Alabama Consumer Law Blog

Max Garnder, III, has an excellent article on some of the abuses that servicers inflict upon consumers who are in a Chapter 13 bankruptcy that we suggest you carefully read.

This is an entertaining and informative article by Max and you can get a taste of it from the first paragraph:

Wayne Gretzky once said that his success was due to the fact that he focused on where the puck was going to be, not where it was. For most consumer debtors who have home mortgage loans and are involved in Chapter 13 bankruptcy cases, this Gretzkyism is somewhat of a double entendre. The fact of the matter is that most of these debtors have no idea who really owns their home mortgage loan and they most assuredly do not know why the balance owed keeps going up. Or, as Yogi Berra might say, these “guys have been double-pucked!”

Read this article if you are interested in securitization and what it means for consumers in a Chapter 13 bankruptcy....and even if you are not in a bankruptcy, you will find useful nuggets as well....

If you live in Alabama and would like to talk with us about this issue or any other issue, please feel free to call us at 205-879-2447 or fill out our inquiry form on our website.

Posted by John G. Watts & M. Stan Herring | Permalink | Email This Post

Posted In: Bankruptcy , Foreclosure , Mortgage/Foreclosure , Securitization - Mortgage

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One issue that comes up in almost all Alabama foreclosures is whether the loan (the note) has been held by the original bank or mortgage company or instead if it has entered the somewhat mysterious world of mortgage back securitization?

We begin a series on this issue today and will add original posts and also newsworthy items to this "category" on our blog.

So, what in the world is "securitization" and what does it mean to me? In this post we will start to answer the first part of this question - what is it - and in future posts we will get to the personal part which is what does it mean to me....

Here is a basic definition that will work for us.

Securitization is when a large number of assets (for examples home loans) are bundled or "pooled" together into a separate legal entity which then sells investments (or securities) to investors who put money into this separate legal entity.

So here's an example to start to put all of this in context.

A local bank could loan you the money to buy a house. You would sign a "note" which lays out the terms of the loan (30 years, 6 % interest, $150,000, etc) and the bank would keep that note. Every month you made your payment the bank would make its return on the loan - the interest payments.

But if you missed a payment, the local bank would miss that money coming in that month. If you went into foreclosure the bank would own the house instead of getting its payments.

If the bank asked Joe Blow to invest in this loan, he would have the same risks and limitations that the bank had. That is, long term (30 years) with the possibility that the loan would not be paid off. Not a very liquid investment.

So, here is where securitization comes into play. An investor does not invest directly into the loans but instead into the separate legal entity which is normally a trust established under New York law.

OK, what difference does this make? Here's the deal. The trust will have hundreds or thousands of residential loans. The trust will also make different investment options available. Maybe you want a higher rate of return and are willing to take on a higher risk? You can invest that way. Maybe you want a short term investment - that's available. Maybe you want to be very safe in your investment - supposedly the trust will allow you do this. All of these options are available even though the trust is full of 30 year - fixed 6% - $150,000 loans.

So going back to the original loan - that loan is normally immediately sold to the trust so the bank that you borrowed the money from does not own the loan. The trust does. Or supposedly it does.

We will pick up on some of the implications of securitization in future posts but for now we wanted for all of us to be on the same page as to what it means to have a loan that is involved in the securitization process.

If you live in Alabama and would like to talk with us about this issue or any other issue, please feel free to call us at 205-879-2447 or fill out our inquiry form on our website.

Posted by John G. Watts & M. Stan Herring | Permalink | Email This Post

Posted In: Foreclosure , Mortgage/Foreclosure , Securitization - Mortgage

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We wanted to give Alabama consumers who are facing foreclosure some examples of typical fraud in the context of foreclosures and loan modifications.

We'll start with loan modifications. A loan modification is typically defined as a permanent change to your note - normally the interest rate, length of the loan, the movement of arrearage (missed payments) to the end of the loan, etc.

Normally the mortgage servicers will talk with you about a loan modification once you start falling behind on your payments. They will also be threatening foreclosure. You need to think of these as two independent trains - whichever reaches the station first wins.

One thing about loan modifications - either by design or otherwise - the mortgage servicer will normally keep you in the dark about the status and will say they don't control the foreclosure people. So you have no way of knowing if the foreclosure is going to be stopped because the foreclosure people will say they don't know anything about a loan modification.

But often towards the end the loan modification people (and remember all of these folks work at the same company) will say "Congratulations, you are approved for your loan modification!" But, what about the foreclosure? "Don't worry about that - it has been stopped and we will send you a new payment book in a couple of weeks."

What a sense of relief! You cancel the meeting with the bankruptcy attorney or with the mortgage broker who said she could save your home, etc.

None of that is necessary because you are not going into foreclosure. Your home is safe. You made it.

Until you get a letter from the foreclosure lawyer informing you that you must leave your house within ten days or you lose your right of redemption because your home was foreclosed yesterday.

Then, a couple of days after the foreclosure letter you will get a letter saying "You have been rejected for a loan modification."

What does all of this mean? Our position is that this is fraud. The servicer, who is the only one who knows if the foreclosure will be stopped and the modification granted, tells you the good news. Who else would know? You believe this good news and rely upon it. Then your home is foreclosed and lost.

The servicer never approved you for a loan modification but yet it said that it had approved you. Classic fraud and this is happening with amazing frequency. The servicers take the position that judges will give them a license to lie and will not hold them accountable. We think otherwise.....

Another example of fraud related to foreclosure. We have seen Alabama consumers who are facing foreclosure contact the mortgage servicer to find out what they need to do to save their home. They are told to pay "three months" payments and that will bring the home out of foreclosure.

Desperate to save their home, and wanting to avoid bankruptcy, the homeowner gathers up the money and does not see a bankruptcy attorney. The three payments are made and the servicer accepts the money and deposits it.

All is well. The home is saved. Or is it?

As in the example above, the Alabama consumer gets a letter informing her that her home has been foreclosed and she must immediately leave or she will be sued. (Remember in Alabama foreclosure is typically "non-judicial" and therefore the court is not involved in the foreclosure and only becomes involved in the lawsuit to "eject" the homeowner from their home.)

What happened? Again, it appears to be fraud. The servicer is the only entity in the world that knows what it will take to end the foreclosure. The servicer says "pay three months payments" and the foreclosure will not occur.

The homeowner believes this and pays it. The servicer accepts it. So why did the foreclosure occur?

Several possibilities. Most common is the servicer wanted the money and wanted to foreclose. Or the servicer will argue that it is just so big and has too many loans to service that it can't possibly be expected to keep up with payments and promises. Or perhaps the servicer applied the payments in the wrong order - instead of applying payments to the interest and principal for each monthly payment first, and then escrow and then late fees and charges (which is how most notes require payments to be applied), many servicers will reverse the order which means you really didn't pay three months. So the servicer will say since it applied the payments wrong, you broke the agreement and therefore it didn't lie! What kind of twisted logic is this?!

Remember there are all sorts of laws that can be used if you are facing a servicer that has lied to you. Federal laws and Alabama state law. Learn about your options and your rights and then take action. This is the only way to protect yourself from abusive mortgage servicers that use fraud to steal your home.

If you are an Alabama consumer and have any questions, call us at 205-879-2447 or fill out our inquiry form on our website. We look forward to hearing from you.

Posted by John G. Watts & M. Stan Herring | Permalink | Email This Post

Posted In: Foreclosure , Mortgage/Foreclosure

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Due to a great amount of interest, we have decided to hold a free teleseminar on Tuesday, November 17, 2009, at 7 pm CST. This will be the first in a series of seminars that you can attend from the comfort of your home, office, or car (be safe if driving....).

Our first one will be on "How To Fight Back Against Abusive Debt Collectors" and in this hour long discussion we will share with you some ideas on how to use both State law and Federal law to protect yourself from debt collectors who cross the line. Based upon the types of cases coming into our office that result in lawsuits being filed against collection agencies, and based upon the number of calls and emails we receive, debt collection abuse is not slowing down any - instead it is picking up. This seminar will help you understand your rights and options in fighting back against these types of collectors who don't play fair.

There is no charge to attend. Those who register will also receive a bonus four part email series that will expand upon the ideas in the seminar.

Here are some of the topics we will cover:

When does the Fair Debt Collection Practices Act apply?
Can a debt collector contact my neighbors? Family? Co-workers? Friends? References?
If a debt collector breaks the law, can I recover money damages against the collector?
How do I make a debt collector take false information off of my credit report?
Should I record calls from a debt collector?
Are voicemails from debt collectors illegal?
Can a debt collector call my cell phone?
There will be other topics we will cover - I don't know what those are because I need for you to come up with them!

We would like your questions and suggestions - please send those in to us before the call and then you can also ask questions during the call.

We are very excited about doing this and trust this will be very helpful for anyone who is dealing with a debt collector. There is nothing wrong with a debt collector collecting a debt. As long as the laws are followed. So join us and learn more about the laws and what your options are when collectors turn abusive.

Fill out the sign up form below so that you can reserve one of the limited spots on this call.

Or you can call us at 205-879-2447 to reserve a spot. We look forward to "seeing" you on the call!

Posted by John G. Watts & M. Stan Herring | Permalink | Email This Post

Posted In: Collectors/Debt Buyers , Seminar

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The Consumerist has posted an article that highlights what your credit report can be (legally) used for. Some things your credit report can be used to determine are:

-Applications for credit, insurance, and rentals for personal, family or household purposes.
• Employment, which includes hiring, promotion, reassignment or retention. A CRA may not release a credit report for employment decisions without consent.
• Court orders, including grand jury subpoenas.
• "Legitimate" business needs in transactions initiated by the consumer for personal, family, or household purposes. (litigation is not legitimate by 3rd parties)
• Account review. Periodically, banks and other companies review credit files to determine whether they wish to retain the individual as a customer.
• Licensing (professional).
• Child support payment determinations.
• Law enforcement access: Government agencies with authority to investigate terrorism and counterintelligence have secret access to credit reports.

However, debt collectors don't legally have the power to false information on your credit reports. Such behavior is prohibited by the Fair Credit Reporting Act.

If you have had issues with how your credit report has been used, or problems with debt collectors, feel free to contact us.

Posted by John G. Watts & M. Stan Herring | Permalink | Email This Post

Posted In: Credit Card , Credit Report Errors

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A Qualified Written Request (QWR) is a powerful tool when dealing with abusive mortgage servicing companies (Litton Loan, Wells Fargo, Bank of America, etc). This is a right under RESPA - Real Estate Settlement Practices Act - to gain information and to dispute false bills or charges.

A couple of pointers.

First - it must be in writing. Seems obvious from "Qualified WRITTEN Request" but we have seen far too many people try and make this by calling. Don't do that - instead send it in writing. Certified mail, return receipt requested.

Second - it should be sent to the mortgage servicing company and to other relevant companies. Here's the deal - send it to everyone you can think of. Former servicing companies. Foreclosure attorneys. Current alleged owner of the note, etc. There have been cases where it was sent to the wrong place and consumers have lost their powerful rights under this law so cover your bases and send it to everyone. Mention that "If this QWR should go to someone else, please let me know so I can forward it directly to that person."

Third - it should be sent to the correct address. This normally is NOT the billing address. Instead it will be a place listed on your bill or on the website of the servicing company that is described as "For all other written correspondence" or "For billing questions or disputes" etc. You can and should also call the company and ask where is the correct address. Carefully document all of your contacts with the mortgage servicing company.

Fourth - expect a response in about 30 days and then again in about 90 days. The servicing company has 20 business days (in essence 30 days) to let you know it received the QWR and then 60 business days (again basically 90 days) to respond.

OK, so what do you put in a QWR? Here are some suggestions:

1. Identify who you are, your loan, account number, property address, etc. so the servicer can find you in its system.
2. Whatever information that you legitimately need to determine if the servicer has been properly applying payments, charging fees, etc.
3. If you legitimately dispute a charge or the way the company handled a payment (particularly a lump sum payment as these are often handled illegally) then clearly state that in the QWR letter. We'll talk about this more later but remember that charges are automatically imposed on your account and to eliminate a bogus charge requires a human being to manually do this so you can see why so often illegal charges are not removed but continue to be added against your account.

While your dispute is pending, the disputed part cannot be shown as late on your credit report.

You will find a QWR a powerful tool to gain information about your account and to dispute bogus charges.

If you have any questions about how to draft a QWR or your legal remedies if a QWR is not properly handled by the servicing company and you live in Alabama, please feel free to contact us. You can call us at 205-879-2447 or send us an email through this blog or through our website or you can join us for our foreclosure seminar tomorrow night at 4pm in which we will discuss QWRs.

Posted by John G. Watts & M. Stan Herring | Permalink | Email This Post

Posted In: Mortgage/Foreclosure

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My friend Denise Richardson has a heartbreaking story on her website about a woman named Tammy who is dealing with the realities of common place mortgage servicer abuses.

Read the entire article but here is a taste:

EMC Mortgage Servicing placed an escrow account on our non-escrowed mortgage. Not once - twice! Not only do I have one of their representatives on a recorded conversation with me stating that this foreclosure was in no way our fault, they also sent me the documentation that they had showing them that we did indeed have insurance. Yet, EMC chose to pay our insurance and charge us for their mistake. I noticed, the second time, right away. I immediately called EMC to get this taken care of, and every few weeks after that. It took them 11 months to figure out how they made the mistake. But, they didn't figure it out until I spent over 3 hours on the phone with their insurance department AFTER they served us with foreclosure papers. I tried for 11 months to have this escrow situation looked into. They did NOTHING!!! Except hand us foreclosure papers just a few days prior to Christmas. Not to mention that for those 11 months, I would make my regular monthly payments and explain to them that the payments were to be applied our mortgage payments, NOT the escrow account. Guess what. They applied the payments where ever they wanted. So, they actually started foreclosure proceedings on us when we weren't in default.

Mortgage Servicing Companies serve a helpful role - if they follow the law. That "IF" is often not present and they can absolutely wreck a family by destroying a family's home. If you are dealing with this type of nonsense and you live in Alabama, feel free to contact us to learn more about your options.

Posted by John G. Watts & M. Stan Herring | Permalink | Email This Post

Posted In: Foreclosure , Mortgage/Foreclosure

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Often we see clients who are facing foreclosure and the reason is, at least in part, misconduct on the part of the mortgage servicer.

We often assume the company we make our payments to - Litton Loan, Bank of America, Wachovia, Wells Fargo, etc. actually owns the note.

But many times the note is owned by someone else and it is instead a "servicer" that we send our payments to and who sends us our monthly bills, etc.

A servicer can be defined as the company responsible for the following items:

1. Sending out bills
2. Accepting payments
3. Applying payments
4. Handling the escrow account
5. Imposing charges and fees
6. Handling any bankruptcy claims
7. Carrying out foreclosures.

The significance of being a servicer is certain laws apply including RESPA - Real Estate Settlement Practices Act. Existing state and federal laws can be very helpful when dealing with a servicer that lies, adds bogus fees, misapplies money, etc.

In future posts we will discuss these types of issues, particularly as they relate to wrongful and illegal foreclosures which are happening with greater frequency around the country and in Alabama.

If you live in Alabama and would like to meet with us to discuss your pending or prior foreclosure, feel free to contact us through our website or you can call us at 205-879-2447 or register for our free Alabama Foreclosure Seminar which will occur November 3, 2009, at 4 pm in our office in Birmingham, Alabama.

Posted by John G. Watts & M. Stan Herring | Permalink | Email This Post

Posted In: Foreclosure , Mortgage/Foreclosure

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On October 9, 2009, bankruptcy judge Robert Drain wiped out a $461,000 mortgage debt because the alleged owner of the note - U.S. Bank as trustee of a securitization pool, could not prove it owned the note.

In Gretchen Morgenson's interesting article in the NY Times, she discusses this ruling. As to where all of the "lost notes" are and why they have been "lost" Gretchen writes:

The reason that notes have gone missing is the huge mass of mortgage securitizations that occurred during the housing boom. Securitizations allowed for large pools of bank loans to be bundled and sold to legions of investors, but some of the nuts and bolts of the mortgage game — notes, for example — were never adequately tracked or recorded during the boom. In some cases, that means nobody truly knows who owns what.

To be sure, many legal hurdles mean that the initial outcome of the White Plains case may not be repeated elsewhere. Nevertheless, the ruling — by a federal judge, no less — is bound to bring a smile to anyone who has been subjected to rough treatment by a lender. Methinks a few of those people still exist.

More important, the case is an alert to lenders that dubious proof-of-ownership tactics may no longer be accepted practice. They may even be viewed as a fraud on the court.

The article gives the explanation from the attorney representing the servicer of the note (the one collecting for the alleged owner):

John DiCaro, a lawyer representing PHH at the hearing, was in the uncomfortable position of having to explain why there was no documentation of an assignment to U.S. Bank. He did not return a phone call seeking comment last week. Ms. Johnson, who couldn’t be reached for comment, did not attend the hearing.

According to a transcript of the Sept. 29 hearing, Mr. DiCaro said: “In the secondary market, there are many cases where assignment of mortgages, assignment of notes, don’t happen at the time they should. It was standard operating procedure for many years.”

Judge Drain rejected that argument, concluding that what had been presented to the court just did not add up. “I think that I have a more than 50 percent doubt that if the debtor paid this claim, it would be paying the wrong person,” he said. “That’s the problem. And that’s because the claimant has not shown an assignment of a mortgage.”

We are seeing more and more situations in Alabama foreclosures where the alleged owner either cannot or will not prove it owns the debt. We are also seeing fraud in the way servicers process payments and charge fees.

We will address many of these issues and others in future posts on foreclosures.

If you live in Alabama and would like to meet with us to discuss your pending or prior foreclosure, feel free to contact us through our website or you can call us at 205-879-2447 or register for our free Alabama Foreclosure Seminar which will occur November 3, 2009, at 4 pm in our office in Birmingham, Alabama.

Posted by John G. Watts & M. Stan Herring | Permalink | Email This Post

Posted In: Foreclosure , Mortgage/Foreclosure

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The BKBlog has posted an article about consumer protection offered by the Fair Debt Collection Practices Act when dealing with collection agencies. Under the FDCPA, credit card companies and collection agencies have different regulations. A credit card company could contact the debtor and not be under the same regulations as a collection agency.

Two of the protections provided by the FDCPA include:
-a prohibition against communicating with a debtor when the collection agency employee does not identify himself as a debt collector; and
-communicating about your debt with third parties

The article brings up a case that was filed that has "clarified the rules about telephone messages by bill collectors."

The case of Edwards v. Niagara Credit Solutions involved a situation in which the debt collector (Niagara) left "bare bones" messages on a phone answering machine asking Ms. Edwards to call back about an "important matter."

The collection agency argued the caller didn't identify himself as a debt collector in case a someone other than the debtor were to hear the message, which would be a violation of the "third party communications" prohibition." The court stated that...

that it is not permissible to violate one provision of the FDCPA in order to comply with another provision. The Court further noted that the FDCPA does not guarantee a debt collector the right to leave answering machine messages.

If you have received similar phone messages and live in Alabama, feel free to contact us. Or you can go to our website that is devoted to illegal voicemails from collectors and request our free report on "Making Debt Collectors Pay For Illegal Voicemails".

Posted by John G. Watts & M. Stan Herring | Permalink | Email This Post

Posted In: Collectors/Debt Buyers

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MyCreditGroup.com has posted an article listing five things that ruin credit scores, and how to avoid these little-known pitfalls.

The first thing you shouldn't do is destroy old credit cards that are paid off. You get points from the credit card company just for keeping an account with them for a long time, whether you use the card or not. Plus, it looks good on a credit report to have a longstanding account.

Next, you shouldn't spend all the limit on your card.

Truth is, your balance-to-limit radio is going to have a big effect on your credit. You want your balance (the amount you spend) to be only 20% of your limit (the amount that’s available). That means that $3,000 credit card should only have $600 on it if you want to keep your credit shiny clean.

Applying for too much credit will also hurt your credit score. Applications sent in to different companies in close intervals often means you won't get any of the cards. The article advises keeping the same card for a long time, as sending in applications less than 6 months apart rarely pays off.

The article also warns against not paying late fees. If you just pay the balance every month, the late fee rolls over and is then considered 30 days late and you're charged double the amount of the original fee.

The last piece of advice offered for consumers is to be sure to pay bills on time. This eliminates fees and benefits your credit score.

You know what date your bills are due. Set up online bill pay, write the due dates in big letters on your calendar, do whatever you have to do, but don’t rely on the postal service to get your bills to you on time.

If you have questions or concerns regarding the accuracy of your credit report, feel free to contact us.

Posted by John G. Watts & M. Stan Herring | Permalink | Email This Post

Posted In: Credit Card

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The Associated Press has posted an article about the Alabama Supreme Court rejecting a jury's verdict that would have awarded the state $274 million. The state of Alabama filed the suit was against 3 pharmaceutical companies ( AstraZeneca, Novartis and GlaxoSmithKline).

The state claimed that the drug companies had "fraudulently manipulating prices of drugs for Medicaid recipients." However, in an 8-1 ruling, the court decided that the state didn't have to solely rely on the companies' data to price medication.

The justices said state officials could have done their own research and determined the correct price.The court ruled the state is continuing to rely on the same formulas established by the drug companies to set prices.

"The state has never altered its course of conduct since taking issue with the reporting methods," said the majority ruling written by Justice Tom Woodall. Justice Tom Parker cast the lone dissent.

If you have experienced issues similar to this, feel free to contact us.

Posted by John G. Watts & M. Stan Herring | Permalink | Email This Post

Posted In: Cases Filed

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