Alabama Consumer Law Blog

Ever wonder why it seems the mortgage foreclosure disaster is not getting better? When Freddie Mac and Fannie Mae say they are on the side of the consumers?

Read this article and be disturbed....

Freddie Mac, a taxpayer-owned mortgage company, is supposed to make homeownership easier. One thing that makes owning a home more affordable is getting a cheaper mortgage.

But Freddie Mac has invested billions of dollars betting that U.S. homeowners won't be able to refinance their mortgages at today's lower rates, according to an investigation by NPR and ProPublica, an independent, nonprofit newsroom.

These investments, while legal, raise concerns about a conflict of interest within Freddie Mac.

"We were actually shocked they did this," says Scott Simon, who heads the mortgage-backed securities team at the giant bond trading and investment firm called PIMCO. "It seemed so out of line with their mission, out of line with what Congress wanted them to do."

In this article by article by Chris Arnold, there is a demonstration of the arrogance of Freddie Mac. I encourage you to read the entire article.

Gotta love the conclusion:

Meanwhile, even though Freddie is a ward of the federal government, its top executives are highly compensated. The Freddie Mac official then in charge of its investment portfolio, Peter Federico, made $2.5 million in 2010, and had target compensation of $2.6 million for last year — the time period during which most of these inverse floater investments were made. ProPublica and NPR made numerous attempts to reach Federico. A woman who answered his home phone said he declined to comment.

You can follow the link below to read about our client who was sued by Freddie Mac for ejectment (or eviction) after a foreclosure by CitiMortgage.

Many Alabama consumers, unfortunately, just give up even when they have valid claims and defenses.

Our client, however, felt the foreclosure was wrongful and improper and she decided to take action.

She answered the lawsuit and then filed a counterclaim against Freddie Mac and CitiMortgage for fraud, wrongful foreclosure, violation of the Fair Debt Collection Practices Act, negligence, etc.

If you have dealt with similar issues in Alabama, please contact us at 205-879-2447.

Take care and we look forward to hearing about your story.

We recently sued Wells Fargo for wrongful foreclosure and fraud and since it is a common type of fraud, we thought it might be helpful to show you the complaint we filed in federal court.

If you live in Alabama and you are dealing with anything similar to this with any mortgage company (especially Wells Fargo), please let us know as we would like to hear about your experiences.

We are in the process of finalizing a new website that is solely focused on Alabama foreclosures and ejectment lawsuits.

While Alabama Consumer and Alabama Consumer Protection have aspects devoted to foreclosure issues, we wanted a site that only discusses foreclosures to make it as easy as possible to find the information that you want.

We hope you enjoy it and leave us a comment or send us a message if you have any questions or suggestions.

Thanks!

John Watts and Stan Herring

As Birmingham, Alabama, foreclosure defense attorneys, we have put a lot of information on the internet about foreclosures in Alabama.

We have videos, articles, and books on the subject. We hold educational seminars and classes here in Alabama and across the country for other lawyers on this subject.

We know the best way for us to help understand your situation with an Alabama foreclosure is to meet with you in person.

But . . . we also know that you are getting bombarded with offers to help. Some legitimate. Some not so legitimate.

It is wise to be skeptical.

So, we recently created a page with a lot of information, and links to videos, on many of the issues and questions that come up regarding an Alabama foreclosure and the lawsuit after a forclosure -- called an ejectment lawsuit.

We hope you find this useful and, if you live in Alabama, let us know if we can help you.

I'm going to quote from the end of a wonderfully insightful article by Barry Ritholtz, but please read the whole article. You need the interesting first part of this article to appreciate the logic and explanation of what he is saying about some of the trader fraud at investment banks and the mortgage crisis we are still in the middle of and whether the US taxpayer should be bailing these banks out. The bolding is mine.

In an era of bailouts on the backs of the taxpayer, it points to a simple reality: Firms must decide whether they are going to sacrifice profit in pursuit of safety, or sacrifice safety in pursuit of profit. Whatever they decide, it is not the responsibility or obligation of taxpayers to backstop these choices.

Consider the choices made by management: The collapse of firms such as AIG, Bear Stearns and Lehman Brothers were caused by the same sort of poor judgment as UBS’s $2 billion in losses — only the rogues gallery there included the senior-most managers of the firms. Alan Greenberg exhorting his staff to focus on reusing paper clips, while the mortgage syndication division lost billions of dollars. Dick Fuld surrounding himself with yes men while the firm’s leverage and risk exposure went through the roof. Tom Savage, president of AIG’s Financial Products, calling derivative underwriting free money.

Paul Volcker, arguably the greatest central banker in history, has persuasively argued that proprietary trading should not be part of the insured depository banking sector. I utterly agree with Fed governor Thomas Hoenig, who has described the banking sector as “more akin to public utilities” than independent entities. Want to be independent to pursue proprietary trading? Let’s drop their FDIC insurance and see how far their reputations carry them.

The next crisis — the one after the present one in Europe — is where I expect to see the ultimate damage wreaked by rogue bankers.

The bailouts have created a moral hazard, where leveraged speculators and rogue bankers know that the state will bail them out. This is unacceptable. There is no reason that taxpayers should be responsible for any rogues, traders or bankers.

Perhaps UBS’s failure to prevent this did us a favor. It points out that Volcker is right: Any firm that can blow itself up should not qualify for taxpayer guarantees. Lenders, underwriters and mortgage originators are in the business of using their capital to earn a fair return safely. That government-backed insurance should be available only to depository banks, not firms associated with speculative traders.

Robo signing is a big problem in the world of foreclosures but it seems Fannie Mae and others have ignored it or downplayed its significance.

In this interesting story, the following information is revealed:

Federal mortgage giant Fannie Mae was told in 2006 about faulty court documents filed by Florida foreclosure attorneys acting on its behalf but did nothing to correct the practices, an inspector general found.

A report issued Friday by the Federal Housing Finance Agency Office of Inspector General said an outside law firm Fannie Mae hired to investigate allegations of wrongdoing confirmed "unlawful" practices and stated that foreclosure attorneys were sacrificing accuracy for speed by filing false documents.

After learning of the attorney misconduct in 2006, Fannie Mae failed to make any improvements in its oversight of the firms.

"Strengthened law firm oversight by Fannie Mae could have detected - if not prevented - these abuses by attorneys," the report said.

Florida foreclosure defense attorneys agreed, pointing to the morass that followed last fall's revelation of robo-signed documents and other faulty paperwork, some of which was produced by Florida's so-called foreclosure mills.

"If action were taken sooner, we would have avoided a lot of this instead of muddying up the public land records in tens of thousands of cases," said attorney Tom Ice of Ice Legal in Royal Palm Beach. "It goes without saying that if someone did something to stop the fraud, it would have benefited everyone."

Here's the kicker -- you can draw your own conclusions:

Friday's report also noted that Federal Housing Finance Agency officials told the inspector general they were unaware of the 2006 report until it was disclosed in a March 2011 "magazine article." The Wall Street Journal published an article in late March about the report.

Fannie Mae declined to comment, but the Federal Housing Finance Agency disputed some of the inspector general's findings, including that foreclosure abuses in Florida and elsewhere "illustrate the negative consequences" of Fannie Mae's oversight failures.

This is why when we sue Fannie Mae and mortgage servicers such as Wells Fargo, Chase, Bank of America (BAC), etc. we can be confident that the evidence will reveal abuse that is consistent with what our clients have alleged. If Fannie Mae can't even discovery reports warning of fundamental problems, until they read it in a magazine (but not the WSJ), then I'm not sure they have any credibility....

If you live in Alabama and have questions about a foreclosure that is either about to happen or has already happened (and if you have been sued for ejectment/eviction), please feel free to pick up the phone and call us at 205-879-2447 or contact us through our blog form to the left or through this contact form.

You can also see many of our foreclosure and ejectment/eviction videos here.

For several years we have sent out every Thursday (except when I am running late!) a free email newsletter where we talk about suing collection agencies, defending against collection lawsuits, correcting errors on your credit reports, fighting wrongful foreclosures, protecting against identity theft, and other consumer issues.

We call it "Consumer Power" as our intention is to give you knowledge and to give you encouragement to take action. Knowledge plus action is truly power and we want to empower consumers.

We have now set up a website, ConsumerPowerNewsletter.com, where we have all of the back issues. Usually a day or so after we put out our weekly newsletter, we will have the new issue up.

Feel free to check it out and let us know your thoughts, comments, and suggestions.

Thanks so much.

John Watts

While we are still working on it, we did want to let you know that we have at least parts of AlabamaConsumerProtection.com up and running and hope you will take a moment and check out our new website.

Our intention is to do a complete overhaul on our websites and to add a number of new websites, such as this consumer oriented site. Most, if not all, of our new sites will be specialized sites but we did want to have another site similar to AlabamaConsumer.com in order to present information about bankruptcy, debt collectors, credit report errors, foreclosures, etc. in a different format. We have lots of videos and we are adding blog posts and articles every day to this site.

Thanks for checking it out and let us know what feedback you have for us.

Updated December 21, 2011 -- the case is back on so we will be glad to hear your story and we will update you with further information as we proceed in the case....

[Update on September 13, 2011 -- the parties asked the court to dismiss the case without prejudice and today the court granted this so the trial date has been cancelled.]

We have a case going to trial in October in Alabama where our clients allege that LPP Mortgage, LTD, committed fraud against them in the foreclosure of their home.

As is often the case, a mortgage servicer will allegedly commit fraud and then foreclose. Following the alleged wrongful foreclosure, the mortgage servicer will then sue the homeowners to kick them out of their home.

The counterclaim of our clients alleges that shortly before the foreclosure, LPP promised the homeowners that the foreclosure would not occur as a modification was being considered.

The foreclosure happened anyway.

If you have had a similar experience, we would like to speak with you as we are making our preparations for trial and if your experience is similar to our case, this could be persuasive with the jury.

Please give us a call at 205-879-2447 or you can fill out our online contact form here.

---------------------------------------
Here are the allegations of the counterclaim:

7. Congress found it necessary to pass the FDCPA due to rampant abusive practices by dishonorable debt collectors. 15 USC § 1692 is entitled "Congressional findings and declaration of purpose" and it states as follows:
(a) There is abundant evidence of the use of abusive, decep¬tive, and unfair debt collection practices by many debt collectors. Abusive debt collection practices contribute to the number of personal bankruptcies, to marital instability, to the loss of jobs, and to invasions of individual privacy.
(b) Existing laws and procedures for redressing these injuries are inadequate to protect consumers.
(c) Means other than misrepresentation or other abusive debt collection practices are available for the effective collec¬tion of debts.
(d) Abusive debt collection practices are carried on to a sub¬stantial extent in interstate commerce and through means and instrumentalities of such commerce. Even where abusive debt collection practices are purely intrastate in character, they nevertheless directly affect interstate com-merce.
(e) It is the purpose of this title to eliminate abusive debt col¬lection practices by debt collectors, to insure that those debt collectors who refrain from using abusive debt col¬lection practices are not competitively disadvantaged, and to promote consistent State action to protect consumers against debt collection abuses.

[Emphasis added].

8. Defendants incurred a financial obligation that was primarily for personal, family or household purposes (Defendants’ home loan) and is therefore a “debt” as that term is defined by 15 U.S.C. § 1692a(5).

9. Plaintiff claims the debt was in default at the time the servicing rights were assigned or transferred to Plaintiff on or about December 18, 2009.

10. Plaintiff is considered a “debt collector” and began engaging in debt collection activities against Defendants.

11. Plaintiff failed to make all required disclosures to Defendants in violation of the FDCPA.

12. Misrepresentations were made regarding the character, amount, or legal status of the debt.

13. The amount of the debt, the amount of fees and charges, were incorrect and not supported by the law and by the note and mortgage.

14. The foreclosure was illegal and constituted a threat to take action which Plaintiff was not legally entitled to take.

15. As set forth below, Plaintiff used false representations and/or deceptive means to collect on this debt.

16. The collection methods employed by Plaintiff were harassing and illegal.

17. Defendants were in a loan modification process with Plaintiff when Plaintiff requested additional papers for the loan modification on May 11, 2010 and gave Defendants 15 days to send the papers to the Plaintiff.

18. Thus, Defendants had until May 26, 2010 to return the papers.

19. Defendants called the week of May 11, 2010 to confirm that the sale was postponed and Plaintiff assured Defendants it was. Defendants were told the same thing at least one other occasion.

20. Defendants sent the papers to Plaintiff and Plaintiff received the papers on May 23, 2010, within the 15 day period.

21. Amazingly, Plaintiff foreclosed on May 25, 2010, within the 15 day window.

22. The sale was without proper notice to Defendants and in direct derogation of Alabama common and statutory law.

23. Plaintiff sent Defendants a letter denying the loan modification.

24. The only reason for the denial of the loan modification was that a foreclosure occurred on May 25, 2010.

25. Plaintiff alleges that it is the purchaser of the property made the subject of this suit.

26. Plaintiff has pursued an order ejecting Defendants from their home while representing to the Court that the foreclosure sale was lawful and that the Plaintiff had the present right, ownership and authority to pursue the foreclosure and that Plaintiff has the right to evict the Defendants.

27. Plaintiff has represented to this Court that it is the proper holder of said mortgage and therefore foreclosed in accordance with Alabama law and its rights under the security agreement.

28. Defendants allege that the Plaintiff lacked standing to foreclose in that it has no present legal right to enforce the security agreement that underlies the foreclosure action.

29. Defendants allege that the alleged assignments between the original lender, and any other entity is defective, void, or otherwise unenforceable.

30. Defendants contend that said sale was wrongful, illegal, in violation of law and the documents governing the relationship between Defendants and the owners of their mortgage.

31. Defendants contend that the foreclosing entity lacked standing to initiate a foreclosure and that the foreclosure is void or at least voidable and that no title has passed to Plaintiff as there was no legal title to pass to it from the foreclosing entity.

32. Defendants allege that the actions of the Plaintiff, and its agents, employees and servants were wrongful.

33. Defendants allege that the actions of the Plaintiff in bringing an action for ejectment from their home and the Plaintiff wrongfully foreclosing is a violation of law, wrongful and tortuous and that Plaintiff holds no title to the home or property, and that the actions of Plaintiff constitutes negligence, wantonness, intentional misconduct, fraud, breach of contract, abuse of process and slander of title.

34. As a direct result of the acts complained of, Defendants have been caused to suffer, and will continue to suffer great mental anguish, damage to their reputation, economic and emotional damages and claim from Plaintiff all damages allowable under the law.

35. All parties acted within the line and scope of any agency relationship and all of their employees and agents acted with the line and scope of their employment and/or agency relationship.

COUNT ONE
NEGLIGENCE

36. Defendants reallege all paragraphs as if set out here in full.

37. The Plaintiff negligently conducted a foreclosure sale on Defendants’ property and have negligently attempted to eject Defendants from the home they rightfully own since the foreclosure performed is void.

38. The Plaintiff negligently handled, serviced, and processed payments, charges, fees, expenses, and other aspects of Defendants’ loan and mortgage, including the loan modification process.

39. As a direct result of the said negligence, Defendants were injured and damaged as alleged above and have suffered mental anguish, economic injury and all other damages allowed by law.

40. As a result thereof, the Plaintiff is liable for all natural, proximate and consequential damages due to their negligence.

COUNT TWO
WANTONNESS

41. Defendants reallege all paragraphs as if set out here in full.

42. The Plaintiff acted with reckless indifference to the consequences, and consciously and intentionally conducted a wrongful foreclosure sale on Defendants’ property and the Plaintiff has acted with reckless indifference to the consequences, and consciously and intentionally in instituting this action to eject Defendants from the home they rightfully owns since the foreclosure performed is void.

43. The Plaintiff wantonly applied, imposed, or created charges, fees, expenses, and payments, and other aspects of the Defendants’ loan and mortgage including the loan modification process.

44. These actions were taken with reckless indifference to the consequences, consciously and intentionally in an effort to increase profits for the Plaintiff.

45. The Plaintiff knew that these actions were likely to result in injury to Defendants including financial and emotional injuries and mental anguish.

46. As a result thereof, the Plaintiff is liable for all natural, proximate and consequential damages due to its wantonness as well as punitive damages.

COUNT THREE
UNJUST ENRICHMENT

47. Defendants adopt and reallege all paragraphs as if set out here in full.

48. The actions of the Plaintiff in foreclosing on the home of Defendants in violation of law resulted in the Plaintiff being unjustly enriched by the payment of fees, insurance proceeds and equity in the home.

49. As a result of the Plaintiff’s unjust enrichment, Defendants have been injured and damaged in that Defendants have been forced to pay charges that were illegal, wrong in character, wrong in amount, unauthorized, or otherwise improper under threat of and the actual illegal foreclosure by the Plaintiff.

50. Defendants claim all damages allowable under law as a result of the Plaintiff’s wrongful conduct and unjust enrichment.

COUNT FOUR
WRONGFUL FORECLOSURE

51. Defendants reallege all prior paragraphs as if set out here in full.

52. The Plaintiff has initiated a foreclosure proceeding against Defendants in violation of law and the Plaintiff has wrongfully brought an action for ejectment.

53. The foreclosure proceeding by the Plaintiff and ejectment action by Plaintiff was either negligent, wanton or intentional, depending on proof adduced at trial.

54. As a result thereof, the Plaintiff is liable for all natural, proximate and consequential damages due to its actions including an award of punitive damages.

COUNT FIVE
ABUSE OF PROCESS

55. Defendants reallege all paragraphs as if set out here in full.

56. The Plaintiff maliciously obtained the issuance of the writ or process of ejectment, from this Court and had it served on Defendants.

57. The Plaintiff abused the said writ or process because the attempt to eject Defendants from their home with the knowledge that they are the rightful owner of their home and that the Plaintiff had no right to act against them.

58. As the proximate result of Plaintiff abuse of the said writ or process, Defendants were caused damages and will continue to suffer injuries and damages.

59. Defendants claim all damages allowable under law.

COUNT SIX
SLANDER OF TITLE

60. Defendants reallege all paragraphs as if set out here in full.

61. The Plaintiff, in filing a foreclosure deed (which is void) have caused a cloud to be placed on the title of the property of Defendants.

62. As the proximate cause of Plaintiff’s slandering of Defendants’ title, Defendants were caused to suffer injuries and damages and claims all damages allowable under law.

COUNT SEVEN
BREACH OF CONTRACT

63. Defendants reallege all paragraphs as if set out here in full.

64. The Plaintiff breached the contract with Defendants and thereby caused Defendants incidental and consequential damages (including mental anguish).

65. Defendants claim all damages allowable under law.

COUNT EIGHT
FRAUD

66. Defendants reallege all paragraphs as if set out here in full.

67. Shortly before the foreclosure, Plaintiff committed misrepresentations and suppressions against Defendants in that Plaintiff told Defendants that the foreclosure would not occur as Defendants were in the process of a loan modification.

68. At the time of the fraud Plaintiff had no intention of honoring their representation.

69. The Plaintiff suppressed from Defendants the truth that it intended to foreclose on Defendants on May 25, 2010.

70. All misrepresentations, and suppressions of these material facts were made intentionally, recklessly, and/or negligently.

71. Defendants properly relied upon the misrepresentations and suppressions of the Plaintiff and were damaged thereby.

72. Defendants could have taken steps to prevent the foreclosure (including filing bankruptcy or curing any alleged default) but Defendants were prevented from doing so by the misrepresentation and suppression of the Plaintiff as it was not until after the foreclosure sale that Defendants knew they had been deceived.

73. This was the purpose and design of this common type of fraud in the mortgage industry – lie about the fact that the foreclosure will not occur so the borrower and homeowners will rely upon the fraud.

74. When there is reliance, then the homeowners will be lulled into a sense of safety by the abusive Plaintiff and the homeowners will not take any further action as they believed that the Plaintiff was reviewing the modification request and was not going to foreclose – precisely what the Plaintiff intended the homeowners to believe.

75. It is proper and appropriate for homeowners to believe Plaintiff when these types of misrepresentations and suppressions of material fact are made – who would know better than the Plaintiff whether or not the foreclosure was going to happen?

76. No one else in the world would know better than the Plaintiff the truth of whether or not they were going to foreclose.

77. All misrepresentations, and suppressions of these material facts were made intentionally, recklessly, and/or negligently.

78. The purpose and intent was to cause Defendants to be in a position where they could not save their home which is exactly what happened.

79. Defendants properly relied upon the misrepresentations and suppressions of the Plaintiff and were damaged thereby.

80. Defendants claim all damages allowable under law.

COUNT NINE
NEGLIGENT AND/OR WANTON HIRING, SUPERVISION, AND/OR TRAINING

81. Defendants reallege all paragraphs as if set out here in full.

82. The Plaintiff hired, supervised, and/or trained incompetent agents or employees who committed some or all of the wrongful acts set forth in this Answer and Counterclaim.

83. The Plaintiff knew or should have known of the incompetence of these agents or employees.

84. The Plaintiff was negligent or reckless in their hiring, supervision, and/or training which led as a direct and proximate result to the damages suffered by Defendants.

85. Defendants claim all damages allowable under law.

COUNT TEN
INTENTIONAL AND/OR MALICIOUS CONDUCT

86. Defendants reallege all paragraphs as if set out here in full.

87. All actions of the Plaintiff were made intentionally and/or malicious and led to the damages of Defendants as a direct proximate result.

88. Defendants claim all damages allowable under law.

COUNT ELEVEN
VIOLATIONS OF THE FAIR DEBT COLLECTION PRACTICES ACT
15 U.S.C. § 1692 et seq.

89. Defendants incorporate by reference all of the above paragraphs of this Complaint as though fully stated herein.

90. The acts and omissions of Plaintiff and its agents constitute numerous and multiple violations of the FDCPA with respect to Defendants.

91. As a result of the violations of the FDCPA, Defendants are entitled to actual damages pursuant to 15 U.S.C. § 1692k(a)(1); statutory damages in an amount up to $1,000.00 pursuant to 15 U.S.C. § 1692k(a)(2)(A); (2) actual and compensatory damages; and, (3) reasonable attorney’s fees and costs pursuant to 15 U.S.C. § 1692k(a)(3), from the Plaintiff.

COUNT TWELVE
INVASION OF PRIVACY BY INTRUSION UPON SECLUSION

92. Defendants reallege all paragraphs as if set out here in full.

93. Alabama law recognizes Defendants’ right to be free from invasions of privacy and Plaintiff violated Alabama state law as described in this Complaint.

94. Congress explicitly recognized a consumer’s inherent right to privacy in collection matters in passing the Fair Debt Collection Practices Act, when it stated as part of its findings:
Abusive debt collection practices contribute to the number of personal bankruptcies, to marital instability, to the loss of jobs, and to invasions of individual privacy.

15 U.S.C. § 1692(a) (emphasis added).

95. Congress further recognized a consumer’s right to privacy in financial data in passing the Gramm Leech Bliley Act, which regulates the privacy of consumer financial data for a broad range of “financial institutions” including debt collectors (albeit without a private right of action), when it stated as part of its purposes:
It is the policy of the Congress that each financial institution has an affirmative and continuing obligation to respect the privacy of its customers and to protect the security and confidentiality of those customers’ nonpublic personal information.

15 U.S.C. § 6801(a) (emphasis added).

96. Plaintiff and/or its agents intentionally, recklessly, and/or negligently interfered, physically or otherwise, with the solitude, seclusion and or private concerns or affairs of the Defendants, namely, by repeatedly and unlawfully attempting to collect a debt and thereby invaded Defendants’ privacy.

97. Plaintiff and its agents intentionally, recklessly, and/or negligently caused emotional harm to Defendants by engaging in highly offensive conduct in the course of collecting this debt, thereby invading and intruding upon Defendants’ right to privacy.

98. Defendants had a reasonable expectation of privacy in Defendants’ solitude, seclusion, private concerns or affairs, and private financial information.

99. The conduct of Plaintiff and its agents, in engaging in the above-described illegal collection conduct against Defendants, resulted in multiple intrusions and invasions of privacy by the Plaintiff which occurred in a way that would be highly offensive to a reasonable person in that position.

100. As a result of such intrusions and invasions of privacy, Defendants are entitled to actual damages in an amount to be determined at trial from Plaintiff.

101. All acts of Plaintiff and its agents and/or employees were committed with malice, intent, wantonness, and/or recklessness and as such Plaintiff is subject to punitive damages.

RELIEF REQUESTED

WHEREFORE, Defendants having set forth their claims for relief against the Plaintiff, respectfully pray of the Court as follows:
a. That Defendants have and recover against the Plaintiff a sum to be determined by a jury of their peers in the form of actual damages;
b. That Defendants have and recover against the Plaintiff a sum to be determined by a jury of their peers in the form of punitive damages;
c. That Defendants have and recover against the Plaintiff a sum to be determined by a jury of their peers in the form of statutory damages;
d. That Defendants have reasonable attorney’s fees, costs, expenses;
e. That the foreclosure sale be set aside; and
f. That Defendants have such other and further and proper relief as the Court may deem just and proper.



Respectfully Submitted,

/s/ John G. Watts
John G. Watts (WAT056)
Attorney for Defendants
OF COUNSEL:
Watts Law Group, PC
The Kress Building
301 19th Street North
Birmingham, Alabama 35203
(205) 879-2447
(888) 522-7167 facsimile
john@wattslawgroup.com

/s/ M. Stan Herring
M. Stan Herring (HER037)
Attorney for Defendants
OF COUNSEL:
M. Stan Herring, P.C.
The Kress Building
301 19th Street North
Birmingham, Alabama 35203
(205) 714-4443
(888) 522-7167 facsimile
msh@mstanherringlaw.com

DEFENDANTS DEMAND A TRIAL BY JURY

Time Magazine has posted an article that brings to light a new method that some banks are using to deal with the massive number of foreclosures that are on the housing market: bulldozing them.

According to Stephen Gandel, writer of the original article, there are 1.7 million US homes in various states of foreclosure. Most of the houses are owned by banks, or will be owned by banks after the foreclosure processes. With so many foreclosed houses on the market, it's possible for housing prices to stay down for years.

However, some of these bank-owned homes won't ever be for sale. Banks are starting to call in demolition teams to get rid of some of the least-valuable repossessed houses. For example, Bank of America had plans to demolish 100 foreclosed houses in Cleveland in July alone. Bank of America then donated the land to the local government and has already donated 150 homes in Chicago and 100 in Detroit. BofA says the demolished homes were worth less than $10,000 each.

And BofA is not alone. A number of banks are ramping up their efforts to not just rid themselves of their unwanted homes but also fully dispose of them. Fannie Mae has a program to sell houses to local municipalities for a few hundred dollars. Wells Fargo has donated 800 homes since 2009. While some of those homes have been demolished, a spokesperson for the bank says many of the homes have been given to not-for-profits with plans to renovate the homes, not tear them down. JPMorgan Chase says it was one of the first banks to donate houses it couldn't sell or didn't think were repairable. Since 2008, JPMorgan has donated or sold at a discount 1,900 houses to city or county officials.

The bank is rewarded for donating the property by not having to pay taxes on the property or pay to have it maintained. Because it's a donation, the banks may even be able to use the donation for a tax write-off. Bank of America says demolishing some houses is the best economical option, as some houses aren't worth repairing. Everyone involved seems to like this method. The local government gets land, the bank gets a tax write-off, and housing economists feel that removing homes from the market that have low values or wouldn't sell at all is keeping home prices from going down even further. The most recent housing market data says it would take about 9 1/2 months for the current number of houses on the market to sell. The housing market is considered healthy when there is6 months' worth of sales available.

The big question is if the banks will demolish enough of the least valuable foreclosed homes to make a difference in the housing market. The Obama Administration says it's working on a program to help keep homeowner's facing foreclosure in their homes, which would help by reducing the number of properties the banks would be putting on the market.

Certainly, the idea that we are at the point where banks would be better off knocking down houses than reselling them shows there is still something very wrong with the housing market. But what is clear is that banks and others are at a point where they are ready to try something new to boost the housing market. And that is a good sign for the future.

If you would like more information on foreclosures, please check out our articles The Three Stages Of Foreclosure In Alabama and Wrongful Foreclosures In Alabama.

If you have further questions or concerns, feel free to contact us through our website or by calling 205-879-2447. You may also obtain a copy of our free book on stopping wrongful foreclosures and the problems of hidden fees by emailing us.

You can join our Facebook Fan Page - Alabama Consumer Protection Attorneys where we share useful information about the same types of issues that we cover in this blog.

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The New York Times has posted an article that discusses how a foreclosure and a short sale differ in the long run when it comes to how your credit score is impacted by losing a home. While economic factors may have been the cause of losing your home, a bad credit score can impact several areas of your life such as getting a job and renting.

A short sale where the balance is forgiven and nothing is recorded in public records can be quick and close to painless for your credit score's recovery. As long as you pay your bills on time your score can be brought up in less than a year. Your score won't be outstanding, but it will definitely help.

However, a foreclosure or bankruptcy can haunt your credit score for years. It takes about 3 years after a foreclosure or bankruptcy to pull up your credit score to even just a middle of the road score. A homeowner with close to a perfect credit score who undergoes a foreclosure will have to work 7 years to restore their credit.

But if someone has gone through foreclosure and still has a mountain of debt and not enough income, bankruptcy is worth considering, said Tracy Becker, the founder of North Shore Advisory, a credit-restoration company based in Tarrytown, N.Y. Sure, it will be another hard blow to your credit rating — but your credit most likely is already “wrecked,” at least for now, she said.

Fannie Mae, Freddie Mac and the Federal Housing Administration have all set guidelines about how long a borrower must wait before getting a new mortgage following a "significant derogatory event." There are other areas that fall under that guideline, such as a serious illness or divorce, but the wait after a foreclosure is the longest. The wait is generally 3-4 years.

As for F.H.A.-insured loans, they are available three years after a foreclosure, assuming perfect credit afterward, and two years after a bankruptcy is discharged. After a short sale, there’s a three-year wait if the borrower is in default at the time of the sale and there are no extenuating circumstances. If the borrower was on time with all payments for 12 months before the sale, there is no wait specified, meaning that an F.H.A. loan might be available immediately. Among the conditions: A loan isn’t available if the short sale was to “take advantage of declining market conditions,” according to the F.H.A. Home Loan Handbook for lenders.

If you would like more information on foreclosures, please check out our articles The Three Stages Of Foreclosure In Alabama and Wrongful Foreclosures In Alabama.

If you have further questions or concerns, feel free to contact us through our website or by calling 205-879-2447. You may also obtain a copy of our free book on stopping wrongful foreclosures and the problems of hidden fees by emailing us.

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The Florida Bankruptcy Attorney Blog has posted an article that discusses what the Mortgage Debt Forgiveness Act means for you. This article is particularly geared toward Florida homeowners, but still contains a lot of valuable information for homeowners anywhere whose home is worth less than what they owe on it..

The Act states that a homeowner who has had their mortgage forgiven, partially or entirely, cannot be taxed on forgiven portion of the debt, provided its value is less than $1 million if you're single, or $2 million if married. Without the Act, homeowners still would have been taxed by the IRS and would have been required to pay a percentage of the forgiven debt.

However, the Mortgage Debt Forgiveness Act only applies to your home or place of primary residence. It cannot be applied toward credit card debt, car loans, student loans, vacation home mortgages, or other lines of equity. The Act will become even more useful to homeowners as the number of foreclosures in the country continue to rise and the threat of a double-dip recession looms.

If you would like more information on foreclosures, please check out our articles The Three Stages Of Foreclosure In Alabama and Wrongful Foreclosures In Alabama.

If you have further questions or concerns, feel free to contact us through our website or by calling 205-879-2447. You may also obtain a copy of our free book on stopping wrongful foreclosures and the problems of hidden fees by emailing us.

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Time.com has posted an interesting article with an unexpected twist about homeowners who turned things around on Bank of America.

In 2009, retired police officer Warren Nyerges and his wife Maureen Collier paid $165,000 cash for their newly purchased home in Naples, Florida. They never took a mortgage out on their home, so imagine their surprise when Bank of America initiated foreclosure proceedings in February of last year. The Nyerges hired an attorney, Mr. Todd Allen, and Bank of America eventually dropped the foreclosure.

The Nyerges had racked up over $2,500 in attorney fees and had requested on multiple occasions that Bank of America pay it. They eventually had to take the matter to court, which ruled B o A had to reimburse the couple for the attorney fees. Five months later, after the couple and their attorney had been pursuing reimbursement by phone calls and writing letters, B o A still hadn't paid up.

Todd Allen, the couple's attorney, went to court and obtained a order of foreclosure against the bank. Allen then went to the bank's local branch with the order of foreclosure and a few sheriff's deputies. He told them to remove cash from the teller's drawers, take the banks computers, furniture, and other property of value. One hour after he began this, the bank's manager produced a check for $5,772.88 to cover Allen's legal fees and additional costs the Nyerges had accrued.

Some might say all’s well that ends well in this scenario, seeing as the Nyerges got their home, Allen got his fees and the bank got it’s comeuppance. But there are deeper implications to every one of these foreclosure foul-up horror stories we read about, and even those we don’t. The finger-pointing to outside attorneys seems reminiscent of the banks’ excuse for the robo-signing scandal that broke last fall, and just as flimsy: the fact that a bank has lots of foreclosures to process and hires an overworked, underqualified or otherwise not-up-to-the-job professional to do it does not justify the nonchalance with which documents and properties of such gravitas were treated. The similarity didn’t escape Allen, who told CBS News, “this is a symptom of a larger problem.”

If you would like more information on foreclosures, please check out our articles The Three Stages Of Foreclosure In Alabama and Wrongful Foreclosures In Alabama.

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The Washington Post has posted an article that discusses how the attorneys general of both Illinois and California have launched investigations to look into problems in the mortgage servicing industry.

The attorneys general are hoping that by putting pressure on the mortgage servicing firms, the firms will turn around their "shoddy foreclosure practices." Illinois Attorney General Lisa Madigan issued subpoenas to two mortgage servicing companies base in Florida- Lender Processing Services Inc. and Nationwide Title Clearing Inc.- claiming that both firms have been taking processing shortcuts such as robosigning.

“Foreclosure became a rubber-stamping operation that robbed many homeowners of the American Dream without a fair and accurate process,” Madigan said in a statement.

California Attorney General Kamala Harris has also served Lender Processing Services with a subpoena over data discrepancies from 2007.

“California homeowners have been exposed to fraud and crime at every step of the mortgage process,” Harris said in a statement, vowing to continue looking for “inaccurate or unjust foreclosures."

A representative from LPS couldn't be reached, but a spokeswoman for National Title Clearing said the firm had not yet been given a subpoena, but if they were, they would cooperate fully “to the fullest extent of the law” to “clear up common misconceptions” about the mortgage assignments the company is responsible for.

Illinois and California aren't the only states to look into the inner workings of the mortgage servicing industry. New York Attorney General Eric Schneiderman has had meetings with 7 of the top banks in an effort to investigate how mortgage securities were being bundled and sold. He has also issued subpoenas to 4 bond insurers "for information related to claims paid on mortgage-backed securities and any litigation and settlements entered into with the banks."

In addition, attorneys general in two other states separately sent letters to Bank of America regarding foreclosures. Connecticut’s attorney general said that the firm wasn’t doing enough to help distressed homeowners, while Utah’s alleged that one of the bank’s units had not complied with state laws in its foreclosure practices.

If you would like more information on foreclosures, please check out our articles The Three Stages Of Foreclosure In Alabama and Wrongful Foreclosures In Alabama.

If you have further questions or concerns, feel free to contact us through our website or by calling 205-879-2447. You may also obtain a copy of our free book on stopping wrongful foreclosures and the problems of hidden fees by emailing us.

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The Kentucky Bankruptcy Blog has posted an article that discusses how purchasing a short sale home can impact your taxes. A short sale occurs when a homeowner and their lender agree to sell a house for less than is owed on a mortgage. Both the lender and homeowner must agree to it and doing so can avoid going into foreclosure, which benefits both parties. Short sales were uncommon before to the current mortgage crisis started happening, since the homeowner loses money and is even sometimes sued by the lender for the amount remaining on the mortgage. Homeowners could also have been taxed by the IRS on the amount of money that was "forgiven" by the mortgage lender.

The Mortgage Forgiveness Debt Relief Act was passed in 2007as a response to the mortgage crisis. It excludes debt forgiveness from a short sale from being counted as taxable income. Debt that has been forgiven by a lender due to a foreclosure, short sale, or refinance from 2007 to 2012 is eligible for the tax relief offered by the Mortgage Forgiveness Debt Relief Act. Up to $2 million can be eligible for relief if you're married, or $1 million if filing as a single. However, it only applies to your principle residence and not a second home, a car loan, or credit card debt.

A forgiven debt is generally taxed as income to the tax payer, but that is not always the case. The most common exclusions of this tax are: (1) if the tax payer was insolvent immediately before the debt was forgiven; (2) if the debt was discharged in bankruptcy; or (3) if the debt is a qualified principal residence indebtedness until 2012.

If you would like more information on foreclosures, please check out our articles The Three Stages Of Foreclosure In Alabama and Wrongful Foreclosures In Alabama.

If you have further questions or concerns, feel free to contact us through our website or by calling 205-879-2447. You may also obtain a copy of our free book on stopping wrongful foreclosures and the problems of hidden fees by emailing us.

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Last month the federal government took a small step towards trying to reign in some of the mortgage servicing abuse that we see on a daily basis. Here is some of the language from the announcement from the OCC:

The eight servicers are Bank of America, Citibank, HSBC, JPMorgan Chase, MetLife Bank, PNC, U.S. Bank, and Wells Fargo. The two service providers are Lender Processing Services (LPS) and its subsidiaries DocX, LLC, and LPD Default Solutions, Inc.; and MERSCORP and its wholly owned subsidiary, Mortgage Electronic Registration Systems, Inc. (MERS).

"These comprehensive enforcement actions, coordinated among the federal banking regulators, require major reforms in mortgage servicing operations," said acting Comptroller of the Currency John Walsh. "These reforms will not only fix the problems we found in foreclosure processing, but will also correct failures in governance and the loan modification process and address financial harm to borrowers. Our enforcement actions are intended to fix what is broken, identify and compensate borrowers who suffered financial harm, and ensure a fair and orderly mortgage servicing process going forward."

The enforcement actions require the servicers to promptly correct deficiencies in residential mortgage loan servicing and foreclosure practices that examiners identified in reviews conducted during the fourth quarter of 2010. The actions require the servicers to make significant improvements in practices for residential mortgage loan servicing and foreclosure processing, including communications with borrowers and dual-tracking, which occurs when servicers continue to pursue foreclosure during the loan modification process. The enforcement actions require the servicers to ensure that foreclosures are not pursued once a mortgage has been approved for modification and to establish a single point of contact for borrowers throughout the loan modification and foreclosure processes. In addition, the actions require servicers to establish robust oversight and controls pertaining to their third-party vendors, including outside legal counsel, that provide default management or foreclosure services.

I haven't seen much that has come from this but hopefully there is some positive action being taken by the servicing industry.

I like how Denise Evans put it:

In a nutshell, each of these companies will to have to CLEAN UP ITS ACT!!!!!! . . . Maybe now we’ll see some reasonable responses to short sale and loan modification requests, instead of the auto-pilot conveyor belt straight to foreclosure.

Well said and hopefully this will happen.

The New York Times has posted an article that discusses recent lawsuits that accuse Wells Fargo of discriminating against African Americans by steering them into predatory loans. Allegedly, the company deliberately pushed African American homeowners, who qualified for prime mortgages, to subprime loans. The lawsuits claim that the homeowners could have kept up with mortgage payments on a prime loan, but the more expensive subprime loan payments caused them to default on the loan. The case also claims that Wells Fargo should have known that would happen.

One of the lawsuits comes from Memphis, Tennessee and the other from Baltimore, Maryland.

"The City of Memphis and Shelby County have not alleged that Wells Fargo lending practices resulted in a host of social and political ills plaguing entire sections of the community,” Judge Anderson wrote in a 32-page order. “Rather plaintiffs contend that defendants have targeted individual property owners with specific lending practices (reverse redlining), resulting in specific effects (foreclosures and vacancies) at specific properties, which in turn created specific costs (services and tax revenue) for local government.”

Judge Anderson of the Federal District Court for the Western District of Tennessee dismissed the lawsuit, saying that it was too "broadly drawn." Judge Anderson's ruling came about 2 weeks after a similar case was dismissed in Baltimore by Judge Motz.

But this time, Judge Motz said city officials had narrowed the allegations enough to show a plausible link between Well Fargo’s actions and its impact on the city. The issue, he said, was whether “the city has plausibly alleged that the properties in question would not have become vacant but for the allegedly improper loans made by Wells Fargo.”

He said the city provided the link by claiming that Wells Fargo deliberately steered African-American borrowers who qualified for prime mortgages into subprime loans. As a result, the plaintiffs claim, borrowers who could have kept up with payments on a prime loan defaulted because of the more expensive subprime payments.
But this time, Judge Motz said city officials had narrowed the allegations enough to show a plausible link between Well Fargo’s actions and its impact on the city. The issue, he said, was whether “the city has plausibly alleged that the properties in question would not have become vacant but for the allegedly improper loans made by Wells Fargo.”

Ms. Teri Schruttenbrunner, a spokeswoman for Wells Fargo, said:
“We disagree with these rulings, and we will present the facts which we believe will ultimately win these cases. Our team members make loan pricing decisions based on credit and transaction risks, consistently treating our customers fairly.”

If you would like more information on foreclosures, please check out our articles The Three Stages Of Foreclosure In Alabama and Wrongful Foreclosures In Alabama.

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

Posted In: Mortgage/Foreclosure

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The New York Foreclosure Law Blog has posted an article that gives some reasons why some loan modifications are accepted and others are rejected by lenders and pushed into foreclosure.

One reason is that many lenders have poorly trained staff, which also leads to homeowners being told false or inconsistent information. Sometimes lenders even tell homeowners that their packet is missing documents even though they have been sent in multiple times. Some lender reps even encourage homeowners not to pay their loans and later the homeowner is rejected for a loan modification. This is particularly irritating for homeowners as they feel like the lender actually set them up to be rejected for a loan modification.

Some lenders encourage homeowners to apply for modifications but then later inform them that a "mysterious investor" won't approve it. Homeowners seeking a loan modification should plan ahead and check a copy of the pooling service agreement and be willing to try other arrangements.

Most homeowners feel lost and helpless when seeking a loan modification or fighting a foreclosure. They don't know how to make a lender keep their word and act appropriately, however, an attorney does. Consulting with an attorney can be crucial to obtaining a loan modification.

If you would like more information on foreclosures, please check out our articles The Three Stages Of Foreclosure In Alabama and Wrongful Foreclosures In Alabama.

If you have further questions or concerns, feel free to contact us through our website or by calling 205-879-2447. You may also obtain a copy of our free book on stopping wrongful foreclosures and the problems of hidden fees by emailing us. We have also started handling bankruptcy cases.

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