Suing your mortgage company for refusing to give you a CARES Act forbearance you were entitled to receive
How to sue mortgage company when you are denied a CARES Act forbearance
The CARES Act is a powerful law that, if you qualify, entitles you to receive a forbearance on making payments on your mortgage. But what happens when your mortgage company refuses to give you the forbearance?
What can you sue for?
This is a question that was asked by a consumer after our article listed above. So here are some possibilities:
- FDCPA
- RESPA and RESPA letters
- FCRA
- State law
Let’s look at these but first let’s remind ourselves of what the CARES Act can do.
The in-depth version of this is in our article CARES Act explained.
First, you need a federally backed mortgage.
This is typically one of the following:
- FHA
- VA
- USDA
- Freddie Mac
- Fannie Mae
Second, you must request the forbearance.
Even if entitled to it, you must request it.
Finally, you must truthfully say that you have been financially impacted by the COVID-19 crisis.
This can be directly caused by job loss or sickness or indirectly you have suffered some financial impact. Virtually everyone has except maybe Jeff Bezos!
If you meet the three requirements above, you are to get your forbearance which would also stop any foreclosure from happening.
But if your mortgage company refuses to give you the forbearance, look at the following options.
FDCPA — Fair Debt Collection Practices Act for CARES Act violation
This law regulates debt collectors.
So first we have to see if your mortgage company is considered a “debt collector” under the FDCPA.
Normally mortgage companies will be debt collectors if the loan was behind when the mortgage company starting servicing the loan. We then need to see if this is a major part of their business to collect delinquent debts.
It can be a bit challenging if you haven’t done this before but we can help you if you live in Alabama — just call us at 205-879-2447 and ask to speak to Carolyn or Randi who will set us up a quick telephone appointment with me (John Watts) for free.
Next, we need to make sure the debt is “consumer debt” which it normally will be unless you took out the home loan for an investment or rental property.
But if you took out the loan to live in your house, this requirement will normally be met.
Finally, let’s look at the different sections of the FDCPA that can be useful for us.
The FDCPA is found at Section 1692 and these are the sections that can help us. I’ve made each section a link to a youtube video that discusses it in case you want to see the actual text of the law with an explanation. These are all things that debt collectors (like your mortgage company) are prohibited from doing:
1692d — harassing or abusive conduct
1692e(2) — lying to you about the status or amount of the debt
1692e(4) — lying by saying if you don’t pay you will lose your property
1692e(8) — lying in credit reporting
1692e(10) — lying in general to get you to pay
1692f — being unfair towards you
1692f(1) — charging you amounts that are illegal
1692f(6) — threatening to take your home in a foreclosure when there is no right to do so
What can you get from your mortgage company if you sue?
You can get compensatory (actual) damages. These can be economic damages or emotional distress damages. You can imagine how being lied to about getting a forbearance could be very upsetting, especially if it leads to a foreclosure.
Statutory damages can be awarded up to $1,000. Statutory damages are to provide an incentive for you to sue even if you had no other damages. You almost always will have other damages but the $1,000 is a nice bonus.
Finally, you can get your litigation costs and attorney fees paid so that you never have to pay your lawyer out of pocket — your lawyer is paid by the abusive mortgage company you sue.
RESPA — Real Estate Settlement Procedures Act for CARES Act violation
This is the law that regulates virtually all mortgage servicing companies. So some mortgage companies are not debt collectors but basically all mortgage companies that you deal with will be regulated by RESPA as a servicer.
Like the FDCPA, you need the loan to be for your personal house to qualify generally under RESPA.
RESPA prevents the notorious and damaging practice of “dual tracking”
RESPA encourages mortgage companies to evaluate you for “loss mitigation” which means doing anything to stop a foreclosure. Under RESPA, if you apply for loss mitigation early enough, it can stop any foreclosure from happening. When your mortgage company does not stop the foreclosure, this is very illegal and is known as “dual tracking” in the industry. This is the visual image of one train is on the loss mitigation track and the other is on the foreclosure track
With the CARES Act, there is no deadline set — if you qualify for and ask for the forbearance before the foreclosure happens, then the foreclosure should be stopped.
If your mortgage company does not do this, then you should look at suing under RESPA as this is “dual tracking” which is prohibited by RESPA.
RFI and NOE letters can be useful when dealing with a mortgage company that won’t give you the CARES Act forbearance
RFI letters are “Request For Information” letters. The basic idea is you ask your servicer for information.
In this context you might ask:
- “Do I have a federally backed mortgage loan?”
- “Did I make a request for a forbearance from you?”
- “Did I tell you I suffered financial impact from COVID-19?”
- “Why did you not give me the forbearance under the CARES Act?”
NOE letters are “Notice Of Error” letters.
You are alerting your servicer to problems and giving them a chance to fix the problems.
Here are some examples:
- “You made an error not giving me the CARES Act forbearance, please correct this by giving me this”
- “You made an error charging me late fees, inspection fees, etc. when you should have given me a forbearance and I need you to correct this”
- “When you reported me as being 60 days late on my credit report when I qualified for and asked you for a forbearance while I was 30 days late, you made an error and I need you to fix this”
- “You foreclosed on me when I should have had a forbearance — please immediately undo the foreclosure and any charges related to it”
Obviously these examples are shortened — you would add a bit more detail but hopefully, these give you a flavor for how to write the letters.
What are some guidelines when sending RESPA letters?
- You must send them by certified mail or other trackable mail (overnight, etc).
- Keep a copy of your letters.
- You must send them to the designated address for these types of letters — you can find the designated address on your mortgage statement or website. If you don’t send them to this address, they are no good.
- Make the letters simple and understandable so the mortgage company is clear on what you are asking for (RFI) or what error you think has happened (NOE).
What can you get when suing for RESPA violations?
Similar to the FDCPA, you can get:
- Compensatory or actual damages
- Emotional distress damages
- Economic damages
- IF you can show a pattern and practice of RESPA violations, then you can get statutory damages of up to $2,000 per violation
- Costs and attorney fees
FCRA — Fair Credit Reporting Act for CARES Act violation
The FCRA requires all credit reporting to be 100% accurate and complete. We will see massive violations of this law related to the CARES Act.
So the CARES Act requires a forbearance when you qualify. This also means that there are no additional late fees and your credit reporting has to stay the same as when you received the forbearance.
Let’s put all that together.
You were entitled to the forbearance but didn’t get it and now your mortgage servicer is reporting you as late, owing extra money and even a foreclosure.
That’s bad for you and ultimately will be bad for your mortgage company when you sue them.
But first, you have to dispute through the credit reporting agencies (Equifax, Experian, and TransUnion).
What are the rules for sending a dispute letter?
- Send it by certified mail
- Send a copy to your mortgage company also
- Identify the account
- Identify yourself — best practice is also to include a copy of your driver’s license and a recent bill or statement to show it is you
- Explain the false credit reporting (balance, late payments, etc) and why it is wrong (not getting the CARES Act forbearance you were entitled to)
- Request the false information be investigated, corrected or deleted
When it doesn’t get fixed due to a lousy investigation, what can you sue for under the FCRA?
Similar to the FDCPA and RESPA (but better!), you can get:
- Compensatory or actual damages
- Emotional distress damages
- Economic damages
- IF you can show the violations of the FCRA are reckless or intentional, then you can get punitive damages. Punitive damages are for two reasons:
- To punish your mortgage company for false credit reporting
- To deter your mortgage company from ever doing this non-sense again
- AND to deter other mortgage companies from ever treating (mistreating) anyone like this again
- Costs and attorney fees
State Laws that can help when your mortgage company violates the CARES Act
You may can use Alabama state law such as:
- Wrongful foreclosure if a foreclosure happened
- Defamation when an upcoming foreclosure is advertised when it was illegal to say you are going to be foreclosed
- Slander of title if a false foreclosure deed is filed in Probate Court
- Invasion of privacy when there is an illegal and public foreclosure against you or the threat of one
The beauty of these state law claims is most of them will allow for punitive damages. This makes the mortgage companies very afraid because they don’t want any jury to be able to judge them and rule they need to be punished.
These mortgage companies are so arrogant — so willing to break the law — that if a jury sees that, and can punish, a jury likely will punish.
So definitely check out state law claims you can bring along with your federal claims.
What to do next to fight back against your mortgage company for violating the CARES Act
First, either on your own or with a lawyer make sure you really qualified for a CARES Act forbearance.
Second, be able to document when you were denied and what reason (if any) your mortgage company gave.
Third, check out your credit reports (you can pull them for free once a week until Spring 2021) at https://www.annualcreditreport.com/index.action.
Fourth, if you are in Alabama feel free to call us at 205-879-2447 or contact us here and we’ll be happy to discuss this with you.
Finally, be persistent and relentless and get the justice you deserve!!
Best wishes
John Watts