Fight Foreclosure!

Reviewed by Michael Kinsman, CPA, PhD, Professor of Finance and Accounting, Pepperdine University

“Valuable Information and a good read”

Fight Foreclosure! 

I look at books on “saving your home in foreclosure” with a cynical eye. Most of them are very long on promises and war stories about how someone with unusual circumstances has saved his or her home (with the help of the author, who, of course, has always done a super-human job helping). Most are equally short on results and good advice that will help the typical person in foreclosure.

To my delight, despite the title laden with promise for everyone, the author provides 130 pages (in addition to valuable appendices) of excellent, practical, commonsense advice for one whose house is in foreclosure. I believe this book is a “must-read” for anyone caught in this situation.

What exactly does the book say? It provides information and advice on six main topics:

• Communicate. If you find yourself in financial difficulty, you will most likely hide that fact from everyone. That is exactly the wrong thing to do, the author says. Communicate with your family, your lender, and others involved in the situation. Petrovich also backs this advice with many examples of situations where lack of communication led to disaster, and communication led to successful resolution of problems.
• Budget. Before finding yourself in financial difficulty, you should begin budgeting so that your plan provides you the information you need to be successful. In foreclosure, that process is even more important.
• Record. When in foreclosure, keep a log of your actions, correspondence, and conversations. Petrovich has a “Mortgage Workout Notebook” with excellent tips on what records to keep and good advice on how to respond to collection agents.
• Don’t deny. Face up to the problem. Early. Petrovich provides stories of success (and failure) from following (or not following) this advice.
• Legal defenses. If your lender has not “followed the rules,” you may have legal defenses to foreclosure. Believe it or not, lenders often make mistakes on loans. While you will probably need an attorney to help enforce your rights in such a situation, Petrovich provides advice on what to look for in this arena.
• When all else fails, sell. Petrovich provides information on: selling your house before foreclosure; on “short sales” (paying less than the loan balance in satisfaction of your loan); and on deeds in lieu of foreclosure.

Even if you are not “in foreclosure,” Petrovich’s 45-page highly readable glossary of real estate terms makes this a worth-having book. If you are in foreclosure, it is a must-read.

Contact the author

Author’s web site

A recent post from a previous blog, An Open Letter to Countrywide

David - I have not met one lender that was willing to work with homeowners as the current media bull trys to get out there.  All you here is “Call your lender” - “they’d love to work something out” - that is hogwash IMO.  I have not come across one that is willing to “work with a homeowner”.

There are a few loan servicers who will voluntarily workout certain non performing loans at terms which favor the distressed borrower,  but they are the exception to the rule.

Another rule, “A lender will only do what is in its own, self financial interest.”

That’s one reason why I’ve developed a “cramdown” loan modification procedule which can be used to compel lenders to more quickly embrace workout proposals which include preforeclosure short sale, short payoff refinance, or cramdown loan modification. The “cramdown” seeks concessions on par with HOPE FOR Homeowners program.  The basis for “leverage” is the identification of predatory lending practices, and or material violations to state of federal lending law.

I am working with individual homeowners, realtors, mortgage brokers, and other non profit organizations who need to implement successful loss mitigation advocacy.

More INFO on SPOCH’s consumer advocacy

Perhaps one third of the people I counsel who want to save their home from foreclosure are fighting an uphill, and oftentimes losing battle.  But they want to fight. I help, but try to temper their expectations, and have them prepare for and accept the eventuality of relocation.

Then, there are situations in which I have a reasonable expectation conditions are such the homeowner can Fight Foreclosure! and keep the home.

Recently, I spoke with a woman, a casual acquaintance whose home is in the early stages of foreclosure. I asked her to bring whatever documents she had pertaining to the loan’s origination and mortgage foreclosure.

Tearfully claiming she doesn’t want to lose her home, she confessed a “friend/confidant” has convinced her saving the home is impossible and her friend (who happens to own a short sale company) is very close to negotiating a preforeclosure short sale…. “What choice do I have?” she asked, visibly upset and choking back tears..

If the deal is approved, this woman will have to vacate the property and find alternative/affordable housing.  In my state, the foreclosure process can take about a year or more.  If she did nothing, she would still have 8 or 9 months in the house before having to leave.  

For all I know, there will soon be a national or state moratorium on residential foreclosure adding months to the process. 

“Where will you go?” I asked her.

“I don’t know.”

“Doesn’t it make sense to try to Fight Foreclosure! and try to keep the house?”  (I run a non profit housing preservation advocacy, and in 2008 authored Fight Foreclosure! How to Cope with a mortgage you can’t pay, Negotiate with your bank, and Save your home)

“He said he tried but the lender refuses to modify my loan… I don’t have the money to bring the loan current.   The house isn’t worth what I owe.  I screwed up.” she stated.

“Have you talked to an attorney?” 

“No.” 

“What have you done?”

“I gave the papers to my friend (who happens to own a short sale company and deals with people in foreclosure for a living) who is helping me.” 

MY 20+ YEAR ADVOCACY INCLUDED INVESTIGATING ALLEGATIONS OF PREDATORY LENDING PRACTICES, UNTOWARD REALTY TRANSACTIONS, AND MORTGAGE LOAN SERVICING ABUSE FOR THE MORTGAGE BANKERS ASSOCIATION OF AMERICA’S CUSTOMER SERVICE DEPARTMENT. 

 A cursory review of her loan documents indicated predatory characteristics, and I suggested we investigate the loan for compliance to Truth in Lending (TILA), RESPA, HOEPA, etc.   If the loan were determined to be predatory, or made in violation to applicable state or federal lending law it would give her some leverage in seeking a loan modification…  She agreed to ask her lender to provide her loan origination file to me.

Based upon my experience, I concluded she had a chance at keeping her home via a Cramdown Loan Modification.  A chance. 

Missing from the folder she brought were the basic transaction documents needed for the “short sale” of her home:  a listing agreement, contract of sale, buyer’s prequalification, and the preliminary HUD1. 

“I don’t recall signing a contract of sale…” she said, but “he” has all the paperwork.

She promised to provide the requested documents.  Instead, I got a call from her friend and confidant who told me her situation was hopeless, and he was very close to getting a short sale approval…. and didn’t want me to screw things up….

“What’s the rush?” I asked him.

“She is in foreclosure.  The lender has refused a loan mod.  This is her only option.”

“Well, I think the loan may be predatory, and as such, she has a chance to keep her home.”

“Nonsense.  Her loan is from an excellent mortgage company!”

“Really?  Well, I looked at the settlement statement, and I disagree. Furthermore, as you must know, a loan in the early stages of foreclosure won’t get the same attention and workout consideration from the lender as will a loan closer to Sheriffs’ Sale which in this case is at least 8 or 9 months away… maybe more.” 

“I think you screwed things up.”  he told me.

Though he promised to FAX to me  the listing agreement, contract of sale, PHUD1, etc., he didn’t.

(OH, BY THE WAY.  I ALSO WROTE, AN ETHICAL APPROACH TO SHORT SALES IN 2006). 

 Instead, I got a polite email from the woman who asked me to “back-off” because her friend would “ask again” for the lender to modify the loan.

I wasn’t afforded the opportunity to review the nuts and bolts of this transaction, in fact, I was denied the opportunity which raised suspicions.   I have nothing invested except a little bit of time, and my compassion for anyone who is at risk of losing their home to foreclosure…

But I do have some unanswered questions.  I have questions about the likely predatory nature of the mortgage in foreclosure, and who originated the mortgage loan.

Is there a connection between the predatory loan’s origination and the convenient, accelerated short sale transaction?

I have only my suspicions based on experience and instinct.  I may be wrong.  I hope I’m wrong.

I feel as if I am watching a person starve to death with a turkey sandwich within reach.

“Hey!  There’s a turkey sandwich over there. Eat it!”

“Oh, no.  My friend says that its not a turkey sandwich, and even if it is, it’s not for me.”

www.spoch.org

The Housing Scene  (CRAMDOWN LOAN MODIFICATION SERVICES)Document Review Could Save Home

If the TIL statement doesn’t match up with the HUD-1 closing cost sheet you received at closing, if the APR is off by just a hair, you might have cause for legal action against the lender.

Typically, forensic loan audits are ordered by mortgage investors to determine what kind of legal liability confronts them in the pools of loans they already own or are considering buying. As a so-called “business-to-business”service, they are not generally available to individual borrowers.

The reviews aren’t cheap. The fee could be as high as $3,000, depending on how much you owe on your mortgage. But if an error is found, it could be the 2-by-4 between the eyes you need to force the lender to move you up to the front of the long, long line of borrowers who are looking for ways to hold on to their homes.

“In some cases, if people were simply overcharged by $30 on the final HUD-1, or if the APR was higher by just .125 percent than was originally disclosed, this may give the lawyers leverage when negotiating with the lender to grant a beneficial loan modification and ultimately save their homes.

Well over 80 percent of the recent audits performed have revealed major Truth-in-Lending violations, errors in the good faith estimates required under the Real Estate Settlement and Procedures Act, illegal predatory lending practices or even fraud. 
 

“With 60 pages of loan documents, there’s bound to be a mistake in there somewhere,” says Ruyle, a real estate and estate planning attorney. “Maybe some pages were left out or they are in the wrong order. Perhaps some of the language is just plain gibberish, or maybe there is a technical error.”
 

The four-out-of-five figure seems a little high to Jeffrey Taylor of Digital Risk, an Orlando-based firm which performs forensic loan audits on behalf of mortgage investors. But in that his company finds “material misrepresentations” in 57 percent of the loans it reviews, he says that high an error rate is “very possible.”

Intentional or not, mistakes on the part of mortgage brokers and funding lenders are characteristic of the housing boom, when there was a gold rush to approve the mortgage application of practically anyone who could fog a mirror. And now that the boom has gone bust, they can be used by borrowers to keep their homes if they so desire.

Forensic reviews “have put a big spotlight on how the average home buyer was abused during the mortgage craze,” says Ruyle. And if any kind of violation of the law is found, adds Maddux, it affords the borrower the opportunity to “use their rights to gain some leverage” with their lender.

The problem isn’t so much that lenders aren’t willing to work with borrowers to keep their homes. Rather, it’s that they are so overwhelmed that they can’t keep with the onslaught of callers seeking help.

Which is why consumer advocate David Petrovich now advises troubled buyers to order forensic loan audits to determine if their loans were predatory or made in violations of state or federal lending laws.  

Petrovich, who is executive director of the non-profit Society for the Preservation of Continued Home Ownership in Oakhurst, N.J., and the author of “Fight Forelcosure: How to Cope With a Mortgage You Can’t Pay, Negotiate With Your Bank and Save Your Home” (John C. Wiley & Sons), says the intent of an extensive review of your documents isn’t to sue the lender. Rather, it is to give you some bargaining power.

“My intent is not to see lenders dragged into court, but to offer them a chance to avoid expensive litigation by agreeing to modify the illegal loan’s terms in an affordable workout,” he explains.

A problem Petrovich encountered just the other day with a large loan servicing company
illustrates the kinds of issues beleaguered home owners face in dealing with their lenders – or, in most cases, the servicer hired by the owner of the mortgage to administer the loan.

As he tells the story, the servicer had been stalling for months on an application for a short-sale, which is basically a contract between the borrower and a potential buyer at a price that isn’t enough to cover the seller’s mortgage. On such situations, the lender must give its approval for the deal to go through.

After resubmitting documents on several occasions, Petrovich was told the file had been closed because the necessary papers hadn’t been received. This, despite the fact that he had confirmation on his fax machine that the docs had been received as well as an e-mail from the company confirming same.
“They killed the file knowing I would resubmit,” he says. “If I sent in a new application, (the servicer) could quickly approve the short sale and boast it completed a new application within a short time. This is unconscionable and despicable behavior!”

The consumer advocate maintains this is not an isolated case. Owners “on the edge of despair” are often misled into believing that if they jump though hoops, all will be okay, he says. “Loss mitigation agents lie to owners about time frames. Others demand big payments up front” before agreeing to modify mortgages or other loan work-out solutions. 

“That’s why I hold little hope home owners will be able to secure the affordable workouts needed to keep their homes,” says Petrovich, “Home owners need teeth.”

A million or more homeowners have mortgage loans which were, from the onset, unsuitable for them and have resulted in foreclosure.  Many of these foreclosures can be challenged by legal claims for unfair lending practices, fraud, misrepresentation, usury, and violations to state unfair and deceptive acts and practices laws, the Truth in Lending Act, the Equal Credit Opportunity Act, and the Racketeer Influenced and Corrupt Organizations Act (RICO).

It’s likely many of those distressed homeowners’ rights were violated during the mortgage solicitation and origination process, and/or during the servicing of their loans. 

Those seeking help from their lender offered quick fix repayment plans, more permanent loan modifications, or outright refinances are often required to waive their rights to pursue legal claims against all that participated in the illegal mortgage process including brokers, lawyers, originators, title companies, appraisers, and loan servicers.

When it comes to workouts to avoid foreclosure, lenders will only do what is in their best, self interest. HopeNow Alliance, whose members include some of the nation’s largest lenders and loan servicers that collect payments, and a group representing investors who hold mortgage debt,  control a consortium of “non profit counseling services” who are compelled to do what is in the best interest of their employer… the mortgage loan servicing industry, and not necessarily what is in the best interest of the distressed homeowner seeking help.

Advising a distressed borrower his or her loan may be predatory and to seek legal counsel is not necessarily  part of the program.  If it isn’t, it should be.

It is important homeowners know they can challenge the legality of the foreclosure, and should not simply or too quickly agree to a temporary, quick fix while ill-advisedly and perhaps unknowingly waive their future, legal rights.

Before signing any agreement involving the listing or sale of their home, a mortgage refinance or workout, homeowners should have an attorney review the documents.  Many local chapters of Legal Services will perform the review without charge to qualified homeowners.

In my book, Fight Foreclosure! (Wiley 2008), I discuss options and alternatives available to homeowners threatened by mortgage foreclosure.

independent, non profit resource

A million or more homeowners have mortgage loans which were, from the onset, unsuitable for them and have resulted in foreclosure.  Many of these foreclosures can be challenged by legal claims for unfair lending practices, fraud, misrepresentation, usury, and violations to state unfair and deceptive acts and practices laws, the Truth in Lending Act, the Equal Credit Opportunity Act, and the Racketeer Influenced and Corrupt Organizations Act (RICO).

It’s likely many of those distressed homeowners’ rights were violated during the mortgage solicitation and origination process, and/or during the servicing of their loans. 

Those seeking help from their lender offered quick fix repayment plans, more permanent loan modifications, or outright refinances are often required to waive their rights to pursue legal claims against all that participated in the illegal mortgage process including brokers, lawyers, originators, title companies, appraisers, and loan servicers.

When it comes to workouts to avoid foreclosure, lenders will only do what is in their best, self interest. HopeNow Alliance, whose members include some of the nation’s largest lenders and loan servicers that collect payments, and a group representing investors who hold mortgage debt,  control a consortium of “non profit counseling services” who are compelled to do what is in the best interest of their employer… the mortgage loan servicing industry, and not necessarily what is in the best interest of the distressed homeowner seeking help.

Advising a distressed borrower his or her loan may be predatory and to seek legal counsel is not necessarily  part of the program.  If it isn’t, it should be.

It is important homeowners know they can challenge the legality of the foreclosure, and should not simply or too quickly agree to a temporary, quick fix while ill-advisedly and perhaps unknowingly waive their future, legal rights.

Before signing any agreement involving the listing or sale of their home, a mortgage refinance or workout, homeowners should have an attorney review the documents.  Many local chapters of Legal Services will perform the review without charge to qualified homeowners.

In my book, Fight Foreclosure! (Wiley 2008), I discuss options and alternatives available to homeowners threatened by mortgage foreclosure.

independent, non profit resource

BOOK REVIEW

‘Fight Foreclosure!’

by David M. Petrovich

A veteran consumer advocate clearly puts forth options for homeowners threatened with foreclosure.

By Frank Nelson, Special to The Times
May 4, 2008

AS foreclosures continue tracking relentlessly higher, nationally and in California, the advice dispensed by David M. Petrovich in “Fight Foreclosure!” could not be more timely, more astute — or more welcome.

He writes of an estimated 2 million families nationwide in danger of losing their homes, a figure that seems to tally with the grim figures in California. DataQuick Information Systems has put the state’s foreclosure activity “at record levels” and reported that in March almost 38% of Southland sales were foreclosed homes.

Petrovich has a winning bedside manner, not sugarcoating bad news but not throwing up his hands in despair either. There is much homeowners can do when threatened with foreclosure, and he sets out the various options clearly and honestly.

The author’s other big advantage is that he really knows his subject. He has spent 25 years working with troubled homeowners and co-founded the New Jersey-based consumer advocacy nonprofit Society for the Preservation of Continued Homeownership.

Petrovich, the agency’s executive director, writes as if he’s much more interested in helping people than in selling books, displaying an empathy for those in trouble that perhaps stems from his own very close brushes with foreclosure.

He tells the moving story of his father-in-law’s losing his home in foreclosure and the resulting effect on his wife’s family; then Petrovich himself, as the result of an injury and later a job loss, twice narrowly escaped the same fate.

Drawing on these personal and professional experiences, Petrovich dispenses solid advice: Be honest with yourself and your lender. Don’t make promises you can’t keep. Act fast. Explore all options. Document and file everything. Don’t sign anything you don’t fully understand. Beware of scams.

The golden rule is to act fast — the race against foreclosure is a race against the clock. Communication with the lender is crucial, and Petrovich outlines ways of persuading a lender to modify loan terms, enabling the homeowner to afford the mortgage payments and stay in the house.

Alternatively, an owner may use the time it takes to foreclose — about four months in California — to sell, with the aim of preserving equity and credit rating. Petrovich suggests smart ways to speed this process, starting with a realistic sales price.

Bankruptcy can stop foreclosure in its tracks, but the author takes time to explain the downside. Strong defense against foreclosure is also provided under the Servicemembers Civil Relief Act, which gives special foreclosure protection to armed services personnel who are, or have recently been, on active duty.

Petrovich points out some shrewd defenses under the Truth in Lending Act in which just trying to establish who owns the loan may be an effective barrier to foreclosure.

“The complexities of mortgage loan securitization cast a shadow of doubt on who has the legal right to foreclose,” he says.

Under the act, evidence of predatory lending may present a stout defense against foreclosure, as can any number of mistakes or omissions of a technical nature.

“A tiny error made (even innocently) by the lender may be grounds to stop foreclosure,” writes Petrovich, suggesting that an attorney can best help unravel those fine legal points.

Many homeowners are vulnerable when it comes to opportunists who begin circling at the first whiff of foreclosure. Petrovich details several popular scams and gives cautionary tips on how to recognize and avoid them.

For further support, this excellent book lists online addresses for Department of Housing and Urban Development offices in every state plus other websites to which worried homeowners can turn.

Petrovich assures readers that financial troubles and foreclosure are nothing to be ashamed of.

“The only shame is in not doing something about it,” he says.

• a portion of Fight Foreclosure! royalties dedicated to SPOCH, a charitable/education org.

I’ve been working a preforeclosure short sale for a property with documented structural deficiencies.  The dwelling is in a gated, clusterhome community.  The subject ‘cluster’ is Plaintiff in a lawsuit against the builder.I submtted a complete, shortsale application several months ago.  The lender conveniently misplaced the file which I see now as more a standard practice, than an exception to the rule.  The market dropped, the buyer revised its offer, the contract was resubmitted, the PHUD1 revised, etc.  Finally the lender agreed to order a BPO. After about 10 days I called to ask the lender about the BPO, and I was advised the BPO had already been performed.  The BPO indicated a value about $100,000 more than the pending offer.

I explained a drive-by BPO wasn’t sufficient for this particular dwelling in light of the engineering problems, and an interior BPO would provide better information.  I was told by the loss mit rep her records indicated the BPO was an interior BPO, and its indicated value would likely result in the rejection of the short sale offer.

I always emphasize to the agents I’m working with it is essential they accompany the BPO rep, point out defects, adverse market conditions, etc. and then hand them updated market data.  That’s our best chance to influence the lenders’ perception of value. I want to be kep informed when the BPO is scheduled, so we can discuss what additional/supportive info should be handed to the BPO rep.  I called the agent to find out why he hadn’t alterted me to the scheduled BPO appointment.

The agent claimed he was not contacted for access, nor did the sellers grant permission to anyone at anytime to perform an interior BPO. The subject property is in a gated community with limited access.  A guard at the gate would first need telephone authorization from the owners before conferring permission to enter the community.  No such permission was sought, or granted.

I called the lender, again, who stated it had the results of an interior BPO performed on January 4th, 2008, complete with interior photos. 

I told the loss mit I had no doubt her records confirmed a BPO had been performed, but her infomration was faulty.  It must be a mistake.  I suggested the vendor must have inserted the property info incorrectly, because there had been no BPO performed.  She said she would investigate and get back to me.  Of course, she never did get back to me.  I sent several emails and FAXes, and left messages asking for the results of her investigation.

Today, after waiting on hold for about 15 minutes,  I was able to speak to another loss mit rep who listened to my allegation of BPO falsification… a subject which should be of interest to all mortgage loan servicers.

The records indicated a rush interior BPO was ordered from the vendor on 1-4-08.  Apparently, the BPO was performed by the vendor on 1-4-08.  Talk about fast service!

I suggested, diplomatically,  the vendor most likely assumed the unit was like any other unit in the community, and provided generic photographs from its archives while claiming it had performed an interior BPO.  In the BPO report, there was no mention of the engineering/structural problems, no pictures of sagging beams or rafters, or settling foundations.  There was no mention of the pending lawsuit, and no mention the listing agent had provided details of the structural problems verbatim from the Plaintiff’s summons and complaint.

In short, it seems the BPO vendor falsified information, and then billed for a service it had not performed.    

Fight Foreclosure!

Wishing all readers their family’s and friends’  warmth and understanding, and the strength to overcome all which ails you.

The administration’s push to transform the FHA into an ATM….

A couple of months back I was invited to attend a round-table workshop whose keynote speaker was HUD Commissioner Brian Montgomery.  Invitees included members of NJ’s non profit default counseling orgs who peppered the tired, travelling panel about their recent acknowledgment of a ‘pending problem’ with mortgage loan resets and the increasing number of mortgage delinquencies, defaults, and foreclosures. Nationwide.

This was their NJ stop.

Of course, foreclosure is nothing new to us… on average, NJ has 15,000 mortgage foreclosures annually.  The predicted housing downturn/market correction/subprime ARM reset will only further increase an impossible workload. Experts predict that number to double this year.  And perhaps triple next year. (see A Perfect Storm)

At that time, Mr. Montgomery (an administration appointee) stated it was the administration’s goal to “reform” the FHA, and then make the FHA more competitive, modernized, and able to offer people more choices… by implementing risk-based pricing for folks with blemished credit willing to pay higher premiums.

I’m sorry, but doesn’t that sound familiar?  Isn’t that what “subprime” lending proposed and wasn’t that proximate cause to the ‘meltdown’ we (those in the trenches) have seen coming for 18 months?

I’m reading HR 1852.  Congress is putting forth legislation which will enable the FHA to help qualified families avoid loss of homeownership by offering alternative financing….  at increased loan amounts,  but with statutory caps on annual premiums.

If enacted as written, HR 1852 would result in additional ‘receipts’ for the FHA… perhaps as much as $75,000,000 which would be used to create a new Affordable Housing Grant Fund linked to increased FHA receipts.

The administration has voiced objections to this proposed legislation (diverting receipts to fund affordable housing) presumably because it needs the additional $75,000,000 to fund other pet projects…..