susie (who then returned it) and Bank of America received it, Bank of America changes its story.
“We lost it.”
So the process is repeated.
All while the train is barreling down the track of foreclosure.
The next package Bank of America received?
“We never got it.”
“Oh, you have the tracking confirmation we did? Well . . . let’s see . . . uhmm . . . we lost it again. And keep in mind we are going to foreclose on you unless you get us the documents immediately.”
The ability to feel shame and “blush” is non existent at these companies.
This process repeats several times until Bobby and Susie are emotionally worn out and then the receive the phone call the day before the foreclosure:
“Well, you didn’t give us all the documents. I realize we didn’t tell you to send us _____ but we have denied the loan modification and will foreclose tomorrow. Thank you for doing business with Bank of America where the homeowner is our number one priority.”
The foreclosure happens and Bank of America (or Wells or Citi or Chase or Ocwen — they are all interchangeable) lies to reporters and Congress and says this is another example of “non compliant” homeowners who obviously did not want to save their home.
Now, let’s see what would happen under the new RESPA rules for Bobby and Susie.
Let’s make the mortgage company Wells Fargo this time.
Bobby and Susie get behind and reach out to Wells Fargo for help.
If they have done this more than 37 days before the foreclosure — so the foreclosure has either not been set or it is 38 or more days out — then Wells Fargo has to stop the foreclosure train.
No dual tracking.
This brings tears to the eyes of the mortgage companies as they love to dual track. Not anymore.
So Wells Fargo sends out a modification package, Bobby and Susie fill it out and return it.
They keep getting passed around to different people at Wells Fargo who have no idea what is going on.
That’s a violation of the new rules.
Wells Fargo claims it never received the package. Even though it did.
So Bobby talks to a lawyer who tells him to send a Request for Information and a Notice of Error. So Bobby and Susie do this related to the alleged “non receipt” of the package.
Now Wells Fargo faces a dilemma.
Does it lie again and say it never received the package? When it knows Bobby and Susie have the tracking information.
Before January 2014, there was no downside to doing so by Wells Fargo. (Remember, morality with these companies left the station long ago….)
But now, if they lie, they can be sued in Federal Court.
So what to do?
Tell the truth? (There is a natural repulsion to any mortgage company to do this but it must be considered now in light of the new rules).
If Wells tells the truth, then it can’t do the foreclosure because it received the package.
A dilemma indeed.
In the past, Wells Fargo and the other companies would make up some “missing document” and then blame the homeowners for not being able to provide it in 24 hours.
Now Wells Fargo has to tell Bobby and Susie very quickly whether anything is missing and give them time to provide it.
This really throws a monkey wrench into the plans of Wells Fargo. Now it has to actually . . . gulp . . .truly consider a loan modification.
What a crazy concept, right?
If it denies it, the homeowners have the right to ask “Why” and get a legitimate answer.
So Wells has two options: give the modification a “fair shake” or face a lawsuit.
Hopefully, for Bobby and Susie, Wells will give a fair shake and if they qualify, give them a loan modification so they can save their home.
But if not, then a quick federal court lawsuit may be just the motivation needed to get Wells Fargo to do the right thing.
Why will a federal court lawsuit make Wells Fargo (or any other mortgage company) do the right thing?
Not because they are good citizens. I asked one of these companies once in a deposition — “Should a good honorable company apologize to consumers when it makes a mistake and hurts them?”
Seems like an easy question, right?
The lawyer for the mortgage company kept objecting as he didn’t like the question. And he didn’t understand why I was asking it.
The “corporate representative” didn’t know how to answer and would never give a straight answer which was fine by me — when a witness refuses to answer a simple question, that normally is more devastating than if they would just answer it truthfully.
So its not because they want to do the right thing.
Its because being sued in Federal Court under this law allows you to recover:
- Actual damages including emotional distress when a company like Wells Fargo tries to foreclose on you in violation of the law;
- Statutory damages of $2,000 per violation (and there will normally be many violations) even when you have no actual damages which is hard to imagine you would have no actual damages; and
- Pay your attorney fees — our hourly rate is $400 per hour so this can add up for them quickly.
All of the above is motivation for these companies to do the right thing.
So, if you are facing a foreclosure, or you are afraid you will be, what should you do next?
Take action — sitting and doing nothing won’t work.
But if you were that type of person, you would not have made it to the end of this incredibly long article… 🙂
So, what type of action should you take?
First, figure out where you are in the foreclosure process. Is there a date set? Are you 40 days away or more? Less?
Second, have you applied for “loss mitigation” or a loan modification? Has it been granted or denied? Where are you in the process?
Third, is there a reason or basis to send a RFI or NOE or QWR (Qualified Written Request) to your mortgage company? If so, how soon can you send it and do you know what to put in it and where to send it? And how to send it? (Hint: first class stamp won’t do it — it will be thrown away. Must send it where you can prove delivery. Think certified mail, return receipt requested.)
Fourth, what will you do if the foreclosure proceeds even if it shouldn’t?
Here’s my suggestion — sit down with us or some other foreclosure defense attorney in Alabama and find out what your options are so you know which way to move.
Will it cost you money?
However, if you are not willing to spend money and time then there is no hope for you in my opinion. If you are at risk of losing a $200,000 house or $1,000,000 house, why would you not spend money to find out your options now? And spend the time gathering the necessary documents and sitting down with us to figure out your next step?
If you are not willing to spend time and money, please don’t call us. That will only waste our time and tie us up from helping those are truly need our help and are willing to take action.
But I believe you are different.
You are in the small minority who will take action. You have proven that by reading this far. If I’m right — and I think I am — then pick up the phone and call us.
You can reach us by phone at 205-879-2447 and ask for Randi Curb who is our paralegal over foreclosures.
She will quickly learn about your situation and then set up an in person consultation with us.
We look forward to helping you.
Oh, and if you are reading this after hours or prefer to not call us, you can fill out this contact form and let us know you read this article and want to sit down with us.
Thank you and Randi and I look forward to meeting with you.