Buying a home is an exciting time for most families. Unfortunately, there are those who would take advantage of that situation. These individuals often intentionally set buyers up for failure. Typically, families do their best to make regular payments and otherwise live up to the financial promises they made. This approach may work for several months or even several years. But, eventually, everything falls apart.
When that happens, the team of professionals at Roemerman Law professional team goes to work for you. First, we thoroughly investigate the facts to figure out what happened. Next, we give you solid legal advice as we lay out your legal options. Then, once we decide on a plan of action, we diligently and aggressively work that plan until we obtain the most favorable result possible under the circumstances.
Predatory Lending and Mortgage Fraud
In the early 2000s, many large lenders blatantly targeted lower-income and poor-credit families, women, and minorities in widespread mortgage fraud scams. The same thing happens today, but the scams are different and more difficult to detect. Some common ones include:
- Insurance Packing: Insurance is a good thing, right? That’s generally true, and many unscrupulous mortgage brokers turn smart financial planning into a benefit for themselves. The broker may add insurance clauses which are really not necessary. These payments add several percent to each installment payment.
- Bait-and-Switch: Brokers promise a certain interest rate or certain loan terms, and then offer something different. These differences are usually in the Good Faith Estimate. But the GFE is buried in a pile of “closing papers” and, especially if the borrower has limited English proficiency, it is hard to notice the fraud.
- Prepayment Penalties: These excessive fees essentially make it impossible to refinance the house, so the homeowner is stuck with the original terms to which they agreed for the life of the loan, without any real option to refinance.
- Balloon Payment/ARMs: In the 2000s, the number of adjustable-rate mortgages (“ARMs”) skyrocketed. In these, the homeowner is asked to make low, interest-only, payments for a period of years, then make a “balloon payment” at the end, for the total amount of principal owed. Often, homeowners were told to make the interest-only payments to improve their credit and that they “could always refinance.” If the home is worth the same amount or has even declined in value, refinancing is often impossible. An “underwater” home, where the amount owed exceeds the value of the home, is almost impossible to refinance because no lender wants to give a loan for more than the value of the home. Homeowners, often with improved credit, are asked to pay the full value of the home, often hundreds of thousands of dollars, or face foreclosure. Here, a modification is often the best solution.
- “Robo-signing”: To foreclose, a lender must prove it is the owner of the original “promissory note” that the borrower signed, promising to repay the home loan. Often, these notes were lost or never transferred from the original lender to subsequent ones, including the mortgage-backed securities (“MBSs”). Sometimes, the notes were even destroyed!As an alternative form of “proof of ownership” of the notes, courts will allow a lender to show a copy of the original note and mortgage and a valid “assignment of mortgage” from the original lender to another party. Instead of properly keeping the notes, the lenders would often wait until the homeowner was in default (behind on payments) and simply have a third-party sign an affidavit saying the original lender had assigned the note/mortgage to the foreclosing lender and that the foreclosing lender possessed the note. These affidavits were not verified, meaning the person signing them had no idea of whether or not the lender owned the note, yet signed the legal equivalent of an affidavit attesting to the lender’s ownership of the note. The person signing would simply sign thousands of documents a day, signing, flipping, and signing the next one, without checking any of the facts to which they were swearing. The hurried and robotic manner in which they did this was dubbed “robo-signing.” The 2012 National Mortgage Servicing Settlement, a $50 billion-dollar agreement between 50 Attorneys General (D.C. and every state except Oklahoma) and the five largest lenders (Ally/GMAC, Bank of America, Citibank, JPMorgan Chase Bank, and Wells Fargo) was intended to halt this practice and hold lenders accountable for their fraudulent practices. However, this did not stop the practice and Roemerman Law has defended homeowners whose foreclosure documents have some of the worst offenders still being used to take people’s homes, including many signed after 2012. The prevalence of this fraudulent practice was a major reason the firm entered foreclosure defense in 2017.If you are facing some form of fraud, Roemerman Law is well-versed in detecting and fighting it.
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