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COVID-19 Update 10–forbearance, evictions, collections, and more

Coronavirus

By

Marc Dann - Marc Dann Consumer Fraud & Foreclosure Defense AttorneyA lot has happened since we issued our first COVID-19 on March 13. In our tenth update we’ll take a look at recent developments, discuss impending challenges and opportunities, issue a couple warnings, and dispense some sage advice…

Involuntary Forbearance can threaten your financial future

Let’s start with a cautionary tale about involuntary mortgage forbearance. As we’ve said repeatedly, while it can be a lifesaver for people who are facing financial disaster as a result of the pandemic, forbearance is NOT forgiveness. Homeowners will eventually have to make the interest, principal, and escrow payments they have been delaying.

In addition, forbearance may jeopardize court-approved bankruptcy repayment plans and could make it difficult to buy a new home or refinance an existing loan. That’s why we urged homeowners to think carefully before taking advantage of the forbearance programs made available by the CARES Act and many private lenders.

Unfortunately, a number of banks and servicers didn’t give borrowers a choice. Back in May we warned that a number of banks and mortgage servicers were putting homeowners into forbearance by “mistake.” One of the offenders, and I’m sure this will shock no one, was Wells Fargo. According to a CNBC report, borrowers who called servicers seeking information about forbearance and other relief programs were put into forbearance without their consent by swamped call center workers.

At that time we doubted that Wells, perennial winner of the worst bank in the world award, was really doing this by accident. Turns out we were right. NBC News reported on July 16 that Wells was purposely placing borrowers into forbearance without seeking or receiving their permission.

The story focused on Troy Harlow of Buchanan, Virginia who filed personal bankruptcy in 2017 after a kidney transplant put him on permanent disability. Troy never missed a house payment because his primary goal was to stay in his home.

Wells Fargo
Wells Fargo is among the banks and servicers who have placed borrowers into forbearance without their consent.

That didn’t matter to Wells. Without his knowledge or permission, on April 29 the bank told the bankruptcy court overseeing Harlow’s payment plan that he had asked to pause his mortgage payments because he had been hurt by COVID-19. Harlow who never even thought about asking to be placed in forbearance continued to forward the full amount owed on his mortgage to Wells.

Harlow’s attorneys soon learned that he wasn’t the only victim. Wells had played the same dirty trick on homeowners in 11 states.

That news set off alarm bells here at DannLaw and led us to launch an investigation to determine if borrowers in Ohio and New Jersey have been scammed by Wells and other lenders. With that in mind, we’re asking homeowners to do two things:

First, contact your lender to determine if they have placed you in forbearance without your permission.

Second, if they have you should contact us right away so we can help rectify the problem and determine if we should file a class-action suit on behalf of every borrower who has been abused by Wells and other lenders. You can reach us by calling 216-373-0539 or filling out and submitting our contact form. Please do this right away because involuntary forbearance can cause real problems for years to come.

Is it time to take your loan out of forbearance?

If you chose to place your loan in forbearance, it’s time to start thinking about an exit strategy. If you haven’t been able to make payments because you lost your job or were laid-off when the COVID-19 crisis cratered the economy but are now back to work you should consider taking your loan out of forbearance before the amount of delayed interest, principal, and escrow you owe becomes unmanageable.

To determine if you should begin making your house payment again, consider the amount you owe on your home relative to its value. If your home is worth more than your mortgage balance it is an asset that you should protect. If it is worth less than you owe it is a liability so your mortgage payment should be viewed as a housing cost and compared to alternatives like paying rent. You should also evaluate other factors including the state of the housing market in your neighborhood, the company that owns your loan, and whether you intend to sell your house sometime in the next few years.

The moratorium on foreclosures is about to end

OH Foreclosure TimelineThe moratorium on foreclosures imposed at the beginning of the COVID-19 crisis are coming to an end in some Ohio counties and will lapse for federally backed mortgages at the end of August. That means sheriff’s sales will resume soon.

If you were in foreclosure when the pandemic struck you should contact your attorney right away. If you have not retained a lawyer contact us to arrange a no-cost consultation so we can review your case and discuss ways we may be able to help save your home. To learn more about the options available to you click here to visit the Foreclosure Defense page on Dannlaw.com.

Evictions set to resume

Dann Law Firm - Foreclosure DefenseToday it is estimated that more than 8 million Americans, including tens of thousands of Ohioans, are behind on their rent payments and may soon be evicted from their homes. This number could rise substantially when the CARES Act’s Pandemic Unemployment Insurance payments sunset at the end of July.

While distressing, the situation is not hopeless if renters and landlords communicate with each other and work together to overcome the challenges caused by the pandemic. Here are some important steps to take:

    1. Renters should communicate in writing with their landlords about their ability to pay, partially pay, or not pay rent. Both renters and landlords are trapped in a dilemma they did not cause, so landlords may be willing to work out payment arrangements. No one benefits from a vacant apartment.
    2. Check this list to determine if your landlord has a federally backed mortgage and is therefore prohibited from evicting tenants. If you are a landlord with a federally backed mortgage you may apply for forbearance if your tenants are unable to pay their rent. The eviction moratorium/forbearance program will end in late August unless Congress extends it.
    3. If you reach an agreement with your landlord regarding late or partial payments put it in writing. We will soon post a form on our website that will make it easy to create written versions of tenant/landlord agreements.
    4. Do not ignore letters or emails you receive from a court and always attend hearings when ordered. While there are legal defenses available to renters and strict procedures that must be followed before a landlord can evict a tenant, ignoring notices and/or failing to appear just about guarantees that your belongings are going to end up on the street.
    5. Retain legal counsel. If you cannot afford an attorney call your local legal aid office. As a service to people impacted by COVID-19, we are making DannLaw’s Cleveland and Cincinnati offices available if you need a computer or internet access to participate in a virtual eviction hearing. A member of our legal team will also be on hand to answer general questions about evictions.
    6. I and Jeff Watson, General Counsel to a number of real estate investor groups will conduct a virtual seminar for landlords and tenants on Thursday, July 23 at 8:00 P.M. This informative session, titled, “The Eviction Tsunami: Facts and Strategies that Lawyers, Landlords and Tenants Must Know,” will feature a discussion of the growing eviction crisis as well advice and strategies that will help landlords avoid insolvency and tenants escape homelessness. To register for the seminar click here.

Collection firms are up to their old (dirty) tricks

While debt collectors are typically shameless, there has been noticeable slow-down in activity since the onset of the COVID-19 crisis in March.  But as states take steps to restart their economies and courts begin to reopen, we’ve received reports that collection lawyers, debt buyers and creditors are ramping up operations.  That means debtors must be on the lookout for and pay close attention to any legal notices they receive.

As we noted in our discussion about evictions, the quickest way to lose a case and have a judgement entered against you is to ignore the problem. Trust me, it’s not going to go away simply because you toss a letter in File 13 or don’t show up for court. So please, respond in writing to communications you receive and appear in court when ordered.

In addition, you should contact us to arrange a no-cost consultation. We’ll be happy to discuss your situation and your options. We’ll also determine if debt collectors have violated any of the laws and rules that protect consumers. If they have, you may be entitled to financial compensation. Here’s a brief overview of the rules that govern the collections industry:

  • The Fair Debt Collections Act (FDCA). Enacted in 1978, the FDCPAis the most well-known federal consumer protection statute. Its primary purpose is to prevent third-party debt collectors from using abusive, unfair, false, or deceptive practices to collect debts. To put it simply, collectors may not lie to or mislead consumers in the course of attempting to collect a debt. Violators of the Act may be liable for statutory damages, actual damages, and attorney’s fees.
  • Telephone Consumer Protection Act (TCPA) The TCPAlimits the use of automatic telephone dialing systems (ATDS) and artificial or prerecorded voice messages by telemarketers. Since its passage in 1991, the TCPA has been expanded to cover the use of ATDS’s and voice messages by debt collectors and now applies to cell phones if an affected consumer does not have a landline. Under the law collectors may not call a cell phone unless the owner gives consent. That means it’s important for consumers to deny consent verbally during the initial call and then to immediately withdraw consent in writing.

Statutory damages under TCPA range from $500.00 to $1,500.00 per call and may be applied to each and every call made if it is found that a debt collector willfully violated the Act. The ability to “stack” damages serves as an effective deterrent and provides just compensation for consumers who have been victimized by aggressive debt collectors who willfully violate the law.

Check Your Credit Report Weekly

The CARES Act allows you to obtain copies of your credit reports from annualcreditreport.com on a weekly basis. You should take advantage of this opportunity because a number of state unemployment computer systems have sustained massive data breaches.  DannLaw has filed class-action lawsuits in Ohio and Arkansas related to those breaches.

In addition, several provisions of the CARES Act are inconsistent with the Fair Credit Reporting Act. Please reach out to us right away if you notice inaccuracies on your credit report because you can sue credit reporting agencies and entities that furnish information to them if they refuse to correct mistakes.

The Con Premieres August 5

Marc Dann - "The Con" Documentary ScreenshotFinally, I would like to extend a personal invitation for you to join me on August 5 for the premiere of “The Con,” a four-part series about the 2008 fraud and corruption-fueled collapse of America’s housing market. I’m both proud and humbled to say the series highlights the steps I took as Ohio Attorney General and at DannLaw to hold those responsible for the crisis that led to 10,000,000 families losing their homes accountable for their actions.  The series provides a lesson for the risks we face as we hurtle toward a pandemic-related recession.

“The Con,” like all movies being released in the midst of the pandemic, is being released direct to video via independent theatres. To receive your invitation to the free live premiere, click here and then click on “Follow” above the video. If you like The Con on Facebook, you’ll be invited to the free live premiere on August 5. We’ll be posting more news about “The Con” in our blog and on our Facebook page in the weeks to come.

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Marc Dann - Marc Dann Consumer Fraud & Foreclosure Defense AttorneyI was mildly enthusiastic about the CARES Act immediately after it was passed because it appeared to be substantially different from the stimulus plan crafted by the federal government during the Great Recession of 2008.

That package funneled trillions of dollars to the big banks and Wall Street speculators whose unfettered greed nearly destroyed the world’s financial system but did relatively little to help working and middle-class families devastated by the collapse of the housing market. By the time the economy began to turn around 10,000,000 of them had lost their homes.

By contrast, the CARES Act appears to direct $937 billion in aid to where it’s needed most: into the pockets of the more than 20,000,000 million Americans who are now unemployed and the bank accounts of small business owners who are literally hours away from losing everything they have built.

Sure, Congress doled out hundreds of billions of dollars to corporate America, including the airlines who have been ripping off travelers for decades, but the stimulus checks, enhanced unemployment benefits, and small business loan programs funded by the Act will help millions of people weather the Covid-19 storm—at least for the next couple months.

While it appears that Congress got a few things right, there are holes in the legislation that could negatively impact consumers, homeowners and small business owners. In this update I’ll identify the gaps and provide advice on who to deal with or avoid them.

Problems with the Paycheck Protection Program 

As I mentioned earlier, hundreds of thousands of small businesses across the nation are about to go under. The Paycheck Protection Program (PPP) is designed to help keep them afloat by providing forgivable loans owners can use to pay expenses including employee wages, rent, and utilities.

In concept the program is great. In practice, not so much.

That’s because the nationally chartered banks and SBA approved lenders charged with administering the program are permitted to pick and choose which applications to accept and in what order. As a result, they’ve been playing favorites. Business owners who have an existing relationship with a PPP lender go to the front of the line. Those who don’t, including minorities, are shoved to the back—if they’re able to apply at all. I’m sure you won’t be shocked to learn that Wells Fargo and other large financial institutions are telling smaller customers to hit the road and “try other banks.”  Publically owned Ruth’s Chris Steakhouse just announced that they alone sucked up $20 Million of the funds appropriated.

This type of discrimination is especially troubling in light of the fact that  Congress did not appropriate enough money to meet the needs of all the small businesses that are in trouble. When the money runs out, thousands of hard-working entrepreneurs and their employees will be doomed simply because they couldn’t access the help they were promised and desperately need.

We launched an investigation into this situation after being contacted by frustrated and infuriated small business owners. If you think something is wrong with the way a lender is handling or, more to the point, not handling your PPP application, please give us a call or email me at [email protected]

On the positive side, a number of clients have told us that smaller community banks are eager to process PPP paperwork. We’re not surprised. Over the years we’ve learned that community banks are extremely responsive to the needs of small borrowers. If you’ve been unable to make headway with a large lender, I encourage you to contact one of the community banks listed here.

Stimulus Checks can be hijacked by Judgment Creditors and banks

Stimulus checks funded by the CARES Act are already being deposited in the bank accounts of millions of Americans. That’s the good news.

Here’s the bad news: The Act doesn’t prohibit private debt collectors from garnishing stimulus money. That means if you’re behind on debt payments and have an outstanding court judgment, a private debt collector can grab your stimulus check. Attorney Javier Merino, head of DannLaw’s New Jersey office, along with consumer lawyers Josh Denbeaux and Ira Metrick just published an op-ed in the New Jersey Law Journal dealing with this issue.

If you fall in this category you should keep a close eye on your bank account and withdraw the money as soon as it is deposited. To stay one step ahead of judgment creditors you can track your stimulus payment here.

Here’s more bad news: if you owe money to the bank where your stimulus payment is being direct-deposited the bank can grab it. For example, if you have a bank account that’s been overdrawn, and your stimulus payment is deposited into that account, the CARES Act does not prevent the bank from taking part or all of the stimulus payment to pay back the debt. So far J.P. Morgan Chase and Wells Fargo have said they will not seize stimulus funds. Bank of America, Citibank, and U.S. Bank have yet to clarify their positions.

Waiver of Federal Student Loan interest is in doubt 

Federal Student Loans servicers have not been completely transparent about how they are going to implement the six-month zero interest, zero-fee forbearance included in the Act. In addition, some observers speculate that Navient, Greatlakes, and Nelnet don’t have the technology needed to properly track accounts. If you are taking advantage of the forbearance program please pay close attention to your loan statements and contact DannLaw or other attorneys if you notice a discrepancy in your account.

The CARES Act does not provide relief for federal loans originated before 2005 and private student loans 

The CARES Act does not provide forbearance for federal student loans originated before 2005 that were not consolidated or private student loans. If your loan falls into these categories you must continue to make your payments. If you are unable to do so, contact your servicer in writing and request a modification, forbearance or another type of accommodation.

Monitor your credit if you are taking advantage of the mortgage forbearance provisions of the CARES Act.

As we’ve noted in previous updates, the CARES Act provides for up to 12 months of payment suspension/forbearance for borrowers with federally-backed loans owned by Fannie Mae, Freddie Mac or insured by the FHA, VA and the Department of Agriculture. To determine if you have a qualifying loan send a request for information (RFI) to your mortgage servicer. We’ve drafted a simple RFI you can use. To obtain a copy email us at [email protected].

Please remember forbearance isn’t forgiveness.  That means you may be subject to higher mortgage payments, escrow payments, and other fees when you begin making your payments after the forbearance period. If you do take advantage of the Act’s forbearance program you should look closely at your monthly statement to make sure it is correct. You should also subscribe to a credit monitoring service and check regularly to make sure your servicer is not entering negative information on your credit report. If you notice discrepancies contact us at [email protected] so we can help protect you and determine if you have legal claims that may entitle you to financial compensation.

Bankruptcy may be the solution to your financial problems 

My parents always encouraged me to hope for the best but prepare for the worst. Today, their advice is more valuable than ever before because the COVID-19 emergency is causing unprecedented damage to our economy and levels of unemployment not seen since the Great Depression. Study after study has shown that a majority of Americans would have a difficult time meeting their obligations for more than a month or two if they lost their source of income. The ongoing crisis has validated those studies.

The $1200 stimulus checks and small business loans may ease the pain in the short term, but when that money is gone many business owners and individuals will be forced to consider filing bankruptcy in the months ahead. And while many people are loathe to do so, bankruptcy protections may provide the best option for dealing with the devastation caused by the crisis—a crisis none of us created or could have anticipated.

The fact that the courts and collection activity are essentially shut down gives business owners and individuals a unique opportunity to closely examine their financial situation and begin planning for the future—including a future that includes bankruptcy. Doing so will put you in a good position to move forward once the crisis ends if you don’t have to file and will help ensure that bankruptcy provides the maximum protection for your family and your business if filing proves to be the best alternative.

If you would like to schedule a phone or video conference with one of our experienced bankruptcy attorneys to discuss your financial future and the options that are available to you, please email [email protected]  We are here to listen, to advise, and to help.

By

Marc Dann - Marc Dann Consumer Fraud & Foreclosure Defense AttorneyI’ve been involved in politics and government for over 40 years and I can say  definitively that I have not seen legislation that offers as much direct and immediate relief to distressed consumers, borrowers, small business owners and tenants as the Covid-19 stimulus package, known as the CARES Act that Congress passed on Friday, March 27.  You can read an analysis of the bill here. You can read the legislation in its entirety here.

While I’m generally pleased with the CARES Act, I do have two concerns:

First, I believe government, mortgage loan servicers and banks may make significant mistakes and cause undue delays as they implement the legislation, and, second, I worry that many mortgage, consumer, and student loan borrowers may not receive the assistance they will need to weather the Covid-19 emergency.

Here’s the bad news…

The Acts’ protections only apply to federally-backed mortgage loans.

If  you are among the more than 50% of homeowners whose mortgage is “federally related” i.e. owned by Fannie Mae, Freddie Mac or insured by the FHA, VA and the Department of Agriculture help, which I’ll describe later, is on the way. But many borrowers, including those who have recently been in default in recent years, are not eligible for relief because their loans are not owned by the listed entities. That means it’s very important to find out who owns your loan. We can help you find out or you can send a “Request for Information to your servicer. Many loans that were formerly owned by Fannie Mae and Freddie Mac or insured by the FHA have been resold. In many cases hedge funds that are not obligated to offer the forbearance of payments included in the bill now hold own the loans.

The Act does not address Private Student Loans.

If your loan is not owned by the U.S. Department of Education then you are not eligible for the 6-month, consequence-free payment holiday included in the Act. While some courts in some counties have placed stays on some collection activity, lawsuits and other collection actions involving private student loans may proceed.

The Act’s eviction protections for renters apply to a very small category of landlords

Landlords who have loans from Fannie Mae or Freddie Mac and who seek mortgage assistance are prohibited from evicting tenants. Unfortunately, the vast majority of landlords do not fall into this category.

It is important to note that the members of Congress did not carve out these exceptions because they don’t care about the people they impact. The exceptions exist because the federal government generally lacks the power to control the private creditors involved.   

Now for the good news—and there’s lots of it…

Mortgages:

Mortgage Servicers for Federally Backed Mortgages must provide a 60-day suspension of payment obligations to borrowers who claim they are unable to apy because they have been impacted they Covid-19 crisis.

Mortgage Servicers for Federally Backed Mortgages are required to agree to forbearance of up to 12 months or longer without adding additional fees, penalties or interest other than that contemplated by the original note. It is important to note, however, that the Act does not prohibit negative credit reporting during the forbearance period.

Servicers of Federally Backed Mortgages are prohibited from moving forward to foreclose or evicting anyone from now until May 17, 2020.

Student Loans:

All Payments on Federal student loans will be suspended for six months. More significantly, no interest, penalties, or fees will accrue during this time period.  The non-payments will be treated as payments for the purpose of forgiveness, loan rehabilitation or public service loan forgiveness programs.  In addition, the Act contains a very consumer-friendly provision that requires lenders to report the borrower as paying currently to credit reporting agencies. Remember these provision DO NOT apply to Private Student Loans.

Unemployment Compensation:

The Act adds $600 per week in federal unemployment benefits to the amount paid by each state. For many workers this means unemployment checks will nearly equal their normal wage. You must still apply through your state’s unemployment system.

Small Business Owners:

Small business owners can apply to banks or other SBS-approved lenders for loans to cover eight to ten weeks of expenses including payroll, rent, health insurance, sick pay and other day to day costs. The loan is forgivable if the business keeps its employees on the payroll during the period. Banks will originate and service the loans and the Government will subsidize them through the SBA. While $355 billion has been appropriated, based on my discussions with clients, the money may run out so we suggest that small business owners apply right away.

Bankruptcy Changes:

The following changes to the Bankruptcy Code will be in effect for the next 12 months:

The stimulus checks Americans receive will not be considered income for purposes of filing a Bankruptcy.

For those already in a confirmed Chapter 13 Plan, the Bankruptcy Code has been amended to allow for Debtor(s) to file a Motion to Modify their Chapter 13 based on financial issues caused by COVID to extend the term of their plan for up to 84 months/seven years.

The definition of Debtor for purposes of filing Subchapter V of Chapter 11 also known as the Small Business Reorganization Act has been expanded to include all debtors, not just those defined as a small business:

The following change to the Bankruptcy Code is permanent:

The debt limit for cases eligible to file under the new Small Business Reorganization Act under Chapter 11 (a.k.a. SBRA or Subchapter V) has been increased to $7,500.000.00

See Previous updates on this crisis and its impact on consumers here

For more information contact [email protected] or call 877-475-8100

Marc Dann

[email protected]