- Checks written on affected accounts may be returned NSF.
- Automatic withdrawals from the account for auto loans, utilities, and other consumer debts may be denied.
- Banks may charge large, multiple overdraft fees.
- Credit scores will be negatively impacted by late or denied payments.
RESPA
A lot has changed since we posted our last update. A new president is in the White House, mortgage forbearance programs and foreclosure moratoriums have been extended by the federal government, a $1.9 trillion stimulus package is working its way through Congress, millions of Americans have been vaccinated against the coronavirus and the entire U.S. population may be inoculated by early summer.
For the first time in a very long time, there is light at the end of the COVID tunnel.
Unfortunately, that light could become an oncoming train for homeowners who make unwise or incorrect decisions when forbearance and foreclosure relief programs sunset in the months ahead. To help ensure that the end of the pandemic doesn’t mark the beginning of a nightmare for people pummeled by the virus, I’ll discuss the aid programs that are now available, how to take advantage of them, and then outline steps families should take now to secure their financial future.
FORECLOSURE MORATORIUMS
Let’s start by taking a look at the foreclosure landscape.
I’m pleased to report that there is some good news for borrowers whose mortgages are backed or owned by the federal government. The moratorium on foreclosures imposed by the Federal Housing Administration (FHA), Veterans Administration, the U.S. Department of Agriculture (USDA), Fannie Mae, and Freddie Mac will remain in effect until June 30, 2021.
While the extensions provide much-needed breathing space for homeowners who were in or were about to be in foreclosure when the pandemic struck, I must emphasize that the bans are temporary reprieves, not pardons. Mortgage servicers will begin processing judicial and non-judicial foreclosures the minute the moratoriums are lifted.
The news isn’t anywhere near as good for homeowners with loans that are not government-backed. While some states have enacted eviction and/or foreclosure moratoriums that protect borrowers whose mortgages are held by private lenders, many, including Ohio, have not. That means foreclosure is a very real and imminent threat—especially as courts in more and more jurisdictions resume normal operations.
Whether you are now protected by a federal or state moratorium or are involved in an active foreclosure proceeding, now is the time to contact experienced legal counsel like the attorneys at DannLaw for advice.
We have helped thousands of families save their homes by negotiating affordable loan modifications and utilizing groundbreaking legal strategies that stop or soften the impact of foreclosure.
We also perform a thorough review of every client’s mortgage history and case file to determine if their servicer or lender made mistakes or committed violations of federal or state consumer protection laws. Those errors and violations often enable us to defeat the foreclosure claim and recover substantial monetary damages from lenders that can put families on the path to financial security.
To learn more about our innovative and highly effective foreclosure defense strategies schedule a free consultation by completing our contact form or sending us a direct message on Facebook. But don’t delay, every day you wait could bring you one day closer to losing your home.
Forbearance
Before I dig into the details about the current state of forbearance relief, please keep this oft-repeated phrase in mind:
Forbearance is NOT forgiveness.
As I have noted in every one of our COVID updates, borrowers will be required to make the principal, interest, and escrow payments that have been deferred when their forbearance period ends. No one, not President Biden, members of Congress, nor the CEOs of major lenders and servicers has ever so much as hinted that these costs will be forgiven. That means homeowners will, at some point, be on the hook for thousands of dollars in arrearages.
That said, here is an overview of the relief programs that are available and applicable deadlines.
Borrowers with FHA, VA, or USDA loans have the right to request up to 12 months of forbearance in two six-month increments. The deadline to apply for an initial 180-day forbearance period has been moved from March 31, 2021 to June 30, 2021.
In addition, the agencies are also providing two extensions of up to three months each for homeowners who paused payments on or before June 30, 2020. The extensions will give homeowners nearing the end of their maximum 12-month forbearance period extra time to recover from financial hardships caused by the pandemic. Borrowers who qualify must apply for the additional time no later than June 30, 2021.
Homeowners with Fannie Mae/Freddie Mac loans are eligible for up to 12 months of forbearance. At this point, the agencies have not set a deadline to apply for an initial 180-day forbearance period.
Like the FHA, VA, and USDA, Fannie and Freddie are also giving borrowers approaching the end of their maximum forbearance period more time to resume making payments. Homeowners who entered forbearance on or before February 28, 2021 may now request an additional three months of relief.
With due apologies to Shakespeare, we’ve arrived at the point in the update where I must say: To forbear or not to forbear, that is the question. Although every situation is different, here are some broad guidelines that will help borrowers with government-backed loans determine if they should enter, remain in, or avoid forbearance:
- While forbearance is not a perfect solution, it is far better than foreclosure. That is why struggling homeowners should take advantage of the available relief programs. If you are in forbearance and are unable to resume making your mortgage payments stay in until you are back on your feet. If you are not in forbearance but need to be, contact your lender, and apply ASAP.
- If you are in forbearance but can now afford to make your mortgage payments, it’s time to plan and execute an exit strategy. Staying in longer than necessary will needlessly increase the amount of deferred principal, interest, and escrow you owe moving forward.
- Borrowers who have been and can continue to make their mortgage payments should avoid forbearance like the plague.
Deciding how to settle the balances accrued during forbearance is just as important as choosing whether to enter the program and when or if to leave. While the specific plans offered by each agency differ, in general, the following four options are available. It is important to note that FHA, VA, USDA, Fannie and Freddie are prohibited from requiring borrowers to make lump sum payments of the amounts due.
Repayment plan. This option enables borrowers to pay the balance due by increasing their mortgage payment for a few months.
Deferral or partial claim. This option allows homeowners who can resume making their regular payments but can’t afford more to move missed payments to the end of their loan or put them in a subordinate lien repayable only when they refinance or sell their home or terminate their mortgage.
Loan modification. Borrowers who can no longer afford their pre-pandemic mortgage payment can negotiate a loan modification. The amount owed in deferred principal, interest, and escrow will be rolled into the loan. The monthly payment will probably drop, but the term or the principal balance of the mortgage may increase.
Lump-sum reinstatement. An option to consider for borrowers who have the financial wherewithal to pay back missed payments all at once.
Your mortgage servicer should reach out to you 30 days before your forbearance period ends to discuss your options. Here are two important points to ponder:
First, remember, you cannot be forced to make a lump sum payment. If that is the only option offered by the servicer, ask them about the other plans they offer.
Second, each repayment option is complicated and carries risk. Don’t think for a minute that your servicer is looking out for your best interests. In many cases the opposite is true. That is why you should consult with DannLaw before leaving forbearance. We will work with you to devise an exit strategy that protects you and your family and helps secure your financial future.
Things are even more complicated and risky for homeowners whose mortgages are held by private lenders. If you are in forbearance, please stay in regular contact with your servicer because they have the ability to change the terms of your plan at any time. They can also require you to make a lump sum payment if you choose to leave or they decide to end your forbearance period. In addition, it is highly likely that any repayment options they offer will be designed to maximize their profit at your expense.
DannLaw’s experienced legal team knows how to deal with and hold private lenders accountable. If you have a private mortgage, don’t hesitate to contact us to arrange a free consultation so we can assess your situation and help ensure that your home and your finances don’t become victims of the pandemic.
Finally, I want to remind everyone that forbearance is not automatic. You must always contact your lender or servicer and ask to defer your payments and you must make the request no later than the deadlines I’ve listed in this update.
If you have any questions about forbearance, foreclosure, or other consumer credit or lending issues, do not hesitate to contact us. We are here to help.
Thank you for taking the time to read this update. Be well, and take heart, we’ve come a long way together and I’m confident better days are just ahead.
The U.S. Supreme Court’s decision in Seila Law v. Consumer Financial Protection Bureau marked the culmination of a years-long attack against the agency by the business community, Congressional Republicans, and the Trump administration. It also provided a major dose of “be careful what you wish for because you just might get it” for the powerful forces who have been trying to destroy the CFPB since it was created in the wake of the collapse of the nation’s housing market in 2007-2008.
Precipitated by Donald Trump’s decision to fire director Richard Cordray in defiance of the statute that established the agency, the suit, filed by a firm that ran a mortgage modification scam, was expected to deal a fatal blow to the CFPB. Or at least that’s what those who lined up on the side of Seila, including the DOJ, U.S. Chamber of Commerce, the National Foundation of Independent Businesses, the Mortgage Bankers Association, and a number of entities that had been tagged by the Bureau for abusing consumers, hoped.
The Court, in a 5-4 decision dashed those hopes. Yes, the majority upheld Cordray’s firing and found that the governing structure of the agency was unconstitutional, but this sentence dealt the CFPB’s foes two staggering blows:
“The agency may therefore continue to operate, but its Director, in light of our decision, must be removable by the President at will.” You may read the entire decision and the amicus briefs here.
The first blow: the CFPB may continue to operate and, thanks to this decision, constitutional challenges to its validity are now at an end. That’s not quite what the boys at the USCOC and the NFIB were looking for when they filed their amicus briefs.
And here’s the second: Kathy Kraninger, the unqualified anti-consumer political hack Trump appointed to succeed Cordray can be booted out the door 30 seconds after Joe Biden is sworn into office.
The ironic part of this entire affair is that the governing structure of the CFPB was specifically intended to shield the agency from politics. The GOP’s attacks have now made who will run the Bureau and whether they will use its immense power to protect consumers a perpetual issue in presidential campaigns.
Along with taking great satisfaction at seeing the business community’s attack on the CFPB blow up in their collective faces, we at DannLaw are also extremely pleased that the ruling preserves our ability to act as “private attorneys general” who can use the Real Estate Sales Practices Act (RESPA) and the Truth in Lending Act (TILA) to protect our clients and seek and secure damages from mortgage servicers and lenders who violate the law.
While little noticed, Director Cordray’s creation of a private right to action is one of the most important components of the laws and regulations enacted after the housing crisis. He, along with Senator Chris Dodd, Congressman Barney Frank, and then-professor Elizabeth Warren recognized that the failure of government regulators to exercise their oversight authority played a major role in bringing the nation and the world to the brink of a catastrophic financial meltdown. By giving private attorneys the power to use RESPA and TILA to hold bad actors accountable they created a second line of defense for homeowners, consumers, and the American economy.
At DannLaw, we’ve used that power to help hundreds of people fight off illegal foreclosures, obtain loan modifications, safeguard their assets, and hold onto their hopes and dreams. We’re truly grateful that those who sought to destroy the CFPB have instead guaranteed that we and lawyers like us across the country will be able to use the law to fight for our clients well into the future.
In fact, I’m so grateful, I think I’ll send the guys at Seila and the Trump Justice Department a thank you note today.
Today, we’re going to tell you story about good vs. evil, right vs. wrong. The main character in the tale is Riad Ghosheh who owns a home that Ocwen Loan Servicing LLC and PHH Mortgage Services tried to steal. They’re the bad guys.
How bad?
As of this year, more than 11,000 complaints against Ocwen had been lodged with the Consumer Financial Protection Bureau (CFPB). PHH, which Ocwen acquired in 2018, has been tagged 781 times. Ocwen, a company we’ve fought and written about many times, is truly among the worst of the bad actors that populate the mortgage servicing industry. It won’t come as a surprise that the company no longer operates under the Ocwen name. They decided to hide behind PHH’s relatively clean reputation. But believe us, Ocwen’s back there pulling the strings.
Those are the bad guys. Who are the good guys?
Well us, of course, the DannLaw legal team. When Riad learned that Ocwen/PHH was about to steal his home he contacted us. Here’s a spoiler alert: we saved his house. On October 30, Federal District Court Judge Mark Norris issued a temporary restraining order that stopped the bad guys from moving forward with a foreclosure that was scheduled for November 1. In the wake of Judge Norris’ ruling, Ocwen/PHH has decided to abort its attempt to swipe Riad’s residence. You can read Judge Norris’ order here: tnwd-2_2019-cv-02710-00015 (1)
Talk about riding to the rescue just in the nick of time…
But the saga doesn’t end there. Simply saving Riad’s house didn’t seem like justice to him or us. Ocwen/PHH had put him through a horrible ordeal. They broke the law—in fact, they broke a bunch of them. So we’re using those laws, in particular the Real Estate Sales Practices Act (RESPA) to hold Ocwen/PHH accountable and make them pay for nearly wrecking Riad’s finances and disrupting his life. You can read the complaint we filed against the companies in Federal District Court for the Western District of Tennessee here: Ghosheh Riad 2019 10 18 TS Complaint
Truth be told, we’ve helped hundreds of people like Riad over the years. But his story is both especially compelling and infuriating, so we thought we’d share it, both as a cautionary tale and to illustrate the strategies we use to fight giant banks and mortgage servicers—and WIN.
Here’s our story…
Riad Ghosheh, who is legally deaf and partially blind, owns a home in Cordova, Tennessee, a community just east of Memphis. Earlier this year, Riad went to Israel for an extended period of time to take care of family business. Before leaving he asked his son to make the mortgage payments on the home and gave him the money to do so.
You can probably guess what happened next: his son didn’t make the payments. Riad returned to the United States and learned that his loan had gone into default. Needless to say, this was not the homecoming gift he expected.
In order to stop the home from going into foreclosure, Riad filed for Chapter 13 bankruptcy on June 3, 2019. As we’ve noted in our blogs and on our website, filing Chapter 13 immediately brings foreclosure actions to a dead stop.
On or about the same day, Riad received a “Streamline Modification Trial Period Plan” (TPP) from Ocwen his loan servicer. Loan modification plans like this are designed to give homeowners the opportunity to prove they can make their mortgage payments and resolve arrearages. They are also supposed to stop foreclosures. Note the use of the word “supposed.” This will be important in just a bit.
If he accepted the proposed TPP, Riad would be required to make three payments of $1,418.15 beginning July 1. If he made the three payments on time, the company would offer him a permanent loan modification plan. Riad signed the TPP on June 18, 2019, and mailed it to Ocwen the same day.
Because he knew he could afford to make the payments called for in the TPP and because the agreement was supposed to prevent Ocwen from foreclosing on his home, Riad allowed his bankruptcy petition to be dismissed. After all, his main reason for filing was to save his home from foreclosure—a threat he supposedly no longer faced.
There’s that word again.
On June 24, Riad, as required by the TPP, made the July payment of $1,418.15. Records show Ocwen received the payment on June 28. He made the August payment on July 24 and the September payment on August 26. Three payments required. Three payments made—early.
So far so good, right?
Look, we told you this was a story of good vs. evil, not a fairy tale. Things were far from good.
Here’s what happened to the three payments:
Ocwen kept the July payment but never applied it to Riad’s loan;
On September 22, PHH, which had taken over the loan, sent the August payment back along with a letter notifying Riad that he had violated the terms of the TPP;
The September payment, which was made nearly a month before PHH sent back the August payment, is MIA. No one at Ocwen/PHH can find it.
Riad was, to say the least, alarmed by these events, so he asked the person who held his power of attorney to contact the bankruptcy lawyer who had filed the Chapter 13 petition on his behalf earlier in the year.
This was a good call on Riad’s part because the bankruptcy attorney was the person who notified him that his house was slated to be sold out from under him on November 1. Ocwen/PHH had never contacted him or his counsel. The lawyer only knew the sale was about to take place because he saw it advertised in the newspaper. It appears the fine folks at Ocwen/PHH who forgot to apply Riad’s July payment to his mortgage then forgot to notify him that they were about to steal his home did remember to advertise the attempted theft in the paper.
At this point, put yourself in Riad’s place. You trusted your kid to make your house payments. He didn’t.
You trusted your mortgage servicer to play by the rules and honor the terms of a mortgage modification plan they offered you. They didn’t.
You assumed that Ocwen/PHH would abide by the laws that govern the mortgage servicing industry. Of course they didn’t. Abiding by the law is not part of their business model.
And as a result of it all, you came within days of becoming homeless—even though you did everything you were supposed to do.
And Riad, like thousands of other people who have been victimized by Ocwen, would have been homeless had he not contacted the DannLaw team.
As we mentioned above, we’ve already saved Riad’s home. Now we’re suing Ocwen/PHH in Federal Court to make them pay for the emotional and physical distress their sordid behavior caused, for damaging Riad’s credit, and for violating both RESPA and Fair Debt Collection Practices Act (FDCPA). Our filing alleges that Ocwen/PHH did the following:
Count One: RESPA Violations
Count Two: Breach of Contract
Count Three: Promissory Estoppel (OK, we know you don’t know what that is, and the explanation is really long and complicated, but take our word for it, Ocwen/PHH did it.)
Count Four: Conversion
Count Five: Unjust Enrichment (This one is easy to understand, it basically means Ocwen/PHH stole Riad’s cash.)
Count Six: Violations of the FDCPA
The best thing is, Riad doesn’t have to pay us to wage this battle on his behalf. If we win the case, Ocwen/PHH will be required to pay our fees and we will receive a small percentage of any damages the court awards.
And the damages part is no fairytale—we’ve won significant financial awards for people like Riad numerous times in courts across the U.S.
That’s our story. We’ll let you know how it ends. But in the meantime, if you or someone you know is facing foreclosure or is being abused by a bank or mortgage servicer, don’t be a victim. Fight back like Riad, by contacting the experienced foreclosure defense attorneys at DannLaw. You can reach us by calling the office near you or by completing the form on our Contact page.
We’ll be happy to schedule a no-cost consultation, provide you with sound legal advice, and help you save your home and win the financial settlement you deserve.