Articles Posted in Mortgage issues

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While it took longer than I and many other consumer advocates thought, the house of cards is starting to slip finally.  Many mortgage companies did not fully disclose exactly what would be required once the CARES Act expired and mortgage payments would resume.  I’m sure many homeowners have claims out there but don’t realize it.  These consumer claims are no small thing and can be leveraged for better mortgage terms than what is being offered.  The CFPB is going after Carrington with a big fine — but a private action will result in actual damages for the homeowner.

CFPB Takes Action Against Carrington Mortgage for Cheating Homeowners out of CARES Act Rights

The Consumer Financial Protection Bureau (CFPB) is taking action against Carrington Mortgage Services for deceptive acts or practices under the Consumer Financial Protection Act in connection with mortgage forbearances, according to a CFPB press release. The CFPB found that Carrington failed to implement many protections, provided to borrowers with federally backed mortgage loans who were experiencing financial hardship, during the COVID-19 public health emergency. The CFPB found that Carrington misled certain homeowners who had sought a forbearance under the CARES Act into paying improper late fees, deceived consumers about forbearance and repayment options, and inaccurately reported the forbearance status of borrowers to the big three credit-reporting companies: Equifax, Experian and TransUnion. The CFPB is ordering Carrington to repay any late fees not already refunded, repair its faulty business practices, and pay a $5.25 million penalty that will be deposited into the CFPB’s victims relief fund.

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People are often confused about how attorney’s fees work – when do you have to pay your own, and when does the losing party have to pay?  This question is very important when you are faced with a decision of whether to “take someone to court”.  In the United States, each party pays their own attorney’s fees unless a contract or statute states otherwise.  Often a person is denied justice unless a contract or statute allows recovery of attorney’s fees because it simply does not make financial sense to right all wrongs.

Many consumer protection or debt harassment protection statutes such as the FCCPA, FDCPA, and the FCRA provides for the recovery of attorney’s fees.  Attorneys act essentially like mini attorney generals in that regard.  We can sue for someone under a statute that provides payment from an offending creditor for instance.

Contracts are another way in which attorney’s fees are recoverable.  You might read in a mortgage or debt related contract that the creditor is permitted to obtain its attorney’s fees and court costs if it has to pursue legal action to collect a debt.  While these contracts don’t clarify this, an attorney’s fee provision in a contract goes both ways, at least in Florida.  If the consumer is the prevailing party, the consumer can obtain their attorney’s fees and court costs as well.

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BK-corrections-ActIf you have significant debt but have been told that you cannot file a Chapter 13 consumer bankruptcy, now you can file bankruptcy and not risk dismissal by the U.S. Trustees office.  This change occurred because the Bankruptcy Threshold Adjustment and Technical Corrections Act was signed into law yesterday.  Prior to this Act, someone with high debt was forced into a Chapter 11 — which is extraordinarily expensive and time consuming for the average consumer.  A Chapter 13 is much more cost-effective and efficient to reorganize someone’s finances.

While the name of this Act is thoroughly boring, it is very practical and necessary.  This Act fixes a recurring problem that has reared its head more in the past year than ever before.  Student debt has reached such a high number for many borrowers, that it was actually preventing someone from filing bankruptcy to address that student debt, or even to get rid of ordinary household debt or stop a foreclosure.

Now the debt limit for an individual filing a Chapter 13 is $2.75 million and the Act also removes the distinction between secured and unsecured debt.  This new law is temporary and will sunset on June 21, 2024.  So basically, this means that if you wait two years to file, you will NOT receive the benefit of this debt increase and may again, be prohibited from filing bankruptcy.

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A mortgage servicer called a “furnisher” for purposes of credit reporting is responsible for updates to a borrower’s credit report.  Many times following a foreclosure, there is a limited time for the lender to seek a deficiency judgment.  Here is Florida it is one year.  If a year goes by, and the lender fails to seek a deficiency judgment then it waives the amount it is still owed after the foreclosure sale of a home.

Here’s the good news:  If a lender fails to report a deficiency as having been eliminated, discharged or abolished, it is then reporting inaccurate information.  This inaccurate reporting opens the door to the furnisher’s liability under the federal Fair Credit Reporting Act, 15 U.S.C. Section 1681 et seq., (the “FCRA”) per the Ninth Circuit (California) in a recent case.  Gross v. CitiMortgage, Inc., 20-17160 (9th Cir. May 16, 2022).

This case is being compared to a leading contempt case, where the Supreme Court in Midland Funding  LLC v. Johnson, 137 S.Ct. 1407, (2017) found that a debt collector who filed a proof of claim in a bankruptcy that was obviously barred by the statute of limitations did NOT engage in false, deceptive, misleading, unconscionable, or unfair conduct so there was no violation of the Fair Debt Collection Practices Act.  While this decision involved a different set of circumstances and a different law, it is clear that these two views could be considered as inconsistent.

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FHA-SL-guidelinesAre you looking to buy a house now?  Waiting could cost you as inflationary pressures will likely cause your dollar to decline.  Moreover, interest rates will begin to rise in 2022 – 2023 as the Fed begins to normalize the interest rate.  If you have student loan debt that has prevented you in the past from buying a home, keep reading…

In light of this, mortgages and refinances are a very popular topic now — especially among those with student loan debt.  One big hang up was just resolved.  Previously, a mortgage lender had to use 1% of the outstanding loan balance, even when a borrower was in IDR and the monthly payment reported on the Borrower’s credit report was zero.

We would suggest a temporary fix:  the borrower would exit IDR for a month or two where the payment may have been zero, make a fixed standard or extended payment, apply for the mortgage and after approval, get back into the IDR.  This wasn’t the best fix; however, as it unnecessarily caused a student loan borrower to have the loan capitalize the unpaid interest.  But it did let someone buy a house who otherwise could not.

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forbearance-optionsThe CFPB stated today “[w]e are at really an unusual point in history.  I don’t think anybody has ever before seen this many mortgages in forbearance at one time that are expected to exit forbearance all at one time.”

No kidding.  This may be the calm before the storm type of thing if mortgage servicers don’t get it right when all these forbearances end.

Living in Florida sometimes it seems like the pandemic is firmly in our rearview. While we are still working from home, it’s mostly because we want to be part of the solution, and can get our work done with our cloud server.  But people are out and about pretty regularly now.

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bidenToday, President Joe Biden is extending a moratorium on home foreclosures for federally backed mortgages until June 30, after previously setting the expiration date at the end of March. Biden also announced the expansion of a mortgage relief program, pushing the window to request mortgage forbearance until the end of June.

You can check our resources page under “Foreclosure Related” to see if your mortgage is federally backed here.  Just type in your property address under Freddie, Fannie or MERS to discover who owns your mortgage.

For those who have private loans, there is no mandated federal moratorium.  You may be covered under a local or state moratorium though.

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mortgage-2Are you STILL having problems with your mortgage servicer after catching up with your mortgage while in a Chapter 13?

Are you being charged a huge sum to catch up even after the bankruptcy is over?  A mortgage servicer is required by federal law to perform an annual escrow analysis on all loans for which it manages an escrow account.  But do they always do this?

Are you suffering not only from payment shock, but also negative credit reporting for these alleged deficiencies?

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this-way-that-wayIt can be risky to reaffirm a mortgage in a bankruptcy, particularly when the property is underwater (worth less than what is owed), or you may need to move and sell quickly.  A reaffirmation agreement puts you back on the hook to pay for the full amount of the mortgage, including interest, taxes, insurance, foreclosure fees and costs after a bankruptcy, if you elect to keep the home.  Why would someone ever sign one of these?  Well, most mortgage companies do not report payments being made on a non-reaffirmed mortgage.  So how do you avoid the risk, while at the same time, benefit from timely payments being made which rebuilds credit?

SELF REPORTING MORTGAGE PAYMENTS

WHEN YOUR LOAN WAS NOT REAFFIRMED

The bankruptcy code does not require that you reaffirm, or sign a court order agreeing to continue the payments on your mortgage. But unless you are surrendering your house, you will want to continue paying because the house will eventually be foreclosed if you do not.

Mortgage companies will not report your payments to the three major credit reporting agencies (Experian, TransUnion, and Equifax) if you have not reaffirmed. It is possible, nonetheless, to still get your payment history included in your credit report, as follows:

  1. Request a payment history from the mortgage company. (The mortgage company is required by law to provide one every year free of charge.) There is no special form – just call your mortgage company and be persistent.
  2. File a dispute with the three credit reporting agencies, attaching a copy of the payment history.
  3. The credit reporting agency is required to verify the accuracy of the debt with the mortgage company within 30 days.
  4. At that point, the mortgage company can either:
  • Remain silent – the credit reporting agency must accept the information you provided; or
  • Accurately report information. The mortgage company would be hard pressed to explain how a payment history it prepared was inaccurate.
  • Repeat this process on a regular basis, to update the information.

Additionally, you should keep the payment history, since that can be provided to anyone you’re applying to for new credit.

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