LSNYC Cases at Heart of Pro Publica Article
Attorneys and clients from Legal Services NYC-Bronx, Staten Island Legal Services, and Queens Legal Services are at the heart of a May 9 Slate/Pro Publica piece investigating banks and mortgage servicers who offer “help” that actually limits homeowners’ ability to sue or fight foreclosure.
From the piece:
Recently, for example, two homeowners working with a legal-aid organization in the Bronx received temporary payment agreements from two different servicers that required the borrower to waive any potential defense to foreclosure. Both companies, Selene Finance and Carrington Mortgage Services, specialize in handling troubled or subprime loans.
What made the agreements particularly unfair, said Justin Haines, director of foreclosure prevention at Legal Services NYC in the Bronx, was that they required his clients to waive rights without receiving a permanent solution.
The offers were forbearance agreements, which typically last three to six months and are frequently used by servicers as short-term solutions. They can be a prelude to an actual modification but offer no guarantee of one if all the payments are made, and they explicitly state that if a foreclosure is pending, it won’t be dismissed.
“The agreements are extremely one-sided and offer no real benefit for the borrower,” Haines said. “If these borrowers did not have attorneys to advocate for the removal of this language they would just be regularly waiving their claims for nothing.”
[…]
Cortez, the homeowner from Staten Island, had been trying to get a loan modification since 2008, ever since his monthly payments had doubled and his son, who lived in the home, lost his job. He said he probably would have signed the forbearance agreement if he hadn’t had legal representation, since any offer at all from Bank of America had been so difficult to come by.
“I might have signed it, but that would have been worse for us. I’ve heard of people who signed their three-month agreement and then don’t get their modification and then get foreclosed on.”
When Cortez’s attorney objected to the clause, the bank initially resisted removing it. At a court hearing in January as part of New York’s foreclosure settlement process, Bank of America’s attorney said it was standard language for the bank’s agreements and shouldn’t be removed, said Diane Johnston, a paralegal at Staten Island Legal Services. The agreement was eventually withdrawn. Having resubmitted their documents once again, Cortez’s family is still waiting to hear whether they’re getting a modification.
Rick Simon, a spokesman for Bank of America, said it wasn’t standard to have a waiver clause in its agreements and there’d simply been a mistake.
Bank of America had stopped the practice back in 2008, he said, but a “specialized unit of the home retention division” had been mistakenly sending out agreements with the waiver language last year. “The mistaken presence of waiver clauses in some agreements appears to be limited to the unit and was discovered in December. The situation was rectified in January.”
Asked about a North Carolina case where a modification agreement offered in March contained similar waiver language—two months after the problem was “rectified”—Bank of America’s Simon said that, too, had been a mistake.
“In the interest of expediting the modification, a previous template for a similar modification was used,” Simon said.
Rochelle Sparko, an attorney with the North Carolina Justice Center, said the homeowner involved had been seeking a modification since 2008.
“In cases where a waiver is mistakenly included in a modification or forbearance agreement, it is not the bank’s policy or intent to enforce it,” said Simon.
Borrower attorneys say that in some cases there’s language in the agreements that doesn’t constitute an explicit waiver but that could have the intended effect of restricting a homeowner’s defense to foreclosure.
GMAC, for instance, the fifth-largest servicer, which oversees about 2.5 million mortgages, includes a clause in its modification agreements that the “Borrower acknowledges that Lender is the legal holder of the owner of the Note and Security Instrument.”
Franklin Romeo, an attorney with Queens Legal Services, said he’d objected to the clause on behalf of his client because there is some doubt about who the legal holder is. Last September, GMAC suspended foreclosure evictions and sales in 23 states after the revelation over its use of “robo-signers,” employees who signed thousands of documents each month falsely swearing that they’d personally verified the details of the mortgage. In the case of Romeo’s client, one key document is signed by one of those robo-signers.
“My concern is that, if the borrower were ever to face another foreclosure in the future, the lender would argue that this paragraph would preclude the borrower from challenging the way in which the lender acquired the note and mortgage even though, in this case, we believe the assignment transferring the mortgage to the lender was faulty,” Romeo said.
Read the article in full at slate.com.
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