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.