Bank Fraud Victims


Predatory Mortgage Servicing is Illegal


Homes are being stolen, families degraded by unscrupulous servicing companies. A few cases have come to trial only to be settled with a miserable amount to the victims.

As a result of these settlements, e.g. Fairbanks, the records are sealed, victims have not received full restitution, and the end result victims are bound to silence.

The worst part is the company is allowed to continue its so-called amended practices.

This is a SLAP IN THE FACE for the American public. Why is there no justice for these victims of servicing fraud?

There is much more to be done. Legislation has been enacted for anti-predatory laws in various states. There is a greater issue that of Predatory Servicing and their fiduciary responsibilities.

Gone are the days when you would go to your local bank and get a mortgage for a new home and know that they would service and maintain your account. Instead they sell the servicing rights to others, companies such as Litton Loan Servicing, Ocwen Federal, EMC, and so many more.

Anyone remember the Household Finance Class action, still in business and many victims still devastated. Now they continue business with a parent company, named HSBC.

It is often difficult for mortgage servicers, particularly if they are not the original lender, to prove the true status of an account. Affidavits are often submitted to prove default that are conclusory and insufficient. Manufacturers & Traders Trust Co. v. Medina, 01 C 768, 2001 WL 1558278 (N.D.Ill., Dec. 5, 2001); Cole Taylor Bank v. Corrigan, 230 Ill.App.3d 122, 595 N.E.2d 177, 181 (2d Dist. 1992). Computer-generated bank records or testimony based thereon are often offered without proper foundation, or are summarized without being introduced. Manufacturers & Traders Trust Co. v. Medina, supra, 01 C 768, 2001 WL 1558278 (N.D.Ill., Dec. 5, 2001); FDIC v. Carabetta, 55 Conn.App. 369, 739 A.2d 301 (1999).

Testimony, whether live or in the form of an affidavit, to the effect that the witness has reviewed a loan file and that the loan file shows that the debtor is in default is hearsay and incompetent; rather, the records must be introduced after a proper foundation is provided. New England Savings Bank v. Bedford Realty Corp., 238 Conn. 745, 680 A.2d 301, 308-09 (1996), later opinion, 246 Conn. 594, 717 A.2d 713 (1998); Cole Taylor Bank v. Corrigan, supra, 230 Ill.App.3d 122, 595 N.E.2d 177, 181 (2d Dist. 1992). It is the business records that constitute the evidence, not the testimony of the witness referring to them. In re A.B., 308 Ill.App. 3d 227, 719 N.E.2d 348 (2d Dist. 1999).

Nor is such an affidavit made sufficient by omitting the fact that it is based on a review of loan records, if it appears that the affiant did not personally receive or observe the reception of all of the borrower’s payments. Hawaii Community Federal Credit Union v. Keka, 94 Haw. 213, 11 P.3d 1, 10 (2000). If the underlying records are voluminous, a person who has extracted the necessary information may testify to that fact, but the underlying records must be made available to the court and opposing party. In re deLarco, 313 Ill.App.3d 107, 728 N.E.2d 1278 (2d Dist. 2000).

Counsel should challenge any such testimony or affidavits. Counsel should not simply assume that the mortgage company must be right in claiming a default; there are reported decisions in which it turned out that the lender’s right hand did not know what the left hand was doing and that there was really no basis for a claimed default. In re Hart, 246 B.R. 709 (Bankr. D.Mass. 2000); In re McCormack, 96-81-SD, 1996 WL 753938 (D.N.H. 1996). See also, FNMA v. Bryant, 62 Ill.App.3d 25, 378 N.E.2d 333 (5th Dist. 1978), where the court found that the lender had foreclosed too quickly and that the default had been cured. Frequently, mortgage servicers attempt to service loans without consulting the loan documents, with the result that they depart from the their terms. In other cases, mortgage companies have been unable to prove that they actually own the loan and gave notice of acceleration as required by the loan documents. In re Kitts, 2002 WL 416912 (Bankr. E.D.Tenn. Feb. 28, 2002).

There is a common assumption that mortgage companies desire performing loans, not to foreclose and acquire real estate. This assumption is no longer well founded. There are an increasing number of "scavengers" that buy bad debts, including mortgages, for a fraction of face value and attempt to enforce them. Such entities profit by foreclosure. "Mortgage sources confide that some unscrupulous lenders are purposely allowing certain borrowers to fall deeper into a financial hole from which they can’t escape. Why? Because it pushes these consumers into foreclosure, whereupon the lender grabs the house and sells it at a profit." Robert I. Heady, The People’s Money, "Foreclosure, You Must Avoid It," South Florida Sun-Sentinel, Feb. 25, 2002, 2002 WL 2949282. In addition, particularly if the loan is guaranteed (by private mortgage insurance or the government), a mortgage company may find it more profitable to foreclose and make a claim on the guarantee rather than work with a "difficult" borrower.

Furthermore, production of original records often reveals unauthorized charges and other improprieties that may give rise to a claim against the mortgage company.

Cranston Gonzales Act, 12 U.S.C. §2605

Obligations of Mortgage Servicers

There is justice: A Legal Remedy


Can You Fire Your Mortgage Servicer?


Press here for more information.


Mortgage Servicing Rules


* Your current servicer usually must notify you at least 15 days before the effective date of the transfer of your loan servicing.


* During a 60-day grace period, you cannot be charged a late fee if you mistakenly send your mortgage payment to the old servicer



* The new servicer cannot report to a credit bureau that payments were late.


* Write to the servicer if you think there are any problems with your account.


* Within 60 business days of receiving your inquiry, the servicer must correct your account or determine it is accurate.


* Do not subtract any disputed amount from your mortgage payment. The servicer may consider this different amount to be a partial payment and declare the mortgage in default.


When you apply for a home mortgage, you may think that the lender, or loan originator, will service the loan until it is paid off or your house is sold. This is not always true. In today's market, mortgage servicing rights often are bought and sold.


If you are notified that your home mortgage servicing has been sold to another company, you may wonder how it will affect your loan terms and monthly payments. Some consumers have complained that they were not given enough notice of loan servicing transfers and were unfairly charged late fees and penalties.


In 1990, the National Affordable Housing Act was passed to address some of these concerns. This brochure explains what a mortgage servicer does and what your rights are under the Housing Act It also tells what you can do if you have a complaint about the transfer of your loan servicing.


What are the responsibilities of a Mortgage Servicer?


The mortgage servicer collects your monthly payments and handles your escrow account. An escrow account is a fund that your lender establishes in order to pay property taxes and hazard insurance as they become due on your home during the year. In this way, the lender uses the escrow account to guard its investment in your home.


When your escrow account is first established, your mortgage servicer must give you a statement telling you the estimated taxes, insurance premiums and other charges that are anticipated over the next 12 months and the expected totals of those payments.


The mortgage servicer also is required to give you an annual statement that details the activity of your escrow account. This statement shows your account balance and reflects payments for property taxes and homeowners insurance.


What does the Housing Act Require Lenders or Servicers To Do?


To protect consumers, the National Affordable Housing Act requires lenders or servicers to do the following.

Provide a disclosure statement.


The disclosure statement says whether the lender intends to sell the mortgage servicing immediately; whether the mortgage servicing can be sold at any time during the life of the loan; and the percentage of loans the lender has sold previously. During 1992, lenders must disclose the percentage of loans for which the servicing was sold in 1990 and 1991. This will change beginning in 1993, when lenders will have to report figures for the previous three years. The percentages will be noted in the ranges 0-25%, 26-50%, 51-75%, and 76-100%. The lender also must provide information about servicing procedures, transfer practices, and complaint resolution.


If you have a face-to-face interview with a lender, you must receive the disclosure statement at the time of the loan application. If you apply for a loan by mail, the lender has three business days to send you the disclosure statement after receiving your application. If you do not return a signed disclosure statement, the lender cannot fund a mortgage for you.


Give proper notification when the loan servicing is going to be sold


If your current servicer plans to sell your loan servicing, you must be notified at least 15 days before the effective date of the transfer unless you received a written transfer notice at settlement. The effective date is when the first mortgage payment is due at the new servicer's address. Under certain circumstances, the current servicer has up to 30 days after the effective date of the transfer to send you notification. These circumstances include:


* The lender terminates the contract because, for example, you have defaulted on the loan.


* The servicer files for bankruptcy.


* The Federal Deposit Insurance Corporation or the Resolution Trust Corporation begins proceedings to take over the servicer's operations.


Include certain information in the notice.


If your loan servicing is going to be sold, you should receive two notices-one from the current servicer and one from the new mortgage servicer. The new servicer must notify you not more than 15 days after the transfer has occurred. The notices must include the following information:


* the name and address of the new servicer.


* the date the current servicer will stop accepting mortgage payments, and the date the new servicer will begin accepting them.


* free or collect call telephone numbers for both the current servicer and the new servicer that you can call for information about the transfer of service.


* Information that tells whether you can continue any option insurance, such as mortgage life or disability insurance, and what action, if any, you must take to maintain coverage. You also must be told whether the insurance terms will change.


* A statement that the transfer will not affect any terms or conditions of the contract you signed with the original mortgage company, other than terms directly related to the servicing of such loan. For example, if your old lender did not require an escrow account, but allowed you to pay property taxes and insurance premiums on your own, the new servicer cannot demand that you establish such an account.


Grant a grace period during the transfer of the loan servicing.


After the transfer, there is a 60-day grace period. During this time you cannot be charged a late fee if you mistakenly send your mortgage payment to the old mortgage servicer instead of the new one. In addition, the fact that your new servicer may have received your payment late cannot be reported to a credit bureau.

Respond promptly to written inquiries.


If you believe you have been improperly charged a penalty or late fee, or there are other problems with the servicing of your loan, contact your servicer in writing. Be sure to include your account number and explain why you believe your account is incorrect.


Within 20 business days of receiving your inquiry, the servicer must send you a written response acknowledging your inquiry. Within 60 business days, the servicer must either correct your account or determine it is accurate. The servicer must send you a written notice of what action it took and why.


Do not subtract any disputed amount from your mortgage payment. Many mortgage servicers will refuse to accept what they consider to be partial payments. They may return the check and charge a late fee, or declare the mortgage is in default and start foreclosure proceedings.


What Can You Do If You Have a Complaint?


If you believe the servicer has not responded appropriately to your written inquiry, contact your local or state consumer protection office. If your lender is certified by the Department of Housing and Urban Development (HUD), you may want to file a complaint with HUD. Write: Office of Single Family Housing, HUD, Room 9282, Washington, D.C. 20410.


You also can send your complaint to the FTC. Write to: Correspondence B ranch, Federal Trade Commission, Washington, D.C. 20580. Although the FTC generally does not intervene in individual cases, the information you provide may indicate a pattern of possible law violations requiting action by the Commission.


You also may want to contact an attorney to advise you of your legal rights. Under the National Affordable Housing Act, consumers can initiate law suits and obtain actual damages, plus additional damages, for a pattern or practice of noncompliance. In successful actions, consumers also may obtain court costs money damages and attorneys fees.


FTC Headquarters
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For more information:


Home Loan Bank Fraud and a Legal Remedy

Home Loan Servicing Fraud

How to Avoid Predatory Lending Practices

Legal Resources

The Truth in Lending Act

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