Lenders reject homeowners who apply for Obama plan

[JustFileSuit]

I express my regrets to "JustBroke" that I was not clear. I would also say that it is not my intention to turn the discussion into a "political forum." That is not appropriate in advancing the thread, nor the issues raised in the thread. Let's take another look:

A. The bona-fides of the "Corporation."
The "corporation" sure meets the minimal requirements of the Secretary of State; "Shark Investments" apparently had an address at the private residence of a listed Director. Yet this is not an address where a bona-fide borrower can go to transact business, like make a payment or inquire of a balance. "Shark" has no telephone even, for "customers" to make inquiries. "Shark" is not in the business of servicing mortgages, or otherwise. It operates to take over properties, and apparently do a quick flip.
In order to do that, it requires that other parties, including the previous "servicer" and the previous "trustee" act as counter-parties to set the stage for the "taking" of some homeowner's position as Owner of the house.
So: it may well be "bona-fide" in the sense that it meets the minimum requirements of the Business Corporations Act of the State, e.g. it has an "address of record" and "Director(s) of Record," but it is certainly not bona-fide as a Lender, or an Investor in Notes, or anything like. It operates to take over private homes and re-sell them. To make that work, the displaced homeowner has to not know about it, so that the homeowner cannot "cure" prior to the Trustee's Sale, and/or does not file for bankruptcy protection. In that sense, it is not a "bona-fide" business - it exists to profit on the edges. It is a "business" engaged in profiteering. Have I clarified my thinking?

B. The Homeowner not reading the Note, etc.
Let us remember that the original post recited that the homeowner got into problems and went the Obama Administration mod route. the Modifications are a "public-policy" mechanism set forth by the government in response to unexpected events, and seek to obtain a public-policy solution to a large-scale disturbance in the lending industry. Consonant to a set-forth mod agreement, the owner made a sequence of payments. She is not particularly sophisticated. Holding someone not sophisticated to complex legalese smacks of abuse (at least to me). If you are led to believe that making a series of payments as set forth in the mod agreement for a period of time (apparently three months) leads to acceptance by the parties of the new Arrangement, then to have the Lender "duck out" by virtue of a subtly-written "escape clause" smacks of abuse (to me). Otherwise, why bother making any payments at all if the making of the payments does not set forth the intentions on-going of the parties? It makes no sense.
So you can yell at the Homeowner for not reading the "escape clause" that the lender is using, but that hardly seems appropriate.

C. Kicking in the door.
The "kicking" part is hyperbole, and I rather suspect the readers here take it as hyperbole. Presumably they would have hired a locksmith. And NO, if they have an eviction order, then they "evict." I have seen cases in Georgia where they just go and change the locks, and claim with a perfectly straight face that what was left on the premises was abandoned - there was nobody home. There was a celebrated case in Colorado where the Sheriff's men did the eviction on the surprised resident, who came home to find her stuff out on the sidewalk! The suggestion of "seals" is suggestive of a highly-refined sense of propriety on the part of "Shark" corporation owners - a bit misplaced. And yes, they call it "Shark Co." for a reason.

D. Being the Holder of the Note.
I respectfully submit that JustBroke misconstrued my point here. The underlying Note was never sold (to Shark or anyone else). The Note was declared in default and the collateral simply "sold" by the trustee holding the Note (*non-judicial foreclosure, remember). The Note is now extinguished - end of Note.
Sure, the new "owner", Shark Co., is now the recorded owner of the property. And therein lies a big part of the problem. By not becoming the holder of the Note, the homeowner is displaced from ownership of the property and that cuts off those avenues of redress. It is apparent what Shark Co's posture is going to be: "Hey, homeowner, don't get mad at me, we're just the property sharks. Go get mad at the Trustee that sold the place out from under you." Just lovely.

E. "good faith and fair dealing."
Again I disagree with JustBroke's analysis. The original Note and Mortgage are consumer contracts. As such (and for that matter even in commercial contracts) there are duties and obligations between the parties, including those that flow from the clauses in the Contract, and those that operate as implied from the operation of the consumer relationship. One is that "inherent in all transactions" is the "implied promise of good faith and fair dealing." For example, the loan requires payment by a calendar date for the monthly payment. The payment is mailed in but the post office mis-places the letter containing the payment. It arrives two days "late." That does NOT trigger a purported "right" of the lender to accelerate the Contract (even if the Note actually contains such language). Sorry; duties and obligations require good faith and fair dealing, and the Contract does not have to specify that. [As for the States that do not require the "re-notification"as mentioned by JustBroke, well - don't live in those States. That is back to beyond cave-man].

F. As to "reading the Note." And making payments on a certain term.
All true of course. But events not anticipated by the framers of the original Note do happen. Nobody expected the interest-rate auction markets to freeze up, either (let's remember that little fiasco). When the unexpected happen, then that is where the modifications to the loan start in. Now here we have it happening on a massive scale, and so the Government has set up a program to mod the Notes and loans so that the parties can survive mutually. Except that, as we see from the original post, some parties are not playing. They take the three month's of payments andthen sell off the collateral anyway! And that is (to me) grossly unfair. I find it abusive. And flagrantly against public policy.

G. "Take everything they wanted."
Unfortunately, this happens more than you might realize. There is another thread on this site that recounts how "clean-out squads" hired by the New Holders or owners (i.e. the equivalent of Shark Investments) then go on a spree, not only taking the contents not bolted down, but also the appliances, the granite off the kitchen countertops, the toilets, the water heaters, and then blaming it all on the original owners who were defaulted. I am not making this stuff up; look at the other posts in this Forum!!!
Whether "Sharks" employees do this, or the men they hire do this, or the trustee's men do this - either way, the homeowner ends up victimized. His stuff is gone.

H. Filing suit against "Shark" Investments.
JustBroke sets forth the case that Shark is merely an innocent buyer of defaulted properties at a Trustee's sale,and thus is to be held harmless from the surprise visited on the homeowner by virtue of the abuses of the original lender. And (no surprise here) that would be their defense.
But "Shark" is not an innocent, some babe in the woods. They exist for the sole purpose of these property flips. Does anyone seriously maintain that "Shark" did not do some "due diligence" on the property before showing up at the Trustee Sale? Any due diligence would establish that the original homeowner is still living in the property. That should set off a flag that there is some problem that needs to be looked at (it sure would if I were a buyer). So does Shark do the elemental step, go ring the doorbell and ask what the owner's perspective is? Nope. Shark is perfectly happy to let the Trustee sell it off without the owner knowing about it, and then swooping in (after all, if the owner knew, then for all Shark could see, the owner might simply file for bankruptcy protection, and there goes the prize). So "Shark" is (no surprise) an active participant.
For all anybody knows, "Shark" simply pays the Trustee a fee to tip "Shark" about these sales and the status of the property. Does "Shark" attract liability? Ultimately, that is up to the Courts - and the jury. I would certainly sue them. But hey, that's me.

So, did "Shark" "purchase" the home "legally?" Well, in a very narrow sort of interpretation, they probably did. Was it even remotely ethical? Nope. Was it actionable? Probably, especially if it can be demonstrated that "Shark's" sole business purpose is to flip properties obtained by some consumer abuse on the part of a corresponding-party Trustee, in crass defiance of public-policy declarations as set forth in the mod agreements (which Shark knows about, by its due-diligence). "Nazi?" Nope. "Hitler?" Nope. Bad behavior? Yep.

[justbroke]

A. The bona-fides of the "Corporation."
The "corporation" sure meets the minimal requirements of the Secretary of State... Have I clarified my thinking?

Minimual requirements? Are you suggesting that the State has different levels of "requirements" for Corporations? Like if you have an address and a director, you get a silver star. If you have a storefront with an office, an 800 number, and customer service representatives, you're now a gold star corporation?

Since when does a real estate investment company become a servicer, just by purchasing a property (not the Note)? Never.

B. The Homeowner not reading the Note, etc.
Let us remember that the original post recited that the homeowner got into problems and went the Obama Administration mod route. the Modifications are a "public-policy" mechanism set forth by the government in response to unexpected events, and seek to obtain a public-policy solution to a large-scale disturbance in the lending industry.

What does that have to do with reading the Note? The person though President Obama himself was going to handle this? (This is why I absolutely hate that people call it the "Obama" plan. It's not the Obama Plan, unless he's signing the Mods himself. This is why, of the 750,000 trial modifications, less than 40,000 have been made permanent, in the 11 months of the Program!!!

C. Kicking in the door.
The "kicking" part is hyperbole, and I rather suspect the readers here take it as hyperbole.

No they don't, because you stated two times that the investment company was there to kick down the door, if the former owner (resident) was not there.

D. Being the Holder of the Note.
I respectfully submit that JustBroke misconstrued my point here. The underlying Note was never sold (to Shark or anyone else). The Note was declared in default and the collateral simply "sold" by the trustee holding the Note (*non-judicial foreclosure, remember). The Note is now extinguished - end of Note.

You eluded to and used the words "servicer" when speaking about them now holding clear Title to the property. The Note has absolutely nothing to do with this, unless you can prove that the (nominated) Trustee committed fraud. You're right... "[b]y not becoming the holder of the Note, the homeowner is displaced from ownership of the property and that cuts off those avenues of redress". That's because they were foreclosed upon under the terms of the Note and for non-judicial foreclosure in that State. The time to redress, was at the time that they were sued for foreclosure.

E. "good faith and fair dealing."
Again I disagree with JustBroke's analysis. The original Note and Mortgage are consumer contracts. As such (and for that matter even in commercial contracts) there are duties and obligations between the parties, including those that flow from the clauses in the Contract, and those that operate as implied from the operation of the consumer relationship.

Huh? This is the problem with contracts, and why I just finished writing one that had 20 people on a conference call discussing T's & C's. The "good faith" is consideration. That's why the first section of the standard Residential (Promissory) Note starts with "BORROWER'S PROMISE TO PAY" and not "GOOD FAITH IS IMPLIED".

That does NOT trigger a purported "right" of the lender to accelerate the Contract (even if the Note actually contains such language).

Huh??? A default in the terms on a Contract does not trigger any "rights" of the lender to accelerate the Note? You forget, the terms of the Note, in this case, were already accelerated. Perhaps you forgot that part. Underlying State non-bankruptcy law controls here and the Note holder (or nominee) still needs to follow such law. Again, there are several States in which once a foreclosure action starts, and is only "interrupted" or "stayed" by another Court, the foreclosure can continue right where it left off without re-notice (such as in North Carolina)! How does this make it an acceleration, when it was already accelerated?

F. As to "reading the Note." And making payments on a certain term. All true of course. But events not anticipated by the framers of the original Note do happen. Nobody expected the interest-rate auction markets to freeze up, either (let's remember that little fiasco)...

Huh? So we're blaming this now on people who signed ARMs who thought they could refinance. And, somehow the ARM problem is tied to the Note that this Shark didn't buy. So since the Shark didn't buy the Note, they have no right to the property under State non-bankruptcy law? Because it's the banks fault.

G. "Take everything they wanted." Unfortunately, this happens more than you might realize. There is another thread on this site that recounts how "clean-out squads" hired by the New Holders or owners (i.e. the equivalent of Shark Investments) then go on a spree, not only taking the contents not bolted down, but also the appliances, the granite off the kitchen countertops, the toilets, the water heaters, and then blaming it all on the original owners who were defaulted. I am not making this stuff up; look at the other posts in this Forum!!!

You're mixing two different situations. Your mixing personal property with people who were actually foreclosed upon and actually abandoned the property. We may as well through in the goons that just rob the places for copper.

Whether "Sharks" employees do this, or the men they hire do this, or the trustee's men do this - either way, the homeowner ends up victimized. His stuff is gone.

Homeowner... they are no longer the owner of the home. How are they victimized? I think you have crossed two different things together to come to this point and it's getting very muddy now.

H. Filing suit against "Shark" Investments. JustBroke sets forth the case that Shark is merely an innocent buyer of defaulted properties at a Trustee's sale,and thus is to be held harmless from the surprise visited on the homeowner by virtue of the abuses of the original lender. And (no surprise here) that would be their defense.

Of course a person does their due dilligence when they are buying "foreclosed" properties. it only makes sense. In many States, a foreclosed home that is occupied by the owner (who was foreclosed upon) does have as little as 3 days to vacate the property. No one indicated that the owner was told to leave prior to the 3 days. You have used conjecture to jump to the point where the investors were "kicking down the doors" and "taking everything they wanted".

So, did "Shark" "purchase" the home "legally?" Well, in a very narrow sort of interpretation, they probably did.

Wow.

Let me sum this up. An investor buys a distressed property at a Trustee (Power of Sale) auction. The investor then goes to the property and informs the owner (who is still resident) that they now own the property and that they are preceding with eviction under the terms of the State non-bankruptcy law (which is 3 days). So, the investor is the blame because they don't hold the note and have no rights to evict the owner because the owner/non-owner wasn't notified? Or, are we blaming this now on people who signed ARMs who thought they could refinance. And, somehow the ARM problem is tied to the Note that this Shark didn't buy. So since the Shark didn't buy the Note, they have no right to the property under State non-bankruptcy law? Because it's the banks fault.

Did I get that right?

Now, as to the facts in the newspaper article, I think they were more complaining about HAMP and the Lender than the investor. You seem to have directed all your anger at the investor.

[JustFileSuit]

Let's remember one basic. The "Shark Corporation" guys are not there as prototypical Donald Trumps, purchasing property on the market at value in Atlantic City in order to assemble a plot and then to build a casino, at which point the land has an increase in value as a result of their development actions. The "Shark Co." outfits are there for one reason only: to seize and convert to themselves the accumulated equity of the homeowner, that the homeowner has built up over years, or decades.

The "Trustee" of the Deed of Trust, who is selling off the place out from underneath the homeowner, has as his interest the recoupment of whatever the outstanding balance due on the Note is. That's it.

But if the property is underwater, then "Shark" Co. is not a bidder. These guys are not out there bidding for properties where the sales price is at the market. They are looking for the property where there is substantial "equity."

So the way I look at it, the guys behind the "Shark" Corporation are not "investors," and using that term is to sugar-coat, or do public-relations spin-control, on their activities. They are more akin to privateers of the 1600's, with the modern equivalent of "Letters of Marque" issued by a rival king so that they can go plunder on the high seas, so to speak. In the latest version, the Letters of Marque are the Certificate of Incorporation; it grants "Shark" the ability to go sharking.

The Trustee dumping the property cannot complete his function without the Shark Co as the counter-party buyer. The equity in the property gets taken from the homeowner, in this case the elderly (and rather naive) woman who has been paying into the Note for decades. She scrimped for those years to accumulate the money, one month at a time, to buy the home. Now along comes the Lender and the Trustee of the trust deed and they say: "OK, here's the Obama Plan, and you pay this new sum for three months, and we modify the interest rate on the Note." And she does, and then after they take her cash, they decide unilaterally: "Nope, not going to do it, bye-bye." And she gets hosed.

Now if you want to term that "raw capitalism" and feel that that is "investing," then fine; you are entitled to that opinion. I call it being a privateer. And since the scheme of the lender and trustee, to bail out and take the cash, does not work without the participation of the "shark" outfits, then my umbrage is also directed at them.

And yes, I would sue them. What they are doing is against Public Policy - the policy as set forth in the Obama Plan. they are also unjustly enriching themselves at the expense of the hosed homeowner. (How that works out is up to the jury. But remember, if the "Shark" companies were consistently sued (which they are not), then that would take the enthusiasm out of this particular form of pernicious exploitation).

[BobMango]

The thing I really don't understand is why the mortgage holder thought it was in their interest to sell the property for substantially less than the original purchaser was willing to pay. She had made the trial payments and looked to be back on track.

[justbroke]

The thing I really don't understand is why the mortgage holder thought it was in their interest to sell the property for substantially less than the original purchaser was willing to pay. She had made the trial payments and looked to be back on track.

In many of these cases, the Loss Mitigation department is not in contact with the Foreclosure department. They basically hire an attorney to foreclose and forget about it.

Besides, this HAMP program has absolutely NOT worked. Out of 750,000 "trial" loan modifications to date, less than 40,000 (5.3%) has become permanent modifications. The program doesn't work. People relying on that program are doomed (95% have not received permanent modifications). The fact that the person made the "last" of a 3-month trial period, has absolutely nothing to do with a permanent modification under the (original) HAMP program guidelines. There is not even anything in the language of the HAMP disclosures that read that a Lender must stop the foreclosure process and make the modification permanent after 3 payments.

People need to read, read read. You need to have other pokers in the fire. People relying on HAMP should also file a Chapter 13, if necessary, and if they really want to keep their home and it is financially sound to do so.

In this particular case, the homeowner was underwater by at least 70%. Sorry, but I wouldn't try to rescue a home that far under. It makes no sense. The HAMP program, I believe, doesn't provide an incentive for lenders when the LTV (well a modified form of it called the mark-to-market LTV or MTM-LTV) is less than 70%. At less than 70% MTM-LTV, the incentive multiplier is 0. This calculation was clearly not in the Lender's (original investor's) favor, with regard to this particular case.

Sorry, that's just how HAMP works. You have to understand the front-end and back-end debt-to-income calculations that they make, as well as their back-end incentive from HAMP, which uses a weighting factor. Any MTM-LTV under 70% is basically zero incentive for the lender to participate in HAMP (or modify under HAMP). There are other calculations too with how the net-present-value (NPV) works too, so there are multiple ways this cat is skinned.

In the end... HAMP sucks. Everyone knows it. That's why the President is back at it for the third time this year.

Sorry to be blunt.

[JRScott]

I feel sorry for the woman, but at the same time with how this is run, why some Americans think the government will provide free and equitable health service to all is hysterical. This should show you exactly what will happen.

The HAMP and other programs since the financial meltdown were never there to help the average American citizen, it was rushed through Congress not to help us, but to help the bankers who fund Congressional campaigns. (Obama has as many if not more bankers on his staff than Bush did).

[JustFileSuit]

The HAMP and other programs since the financial meltdown were never there to help the average American citizen, it was rushed through Congress not to help us, but to help the bankers who fund Congressional campaigns. (Obama has as many if not more bankers on his staff than Bush did).

Sadly, the HAMP program has failed. What irks me is that the national bankers get $800 billion to save their necks, and then an effective interest rate of Zero on the funds they borrow at the Federal reserve window, and then they loan it to each other and play with the cash on the commodities exchanges including exchange-rate fluctuations, and none of the cash filters back to business and homeowners, and then after all that the homeowners facing an illiquid real estate market end up taking the hit.

There is a lot wrong with this picture.

[hamletsdead]

Actually, every contract contains an equitable obligation of good faith and fair dealing -- which you can sue for breach of in California.

The problem that is crying out for redress here in both these stories is the fact that the homeowner doesn't get any notice of the foreclosure sale while the lender lulls them into thinking that they're going to be approved for a loan modification. I have no idea who came up with that brilliant idea in the federal government, but it's entirely at odds with the purported idea behind loan modifications -- i.e., keeping folks in their homes rather than booting them out onto the street -- and is just patently unfair. It's true, people don't read legal documents closely enough, but when the program is billed as HOPE for America it beggars belief to have a clause buried in the trial modification contract that essentially reads "and by the way, we can sell your home out from under you without notice while you're making these partial payments." The only reason for such a clause is to prevent people from staying the foreclosure sale by filing BK. The banks are not exactly acting with enlightened self-interest here, which I suppose is not surprising if one hearkens back to the last S&L lending crisis of the 80s; this is just another variety of stupidity and greed made manifest, and all the raptors will descend as usual to get what they can.

[1967]

Geez, i'm sitting here reading this thread and it makes me a mad as hell.

The real kicker is you and I still pay, you and I pay for all of it. The Obama plan that doesn't work.....we pay! The more it doesn't work the more we pay!

I had a chat with a very respected economist a month ago and he said it perfectly. "Regardless if the economy picks up or not doesn't matter." " the fact is all the bad debt is still here, it never went away, we have yet to deal with it"

Then he went on to say " In the current situation with foreclosures and BK's at a record level we have no means to clean up the bad debt."

Then he went on to say " As rosy as things may appear we are headed for disaster and we will have another round of this twice as bad as the first.

He claims we gonna be in this for 10-15 years minimum.

I'm just the village idiot so I try and be a good listener, he did make a lot of sense though.

scary stuff

Mike

[JustFileSuit]

You may reasonably anticipate about another 14 million suits in foreclosure. You may also anticipate that about 40% of these suits will be brought by plaintiffs that are not the legal Holders of the Note! Amazing stuff, indeed. Always check the paper trail of the transfers of your Note and Security Instrument (the mortgage); if there are defects, the lender will be unable to perfect his interest and foreclose. The bonanza is when there is a "break in chain of title."

[albacore44]

the attorney i spoke to today mentioned that the government just gave fannie/freddy unlimited funding, and speculation is this will allow them to start writing down principal, which is something that has yet to be a serious option for the banks

[JRScott]

the attorney i spoke to today mentioned that the government just gave fannie/freddy unlimited funding, and speculation is this will allow them to start writing down principal, which is something that has yet to be a serious option for the banks

Doesn't solve the problem, just means we are all on the hook for the mortgages now instead of just a few.....after all Fannie/Freddie are government entities really.

[Tom_Mi]

Here's what Congress CAN do, but wont. I'm about to walk to my guy's office and ask him why they don't do this:

The Govt can't change the banks. But the Govt OWNS FHA. They can change the outmoded FHA waiting periods. My suggestion won't save homes, but will get people buying again.

The 3yr waiting period came about because in a rising market it's very difficult to NEED foreclosure. You can just sell your friggin house for at least what you paid.

Today, we're being penalized for a "job change" or "job loss" or "medical expenses"...none of which really comes from any desire to screw the lender.

So the law should read:
People who have lost a home to foreclosure, but are re-employed/relocated and have discharged any medical debt should have PRIORITY for any 80/20 loan. This gets the housing market moving faster at the reduced prices. The money the bank loses is their problem...they bet on a rising market just like we did.

[North1]

Post above said try HAMP and do C-13 as backup - problem is that if you are in a trial HAMP mod and file BK, lender will file motion for relief from stay.