The Federal Reserve is trying to roll up a key law that allows borrowers to challenge predatory lending. Under “rescission” rules, if a borrower can prove that a mortgage loan was created in a predatory way, they can basically nullify the bank’s right to foreclose. Under the Fed’s new proposal, borrowers would have to pay off the balance of the predatory loan before the bank loses the right to foreclose, which renders a rescission judgment virtually meaningless. The entire point is to void out a fraudulent mortgage.
Rescission has been used as a major tool to stop foreclosures for many years. However, we are in a brave new world, with all kinds of opportunities open to foreclosure defense attorneys, a whole menu of options to challenge foreclosures. The lending industry has been so fraudulent on so many different levels for so many years, that the possibilities for challenging a foreclosure are virtually limitless. Unfortunately, so are the bank accounts of the big banks, so rarely can borrowers struggling to pay their mortgage afford equal justice. But sometimes it works, like in this case in California.
A California homeowner sued Bank of America in small claims court and won $7,595 from the bank after it burned him on a mortgage modification.
“It was a good victory for me and I think for homeowners around the country,” Dave Graham told HuffPost.
Graham, who lives in Big Bear City, Calif., applied for a loan modification under the Obama administration’s Home Affordable Modification Program, which is supposed to give eligible borrowers a “permanent” five-year modification if they make reduced payments during a three-month trial period.
Graham said his trial dragged on for 18 months. He said he made every payment until Bank of America told him in May that he didn’t qualify for HAMP, and that he’d lose his home unless he paid about $7,000 to make up the difference between his normal monthly payments and the reduced payments he made during the trial period.
“Each month when I did talk to them I was informed it’s still under review — as long as you keep making this trial payment everything will be fine,” said Graham, 53. “At some point I started receiving notices from my credit cards that they were reducing my credit amount due to recent problems making my mortgage payment on time.”
Bank of America mortgage service specialist Anthony Lopez admitted during a Dec. 15 hearing that the bank continued taking Graham’s payments even after Graham had no chance of getting a modification, according a transcript of the hearing provided by Alan Sims, a forensic real estate specialist who helped Graham make his case.
This is a servicer-driven default. The HAMP trials are supposed to last for three months. After Graham paid the trial payment for three months, he may have had a shot to qualify for the permanent modification. But after 18 months, with all the tacked-on fees and bad credit reports, he was seen as a higher risk. The delay, then, drove the denial.
$7,500 is barely enough for Graham to get even with the bank. But the precedent of this ruling can be applied to literally thousands of class-action suits across the country. Anyone who has waited more than three months for a decision on their modification could be eligible. Anyone who has suffered through dual-track, where the foreclosure is in a race against the modification simultaneously, could use this legal avenue. As one door closes, another can open. That’s not to say that the Fed should mess with the Truth in Lending Act; only that borrowers should catalog the abuses they suffer with their bank and use every means at their disposal to fight for their home.




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That’s most citizens can sue for in CA Small Claims matters. Congratulations to Mr. Graham for going the distance on this one and winning. It sets precedent for sure. Glad to hear it.
Good on Him! The banks have stolen America, period! Besides, mortgages are based on Contract Law. The banks themselves and our government are quickly trying to do away with contract law completely.
It still goes back to the mortgage note and who owns it properly. The two parties have to be noted and recorded. The buyer and the mortgager are the two parties and must be notarized, recorded, and signed by representing lawyers.
Did the bank ever pay anything.
Small Claims judgments are ignored -
I’ve won like amounts – ran to the Secretary of State where incorporated to demand payment after non-payment of the judgment – - and gotten nothing
Indeed the company can demand a retrial from the beginning ignoring everything in the small claims case as if the case never occurred – and the extra expense kills the case.
True what you say, but it’s a moral victory, if nothing else. As you no doubt realize, Small Claims Court is certainly one place to start, which is pretty easy for the “average citizen” to handle (and not expensive like a bigger court case). I think it’s worthwhile.
David Dayen has another fresher post ready: Ladies and Gents, Your New Republican House Majority
Where can I find some of those class action suits to join? Just tell me and I’ll join it! I completed the online app regarding one case (the one from WA also has something they’ve listed on their website in Phx. court) I’ve never heard a word back from them. I called the law firm here in Phx., and they referred me to the WA office. They said the WA office was taking the lead on the case. All I got was a recording. That was in mid-Nov. I’m not sure if I’m going to be part of the case or not. I don’t know if you can be part of several cases or not?
Also, where can I get me one of those forensic real estate specialists. I’m pretty sure I will be forced at some point to sue BofA to get them to make an adult decision on my modification. It’s obvious that they are just playing games with my modification. I can’t imagine the (mostly lawyers?) legislators that created HAMP allowing the banks to continue to apply (mostly late) fees to the accounts of folks who have applied for a modification month after month after month forever or for an indefinite period. Also, what I’m seeing is fees that escalate over time, as in, $29/mo. for the first 3 months; $59/mo. for the second 3 months; $89 for the third 3 months. I don’t know if or when the fees cap out. So far, I’ve never been late and never missed a payment. In fact, for a period of 3 months, they had a full amount extra payment which they got due to a failure of humans to communicate properly with a computer. I requested that they return the amount they got by mistake, but the bank continued to “study” whether I’m entitled to my own money until I had another payment due that had not been prearranged as part of my “trial” period. The overpayment was in April, but I told them I would not be sending my July payment in since they already have the money to cover the July payment. They got the money in April.
About a month ago they were saying that I owed them over $1,600. I applied for my mod in January; BofA received my completed package on Feb. 12, 2010; my “trial” amount was $107.79 less than my normal mtg amount was. My point is, BofA is obviously taking advantage, and it is to their advantage to keep the homeowner dangling for as long as legally possible and then deny them but demand both the lost principle and interest AND escalating late fees generated by their delaying tactics. Sure wish I knew a forensic real estate specialist or a lawyer who could not only win, but would either be affordable or get the bank to pay my legal fees, who could tell me if any of the banks tactics are legal.