Loan modification and help

Have you made your three mandatory trial loan modification payments but still have not been approved for a permanent loan mod? Do you believe your home was wrongfully foreclosed? Have you been approved for loan modification but have still been sent a foreclosure notice? Do you struggle day in and day out to communicate with your servicer or mortgage lender?

Perhaps it is time to think about suing your lender or servicer to finally get their attention.

While suing mortgage lenders and servicers over mortgage foreclosures and denied loan modifications is nothing new, it can work, but it will not be easy.

Before you decide to sue…

MaryLou Urrutria of The Grace Group advises that you persist with your lender before pulling the trigger on a lawsuit. "Be persistent with your bank if you really want to keep your house," she says. "Depending on your situation and value of your house in relation to your mortgage, you may want to fight for the modification."

If you have a second mortgage, your best bet may be to consolidate those products into one, says Urrutria. "If you are really upside down and have a second mortgage, negotiate a settlement on the second and if it has been sold to another servicer or collection agency, you may be able to settle for 1-3 percent of the balance of the second. Getting rid of the second mortgage may put your amount owed on your mortgage closer to the value of the house."

Help may already be on the way

One settlement between eight of the country's largest mortgage servicers and federal regulators has resulted in an agreement in which servicers have to hire independent firms to go through loans and look for improper procedures like robo-signing.

The actions also require each servicer to establish a process for borrowers who believe they have been financially harmed by such defects to make submissions to be considered for remediation. Each servicer must also submit a plan to compensate borrowers for errors, misrepresentations, or other deficiencies identified in the independent consultant's findings.

Trial payments do not guarantee a mod

Many lawsuits making their way through the courts these days claim that by denying modifications once the borrowers made three trial modification payments, that lenders are breaching contracts with homeowners. The lenders have countered that trial modifications are not contracts. Treasury Department officials agree, saying homeowners in HAMP trial plans are not promised permanent modifications. This claim has not paid off for anyone yet, despite the slew of law firms that have independently pursued it.

MERS cannot save your home either

In foreclosure litigation, the class action big guns have turned their attention to MERS filings--the Mortgage Electronic Registration System that keeps track of the ownership of many American mortgages. Most of these lawsuits center on the principle that the firm lacks standing to foreclose because it is not the true owner of the mortgages, or that the paperwork proving ownership has not been presented.

These suits have caused courts in some jurisdictions to require that the true owner of the mortgages do the foreclosing, not MERS. In some cases, these suits cause a delay in foreclosure proceedings--but no one yet has gotten their house back because of a MERS issue.

Class action lawsuits have had little success

While an online search turns up plenty of class action filings, they have mostly been dismissed or are not yet resolved. Experts attribute this overall lack of big class action success in the courts thus far to the fact that the plaintiffs bring rather basic claims, such as "I made my trial payments on time and I still have not been approved for a loan modification."

Individual cases have had more success

That said, the home affordable modification program (HAMP) and foreclosure lawsuits that have been successful are exactly those kinds of claims--brought by individual homeowners alleging bad faith by lenders in courts all across the country--from US Bank Natl. Assn. v Alejandra Padilla in New York, to the Small Claims case in Big Bear City, Calif., in which homeowner Dave Graham successfully sued Bank of America all by himself.

How to win a foreclosure or modification battle in court

Storm Bradford, of Mortgage Fraud Examiners, says if you are trying to get a mortgage modification or avoid foreclosure, you can make your own luck. Before going hat in hand to your lender, he advises you get a high-quality forensic evaluation of your mortgage. Irregularities in the loan origination process are common, particularly in the appraisal. Discovering these irregularities puts you in a much better position to negotiate out of your mortgage difficulties.

"Nothing works like the lawsuit or the threat of a lawsuit" when dealing with a mortgage lender, he says. Want proof? "Check the language of a modification agreement--they always put an indemnity clause in there that keeps you from going after them if you discover something illegal or fraudulent--because there are things that are wrong in there, and they know it."

Beware of class-action scams

The Better Business Bureau is warning homeowners to be aware of the latest scam designed to get you to pay upfront mortgage assistance costs of as much as $5,000. This new crop of foreclosure and modification "help" is masking itself as the nation-wide "mass joinder" lawsuit against mortgage companies.

Homeowners receive letters promising a loan modification, foreclosure stoppage, cash settlement, lien stripping, or even free and clear title. Do not fall for this--it is merely a way for firms to get around the laws prohibiting the collection of upfront fees for mortgage modification help.

Talk to a lawyer

"I regularly meet clients who have been repeatedly denied mortgage modification requests, and are faced with foreclosure lawsuits initiated against them by their mortgage companies," says New Jersey attorney David Giller. "Most of these homeowners don't realize that a qualified attorney can help them in many ways."

Have you considered bankruptcy?

One final available weapon is a bankruptcy filing. "Although most homeowners are afraid of filing for bankruptcy, there are many solutions available through the bankruptcy laws which are not available in foreclosure defense," Giller says. "These solutions help get the clients the mortgage modification they desperately sought from their mortgage company in a far more efficient manner."