Cases of Predatory Lending, Mortgage Fraud, and Failed Loan Modifications
As California bankruptcy attorneys we are seeing thousands of homeowners trying desperately to save their homes from foreclosure with loan modifications and bankruptcy, even homes that are severely underwater. What we have noticed is that many of these homeowners never stood a chance to survive the toxic mortgages they were approved for. It's become obvious to us both mortgage fraud and predatory lending practices were common hat, and Fair Lending Practices were thrown to the wind as investors and lenders capitalized on their share of the housing boom. Banks are now doing the same thing on the housing bust, backed by the Governments "Shared Loss Agreements".
I mean seriously, let's call it as we see it, these banks blew it, raked in trillions, and we bailed them out to do it to us again! As housing prices ran up with every month of the housing boom, lenders were forced to become increasingly creative in order to make mortgage payments affordable for lower income earners and sub-prime borrowers. The sad truth is the families that were taking out loans on these overpriced homes with creative lending didn't know any better. They applied for a new home loan or refinance and presto, "you’re the winner of a time bomb mortgage". The creativity extended into the high end of the housing market as well due to skyrocketing monthly mortgage obligations attached to the escalating housing market.
Predatory Lending Practices
These mortgage schemes quickly morphed into predatory lending practices with mortgages designed to get people into homes they couldn’t actually afford. At their most extreme, lenders were actually committing mortgage fraud, knowingly falsifying information on mortgage applications and appraisals to ensure approvals. In this environment, homeowners gratefully took on stated income loans, teaser rates, and negative amortization mortgages known as "Option ARM's" designed by lenders to be affordable for only a short period of time. It was common knowledge for lenders at the time that these artificially low payments would eventually increase to the point where homeowners could no longer afford them.
These predatory lending practices were common at all levels of the housing market, as was mortgage fraud when predatory lending alone wasn’t enough to secure the necessary mortgage approvals. Homeowners who were victimized by these activities were left to defend for themselves once their payments got out reach. To compound matters, new home builders joined forces with lenders and homeowners found themselves underwater in homes which they should have never been approved to buy in the first place.
Loan Modification
With the possibility of re-sale and refinancing eliminated due to negative equity and mortgage payments set to rise for the foreseeable future, home loan modifications became the only way to reduce payments and stop foreclosure. The problem that then became evident, even with home loan modification as a viable option, was that homeowners were ill-equipped to conduct negotiations with their lenders. The message went out to the public to try working directly with their lenders to obtain a HAMP loan modification, the same lenders who may be guilty of predatory lending practices and mortgage fraud.
Lenders Not Acting in Good Faith
Let's be serious, why would mortgage servicers modify the loan when they can make more money in service fees through foreclosure? In all candor, from what I have seen as a bankruptcy attorney is that these lenders are not acting in good faith and setting these homeowners up to be homeless. Despite obvious predatory lending practices and mortgage fraud, many homeowners either never made it through the home loan modification process or negotiated such small decreases in payments that they still couldn’t afford their mortgages.
A second issue was that some firms which were hired to negotiate home loan modifications never delivered on their promises while taking thousands of dollars for their services up front. Many homeowners were unable to stop foreclosure either after not being approved or not getting their payments lowered enough. Homeowners are now finding that having an experienced attorney litigate on their behalf for predatory lending, mortgage fraud or failed home loan modifications is a way of recovering money which was lost due to these practices.
Lawsuits Against Lenders
Additionally, if you have a cause of action against your lender you could avoid filing bankruptcy and stop foreclosure with a lawsuit. Obviously you can't just sue your lender frivolously, but if your lender has denied you a loan modification due to affordability there's a chance you should have never been approved for that mortgage loan in the first place. There's a good chance you’re a victim of mortgage fraud/ predatory lending or your mortgage was not properly transferred by MERS or it's security pool.
If your refinance or new home loan was an ARM, Option ARM, 80/20 Sub prime loan or you feel that you could be the victim of predatory lending practices or mortgage fraud, you may have a very good chance of recouping some or all of those lost funds. The key is to have an experienced attorney on your side to fight these lenders and avoid foreclosure or filing bankruptcy. In an effort to preserve home ownership and fight predatory lending practices, mortgage fraud, and failed home loan modifications the California bankruptcy attorneys the Law Offices of Zhou & Chini can review your situation and refer you to a real estate litigation attorney in your area. For a FREE consultation on your personal situation call us at (800) 972-9600.
