Alabama Consumer Law Blog

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.

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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.

You can also sign up for our free email newsletter sent out every Thursday morning - we cover topics such as the one in this post. We would love to include you! Just fill out the form below:

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.

You can also sign up for our free email newsletter sent out every Thursday morning - we cover topics such as the one in this post. We would love to include you! Just fill out the form below:

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".

You can also sign up for our free email newsletter sent out every Thursday morning - we cover topics such as the one in this post. We would love to include you! Just fill out the form below:

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.

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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.

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The Florida Bankruptcy Attorney Blog has posted an article that discusses the effect bankruptcy has on student loans. Previously it was possible to discharge student loan debts after seven years if someone couldn't make their monthly payment. However, amendments passed by the BAPCA (Bankruptcy Abuse Prevention and Consumer Protection Act) recently have made that more difficult.

These amendments require the person to prove to the court that you are undergoing "inordinate hardship" for bankruptcy to include student loans. The requirements for "inordinate hardship" are very strict and most people simply cannot fulfill the conditions.

We do not cover bankruptcy, but would be happy to discuss options with you if you have questions. Feel free to contact us.
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The Consumerist has posted an article on how to get free and accurate credit reports from government operated websites. The article warns against purchasing credit reports due to such a high rate of scams from "no name companies."

If you want your credit report, go to AnnualCreditReport.com. The Fair Credit Reporting Act gives you the right to see your credit report every twelve months. The government set up the AnnualCreditReport.com website for you to request these reports. Don't go anywhere else and don't pay for what is yours for free by law.

However, you will have to pay to see your credit score. The Fair Credit Reporting Act doesn't give consumers the right to view credit scores every year like credit reports. The article suggests only making a purchase to view your credit score from any of the three Fair Isaac bureaus: Equifax, Experian, TransUnion, or directly from Fair Isaac.

There are two reasons why:
- The other companies selling credit reports and bureaus are usually not affiliated with the three bureaus or Fair Isaac and they intend to sell your information to the highest bidder. Whereas the bureaus intend to make their money on people sticking around for the trial service, these independent companies profit off selling your information.
- The bureaus and Fair Isaac already have your personal information, why give your sensitive information to yet another company that doesn't need it? When I give Equifax my social security number, it's used as a way to look up my credit report. Who knows what happens when I give it to some fly-by-night company?

If you have had problems with incorrect credit reports and/or scores, feel free to contact us.

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MSNBC.com has posted an article about the rise in personal bankruptcies. According to the article, 124,790 bankruptcies were filed in September of this year, a 41% increase from September 2008. September 2009 also had the fourth largest amount of filings since the bankruptcy law changed in 2005.

September's filings pushed 2009 consumer bankruptcies to about 1.05 million, the highest for the first nine months of a year since 1.35 million in 2005.

The American Bankruptcy Institute says the high bankruptcy numbers are because of the high unemployment rate and lagging housing market. The ABI estimates a total of 1.4 million consumer bankruptcies to be filed this year.

We don't cover bankruptcy, but if you have questions, feel free to contact us to discuss possible options.

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The New York Times has posted an article warning consumers about "several unscrupulous companies that prey on homeowners who are having trouble paying their mortgages."

These companies promise to save consumers' homes from foreclosure for a hefty up front fee. After dealing with these deceptive debt-relief companies, consumers often end up worse than before.

The article quotes Derrick Briscoe, from Tucson, who was told by one of these companies to pay them $2,000 and quit paying his mortgage for three months. His home is now in foreclosure and he is currently seeking to get his money back. These companies often offer money-back guarantees but seldom pay them.

The article advises consumers to...

Be wary of the many companies that advertise on the Web, who offer guarantees and who tell you to send them your mortgage payments. And don’t sign anything without reading the small print — some homeowners have unwittingly signed away their deeds to fraudsters who ultimately evict them.

Legitimate companies, such as the Obama loan modification program, (MakingHomeAffordable.gov) do not charge fees. Consumers should be wary of companies who charge large fees.

If you have had problems with this type of dishonest debt-relief company, feel free to contact us.

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