Andrew D. Cotlar Andrew D. Cotlar Your Tool Box for Mortgage - - PowerPoint PPT Presentation
Andrew D. Cotlar Andrew D. Cotlar Your Tool Box for Mortgage Your Tool Box for Mortgage Foreclosure Defense V 2.0 Foreclosure Defense V 2.0 Andrew D. Cotlar, Esq. Andrew D. Cotlar, Esq. Cotlar & Cotlar Cotlar & Cotlar 23 West.
Andrew D. Cotlar, Esq. Andrew D. Cotlar, Esq. Cotlar & Cotlar Cotlar & Cotlar 23 West. Court St. 23 West. Court St. Doylestown, PA 18901 Doylestown, PA 18901 Tel: 215 Tel: 215-
345-
7310 Email: Email: Acotlar@hotmail.com Acotlar@hotmail.com www.cotlarlaw.com www.cotlarlaw.com
But a many a starving farmer But a many a starving farmer The same old story told The same old story told How the outlaw paid their mortgage How the outlaw paid their mortgage And saved their little homes. And saved their little homes. … … Yes, as through this world I've wandered Yes, as through this world I've wandered I've seen lots of funny men; I've seen lots of funny men; Some will rob you with a six Some will rob you with a six-
gun, And some with a fountain pen. And some with a fountain pen. And as through your life you travel, And as through your life you travel, Yes, as through your life you roam, Yes, as through your life you roam, You won't never see an outlaw You won't never see an outlaw Drive a family from their home. Drive a family from their home.
Woody Guthrie, Pretty Boy Floyd
Woody Guthrie would be appalled
Mortgages bought and sold
Investors sue to foreclose
Filed by foreclosure mill law firms
Little contact with their client (LPS)
Why are homeowners delinquent?
Lost jobs
Medical emergency and no insurance
Divorce
Profligacy
Unexpected sudden debts
Predatory lending
Federal attempts to encourage loan modifications have largely failed iled
Competing values: families v. investments
No “ “pot of gold pot of gold” ” for attorneys for attorneys
2 months of arrearages
Act 91 Notice
30 day extension if you consult with credit counselors and apply for for emergency loans emergency loans
Foreclosure Complaint filed
Mediation program, Bucks County
Answer filed (or default judgment if no answer)
Foreclosing attorney lists for trial if answer filed
Obtain judgment at trial
Schedule Sheriff’ ’s sale s sale
May be several adjournments of Sheriff’ ’s sale s sale
Sheriff’ ’s sale held; deposits made s sale held; deposits made
Sheriff’ ’s deed issued and transfer of property at Settlement s deed issued and transfer of property at Settlement
Separate action in ejectment if necessary
Private right of action for actual damages and 2x finance charges, rights of rescissions, costs and attorney charges, rights of rescissions, costs and attorney’ ’s fees. s fees.
1 year statute of limitation from closing, but you can assert it as a defense to foreclosure at any time. assert it as a defense to foreclosure at any time.
Details are specified at Federal Reserve Board Regulation Z Regulation Z
Basic concept: All fees must be disclosed and cannot be excessive. excessive.
3-
day right of rescission must be given
Implemented by Federal Reserve Board Regulation X
Private right of action for damages, attorneys fees and costs costs
3 year statute of limitations
Prohibits kickbacks, unearned fees, etc
Requires HUD sheet to be accurate
Servicing requirements if you challenge the calculation of amounts owed, e.g. no credit reporting while they verify. amounts owed, e.g. no credit reporting while they verify.
Limited to home loans $50k and below
Anti-
usury law requiring notices prior to foreclosure
Independent private right of action
Plaintiff can recover excessive interest x3, costs and attorney fees attorney fees
Statute of limitations is 4 years
Lots of exceptions; big one is for national banks, which follow more favorable federal law follow more favorable federal law
Fair Debt Collections Practices Act, 15 U.S.C. 1692 et seq. 15 U.S.C. 1692 et seq.
Prohibits abusive debt collection by debt collectors
Fair Credit Extension Uniformity Act
Nearly identical protections and covers debt collectors AND creditors in PA. 73 P.S. creditors in PA. 73 P.S. § § 2270.2 et seq. 2270.2 et seq.
PA Unfair Trade Practices and Consumer Protection Law
Staple in litigation; 3x damages, costs and attorney fees
Applies to mortgage loans
Must prove elements of fraud
Common law torts, e.g. fraud, misrepresentation, etc. e.g. fraud, misrepresentation, etc.
Federal Courts can’ ’t issue injunctions (Anti t issue injunctions (Anti-
injunction Act), so don so don’ ’t bother t bother
Up-
front payment is possible: flat rate or hourly drawn upon non non-
refundable retainer
Or combination of the two with credit for amounts paid
NB: FTC rules, 16 CFR 322.7:
Option 1: Collect an advance fee, place it in your escrow account and draw upon it on an hourly basis. account and draw upon it on an hourly basis.
Option 2: Charge an advance flat fee and make it clear the fee is earned upon receipt. is earned upon receipt.
No flat fees collected for not actually providing legal work.
Therefore, BEWARE of companies that want to affiliate with you to avoid the scope of state or federal regulations. you to avoid the scope of state or federal regulations.
Assignments in process of being formalized is allowed. U.S. Bank v. Mallory U.S. Bank v. Mallory, 2009 PA Super 182; 982 A.2d 986 , 2009 PA Super 182; 982 A.2d 986 (Pa. Super. 2009) (Pa. Super. 2009)
Nothing inherently wrong with MERS being assignor. See Deutsche Bank v. Wyrzykowski Deutsche Bank v. Wyrzykowski, 2010 Pa. Dist. & Cty Dec. , 2010 Pa. Dist. & Cty Dec. LEXIS 357 (Bucks Co., J. Scott, 2010). LEXIS 357 (Bucks Co., J. Scott, 2010).
But through discovery you may want to explore whether MERS vice presidents really exist (robo signers) MERS vice presidents really exist (robo signers)
Philadelphia Housing Auth. v. Barbour, 405 Pa. Super. 140, , 405 Pa. Super. 140, 592 A.2d 47 (Pa. Super. 1991). 592 A.2d 47 (Pa. Super. 1991).
But see Act 70, 2012, S.B. 1433: not jurisdictional but still a good defense and case can be dismissed w/o prejudice after good defense and case can be dismissed w/o prejudice after notice is provided notice is provided
Inherent in every PA contract
Especially for FHA insured mortgages
HAMP participating lenders have additional duties: see their service agreement and HAMP guidelines (U.S. Treasury) service agreement and HAMP guidelines (U.S. Treasury)
See, e.g. NV and AZ AG complaints against Bank of America. Great detailed examples of bad faith: Great detailed examples of bad faith:
Assurances of no foreclosure pending loan modification discussions when proceeding with foreclosure anyway; discussions when proceeding with foreclosure anyway;
Falsely telling customers they must be in default to obtain a modification; modification;
Promising to make loan modifications permanent only to renege on the deal; the deal;
Conjuring bogus reasons for denying modifications. (Andrew Martin and Michael Powell, Martin and Michael Powell, “ “Two States Sue Bank of America Over Two States Sue Bank of America Over Mortgages, Mortgages,” ” New York Times, Dec. 17, 2010) New York Times, Dec. 17, 2010)
After reasonable investigation, Defendant is without knowledge or r information sufficient to form a belief as to the truth or accur information sufficient to form a belief as to the truth or accuracy of acy of the allegation/averment and therefore said allegation/averment i the allegation/averment and therefore said allegation/averment is s
So what do you do?
Pick apart the breakdown of arrears and look for inconsistencies or
inaccuracies that allow you to deny the allegations, e.g. date inaccuracies that allow you to deny the allegations, e.g. date interest started on arrears interest started on arrears
Highlight any discrepancies between complaint and Act 91 notice description description
Use the following language:
After reasonable investigation, Defendant is without knowledge or r information sufficient to form a belief as to the truth or accur information sufficient to form a belief as to the truth or accuracy of the acy of the allegation/averment and therefore said allegation/averment is de allegation/averment and therefore said allegation/averment is denied. nied. Strict proof is required at trial. Further, pursuant to Pa. R.C Strict proof is required at trial. Further, pursuant to Pa. R.C.P. 1029(c), .P. 1029(c), Defendant avers that the information forming the substance of th Defendant avers that the information forming the substance of this is allegation is not information to which she has access, because [ allegation is not information to which she has access, because [her her departed husband dealt exclusively with servicer Bank of America departed husband dealt exclusively with servicer Bank of America and and the matter of arrears and that information was not shared with h the matter of arrears and that information was not shared with her.] [the er.] [the proper calculation of interest, escrow advances, penalties and p proper calculation of interest, escrow advances, penalties and property roperty inspection fees are matters within the exclusive knowledge of th inspection fees are matters within the exclusive knowledge of the e servicer servicer, not Defendant] , not Defendant]
What to look for
Lender provides loan to applicant when it knew or should have known repayment was not possible
Compare loan app and credit history
Look at appraisals
Discovery: request entire file and look at underwriting comments, especially for any , especially for any “ “overrides
”
Note on abusive lending practices. [PA Banking Dept.]
Making a loan without regard to the borrower’ ’s ability to repay; s ability to repay;
Loan flipping;
Excessive fees and packing;
Aggressive and deceptive marketing;
Home improvement scams;
Prepayment penalties
Balloon payments
Negative Amortization (paying less than interest and principal/ month) month)
Hallmarks of Predatory Lending:
“One of the clearest indicators of a predatory and unfair loan is One of the clearest indicators of a predatory and unfair loan is one which exceeds the borrower
’s s needs and repayment capacity. needs and repayment capacity.” ” Girard Finance v. Pa Hum. rel. Comm Girard Finance v. Pa Hum. rel. Comm, 2012 Pa. Commw. LEXIS , 2012 Pa. Commw. LEXIS 223, 13 (Pa. Comw. 2012) (reverse redlining case) 223, 13 (Pa. Comw. 2012) (reverse redlining case)
“high interest rates, high upfront fees, high late fees, hidden f high interest rates, high upfront fees, high late fees, hidden fees, hidden costs, and a lack of ees, hidden costs, and a lack of disclosure to the borrower. disclosure to the borrower.” ” 14 14
Could trigger information for counterclaim under FDCPA if it is inaccurate. is inaccurate.
See Allen v. LaSalle Bank, NA Allen v. LaSalle Bank, NA, 2011 U.S. App. LEXIS 587 , 2011 U.S. App. LEXIS 587 (3d Cir. 2011) (holding that reinstatement letter from (3d Cir. 2011) (holding that reinstatement letter from foreclosing attorney to defense attorney claiming fees and foreclosing attorney to defense attorney claiming fees and costs in excess of those authorized by New Jersey law costs in excess of those authorized by New Jersey law violated Fair Debt Collections Practices Act 1692(f)(1) violated Fair Debt Collections Practices Act 1692(f)(1) because such amounts were not authorized by agreement or because such amounts were not authorized by agreement or permitted by law). permitted by law).
But see Wright v. Phelan, Hallinan & Schmieg Wright v. Phelan, Hallinan & Schmieg, 2010 U.S. , 2010 U.S.
not apply to attorney not apply to attorney-
to-
attorney communications)
10 day automatic open, Pa. R.C.P. No. 237.3.
Otherwise… …
Prompt filing of petition (82 day delay is too much time; within a a month preferred) month preferred)
Reasonable excuse or explanation (lack of sophistication not an excuse) an excuse)
A meritorious defense (see above)
As long as Plaintiff alleges they’ ’re the legal owner of note, re the legal owner of note, Plaintiff can merely allege that they Plaintiff can merely allege that they’ ’re re “ “in process of in process of formalizing the assignment formalizing the assignment” ”; actual assignment may be ; actual assignment may be made after complaint is filed and before default is entered! made after complaint is filed and before default is entered!
Dates of assignment did not make sense
No factual averments about the assignment in Complaint.
Forbearance (temporary) (beware of waivers) (interest on arrears still accrues) arrears still accrues)
Home Affordable Modification Program (“ “Obama Plan Obama Plan” ”) )-
More
ALWAYS APPLY: foreclosure can’ ’t go forward with a pending t go forward with a pending application. application.
Tier 2 allows multiple tries if previously rejected.
Countrywide & Citibank agreement with PA attorney general with principal reduction (beware of tax consequences for with principal reduction (beware of tax consequences for principal forgiveness) principal forgiveness)
Short sale; must be by consent of all interested parties
Deed in lieu of foreclosure, possibility of $3-
4K payment ( (“ “Deeds for Keys Deeds for Keys” ”) )
Transfer deed with lease back (e.g. Fannie Mae program)
Reverse mortgage for older adults with equity in property.
st time modification (HAMP Tier 2 allows multiple
Homeowner offered Temporary Trial Plan (TPP)
Lender reduces payments using “ “waterfall waterfall” ” method in this order: method in this order:
reducing interest and escrow advances
reducing interest rate as low as 2%
extending term up to 40 years and re-
amortizing loan
principal forgiveness
Goal is to reduce monthly payment to 31% of gross monthly income
Lender uses Net Present Value test: Asks whether modified mortgage ge’ ’s value s value greater than the return on the mortgage if unmodified. If the a greater than the return on the mortgage if unmodified. If the answer is nswer is “ “yes, yes,” ” lender must offer loan modification. lender must offer loan modification.
3 reduced payments per month, paid on time and in full
Provide financial information to support
Information stays the same
Then you get a permanent loan modification, interest rate is typically fixed in ically fixed in stages stages
Balloon payment at end possible
Frequently lost, sometimes on purpose, see Urban Lending Solutions case: Solutions case: U.S. ex rel Mackler U.S. ex rel Mackler v. Bank of America,
E.D. NY, docket 1:11 E.D. NY, docket 1:11-
cv-
03270.
Wigod v. Wells Fargo Bank, 7th Cir. 2011. , 7th Cir. 2011.
In re Bank of America Home Affordable Modification Program Contract Litigation, Multidistrict Litigation Contract Litigation, Multidistrict Litigation, Docket 1:10 , Docket 1:10-
md-
02193-
RWZ, 2011 WL 2637222, Memorandum of Decision denying motion to dismiss (D. Mass. July 6, 2011) (J. Zobel). denying motion to dismiss (D. Mass. July 6, 2011) (J. Zobel).
Arguments you’ ’ll encounter, which have been rejected: ll encounter, which have been rejected:
Using state contract rights is an end-
run around lack of private right of action
But where federal law is silent, there is no automatic pre-
emption of state law
“The absence of a private right of action from a federal statute The absence of a private right of action from a federal statute provides no reason to provides no reason to dismiss a claim under a state law just because it refers to or i dismiss a claim under a state law just because it refers to or incorporates some ncorporates some element of the federal law element of the federal law… …. To find otherwise would require adopting the novel . To find otherwise would require adopting the novel presumption that where Congress provides no remedy under federal presumption that where Congress provides no remedy under federal law, state law law, state law may not afford one in its stead. may not afford one in its stead.” ” Wigod Wigod at 63. at 63.
No consideration
But commitments to undergo credit counseling, vouch for truth of financial financial information are detriments information are detriments
If you pay reduced temporary payments, you’ ’re still incurring fees and additional re still incurring fees and additional interest you would not otherwise be paying interest you would not otherwise be paying
Not definite enough to be enforceable
But TPP agreement is very definite with regard to payments
Incorporates terms of the mortgage where silent
construed against drafter