Banks Find More Wrongful Foreclosures Among Military Members

By JESSICA SILVER-GREENBERG and BEN PROTESS

 

The nation’s biggest banks wrongfully foreclosed on more than 700 military members during the housing crisis and seized homes from roughly two dozen other borrowers who were current on their mortgage payments, findings that eclipse earlier estimates of the improper evictions.

 Bank of America, Citigroup, JPMorgan Chase and Wells Fargo uncovered the foreclosures while analyzing mortgages as part of a multibillion-dollar settlement deal with federal authorities, according to people with direct knowledge of the findings. In January, regulators ordered the banks to identify military members and other borrowers who were evicted in violation of federal law.

 The analysis, which was turned over to regulators in recent days, provides the first detailed glimpse into the extent of wrongful foreclosures amid the collapse of the housing market. While lenders previously acknowledged that they relied on faulty documents to push through foreclosures, the banks claimed borrowers were rarely evicted by mistake, including military personnel protected by federal law.

• Banks Told to Review Their Own Foreclosures (Feb. 12, 2013)

That thesis, which underpinned the government’s response to the financial crisis, helps explain why homeowners languished for years without relief. The revelations of more pervasive harm could provide fresh ammunition for Wall Street critics and prompt regulators to adopt a tougher stance.

 Housing advocates say the findings also underscore the broader flaws with the settlement. In the latest negotiations, according to people briefed on the talks, the banks secured favorable terms for doling out some aid, a deal that could diminish the relief to homeowners.

 Dan Petegorsky, national outreach manager with an advocacy group, the Campaign for a Fair Settlement, described the terms as a “step backwards” for homeowners.

“Our initial reaction was stunned disbelief,” he said.

Complaints that active military personnel and National Guard members were losing their homes while deployed in war zones set off national outrage and prompted Congressional hearings in 2011. The case of Sgt. James B. Hurley, a disabled veteran whose home outside Hartford, Mich., was sold two months before he returned from Iraq, dragged through the courts for years, highlighting the devastating effect of foreclosures.

In 2011, JPMorgan settled claims that it inappropriately foreclosed on 18 military service members and overcharged 6,000. Bank of America and Morgan Stanley also struck a pact with the Justice Department to settle claims they foreclosed on 178 military members between 2006 and 2009. Sergeant Hurley has since reached a settlement with Deutsche Bank in his case.

But the problems are more extensive than the wave of cases indicated.

When regulators forced them to take a close look at their loans, JPMorgan, Wells Fargo and Bank of America, the largest loan servicers, each discovered about 200 military members whose homes were wrongfully foreclosed on in 2009 and 2010, according to the people with direct knowledge of the findings. Citigroup had at least 100 such foreclosures. The foreclosures violate the Servicemembers Civil Relief Act, a federal law requiring banks to obtain court orders before foreclosing on active-duty members.

“It’s absolutely devastating to be 7,000 miles from your home fighting for this country and get a message that your family is being evicted,” said Col. John S. Odom Jr., a retired Air Force lawyer in Shreveport, La., who represents military members in foreclosure cases. “We have been sounding the alarms that the banks are illegally evicting the very men and women who are out there fighting for this country. This is a devastating confirmation of that.”

The banks note that the wrongful evictions make up a fraction of the foreclosures under review. Bank of America analyzed more than 1.2 million loans, and JPMorgan assessed roughly 900,000.

The banks also said they had taken steps to protect service members. “Wells Fargo is honored to serve the needs of the men and women who defend our country, we take our responsibilities under the Servicemembers Civil Relief Act very seriously and we regret any hardship that has been caused,“ said Vickee Adams, a bank spokeswoman.

A spokeswoman for JPMorgan, Kristin Lemkau, said the bank had instituted “very generous programs for the military, including awarding homes, forgiving principal and hiring more than 5,000 veterans.”

“We have remediated these errors and plan to appropriately compensate anyone whom we made a mistake with,” Ms. Lemkau said.

A spokesman for Citigroup, Sean Kevelighan, said that the bank was committed to meeting its obligations to military personnel, “in many cases going beyond the requirements of law.” He added: “We have taken several measures to enhance our processes and are working with our regulators to ensure they have the information they need to appropriately address these issues and provide restitution for those affected.”

Other types of borrowers have been erroneously evicted, too.

The banks uncovered about 20 borrowers who never missed a single mortgage payment, but lost their homes nonetheless. The properties, according to the people with direct knowledge of the findings, have since been sold.

The banks also found a handful of foreclosures related to botched loan modifications. In those cases, the people with direct knowledge said, customers had successfully negotiated a permanently lower mortgage payment, but the banks failed to honor those agreements.

Ms. Adams, the Wells Fargo spokeswoman, said the bank identified only five cases of foreclosure on borrowers “technically not in default.” She noted, though, that the customers were “seriously delinquent” and the problems may have been caused by mortgage payments made “close to the scheduled foreclosure action.” Ms. Adams said in all but one case, “we identified the issues ourselves in a timely manner and reversed them immediately, so that the customers did not lose their homes.”

The revelation of wrongful foreclosures is the latest development in the long and tangled effort to clean up the mortgage mess.

In 2011, the Federal Reserve and Office of the Comptroller of the Currency ordered the banks to hire independent consultants for a sweeping review of foreclosures. The process of scanning loan files for flaws was marred as some consultants farmed out work to contractors who had to navigate a bureaucratic maze.

When problems emerged and relief was delayed, the regulators halted the review in January, opting instead to strike a settlement with the banks. Under the terms of the deal, banks will have to provide $3.6 billion in cash and $5.7 billion worth of other assistance to 4.2 million homeowners.

At the time, regulators still did not have a full window into the flawed foreclosures.

When the review was scuttled, consultants had identified scant instances in which homeowners suffered wrongful foreclosures, according to regulators. After completely reviewing just 104,000 loans, consultants discovered errors in roughly 5 percent of the foreclosures, including many smaller problems like excessive fees or failure to provide sufficient notice before an eviction.

At the behest of regulators in January, the banks combed through their foreclosures to spot the most harmed borrowers. Using a complex model, they focused on military members and homeowners who were current on their payments, along with other illegal foreclosures.

The banks turned over the figures, including those on the military members, to regulators last month. The regulators have no plans to release the information publicly. The people with direct knowledge cautioned that the numbers were not precise and could underestimate the extent of the problems.

Rather than further delay payments, regulators decided to spread the money among all borrowers in the process. As a result, housing advocates say the most aggrieved homeowners will most likely receive less money than they deserve, while others will get unnecessary payouts.

Bank of America, for example, will have to pay borrowers who were evicted for running a methamphetamine lab, according to three people with direct knowledge of the findings. People who lost second homes or fell behind on payments will also collect checks, prompting some bank officials to question the prudence of the payouts.

But regulators said they were wary of taking additional time to assess individual loan files, a process that would have delayed aid to everyone. The largest swath of payments, the regulators said, will go to the most deserving borrowers rather than extreme examples like drug dealers.

To help accelerate the payments, regulators also gave the banks significant leeway in handing out the $5.7 billion portion of the aid, potentially undercutting the help to homeowners.

During negotiations late last year, regulators declined to attach any conditions to the assistance. The regulators, the people briefed on the matter said, were primarily focused on extracting the $3.6 billion in cash relief.

Last month, regulators pressed the banks to tighten the terms. But the banks balked, the people said, objecting to the last-minute reversal.

Under the settlement, banks receive credit for the size of the outstanding loan balance, rather than the amount of actual assistance provided. For example, if a bank cut a borrower’s $100,000 mortgage debt by $10,000, the lender could then reduce its commitment under the settlement by $100,000. In a previous foreclosure settlement, the banks received credit only for the $10,000.

Homeowners battle banks to stop foreclosures...and win

Steven Bridges for msnbc.com

Jewel and Jack Miser stand in front of their home in Sweetwater, Tenn. After trying for more than a year to modify their loan, they won a settlement in court that cut their monthly payment by about 15 percent.  Revenge can be sweet. It can be even sweeter when you use your enemy’s own weapons to extract vengeance.Six years into the worst wave of foreclosures since the Great Depression, shoddy underwriting and legal shortcuts are coming back to haunt mortgage lenders. Homeowners, sick of being pushed around by the banks, are fighting back, sometimes with David and Goliath results.  In 2008, Jewel Miser and her husband Jack began trying to get Bank of America to modify their mortgage when Jack lost his job after a local auto parts factory closed. “We were just a month behind then,” said Jewel. “But I tried every way in the world. And they just put me off and gave me excuses.”

After more than a year of dead ends and red tape, the Sweetwater, Tenn., couple found a lawyer who successfully challenged the shaky paper trail on which the lender relied on to prove it owned the Miser's note. In the resulting settlement, the bank agreed to new loan terms that cut the Miser’s monthly payments by roughly 15 percent, paid their legal fees and stopped the foreclosure.  "I did not want to lose my home," Jewel said. "We had done so much work to it. When you find a home and know it's your home you don't want to lose it. I tried every way in the world."  The Misers and other homeowners who are fighting back in court are using the legal quagmire created by the mortgage lending industry to win loan modifications that lenders have been unwilling or unable to extend voluntarily.

When these homeowners get to court, they find a laundry list of shoddy practices that undercut lenders’ legal claim to foreclose, say consumer attorneys who have pursued these cases. Many cases are tainted by “robo-signers” who failed to properly review files, despite swearing under oath they had done so. Other title claims are undone by improper accounting, including unwarranted fees, and payments that were not credited.  Consumer attorneys also are attacking lenders’ effort to paper over missing links in the chain of documents required to prove that a bank owns a loan and has the right to foreclose. Some of those defective paper trails date to the sloppy underwriting that accompanied the frenzy of mortgage lending in the 2000s, when hundreds of now-defunct lenders churned out a blizzard of notes that were instantly offloaded to investors.  “There are more (homeowner) claims because lenders operated in flagrant disregard of the law,” said Diana Thompson, a veteran consumer attorney with the National Consumer Law Center. “You only have a claim against the lender if the lender didn't do what they were supposed to do.”  

Lenders' disregard for the law is still rampant, according to consumer advocates and regulators. Last month, a survey of 260 consumer attorneys in 45 states by the NCLC found that thousands of homeowners were improperly foreclosed on in just the past year. In more than 80 percent of the cases, the lender scheduled a foreclosure sale while processing a loan modification. In four out of five cases, the attorneys reported, lenders failed to properly credit payments or wrongly claimed homeowners owed bogus fees.  An audit by the San Francisco assessor’s office last month found lenders routinely broke the law in some 400 foreclosure cases over the past three years. Last April, the nation's top two bank regulators, the Federal Reserve and the Office of the Controller of the Currency, reviewed the foreclosure and loan modification practices and found a litany of "deficiencies and weaknesses" that "represent unsafe or unsound practices and violations of applicable law."

Though 49 state attorneys general have settled a sweeping complaint covering a long list of fraudulent and deceptive foreclosure practices, a handful of states are pursuing lawsuits against the mortgage industry. New York Attorney General Eric Schneiderman, named to a federal task force to investigate mortgage fraud, has charged lenders with deceptive and fraudulent foreclosure filings based on a national mortgage electronic registry system, known as MERS. The lawsuit claims that Bank of America, J.P. Morgan Chase and Wells Fargo, “have repeatedly submitted court documents containing false and misleading information that made it appear that the foreclosing party had the authority to bring a case when in fact it may not have.”

Regulators how vowed to crack down on these practices. Lenders say they are correcting them. "In 2010, we reviewed our processes and procedures and put in place a number of improvements and worked with our regulators," said Jumana Bauwens, a Bank of America spokeswoman. "And we continue to improve our processes and procedures."  But lenders still have more work to do, according to consumer attorneys, judges and mortgage industry professionals. Until reforms are widely adopted, it has fallen to homeowners and their attorneys to try to see that the law is enforced.

Loan modification

Borrowers have been taking their disputes with lenders to court for decades. The latest efforts, though, have been sparked by rising frustration with other means of trying to get a loan modified, say consumer attorneys. Early in the mortgage crisis, millions of homeowners, encouraged by the industry, tried working directly with lenders.  A succession of government-sponsored programs aimed at providing mortgage relief to millions of borrowers have fallen far short of promises.  "They (lenders) advertised all the time: 'If you want get your mortgage modified all you have to do is call,'” said Jewel Miser. "I called about 100 times. Each time they would tell me different things or that it was 'in process' - but they weren't doing anything."  In its review, the OCC also cited widespread failings of lenders’ "voluntary" mortgage relief efforts. 

The government’s highly-touted Home Affordable Modification Program (HAMP) has badly underperformed expectations, according to housing advocates and counselors working with homeowners, largely because the decision to modify a loan still rests entirely with the lender.  Bauwens, the Bank of America spokeswoman, said that since the Misers applied for their loan modification, the process has been streamlined and reviews and decisions are now made much more quickly.   "We are in a very much better position to be able to respond to customers modifications in a much more timely manner," she said.  But consumer attorneys said that, in some cases, homeowners are being denied modifications that should have been made under government guidelines. “Because of the government’s failure to enforce HAMP and failure to hold (lenders) accountable, in many cases in order to get a HAMP modification for which they are complete qualified, homeowners have to hire an attorney and sue their lender,” said Thompson of the NCLC.  That often means a trip to bankruptcy court for a Chapter 13 proceeding, which allows people with a regular income to adjust their debt. Once in court, a foreclosure is typically halted automatically, placing the burden on the lender to have the process re-instated. That forces the lender to prove it owns the mortgage and to account fully for any disputed back payments. When the lender is unable to do so, consumer lawyers say, it is more likely to agree to settle by modifying the loan terms, often by simply lowering the interest charged to current market rates. Lenders rarely forgive principal, even on homes that are deep underwater, say consumer attorneys. But while bankruptcy law prevents a judge from writing down the primary mortgage on residential property, other loans don’t enjoy that protection.  That means judges often are able to force lenders to take deep losses on second and third mortgages, said Raffi Tal, who advises homeowners facing foreclosure at Los Angeles-based Peak Corporate Network. “That by itself is a great advantage to borrowers who can afford to make the first mortgage payment - just by canceling the second (mortgage).”  Some bankruptcy courts, including the Southern District of New York, have established special procedures to speed loan modification negotiations between homeowners and lenders.

But it hasn’t been easy.

Consumer attorneys often are outgunned by big banks. Though more than six million households are either delinquent or in foreclosure, there are fewer than 500 consumer attorneys nationwide who specialize in suing to stop foreclosures, according to the NCLC’s Thompson. As demand for legal help has risen, more lawyers have shifted the focus of their practice to fighting foreclosures. That can include attending seminars focused on the legal arguments used to successfully challenge lenders in court.  For the past six year, Max Gardner has been running "boot camps" out of his Shelby, N.C., farmhouse, training consumer attorneys from across the country in the finer points of turning the mortgage mess to their clients’ advantage. More recently, Gardner has been taking these seminars on the road.  On a recent visit to New York, Gardner summoned several dozen lawyers, mortgage industry veterans and a handful of reporters to an intensive weekend crash course in a grab bag of legal strategies. It included a tour deep into the weeds of the Uniform Commercial Code, a subject that has been known to put law students to sleep. Once trained, the more than 200 boot camp alumni in 39 states communicate via listserv, swapping tips and sharing legal opinions that help them build arguments to stop the next foreclosure.  

Though they’ve won case-by-case victories for individual homeowners, consumer attorneys such as Gardner say regulators continue to turn a blind eye to improper and illegal foreclosures. The industry has been able to keep regulators at bay, he said, by effectively managing public opinion about its role in the foreclosure crisis.  “I think they've done pretty good job - on the other side - of getting across the message that these are just a bunch of deadbeats trying to get a free home,” he said. “And that these (wrongful foreclosures) are just the result of technical problems.”  “So let’s just forget about the system of justice, due process and the rules of evidence and everything else. They’re just glitches. They don't mean much,” he said sarcastically.  For borrowers, those glitches can mean the difference between homelessness and holding onto their house. For lenders, the process of fixing those errors can prove costly. Once challenged in court, some lenders decide it's cheaper to settle the case and move on to the next foreclosure waiting in the pipeline. “I have quite a few cases where the banks just walked away from the foreclosure litigation and either dismissed the action formally or just abandoned the litigation,” said April Charney, a staff attorney with Jacksonville Area Legal Aid, who has defended hundreds of Florida homeowners facing foreclosure since the market crashed in 2006.   

Homeowner victories in court go largely unreported, however. In some cases, lenders demand borrowers keep quiet as a condition of stopping the foreclosure and settling the case. Other borrowers feel intimidated, say consumer lawyers, fearing the lender could find a reason to restart the foreclosure process again. “Unless the loan is paid off, there’s always the risk of further fighting,” said Thompson. “And you just don't want to have the (lender) have a reason to be looking over your client’s payment records with a fine tooth comb.”

Government report on Freddie Mac filled with redactions.

Government report on Freddie Mac filled with redactions

A simmering debate on Capitol Hill over how to help more than six million Americans struggling to save their home from foreclosure took a strange twist Wednesday.
The inspector general charged with detecting "fraud, waste and abuse" in government-controlled mortgage giant Freddie Mac issued a performance audit that was compromised by heavy redactions in key sections.
Several of the report's 44 pages included blacked-out figures because of concerns over disclosing "confidential financial, proprietary business, and/or trade secret information," according to the explanation provided by the Federal Housing Finance Agency inspector general's office.
The redactions were made at the request of FHFA "and/or" Freddie Mac, according to the report.
FHFA was established in the wake of the financial collapse to oversee Freddie Mac and Fannie Mae, government-sponsored enterprises that were rescued out at a taxpayer cost of well over $100 billion.
The inspector general's report concluded that Freddie Mac alone could save taxpayers “significant” sums of money if it pressed the companies servicing its mortgages to modify more loans.
How much money could taxpayers save? That we don’t know because the OIG redacted the amounts.
For months, members of Congress have been pressing Fannie and Freddie to move more aggressively to modify loan terms to more affordable levels and write down the balances of underwater homeowners. The two enterprises own more than half of all U.S. residential mortgages.
More than 100 members of Congress have written to Edward DeMarco, acting director of FHFA, urging the agency to help underwater homeowners.
DeMarco has defended the refusal to write down loans on grounds that it would inflict large losses on taxpayers and that other forms of mortgage relief are just as effective. Some members of congress aren't buying it.
Reps. Elijah E. Cummings, D-Md., ranking minority member of the House Committee on Oversight and Government Reform and John F. Tierney, D-Mass., said in a letter to DeMarco last month that, according to a former Fannie Mae employee, a pilot program for principal reductions was cancelled because officials at Fannie were “philosophically opposed” to reducing principal.
Last month, California Attorney General Kamal Harris wrote DeMarco urging a halt to Fannie and Freddie foreclosures until FHFA conducts a “thorough, transparent analysis” of the costs and benefits of principal writedowns. In his response, DeMarco declined the request, saying he would "further delay foreclosures provided those borrowers have been given a meaningful opportunity to avail themselves of a loan modification or some other suitable foreclosure avoidance alternative."  
Here is the inspector general's full explanation for the redaction:
“This report includes redactions requested by the Federal Housing Finance Agency and/or the Federal Home Loan Mortgage Corporation (Freddie Mac). According to them, the redactions are intended to protect from disclosure material that they consider to be confidential financial, proprietary business, and/or trade secret information. They claim further that the redacted information would not ordinarily be publicly disclosed, and, if disclosed, could place (Freddie Mac) at a competitive disadvantage."
A spokeswoman for FHFA declined to comment further.

Private actions not blocked in major government settlement on unfair foreclosures

March 1, 2012

Matthew Malamud

The $25 billion settlement recently reached between 49 state attorneys general and five mortgage servicers that is intended to help current and former homeowners affected by the foreclosure crisis does not release banks and their third-party servicers from private actions. The settlement includes relief such as principal reduction and refinancing. Diane Thompson, of counsel for the National Consumer Law Center in Boston, said while the settlement won’t solve the foreclosure problem, “it is a good start.”

The $25 billion settlement recently reached between 49 state attorneys general and five mortgage servicers that is intended to help current and former homeowners caught up in the foreclosure crisis may be most notable for what it doesn’t do—release banks and their third-party servicers from private actions.
An executive summary of the settlement indicates that the state attorneys general and banking regulators will no longer pursue civil claims against Ally Financial (formerly GMAC), Bank of America, Citibank, JPMorgan Chase & Co., and Wells Fargo over past conduct related to mortgage loan servicing, foreclosure preparation, and mortgage loan origination services.
The banks will pay a total of $5 billion in penalties and provide eligible current and former homeowners with $20 billion in various forms of relief, such as principal reduction and refinancing. The banks will also adopt new servicing standards, which include ending the mass signing of unverified foreclosure documents, a practice known as “robosigning.”

The settlement also provides compensation to servicemembers who were foreclosed on after January 1, 2006, in violation of the Servicemembers Civil Relief Act, and establishes new protections for servicemembers.

However, the settlement does not affect liability of the banks to homeowners or investors, nor does it clear the banks of any criminal wrongdoing. The executive summary states: “Securitization claims, including claims of state and local pension funds, and including investor claims related to the formation, marketing, or offering of securities, are fully preserved. Other claims that are not released include violations of state fair lending laws, criminal law enforcement, claims of state agencies having independent regulatory jurisdiction, claims of county recorders for fees, and actions to quiet title to foreclosed properties. Of course, the release does not affect the rights of any individuals or entities to pursue their own claims for relief.”
The government is touting the settlement’s size, but those who represent homeowners say $25 billion is just a drop in the bucket. About 750,000 Americans who have lost their homes—a fraction of the total—will receive $2,000 in compensation under the settlement, while as many as 1 million homeowners who currently owe more on their mortgages than their homes are worth could be eligible for as much as $20,000 in principal reductions.

“We’re $700 billion under water,” said Diane Thompson, of counsel for the National Consumer Law Center in Boston. “The money for principal reductions is clearly not going to be enough to solve the problem, but it is a good start.”

Thompson was glad to see that those who lost their homes and opt in to the settlement can still proceed with individual or class action litigation against the servicers. “I suspect that it took a fair amount of work on the part of the attorneys general to get the banks to agree to that and I think it’s extremely important that they did,” she said.

The new servicing standards will add strength and credibility to homeowners’ allegations that banks were not following best practices, Thompson said. “But this settlement involves just five mortgage servicers. Homeowners with mortgages owned by Fannie Mae and Freddie Mac—about half of all mortgages—are not covered. It’s an important step forward, but there’s a lot more work that needs to be done,” she said.

Fannie Mae Challenges Bank of America on Rift

By NICK TIMIRAOS

Fannie Mae challenged Bank of America Corp.'s assertion that the two decided by mutual consent in January not to renew their loan-purchase agreement in the middle of a battle over who should pick up the multibillion-dollar tab for bad mortgages.

Rather the mortgage-finance company said in interviews and filings Wednesday that it alone opted against renewing its contract with Bank of America because the bank was resisting demands to buy back defaulted mortgages. "We felt like we had to take that step," Susan McFarland, Fannie's chief financial officer, said in an interview.

The termination means that Bank of America will stop selling Fannie Mae most mortgages after years of being one of its biggest customers. Last week, Bank of America characterized the cancellation as mutual and said that it had pared ties to Fannie after the company changed its policies concerning certain buy-back demands.

Ms. McFarland also pushed back against that assertion. "We have not changed our position on buyback requests. From our vantage point, it's a change in their behavior," she said. Bank of America declined to comment.

Fannie Mae ramped up its dispute with Bank of America as it reported a $2.4 billion net loss for the fourth quarter, compared with from a year-earlier profit of $73 million. The company has reported losses in 17 of the last 18 quarters amid continuing deterioration in housing markets.

Bank of America briefly became Fannie's top client following its acquisition of Countrywide Financial Corp. in 2008. It accounted for 20% of all loans Fannie bought or backed in 2009, but that share had fallen below 10% by the third quarter last year, and below 3% in the fourth quarter, according to Inside Mortgage Finance.

In its federal filing, Fannie reported more than $5.4 billion in outstanding repurchase requests with Bank of America at the end of 2011, accounting for 52% of such requests. Moreover, some 18% of all repurchase requests to Bank of America hadn't been satisfied after 120 days, compared to 2% at J.P. Morgan Chase & Co ., Citigroup Inc. and Wells Fargo & Co .

Bank of America is an "exception," said Ms. McFarland, who joined Fannie as its finance chief last summer from Capital One Financial Corp. "They are the only one that is not honoring their contractual obligations even though the kinds of requests we're making of them are no different from those of our other counterparties."

Bank of America's annual contract with Fannie expired in October, and the two companies had operated under month-to-month agreements through January, according to a Fannie spokesman.

Ms. McFarland said that if BofA didn't honor Fannie's demands, "ultimately the taxpayer pays" because Fannie could be required to increase the amount of money it takes from the Treasury. She said both companies were working to find an "amicable agreement."

Fannie and Freddie don't make loans but instead buy them from banks and other lenders. Contracts governing those sales allow Fannie and Freddie to kick back mortgage loans found to be defective.

Those buybacks were seen as a minor nuisance when the mortgage market was running smoothly, but they have become a big drag on mortgage profitability over the past three years as Fannie and Freddie sift through huge piles of defaulted loans.

Banks have argued that Fannie and Freddie are being overzealous in forcing back loans that default due to reasons unrelated to underwriting, such as when a borrower loses his or her job.

Buybacks have become a major headache for Bank of America, in particular, thanks to its acquisition of Countrywide, whose role as Fannie's top client stretched back many years.

In January 2011, BofA paid $1.3 billion to settle all existing and future buy-back demands with Freddie Mac. It paid $1.3 billion to settle buyback demands with Fannie, but the agreement only covered buyback requests through Sept. 20, 2010.

Bank of America's row stems from policies concerning the treatment of loans that are covered by mortgage insurance, which is typically taken out to cover loans that have less than 20% in down payments. Mortgage insurance companies have rescinded coverage when they find instances of fraud or misrepresentation, and those rescissions may trigger buybacks from Fannie and Freddie.

Last summer, Fannie issued guidelines requiring banks to report insurance rescissions and clarified repurchase policies around those loans. BofA in several filings has said that Fannie changed its policy, but Fannie says that isn't the case.

The quarterly loss reported Wednesday forced Fannie to ask the U.S. Treasury for $4.6 billion, though that includes nearly $2.6 billion that it will pay the government in dividends. The taxpayer cost of Fannie's rescue now stands at more than $96 billion.

Fannie and its sibling, Freddie Mac, were taken over by the government 3½ years ago. The government has promised to inject unlimited sums through the end of this year, and nearly $300 billion after that, to keep them afloat.

California AG asks halt to foreclosures in state on GSE mortgages.

The New York Times (2/28, Dewan, Subscription Publication) reports, "California's attorney general, Kamala D. Harris, has ratcheted up the pressure on Fannie Mae and Freddie Mac to allow debt reduction on their home loans by asking the mortgage finance giants to halt foreclosures in the state. In a letter to Edward J. DeMarco, the regulator who controls Fannie and Freddie, Ms. Harris asked that foreclosures be suspended until his agency, the Federal Housing Finance Agency, completes a promised review of its policy forbidding debt reduction for delinquent homeowners who owe more than their home is worth." Harris has already "suggested that Mr. DeMarco should resign because he was not doing enough to help the housing market recover." DeMarco has cited costs to taxpayers in opposing debt reduction.

        The Los Angeles Times (2/28, Lazo) reports, "Harris' request for a foreclosure pause comes on the heels of a multistate mortgage settlement that will require the nation's largest mortgage servicers to reduce principal for certain borrowers."

Rulings keep homeowners' lawsuits on track

Mary Ellen Podmolik The Home Front

July 15, 2011

Federal judges in Chicago and Boston have issued rulings in the past three weeks that keep alive two long-running lawsuits brought by homeowners, including two suburban Chicago residents, who have suffered as a result of the housing crisis.

The rulings do not mean a resolution of either case is near, but the final outcome of both cases could affect hundreds of thousands of homeowners, so they bear watching. That's because the next step in the process is to try to get the cases certified as class-action suits.

The first ruling, handed down by a federal judge in Boston, allows a case to move forward that addresses a major complaint regarding loan servicers' implementation of the federal Home Affordable Modification Program, namely that some homeowners who faithfully make their trial payments were nevertheless denied permanent loan modifications.

According to the Treasury Department's most recent report of the program, of the almost 1.6 million trial modifications begun since HAMP started in April 2009, only 608,615, or 38 percent, have resulted in permanent mortgage modifications.

The U.S. District Court case consolidated 26 individual cases in 19 states that were brought by homeowners who allege that Bank of America broke "a binding contract" tied to the loan modifications.

The lender tried and failed to have the entire case, which includes Oak Lawn homeowner Deborah Brozak as one of the plaintiffs, dismissed, although Bank of America was successful in having some of the claims dismissed.

According to the suit, all 46 homeowner-plaintiffs had their mortgages with Bank of America and started trial HAMP mortgage modification plans with the servicer. The homeowners said despite fulfilling all the provisions that were necessary to have their lowered payments made permanent, Bank of America either failed to grant them permanent modifications or did not provide them with a written response as to why they were being denied.

Brozak, for example, made six trial payments to Bank of America in 2010 until September, when Bank of America stopped accepting her payments, and the servicer a month later initiated foreclosure proceedings against her, according to her suit, filed in October 2010 in Chicago.

The homeowners' suit proposes two classes of plaintiffs: Those who didn't receive temporary modifications and those who were not given permanent HAMP modifications.

The other suit, brought by homeowners against JPMorgan Chase, argues that the lender unfairly froze or reduced customers' home equity lines of credit as the housing crisis sent home values spiraling downward.

The lawsuit, filed in December 2009 by Evanston resident Shannon Hackett and then consolidated in federal court in Chicago with similar lawsuits in other states, challenges the decision by lenders to freeze home equity lines starting in 2008 as the value of homes securing the loans began dropping. National City Bank, now part of PNC Financial, offered some customers $200 cash if they would voluntarily cancel their credit lines.

Hackett had held a $100,000 home equity line for five years with Chase when she received notice in November 2009 that the line had been frozen and she could make no additional draws against it, according to the suit. Chase said her home, valued at $445,000 at the time of the line was taken out, had dropped in value to $358,000 based on "an industry standard method," and that sum no longer supported the full credit line.

She appealed Chase's decision and paid $385 for an appraisal that pegged the value of her home at $400,000. According to her complaint, the decline wasn't significant enough to enable Chase to employ provisions of lending rules that would allow it to suspend the credit line.

JPMorgan Chase sought to have the consolidated case dismissed, saying among other things that federal law and contractual provisions give it the right to cut home equity lines.

U.S. District Judge Rebecca Pallmeyer dismissed certain portions of the case that alleged fraudulent practices. But she also said the homeowners' allegations that Chase "reduced or suspended their (home equity lines) without adequate justification are sufficient to state claims" for breach of contract in some states, and the unfair conduct claims survive under state laws in, among other places, Illinois.

Efforts to reach Brozak and Hackett were unsuccessful.

Government Mortgage Program (HAMP) Not Preventing Many Foreclosures

By Jim Puzzanghera, Los Angeles Times

Just as the housing market recovery has stalled, so has the Obama administration's main program to ease home foreclosures.

Only 36,695 homeowners received permanently lowered mortgage payments in July through the much-criticized Home Affordable Modification Program, the smallest increase since December, administration officials said Friday.

And the number of people dropping out of the program continued to soar. Overall, nearly half the homeowners who entered the program since it launched in March of last year have dropped out.

Many had hoped the $75-billion program would be a silver bullet to the foreclosure problem, but it's turned out to be a dud, said independent banking analyst Bert Ely. That's not surprising, he said, given the depth of the housing market crash and recession, combined with a slow recovery.

"Even with a substantial reduction in mortgage payment and even some reduction in principal, you still have people who are over their head financially because of their reduced financial circumstances," Ely said. "Isn't it time to just rethink this whole business of modification … and let the market clear through foreclosures and short sales?"

The Los Angeles-Orange County area continued to have the most active trial and permanent modifications under the program, with 44,617 total modifications in July, or 6.6% of the national total. But that was down from 48,846 total modifications in June.

The Inland Empire was third nationwide, with 35,169 total modifications in July, or 5.2% of the total.

So far, 434,716 homeowners nationwide have received permanent modifications since the program began last year. The pace had picked up significantly starting in December after administration officials began pressuring mortgage servicers to convert more three-month trials under the program into permanent modifications.

The number of permanent modifications nearly tripled from January to May. Even in June, the administration reported that more than 50,000 new permanently modified mortgages were added.

July's slowdown in the program's growth comes amid a struggling real estate market.

During the second quarter of the year, there were a record 269,952 home foreclosures, up 38% from the same period a year earlier, according to Irvine research firm RealtyTrac. Last month, Southern California home sales plunged 21.4% compared with a year earlier, according to research firm MDA DataQuick of San Diego.

"While there has been some stabilization in the housing market, it remains clear that we have more work ahead," said Raphael Bostic, an assistant secretary at the Department of Housing and Urban Development.

The Obama administration program provides cash incentives to servicers to modify mortgages. Homeowners who qualify first get a three-month trial modification with lower payments. If they make those payments, the modification can be made permanent. Only at that point does the servicer get the incentive payment.

The administration's stated goal was to modify 3 million to 4 million mortgages through 2012.

The pace of new, temporary mortgage modifications under the program slowed in July, increasing just 1.3% to 1.3 million. Overall, about 47% of trial modifications started since the program began have been canceled. In addition, 12,912 permanent modifications have been canceled, mostly because the homeowner missed at least three straight payments.

Increasing numbers of cancellations were the latest problem for the administration's modification program, which has been plagued by complaints from homeowners of bureaucratic runarounds by servicers, including lost paperwork and unreturned phone calls.

Herbert M. Allison Jr., the Treasury Department's assistant secretary for financial stability, said the administration expected cancellations to continue as mortgage servicers work through earlier modifications that were made without documentation. Those stated-income modifications were needed last year because so many people were in need of quick foreclosure assistance, he said.

Many of the homeowners who got those early modifications under the program were removed because it turned out they "did not meet the qualifications for various reasons, such as income levels or the fact that they were not in the home itself," Allison said.

But many of those who were canceled out of the program have been helped by modifications made outside of the Obama administration program.

For the eight largest mortgage servicers, including Bank of America, CitiMortgage and Wells Fargo Bank, 45% of homeowners whose trial modifications were cancelled received an alternative modification. Wells Fargo reported Friday that 87% of the 520,399 active modifications it had done from Jan. 1 to July 31 were through its own programs.

Administration officials said the housing market had stabilized significantly since Obama took office in January 2009, and stressed that homeowners with permanent modifications had a median payment reduction of 36%, or more than $500 a month.

But Bostic said administration officials are not "in happy land" and that the market was not yet "out of the woods."

Ely said one flaw with the administration's modification program is that it does not adequately take into account all the other debts faced by homeowners.

"There's been this hype that you could wave a magic wand, change a few things [with the mortgage payment] and everything would be hunky-dory," Ely said. "It's not playing out this way."

In jail for being in debt

You committed no crime, but an officer is knocking on your door. More Minnesotans are surprised to find themselves being locked up over debts.

By CHRIS SERRES and GLENN HOWATT , Star Tribune staff writers

June 9, 2010

As a sheriff's deputy dumped the contents of Joy Uhlmeyer's purse into a sealed bag, she begged to know why she had just been arrested while driving home to Richfield after an Easter visit with her elderly mother.

No one had an answer. Uhlmeyer spent a sleepless night in a frigid Anoka County holding cell, her hands tucked under her armpits for warmth. Then, handcuffed in a squad car, she was taken to downtown Minneapolis for booking. Finally, after 16 hours in limbo, jail officials fingerprinted Uhlmeyer and explained her offense -- missing a court hearing over an unpaid debt. "They have no right to do this to me," said the 57-year-old patient care advocate, her voice as soft as a whisper. "Not for a stupid credit card."

It's not a crime to owe money, and debtors' prisons were abolished in the United States in the 19th century. But people are routinely being thrown in jail for failing to pay debts. In Minnesota, which has some of the most creditor-friendly laws in the country, the use of arrest warrants against debtors has jumped 60 percent over the past four years, with 845 cases in 2009, a Star Tribune analysis of state court data has found.

Not every warrant results in an arrest, but in Minnesota many debtors spend up to 48 hours in cells with criminals. Consumer attorneys say such arrests are increasing in many states, including Arkansas, Arizona and Washington, driven by a bad economy, high consumer debt and a growing industry that buys bad debts and employs every means available to collect.

Whether a debtor is locked up depends largely on where the person lives, because enforcement is inconsistent from state to state, and even county to county.

In Illinois and southwest Indiana, some judges jail debtors for missing court-ordered debt payments. In extreme cases, people stay in jail until they raise a minimum payment. In January, a judge sentenced a Kenney, Ill., man "to indefinite incarceration" until he came up with $300 toward a lumber yard debt.

"The law enforcement system has unwittingly become a tool of the debt collectors," said Michael Kinkley, an attorney in Spokane, Wash., who has represented arrested debtors. "The debt collectors are abusing the system and intimidating people, and law enforcement is going along with it."

How often are debtors arrested across the country? No one can say. No national statistics are kept, and the practice is largely unnoticed outside legal circles. "My suspicion is the debt collection industry does not want the world to know these arrests are happening, because the practice would be widely condemned," said Robert Hobbs, deputy director of the National Consumer Law Center in Boston.

Debt collectors defend the practice, saying phone calls, letters and legal actions aren't always enough to get people to pay.

"Admittedly, it's a harsh sanction," said Steven Rosso, a partner in the Como Law Firm of St. Paul, which does collections work. "But sometimes, it's the only sanction we have."

Taxpayers foot the bill for arresting and jailing debtors. In many cases, Minnesota judges set bail at the amount owed.

In Minnesota, judges have issued arrest warrants for people who owe as little as $85 -- less than half the cost of housing an inmate overnight. Debtors targeted for arrest owed a median of $3,512 in 2009, up from $2,201 five years ago.

Those jailed for debts may be the least able to pay.

"It's just one more blow for people who are already struggling," said Beverly Yang, a Land of Lincoln Legal Assistance Foundation staff attorney who has represented three Illinois debtors arrested in the past two months. "They don't like being in court. They don't have cars. And if they had money to pay these collectors, they would."

The collection machine

The laws allowing for the arrest of someone for an unpaid debt are not new.

What is new is the rise of well-funded, aggressive and centralized collection firms, in many cases run by attorneys, that buy up unpaid debt and use the courts to collect.

Three debt buyers -- Unifund CCR Partners, Portfolio Recovery Associates Inc. and Debt Equities LLC -- accounted for 15 percent of all debt-related arrest warrants issued in Minnesota since 2005, court data show. The debt buyers also file tens of thousands of other collection actions in the state, seeking court orders to make people pay.

The debts -- often five or six years old -- are purchased from companies like cellphone providers and credit card issuers, and cost a few cents on the dollar. Using automated dialing equipment and teams of lawyers, the debt-buyer firms try to collect the debt, plus interest and fees. A firm aims to collect at least twice what it paid for the debt to cover costs. Anything beyond that is profit.

Portfolio Recovery Associates of Norfolk, Va., a publicly traded debt buyer with the biggest profits and market capitalization, earned $44 million last year on $281 million in revenue -- a 16 percent net margin. Encore Capital Group, another large debt buyer based in San Diego, had a margin last year of 10 percent. By comparison, Wal-Mart's profit margin was 3.5 percent.

Todd Lansky, chief operating officer at Resurgence Financial LLC, a Northbrook, Ill.-based debt buyer, said firms like his operate within the law, which says people who ignore court orders can be arrested for contempt. By the time a warrant is issued, a debtor may have been contacted up to 12 times, he said.

"This is a last-ditch effort to say, 'Look, just show up in court,'" he said.

Go to court -- or jail

At 9:30 a.m. on a recent weekday morning, about a dozen people stood in line at the Hennepin County Government Center in Minneapolis.

Nearly all of them had received court judgments for not paying a delinquent debt. One by one, they stepped forward to fill out a two-page financial disclosure form that gives creditors the information they need to garnish money from their paychecks or bank accounts.

This process happens several times a week in Hennepin County. Those who fail to appear can be held in contempt and an arrest warrant is issued if a collector seeks one. Arrested debtors aren't officially charged with a crime, but their cases are heard in the same courtroom as drug users.

Greg Williams, who is unemployed and living on state benefits, said he made the trip downtown on the advice of his girlfriend who knew someone who had been arrested for missing such a hearing.

"I was surprised that the police would waste time on my petty debts," said Williams, 45, of Minneapolis, who had a $5,773 judgment from a credit card debt. "Don't they have real criminals to catch?"

Few debtors realize they can land in jail simply for ignoring debt-collection legal matters. Debtors also may not recognize the names of companies seeking to collect old debts. Some people are contacted by three or four firms as delinquent debts are bought and sold multiple times after the original creditor writes off the account.

"They may think it's a mistake. They may think it's a scam. They may not realize how important it is to respond," said Mary Spector, a law professor at Southern Methodist University's Dedman School of Law in Dallas.

A year ago, Legal Aid attorneys proposed a change in state law that would have required law enforcement officials to let debtors fill out financial disclosure forms when they are apprehended rather than book them into jail. No legislator introduced the measure.

Joy Uhlmeyer, who was arrested on her way home from spending Easter with her mother, said she defaulted on a $6,200 Chase credit card after a costly divorce in 2006. The firm seeking payment was Resurgence Financial, the Illinois debt buyer. Uhlmeyer said she didn't recognize the name and ignored the notices.

Uhlmeyer walked free after her nephew posted $2,500 bail. It took another $187 to retrieve her car from the city impound lot. Her 86-year-old mother later asked why she didn't call home after leaving Duluth. Not wanting to tell the truth, Uhlmeyer said her car broke down and her cell phone died.

"The really maddening part of the whole experience was the complete lack of information," she said. "I kept thinking, 'If there was a warrant out for my arrest, then why in the world wasn't I told about it?'"

Jailed for $250

One afternoon last spring, Deborah Poplawski, 38, of Minneapolis was digging in her purse for coins to feed a downtown parking meter when she saw the flashing lights of a Minneapolis police squad car behind her. Poplawski, a restaurant cook, assumed she had parked illegally. Instead, she was headed to jail over a $250 credit card debt.

Less than a month earlier, she learned by chance from an employment counselor that she had an outstanding warrant. Debt Equities, a Golden Valley debt buyer, had sued her, but she says nobody served her with court documents. Thanks to interest and fees, Poplawski was now on the hook for $1,138.

Though she knew of the warrant and unpaid debt, "I wasn't equating the warrant with going to jail, because there wasn't criminal activity associated with it," she said. "I just thought it was a civil thing."

She spent nearly 25 hours at the Hennepin County jail.

A year later, she still gets angry recounting the experience. A male inmate groped her behind in a crowded elevator, she said. Poplawski also was ordered to change into the standard jail uniform -- gray-white underwear and orange pants, shirt and socks -- in a cubicle the size of a telephone booth. She slept in a room with 12 to 16 women and a toilet with no privacy. One woman offered her drugs, she said.

The next day, Poplawski appeared before a Hennepin County district judge. He told her to fill out the form listing her assets and bank account, and released her. Several weeks later, Debt Equities used this information to seize funds from her bank account. The firm didn't return repeated calls seeking a comment.

"We hear every day about how there's no money for public services," Poplawski said. "But it seems like the collectors have found a way to get the police to do their work."

Threat depends on location

A lot depends on where a debtor lives or is arrested, as Jamie Rodriguez, 41, a bartender from Brooklyn Park, discovered two years ago.

Deputies showed up at his house one evening while he was playing with his 5-year-old daughter, Nicole. They live in Hennepin County, where the Sheriff's Office has enough staff to seek out people with warrants for civil violations.

If Rodriquez lived in neighboring Wright County, he could have simply handed the officers a check or cash for the amount owed. If he lived in Dakota County, it's likely no deputy would have shown up because the Sheriff's Office there says it lacks the staff to pursue civil debt cases.

Knowing that his daughter and wife were watching from the window, Rodriguez politely asked the deputies to drive him around the block, out of sight of his family, before they handcuffed him. The deputies agreed.

"No little girl should have to see her daddy arrested," said Rodriguez, who spent a night in jail.

"If you talk to 15 different counties, you'll find 15 different approaches to handling civil warrants," said Sgt. Robert Shingledecker of the Dakota County Sheriff's Office. "Everything is based on manpower."

Local police also can enforce debt-related warrants, but small towns and some suburbs often don't have enough officers.

The Star Tribune's comparison of warrant and booking data suggests that at least 1 in 6 Minnesota debtors at risk for arrest actually lands in jail, typically for eight hours. The exact number of such arrests isn't known because the government doesn't consistently track what happens to debtor warrants.

"There are no standards here," said Gail Hillebrand, a senior attorney with the Consumers Union in San Francisco. "A borrower who lives on one side of the river can be arrested while another one goes free. It breeds disrespect for the law."

Haekyung Nielsen, 27, of Bloomington, said police showed up at her house on a civil warrant two weeks after she gave birth through Caesarean section. A debt buyer had sent her court papers for an old credit-card debt while she was in the hospital; Nielsen said she did not have time to respond.

Her baby boy, Tyler, lay in the crib as she begged the officer not to take her away.

"Thank God, the police had mercy and left me and my baby alone," said Nielsen, who later paid the debt. "But to send someone to arrest me two weeks after a massive surgery that takes most women eight weeks to recover from was just unbelievable."

The second surprise

Many debtors, like Robert Vee, 36, of Brooklyn Park, get a second surprise after being arrested -- their bail is exactly the amount of money owed.

Hennepin County automatically sets bail at the judgment amount or $2,500, whichever is less. This policy was adopted four years ago in response to the high volume of debtor default cases, say court officials.

Some judges say the practice distorts the purpose of bail, which is to make sure people show up in court.

"It's certainly an efficient way to collect debts, but it's also highly distasteful," said Hennepin County District Judge Jack Nordby. "The amount of bail should have nothing to do with the amount of the debt."

Judge Robert Blaeser, chief of the county court's civil division, said linking bail to debt streamlines the process because judges needn't spend time setting bail.

"It's arbitrary," he conceded. "The bigger question is: Should you be allowed to get an order from a court for someone to be arrested because they owe money? You've got to remember there are people who have the money but just won't pay a single penny."

If friends or family post a debtor's bail, they can expect to kiss the money goodbye, because it often ends up with creditors, who routinely ask judges for the bail payment.

Vee, a highway construction worker, was arrested one afternoon in February while driving his teenage daughter from school to their home in Brooklyn Park. As he was being cuffed, Vee said his daughter, who has severe asthma, started hyperventilating from the stress.

"All I kept thinking about was whether she was all right and if she was using her [asthma] inhaler," he said.

From the Hennepin County jail, he made a collect call to his landlord, who promised to bring the bail. It was $1,875.06, the exact amount of a credit card debt.

Later, Vee was reunited with his distraught daughter at home. "We hugged for a long time, and she was bawling her eyes out," he said.

He still has unpaid medical and credit card bills and owes about $40,000 on an old second mortgage. The sight of a squad car in his rearview mirror is all it takes to set off a fresh wave of anxiety.

"The question always crosses my mind: 'Are the cops going to arrest me again?'" he said. "So long as I've got unpaid bills, the threat is there."

cserres@startribune.com • 612-673-4308 ghowatt@startribune.com • 612-673-7192

Bank of America to pay $108 million to settle Countrywide case

The agreement with the Federal Trade Commission will create a fund to provide refunds to homeowners who were charged improper fees.

By Jim Puzzanghera, Los Angeles Times

Reporting from Washington —

Homeowners who had mortgages serviced by defunct subprime lender Countrywide Financial Corp. are eligible for refunds of some improper fees under a $108-million settlement announced Monday by the Federal Trade Commission.

The agency began investigating the loan-servicing business of the company, since acquired by Bank of America, in 2008 amid complaints about fees charged to homeowners who had fallen behind on their mortgages and were in default.

Mortgage servicers, who collect monthly payments on loans, are allowed to charge homeowners for items such as property inspections, lawn mowing and other services designed to protect the lender's financial interest in the property, the FTC said.

But as the housing market collapsed, Countrywide created subsidiaries to do the work, then marked up the price of those services by 100% or more, charging homeowners the fees to increase profits from default-related services in bad economic times, the FTC said.

"Life is hard enough for homeowners who are having trouble paying their mortgage. To have a major loan servicer like Countrywide piling on illegal and excessive fees is indefensible," FTC Chairman Jon Leibowitz said.

Countrywide also failed to tell borrowers when it added new charges to their mortgages and made "false or unsupported claims" to borrowers about the how much they owed on their loans, the agency said. The marked-up fees were collected as part of repayment plans, foreclosures or bankruptcies.

The settlement creates a $108-million fund to provide refunds to homeowners who were overcharged before July 2008, when the company was bought by Bank of America.

Bank of America agreed to settle the charges "to avoid the expense and distraction associated with litigating the case," it said in a statement. The settlement involved no admission of wrongdoing, BofA said. The settlement requires the company to stop the practices.

Once the court approves the settlement, the FTC said it would notify eligible homeowners in a process that could take several months. The agency has a website with more information, http://www.ftc.gov/countrywide.

HAMP Mortgage Modification Litigation

NCLC, with its co-counsel, has brought four class action suits on behalf of Massachusetts residents to challenge the failure of Wells Fargo Bank , Bank of America , J.P. Morgan Chase Bank and IndyMac Mortgage Servicers/OneWest Bank to honor their agreements with borrowers to modify mortgages and prevent foreclosures under the United States Treasury’s Home Affordable Modification Program ("HAMP”). The complaints are filed with the United States District Court for the District of Massachusetts and assert claims for breach of contract, breach of the implied covenant of good faith and fair dealing and promissory estoppel under Massachusetts common law arising from the financial institution's alleged failure to keep its promises to modify eligible loans to prevent foreclosures against homeowners who have lived up to their end of the bargain as required by HAMP.

• Bosque v. Wells Fargo Complaint
• Johnson v. Bank of America Home Loans Servicing Complaint
• Durmic v. J.P. Morgan Chase Complaint
• Reyes v. OneWest Complaint

Our firm is currently reviewing cases involving the HAMP program similar to what the NCLC has filed. We believe that the requirements under HAMP for a loan modification are very favorable toward most borrowers, and the fact that the majority of the home owners we speak with have been denied the HAMP modification tells us that the Mortgage companies and servicing agencies are failing to follow the guidelines under HAMP to help consumers modify their loan. Whether this is intentional or just incompetence, we are not sure yet at this stage. If you have a situation where you have been denied a HAMP modification and are in Alabama, please give us a call as we may be able to help.

Man Wins $1.5M Over Profane Debt Collection Calls
Collections Agents Allegedly Used N-Word, Sexual Language in Voicemails

By ALICE GOMSTYN and DALIA FAHMY

A jury has awarded a Texas man more than $1.5 million in a lawsuit over profane voicemail messages allegedly left by a collections agency.
Allen Jones receives profanity-laced collection agency calls.

Lawyers for Allen Jones, of Lewisville, Texas, say he was subjected to harassing phone calls from Advanced Call Center Technologies. Employees, lawyers said, used the n-word and the f-word and made racially-charged remarks about Jones, who is black.

In one voicemail message, a collector suggested that Jones "go pick some m*****f****** cotton fields," according to recordings provided by Jones' lawyers.

"It got out of control," Jones, 26, said. "It was horrific."

Dean Siotos, a lawyer for Advanced Call Center Technologies, called the language in the voicemails "indefensible" and said that the calls allegedly placed by ACT employees "must have been in some sort of personal attack unrelated to the business."

"It's not in any way, shape or form consistent with the way ACT's collection deparment attempted to collect debts," he said.

Two ACT employees named in Jones' lawsuit no longer work at the company, Siotos said. He said the company, which has headquarters in Pennsylvania, will wait until an official judgment is entered on the jury verdict before deciding whether to appeal. The jury issued its verdict last Friday.

Jones said that the collection calls took place in August, 2007 and stemmed from an $81 credit card debt. Jones said the he had actually paid off the debt at the time he started receiving calls from ACT, but the collections agents wouldn't stop calling even after he told them the debt was resolved.

The calls came as early as 6:30 a.m. and as late as 11 p.m., said lawyer Dean Malone, who along with Mark Frenkel, represented Jones in the case. In addition to profanity, one of the messages included a sexual message about Jones' wife, Malone said.

"It was just significant, over-the-top harassment," he said. "I've handled hundreds of these cases over the years. This is by far the worst I've ever seen."

After a two-week trial, a jury found ACT and its former employees had violated Texas debt collection rules and awarded Jones $50,000 for mental anguish, $143,000 in attorney's fees and $1.5 million in additional damages.

http://abcnews.go.com/Business/man-wins-15m-vulgar-debt-collection-calls/story?id=10795674