On April 13, 2011, the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, and the Office of Thrift Supervision announced enforcement actions against 14 large residential mortgage servicers and two third-party vendors for unsafe and unsound practices related to residential mortgage servicing and foreclosure processing.  As part of those consent orders, federal regulators required servicers to engage independent firms to conduct a multi-faceted review of foreclosure actions in process in 2009 and 2010. Under the orders, independent consultants are charged with evaluating whether borrowers suffered financial injury through errors, misrepresentations, or other deficiencies in foreclosure practices and determining appropriate remediation for those customers. Where a borrower suffered financial injury as a result of such practices, the agencies’ orders require financial remediation to be provided.

To be eligible, the mortgage must have been active in the foreclosure process between January 1, 2009, and December 31, 2010, the property securing the loan must have been the primary residence, and the mortgage must have been serviced by one of the following mortgage servicers:

To be eligible, the mortgage must have been active in the foreclosure process between January 1, 2009, and December 31, 2010, the property securing the loan must have been the primary residence, and the mortgage must have been serviced by one of the following mortgage servicers:

• America’s Servicing Co.
• Aurora Loan Services
• BAC Home Loans Servicing
• Bank of America
• Beneficial
• Chase
• Citibank
• CitiFinancial
• CitiMortgage
• Countrywide
• EMC
• EverBank/EverHome Mortgage Company
• GMAC Mortgage
• HFC
• HSBC
• IndyMac Mortgage Services
• MetLife Bank
• National City Mortgage
• PNC Mortgage
• Sovereign Bank
• SunTrust Mortgage
• U.S. Bank
• Wachovia Mortgage
• Washington Mutual (WaMu)
• Wells Fargo Bank, N.A.
• Wilshire Credit Corporation

As part of that program, the 14 mortgage servicers covered by the enforcement actions will begin mailings November 1, 2011 that will continue through the end of the year. The mailings are intended to provide information to potentially eligible borrowers on how to request a review of their case if they believe they suffered financial injury as a result of errors, misrepresentations, or other deficiencies in foreclosure proceedings related to their primary residence between January 1, 2009 and December 31, 2010. The mailings will include a request for review form. Requests for review must be received by April 30, 2012.

The third-party consultant will assess whether any errors, misrepresentations, or other deficiencies resulted in financial injury to borrowers. Where a borrower suffered financial injury as a result of such practices, the consent orders require remediation to be provided.  During the review, customers may be contacted by mortgage servicers for additional information at the direction of the independent consultant.

Borrowers may also visit www.IndependentForeclosureReview.com for more information about the review and claim process. Assistance with the form and answers to questions about the process are available at 1-888-952-9105, Monday through Friday from 8 a.m. to 10 p.m. (ET) and Saturday from 8 a.m. to 5 p.m. (ET).

If you believe that you are eligible for the Review Program or need assistance with the process or determining your rights, we at BPE Law are here to help you with both the application and review process as well as any related proces such as making a Qualified Written Request for your loan information. You can reach us by e-mail at sjbeede@bpelaw.com or by phone at 916 966-2260.

The information presented in this Article is not to be taken as legal advice. Every persons situation is different. If you are upside-down on your loan(s), especially if you’re facing a lender lawsuit, get competent legal advice in your State immediately so that you can determine your best options.

If you’ve been involved in the real estate market over the past 6 years as a real estate agent, lender, seller, or even buyer, you are at a greater risk of being involved in a lawsuit. Today’s Article is one of several which will educate you on the strategies you can use when faced with a lawsuit to take control of the situation, minimize the risk, and maybe even make it go away.

Here’s a possible situation in which you could find yourself: 

A Demurrer is one of those funny sounding latin words which essentially means “so what”… as in “you’ve filed this Complaint but I don’t know what you’re saying so how can I respond?”  It is a hard to pronounce but powerful tool to narrow and focus the claims and possibly eliminate them up-front. In California, the legal authority for a Demurrer is found at Code of Civil Procedures Sec. 430.10. A demurrer is a pleading used to test the legal sufficiency of other pleadings, not their truth. For example, all facts stated in the Complaint are assumed to be true however improbable they may be!  The Demurrer challenges only defects in the Complaint which would prevent the Plaintiff from being able to actually state a claim against the defendants.

Common grounds for Demurrer include: a) The court has no jurisdiction over the claim - such as when the parties have agreed to arbitration; b) The person who filed the Complaint does not have the legal right to sue - such as when the Plaintiff had previously filed and been discharged in Bankruptcy; By far, the most common grounds for Demurrer are: c) that the pleading does not state facts sufficient to constitute a cause of action against this Defendant; or d) the claims made are ambiguous and unintelligible.  The important part here however is that although the facts stated in the Complaint are deemed to be true (at that stage only), the Court on reviewing a Demurrer can consider certain other documents and statements by the Plaintiff where those counter what the Plaintiff claims in the Complaint.

So here’s how it works in practice. 1) You get served with a Complaint; 2) As soon as you are served, you serve the Plaintiff with discovery requests demanding that the Plaintiff clarify facts concerning the claims and produce all supporting documents. The Plaintiff must respond under penalty of perjury within 30 days thereafter; 3) within the time allowed for filing a response to the Complaint (generally 30 days), you file a Demurrer.  The Court will set a hearing date, generally 45-60 days out but in some Counties, such as Sacramento, the hearing may be 6 months later.  Now you wait for the Plaintiff’s discovery responses and, when they arrive, you look to see if they counter the Plaintiff’s claims in the Complaint. They often will.  Then, if and when the Plaintiff files an Objection to the Demurrer, you file a Reply with the Plaintiff’s own sworn Discovery responses undermining his claims. If the Court agrees with you, the Demurrer will be granted and the Court will usually give the Plaintiff a chance to fix the Complaint - if that can be done. The Plaintiff may file an Amended Complaint trying to deny the defects stated in the Demurrer, and if so, possibly another Demurrer is warranted.  The result of this strategic pleading will at least narrow the issues and often will enable you to win outright without ever having to file an Answer.

Here’s how this worked in a recent case where a foreclosed buyer sued the seller and real estate brokerage company over supposedly undisclosed defects:  All lawsuits must be brought within a certain time called the “Statute of Limitations Period”. For a Fraud lawsuit, this is 3 years (in CA) from the date the Plaintiff knew or should have known that they were injured from the alleged fraud, called the “date of discovery”. The dates in the Complaint indicated that the Complaint was filed within 3 years from this date of discovery.  However, when we received the Plaintiff’s Discovery responses, we received documents indicating that the Plaintiff discovered the alleged fraud months earlier and even had filed an insurance claim more than 3 years before the Complaint.  Based on this simple step, the Court granted the Demurrer and ultimately threw the case out.  But there was even more. Further Discovery revealed that the Plaintiff had filed Bankruptcy and had not disclosed this possible claim. So, the Plaintiff had no right to bring any claim on the alleged fraud.

This is not an uncommon result. It is strategically taking control of the case at the outset by going on the attack. If successful, you save years of legal battles and many thousands of legal costs incurred in going to trial. If nothing else, you force plaintiffs to lay out their claims more clearly, narrow the scope of the litigation, get rid of non-meritorious claims, and gain important evidence at the begining of the case. The downside is that you educate the Plaintiff in defects in their case that you can use against them later.  But I would rather seek to knock the case out up front if at all possible and, for this, the Demurrer is a great legal tool.

The information presented in this Article is not to be taken as legal advice. Every persons situation is different. If you are facing a lawsuit, get competent legal advice in your State immediately so that you can determine your best options.

Here at BPE Law, our attorneys have handled thousands of lawsuits both in California and nationwide, plus in the Federal Courts. We’re experienced, aggressive, and focussed on getting you the results you want as cost-effectively as possible.  For agents, we have relationships with most E&O carriers and can work seemlessly with them on your behalf.  To learn more, contact me at sjbeede@bpelaw.com or even better, call us at 916 966-2260 for our $200 Attorney Consult to learn the strategies you need to move forward.

The most common question we’re asked lately is what can we expect for 2012.  While we don’t have a crystal ball, from what we can sense the simple answer is to expect more of the same.

Loan Modifications - Although many web posting talk about increased numbers of people getting loan modifications, we’re not seeing this in California.  If anything, lender willingness to make changes seems to be worsening perhaps forced by large demand and lowered response capacity.  For those who do get modifications, principal reduction remains rare with private modifications exceeding HAMP nearly 2-1.  Don’t look for any help from Washington.  The Treasury Dept. will not enforce any strong procedures recommended by their own Inspector General.  Treasury says that “participation is voluntary” so there’s nothing they can do.  Even the much advertised HARP2 program which was to take effect on December 1st, is now pushed back to at least March 2012. Real help would take an act of Congress but they’ve shown no real willingness to compel the lenders to be more responsive.  With an election year coming up and the Republicans and Democrats drawing battle lines, helping upside down property owners is not on their agenda.

Short Sales - This remains the safety valve for upside down owners who can’t hang on. Between SB458 in July and the Debt Forgiveness Relief Act which expires at the end of 2012, Short Sales remain the best means that owners have to avoid deficiency judgment liability and resulting taxes.  The real challenge is getting lenders to respond, especially Bank of America. In November, Treasury rules went into effect requiring lenders to designate a “single point of contact”, a person who will act as the relationship manager for everything. This sounds good in theory but only if the designated person really exists.  Already we’re hearing repeated horror stories of the BofA point of contact not responding to e-mails, phone calls, or any other attempt to get the system to work. So short sales die because of lack of response.  And with BofA planning to slash another 30,000 jobs, it is reasonable to worry that this will only get worse. Beyond BofA, the short sale market appears to be finding an understanding of how to respond to SB458 requirements which bar recourse for any deficiencies following a 1-4 unit residential short sale.  Junior lenders will remain in the driver’s seat… at least when they believe there may be post-foreclosure recourse that is collectible.  As always, the key to short sales is having an experienced, skilled, and aggressive Realtor pushing the lenders to get the deal done. Short sales is not a place for the meak.

Foreclosures - With the lack of modifications and confusion in the short sale market, foreclosures are on the rise everywhere. As of August, BofA increased their foreclosure rate 200% and said they want to double that!  In part, the foreclosure increases reflect a year-to-date change from the moratoriums that took effect after the robo-signer scandal in the Fall of 2010. Foreclosure rates are highest in States like California where there is no judicial supervision of the foreclosure process.  Increased foreclosures are scaring buyers who fear further price drops and with good reason.  Prices are down over 30% from their 2006 highs and market watcher, Core Logic, reports continuing prices declines of 1% per month. FNMA reports that 4.5 million homes are now delinquent.  The high levels of foreclosures is also resulting in record numbers of Real Estate Owned (REO) properties which lenders take back, particularly in the inner-city, lower-income areas.  But rather than resell to individual homeowners, lenders have been selling these in large blocks to investors who will then rent the homes out.  As has been observed, this process is quickly unwinding the long history of neighborhood and urban stability brought about through the Community Reinvestment Act of the 1970’s and subsequent efforts to bring home ownership within the reach of blue-collar workers.

When will Recovery Start? - At the beginning of 2011, we thought that we’d work our way through the residential default backlog by this time.  That certainly was not the case.  Based in part of economic stress in Europe, the U.S., and here in California, the unemployment rate remains around 9% nationally and almost 12% in California.  Unless people gain stability in their paychecks, they cannot qualify for the loans needed to buy all the “shadow inventory” of foreclosed homes which is holding back lender capacity to make new loans.  Similarly, loans to new, job-creating businesses have been hard to get. Although recovery will vary by location, both FNMA and the Center for Responsible Lending agree that we’re about halfway through a 10 year process… look to 2016 for price increases to start in.  The most visible evidence of this will come in 2012-13 as all of the interest-only loans made in 2007-08 start to re-set as fully amortized loans, possibly with dramatic interest rate bumps as well.  Less visible but potentially even more serious will be the likely increase in commercial foreclosures as shopping center and office building owners run out of capacity to wait out the recession.  With those foreclosures, a great many small and large employers may get put out of business.

What Should You Do Now? - 10 years from now, people will say “why didn’t I buy in 2012″.  Interest rates are at an all-time low;  home prices are at or near the floor; and rents are not falling with the prices. There is a reason why investors are buying properties in bulk and grabbing whatever they can at foreclosure auctions. According to the Economist Magazine that recently surveyed real property values worldwide, U.S. property is 8% under-valued for the rent it generates and 22% under-valued relative to income. Don’t be surprised if foreign money starts buying up more and more property here… if they can get their money out of their own country.

For Real Estate Agents - If you don’t like the hassle of short sales, get over it.  We have a long way to go and short sales as well as REO’s will continue to define where you must look for business.  For short sales, stay in close contact to your farm areas and go knocking on doors and look for those people who purchased in 2007-08.  They need you.  The strongest agents will also build relationships with investors.  Remember, a reduced commission is not bad when the purchase price is $10 million or more.

BPE Law is here to be a part of your real estate team.  We’re experienced in all parts of transactions from acquisition to short sales to foreclosures and we work directly with you and your Realtor to help upside-down owners and anyone interested in real estate achieve their objectives. To learn more, contact me at sjbeede@bpelaw.com or even better, call us at 916 966-2260 for our $200 Attorney Consult to learn the strategies you need to move forward.

The information presented in this Article is not to be taken as legal advice. Every persons situation is different. If you are upside-down on your loan(s), especially if you’re facing a lender lawsuit, get competent legal advice in your State immediately so that you can determine your best options.