Welcome to our Q&A on consumer protection issues. The entire video is above, and the transcript is below.
I hope you enjoy!
John Watts ============
Hello and welcome to our question and answer webinar. My name is John Watts, consumer protection attorney in Alabama. We’ve been a couple weeks late doing this webinar so I apologize for that.
Thank you for those that have asked about it. We will focus this webinar really on the topic of mortgages, foreclosures, and things of that nature. I’ve mentioned this in other webinars but we certainly welcome your questions. You can submit your questions through our website, Alabama Consumer.
You can also put a comment beneath this video. You can even call us at 205-879-2447. What we do is we take all those questions and then one of my assistants puts them in written form for me so I read and answer them for you. We try to answer as many questions as we can. Now, we have more questions than we can possibly answer today but we certainly welcome your questions because it gives us a nice supply of questions to work through. We are also looking at maybe even doing this twice a week instead of just one time a week due to the volume of questions.
Let me read for you what the questions are then we’ll go through these one at a time.
“Who is Freddie Mac or Fannie Mae?”
If you have been involved with mortgages or you’ve done any research you probably have run across those companies.
“Should I hire a loan modification company to help me stop a foreclosure?”
It’s a big one. Many people we meet with have hired companies and they’ve paid i$3,000, $5,000, or even $10,00 and usually that has not been successful.
“I had a loan modification then the loan got transferred and the new company is refusing to honor the loan modification. What do I do?”
Again, very common situation. Here’s one, it’s a little bit different but if it applies to you it would be very helpful.
“I have a first and second mortgage. I’m thinking of letting the house foreclose or maybe doing a deed in lieu with the first. Is this a good strategy if I cannot afford my house?”
We’ll talk about that. The key is that there’s a second mortgage.
And last but not least,“I got sued for a ejectment after a wrongful foreclosure and I didn’t answer so I just got the default judgment.” That means you lose because you did not respond. “Will this hurt me suing my mortgage company?”
Let’s start from the top number one, who or what is Freddie Mac or Fannie Mae?
You really have to go back in time. We start way back in the 30’s and we’ve got the depression and Roosevelt, the new deal and we’ve got to try to stimulate housing growth here. Loans were not the same back then. You didn’t have the 30 year fix rate.
These were more like five year loans, ten year loans, maybe it was interest only. Then as you get to the end of that there’s this big balloon payment at stake. Freddie Mac, Fannie Mae, they are governmental companies, agencies. It was more of an implied promise that if these companies started falling, then the government would step in and prop them up. They may guarantee to mortgage companies. They’re like, “If the borrower defaults we’ll cover the land.”
What if too many borrowers defaulted and Fannie Mae, Freddie Mac could not afford it? Well then the idea is that the government will step in. There was never an explicit promise of that but it was just understood that would happen. We’re rolling through time, in the 70’s, 80’s, 90’s, 2000’s.
Now, Freddie Mac and Fannie Mae and doing more than just securing or promising about these loans. They are out there investing in the sub prime loans and part of the problem with the sub prime loans. We had loans being made $500,000 loan to somebody who’s making $25,000 a year. Really, that’s going to fail. Of course that’s going to fail.
Many of the loans were really refinances so people are pulling money out of their house. It was the traditional, “I’m going to put down 10%, 20% down payment and then stay in my house.”
They are doing all this investing and then in about seven or eight years when they start to crash, the housing market starts crashing. Dominoes start falling. Fannie Mae and Freddie Mac are sitting in there and now they are going to be wiped down. The government, remember it was always the implied promise, the government will come in and save them.
The government institute was called a conservatoire relationship over Fannie Mae, Freddie Mac. We’re primarily talking about the treasury department. They come in, they take over, they get rid of most of the leadership of Fannie Mae, Freddie Mac.
There are a lot of issues, there’s some accounting scandals. These companies, agencies sort of private, sort of government have become incredibly powerful politically very powerful. Whether right or wrong, government comes in, takes them over and that’s still the case to this day.
If you are facing a foreclosure or you’re trying to do a loan modification and you get something in the mail that goes, “Freddie Mac is the owner or the investor of Fannie Mae.” Just understand that is a governmental agency particularly now.
I’m recording this September 18, 2015 so about seven or eight years it’s been this situation. It’s not necessarily good or bad it’s just Fannie Mae, Freddie Mac is going to be calling the shots for this servicer. You may be dealing with Ocwen, Seterus, Nationstar, any of these.
Bank America, Chase, Wells Fargo and it maybe that behind them is Fannie Mae or Freddie Mac and they are the ones that will be dictating the terms. Just be aware of that and it’s important to know who is behind the servicer.
Is it a trust? Private trust? Is it Fannie Mae, Freddie Mac? Who is it? Because that can make a difference. We don’t have time to go in all that but hopefully that gives you a nice overview and I want to make a book recommendation.
If you’re interested in Fannie Mae, Freddie Mac, the economic crash from the housing market, there’s a book by I believe her name is Bethany McLean. It just came out maybe two weeks ago. It is called Shaky Ground, and it’s all about Fannie Mae, Freddie Mac, how the government is running those two and whether that’s good bad and what vulnerabilities that poses and really how that can affect you even if you don’t have a mortgage. It still can affect you because there’s so much money involved.
It’s a fascinating look into the government and the housing crash and based on my experience it is fairly accurate. I think what she has in there is very, very correct. There are conclusions, implications drawn and you’re to decide how accurate those are but I think the facts in there are very, very solid so I recommend that book to you.
Okay, our second question is, “Should I hire a loan modification company to help me stop a foreclosure?”
If the choice is hire a loan modification or do nothing, then yeah hire one because maybe it won’t be a scam company and maybe it will help you. If you do nothing then you’re behind on your mortgage then you’re head to a foreclosure.
Here’s my concern with the load modification company as I see, those who say, “Okay, pay us money. You don’t talk to your mortgage company anymore. We will talk to them. We want to control everything. You get a letter in the mail from them, you get letters from foreclosure lawyers, you just ignore those. You let us do everything.”
It’s okay if they are legitimate and they know what they are doing and if they are giving you legal advice that their license in Alabama but that didn’t really happen. What happens is you’re paying all those money to them, you have no idea what’s going on. Then, boom there’s a foreclosure.
You get on the phone and you call this place, you say, “What happened?” They go, “Whoa, whoa, we can’t help you. We don’t deal with foreclosures.” “What do you mean? I hired you to stop a foreclosure.” They go, “No, no, no. We can’t do that.” That’s if you’re lucky and can get them on the phone.
Normally these places, the phone number becomes disconnected. The address is really just a little mail box in the UPS store and there’s nobody there. It’s a scam. They stole all your money. Particularly if it is a law firm out of state. That’s almost absolute give away that it is a scam.
Some Florida law firm doesn’t have a license with an Alabama attorney that’s an employee of the firm, it’s almost always a scam. If you’re going to hire somebody to help you then hire a lawyer in Alabama that can actually help you. You need to go to court, they can go to court with you. Do you have to hire anybody? No.
As a matter of fact, we have a very comprehensive video training course and you can find it at foreclosuredvd.com and that should be in the notes here or the transcript of this after this webinar is over but you can go there.
There’s no cost, you put your information in and you’ll get access to four videos plus I think it’s maybe a 17 page workbook. Now, if you’re saying, “I want to stop a foreclosure. I want to get my loan modified and I’m not willing to do any work.” Then it’s not going to help you. I think we have probably two or three hours of videos in there.
It’s a very detailed workbook that you follow along, print it out or watch us on your phone and type on your computer, whatever works for you. You have to do work to make this happen. If you’re not willing to do work, if you’re saying, “Where is that easy button that I hit and everything is fixed?” It’s not going to help you. At the end of that, we make an invitation to use it. If you watched the videos, if you filled out the worksheet, we’ll do a free consultation call with you.
Normally, my consultation calls are $500. Free consultation call and I’ll help you understand, can you do it on your own, should you hire a lawyer if you hire a lawyer and if you want to hire us, what are the levels of service that we offer. Just did one of these calls today and I was very encouraging of the person by saying, “Look, you can do this on your own.” If you’re not willing to do it on your own or you just don’t feel comfortable, sure you can hire me.
You can do this on your own.
You will know so much more about foreclosures that almost all lawyers in Alabama when you get through with this video training series. If you are saying, “I don’t know if I should hire somebody to do it.”
Then, spend the time if it’s your house it is important. Spend the time foreclosuredvd.com. I think you will be very happy that you went through that.
Okay, our third question is: “I had a loan modification then the loan got transferred and then new company is refusing to honor the loan modification. What do I do?”
I think what’s happened here is a person gets a loan modification so maybe it’s with Chase and Chase says, “All right, we’re going to lower your interest rate 4%. We’re going to take all the missed payments and we’re going to put those on the back end.”
Whatever they said they are going to do and then you get a letter in the mail that say, “Hey, you’ve been transferred to Seterus,” or to Nationstar, whoever it may be. They go, “Look, you had that with Chase but we’re not going to honor that. You are behind, you’re late and we’re going to start foreclosing.” That’s wrong.
Now, I’m not saying that 100% of the time it is wrong but we’ll say 99.99% of the time that’s wrong, that’s illegal, that violates RESPA, R-E-S-P-A. It violates the contract that you have and you need to be very, very aggressive about fixing that problem because if you let it linger then overtime the company will say, “See, you accepted it so now you can’t complain about it.”
Then, they’ll foreclose on you and then you’re trying to go back in time to say, “Yeah, but you should have honored that loan modification.” It is something you really need to take care of, you can do that through RESPA letters.
Again, we cover that in our foreclosuredvd.com. You can also call the company, why are you doing this. I will say this, over the phone there’s a lot of problems with it.
You really need it in writing.
I encourage you take immediate action with that. If you had a loan modification and now this company that has your loan is saying, “We’re not going to honor it,” you need to know why. They need to explain to you in writing why they are not going to honor it.
Maybe when you get the explanation you go, “Okay, that make sense.” You need to know why. Why are they not honoring that because normally that’s illegal and sometimes the way to solve this is we sue on the Federal Court.
Then they go, “Yeah, yeah, I’m sorry. It’s just a mistake. We will honor that loan modification.” They need to do that before you have to sue them, they need to do that before you wind up facing a foreclosure.
Okay, our fourth question is, “I have a first and a second mortgage. I’m thinking of letting the house foreclose or maybe doing a deed in lieu with the first mortgage company. Is this a good strategy if I can’t afford my house?”
Let’s talk about first of all what is a deed in lieu.
A deed in lieu is where it’s like you have your deed and you hand that to the mortgage company and you say, “I’m giving you the deed in lieu of,” instead of you foreclosing. There’s no foreclosure. It’s like you’re swapping the deed and now they get the house.
What’s the downside of that?
You may get stuck with the deficiency. It may count on your credit report. Maybe report as a foreclosure. We’ll talk about later on whether that’s good or bad, right or wrong but here’s the problem in this situation. This person has a second mortgage.
They give a deed in lieu to the first mortgage company and second mortgage company is going, “Okay, we just lost our security interest in the property. We want our money.” What if you have a $100,000 second mortgage?
They are coming to you saying, “We want our 100,000.” Generally this idea, I’m just going to give them the deed in lieu or I’m just going to walk away and let them foreclose. Not really a good idea if you’re at all concerned about owing that $50,000, $100,000, whatever it is on that second mortgage.
Usually the better option is to go to the first mortgage company, go to the second mortgage company and say, “Guys, I need help. I cannot afford this house. I need loss mitigation, loan modification, principal reduction, forbearance, deferment. Let me do a short sale. Let me do a deed in lieu but I need it for both of you guys.”
It’s a tough situation when you get two mortgages because you can really get caught in a bind but at least you have a chance if you’re reaching out to them saying, “Give me some loss mitigation.”
Again, go to that foreclosuredvd.com, we walk you through about loss mitigation, about RESPA letters, things called request for information, notice of error, all these things we walk you through because those are vitally important if you want to save your house.
Look, if you can get your loans modified enough, the interest rate comes down, the payment comes down, maybe you can afford your house. Even if you can’t at least you have a shot at being able to do something to protect yourself from getting hit with that second mortgage company coming after you.
Okay, our final question on this foreclosure webinar is, “I’ve been sued for ejectment after a wrongful foreclosure and I did not answer. I just got default judgment. Will this hurt me suing my mortgage company?”
I think what they are talking about here is they are saying, “Look, it was illegal to foreclosure against me. Then I got sued for ejectment.” That’s where they are trying to kick you out of your house and I lost because I didn’t do anything but I still want to sue my mortgage company for a wrongful foreclosure. Can I do that? Maybe. Maybe not.
It depends who sued you for ejectment, was that your mortgage company? Was that Fannie Mae, Freddie Mac, some trust out of New York, who was it? If it is Fannie Mae or Freddie Mac, you may still have the right to sue your mortgage company.
It’s questionable. It depends on exactly what happened. You see, when you get default judgment against you, you lose so you’re kicked out of your house. People will say, “That’s not fair. I want my day in court.” That was your day in court, you have to answer the ejectment lawsuit.
What if you didn’t do that you got a default judgment and it was your mortgage company suing you for ejectment? Generally speaking, you lost your right to counter-suit. You have to check that out. You can contact us, you can contact another lawyer.
Get specific advice. This video this whole webinar we’re just giving you general information. I can’t give you advice because I don’t know your specific situation, I don’t represent you.
I’m just telling you it’s a really, really bad position to be in to have a default judgment against you in the ejectment case because that may have taken away your right even if you’re absolutely wrongfully foreclosed. If you did nothing, that default judgment came against you that’s going to be a real problem.
I hope that these videos, these webinar questions, answers have been helpful to you. We try to do these every Friday and again we may start doing on maybe on Fridays but also I don’t know Wednesdays or Tuesdays, Mondays.
Someday we’ll do and we’ll go through these questions. Feel free to give us your questions, you can call us 205-879-2447. You can go to Alabama Consumer and contact us there or you can put a comment below this. I will look forward to finding out your questions and then seeing you next week. Okay, have a good one. Bye-bye.