November 2015 - Denbeaux & Denbeaux Attorneys at Law

Mortgage lender HSBC may have tried to hide $190,000 Sandy insurance check

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Mortgage lender HSBC may have tried to hide $190,000 Sandy insurance check

November 20th, 2015 by

Judge to mortgage lenders: no double-dipping on Sandy foreclosures

Insurance money received by mortgage lender has to be disclosed before a property is sold through foreclosure

A home in Keansburg heavily damaged by superstorm Sandy. (Photo courtesy of Jenny Heid)
Brian Donohue | NJ Advance Media for NJ.com

By MaryAnn Spoto | NJ Advance Media for NJ.com
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TOMS RIVER — A mortgage lender has to disclose before a property is sold through foreclosure whether it has insurance money to repair any damages, otherwise there’s the potential for double-dipping, a Superior Court judge has said.

The ruling by Judge Francis Hodgson Jr. in Ocean County attempts to make the foreclosure process – particularly of properties damaged by Hurricane Sandy – a more open and fair one to bidders and the property owner, attorneys for the property owner said.

“By permitting the lender to hold the insurance proceeds secretly through the sale suppresses the fair market value, discourages bidders and allows the lender to potentially retain excess collateral, thereby prejudicing the borrower,” Hodgson said in his decision.

RELATED: 3-year foreclosure ban proposed for Sandy-damaged homes

Hodgson ruled on a case involving a home in the Ortley Beach section of Toms River that was in foreclosure before Hurricane Sandy. After the 2012 storm, the property owner, Nicole Strumeier, got $190,000 from her insurance company for flood damage, but her lender, HSBC, kept the money, as permitted by the terms of the mortgage.

Under the mortgage terms, the lender could either apply the money to decrease the debt owed on the property or it could use the money to make the necessary repairs.

HSBC said it would use the money to make the repairs, according to court documents. It said the repairs would be done after the sheriff’s sale.

The legal fight, however, came when HSBC tried to set the price for the house through the sheriff’s sale. HSBC had no plans to disclose to potential bidders that it was holding an insurance check for $190,000 to go toward repairs, the decision said.

Hodgson said that gave the mortgage lender an unfair advantage. Without knowing that there was money available to make the repairs and without a price reduction to reflect the amount of repairs, bidders would be discouraged from making an offer on the property and the lender would wind up purchasing it at a nominal amount, Hodgson said.

Hodgson made the ruling verbally in June but he expounded on it in a written opinion on Oct. 30.

R. Jared Stepp, Esq.

R. Jared Stepp, an attorney for the Westwood lawfirm Denbeaux & Denbeaux that represented the homeowner, said the ruling was a reasonable one.

“His decision was good for homeowners, which is a refreshing change,” Stepp said.

He said that without HSBC disclosing the existence of the insurance funds and not reducing the sale price by that amount, potential bidders would have been at a double disadvantage: they would be making an offer that didn’t reflect true fair market value or they would have been dissuaded from bidding altogether out of concern they couldn’t afford the repairs.

Because the house has not yet been the subject of a sheriff’s sale, Stepp noted the case did not get to the point to test whether HSBC would have disclosed the existence of the funds at any point in the foreclosure process.

“The money should go to the purchaser at sheriff’s sale,” Stepp said. “But if (the bank) neglects to transfer the money to them, that’s a situation where the bank would get a windfall, which is what the judge was trying to avoid.”

MaryAnn Spoto may be reached at [email protected] Follow her on Twitter @MaryAnnSpoto. Find NJ.com on Facebook.

Judge to mortgage lenders: no double-dipping on Sandy foreclosures

November 19th, 2015 by

R. Jared Stepp, Esq.

R. Jared Stepp, an attorney for the Westwood lawfirm Denbeaux & Denbeaux that represented the homeowner, said the ruling was a reasonable one.

“His decision was good for homeowners, which is a refreshing change,” Stepp said.

He said that without HSBC disclosing the existence of the insurance funds and not reducing the sale price by that amount, potential bidders would have been at a double disadvantage: they would be making an offer that didn’t reflect true fair market value or they would have been dissuaded from bidding altogether out of concern they couldn’t afford the repairs.

Because the house has not yet been the subject of a sheriff’s sale, Stepp noted the case did not get to the point to test whether HSBC would have disclosed the existence of the funds at any point in the foreclosure process.

“The money should go to the purchaser at sheriff’s sale,” Stepp said. “But if (the bank) neglects to transfer the money to them, that’s a situation where the bank would get a windfall, which is what the judge was trying to avoid.”

MaryAnn Spoto may be reached at [email protected] Follow her on Twitter @MaryAnnSpoto. Find NJ.com on Facebook.

NJ Consumer Protection Attorney’s Review of the Fair Debt Collection Practices Act CFPB Annual Report 2015

November 18th, 2015 by

CFPB Annual Report 2015

On March 26, 2015 the Consumer Finance Protection Bureau (“CFPB”) published its fourth annual report to Congress summarizing Fair Debt Collection Practices Act (“FDCPA”) consumer complaints and enforcement actions.

The report addresses CFPB activities during the 2014 calendar year.  This year’s report demonstrates problems in the industry, progress in enforcement areas, and leaves open much room for improvement.  The ultimate goal should be for the CFPB to work in tandem with consumers pursuing private rights of action.  Only then will the full breadth of the FDCPA be respected and consumer rights protected in the area of debt collection.

As usual, the report begins with an analysis of market statistics which are staggering.  According to the report, “Consumer credit, excluding mortgages is $615 billion higher than pre-2008 levels,” and 77 million or 35% of adults with credit files have at least one debt in default collections.  This has lead the debt collection industry to experience substantial growth and as the report highlights, substantial consolidation of larger third party collection entities.

In 2014 37% of the 88,300 consumer complaints filed with the FDCPA related to allegations that a debt collector was seeking to collect on a debt that was not owed or was miscalculated.  An additional 20% of complaints related to phone calls from debt collectors often made at inconvenient times or worse, to a person’s place of business.  Another common complaint from debtors is the allegation that collectors failed to issue validation of debt letters within 5 days of their initial communication with the debtor as required by 15 U.S.C. 1692g.

The report highlights a potential problem with the CFPB data.  When a consumer files a complaint with the CFPB they are required to authorize that the complaint will be forwarded to the offending company for a response.  Consumers may be fearful of retribution or of undermining a separate civil litigation matter if they file a complaint with the regulatory agency.  This may be a cause of underreported offenses.  To correct this potential problem, the CFPB should allow consumers to submit complaints with proofs and elect not to have their information disclosed to the offending company.  If the CFPB notices a pattern of problems from a particular collection company they could contact the complainant and seek their permission to pursue the action and disclose the debtor’s information.

This past year, the CFPB expanded its research initiative and conducted a study determining that an astonishing 70% of all debt collection court actions were dismissed once the consumer filed a contesting answer.  In these lawsuits, the collector was unable to furnish necessary documentation to prove its case.  The CFPB suggests in its report that such activity is a misleading representation that violates the FDCPA because the collector made representations and threats to collect the debt based on false information and/or an intention not to actually pursue if challenged.

Finally, the report addresses successes of the CFPB’s affirmative enforcement activities.  In 2014 the CFPB successfully obtained $570 million in relief for consumers in five key actions against large scale offenders.  These results are to be hailed as a major success.  That said, it remains a drop in the bucket and highlights that individual civil actions remain a significant policing mechanism for the industry that continues to grow annually.  The CFPB has demonstrated its support for such civil actions by contributing friend of the court Amicus briefs in several circuit court cases.  Most notably, in 2014 the CFPB has advocated finding that efforts to collect a statutorily time barred debt is actionable under the FDCPA.

Entering its fifth year, the CFPB continues to grow in effectiveness.  The agency has done a particularly good job of increasing public awareness of its efforts which will continue to result in a blossoming partnership between the public and governmental agency in policing the often unscrupulous debt collection industry.

Link to the report: http://files.consumerfinance.gov/f/201503_cfpb-fair-debt-collection-practices-act.pdf

$5M Jury Award for One Foreclosure Fraud Makes U.S. Punishment Look Trivial

November 14th, 2015 by

$5M Jury Award for One Foreclosure Fraud Makes U.S. Punishment Look Trivial

Article by David Dayen in theintercept.com 11/13/15 tells of  a couple’s foreclosure fight and award of $5 million in damages.

Article suggests that the Department of Justice let big banks escape from paying $32 trillion and settle for less that a tenth of a penny on the dollar.

By David Dayen

A Texas jury’s recent decision to award over $5 million in damages and fees for the fraudulent foreclosure of a single home suggests that the big banks could have been on the hook for as much as $32 trillion — before the Justice Department and state attorneys general settled for $25 billion, or less than on tenth of a penny on the dollar.

In the trial in Harris County district court, the jury awarded Houston foreclosure victims

Mary Ellen and David Wolf $5.38 million on November 6, on the grounds that Wells Fargo Bank and Carrington Mortgage Services knowingly submitted false documents to kick them out of their home.

The Wolfs had taken out a $400,000 home equity loan from Carrington (then known as New Century), which was immediately sold into a mortgage-backed trust administered by Wells Fargo. The loan was never properly placed into that trust, however, breaking the chain of title and making it impossible for Carrington or Wells Fargo to legally enforce the lien.

They put the Wolfs into foreclosure anyway, relying on a transfer document fabricated (or “robo-signed”) by Tom Croft, a New Century employee. New Century did not own the promissory note or deed of trust and could therefore not legally transfer the lien, and Croft signed off without personal knowledge of the underlying loan.

The jury agreed with the Wolfs that this made the foreclosure invalid, and awarded the family $150,000 in financial injuries, $40,000 for mental anguish, $5 million in punitive damages and $190,000 in attorney’s fees. Wells Fargo can seek a new trial, ask the judge to reduce the damages, or appeal the case, though they haven’t done so yet.

Numerous court depositions released in 2010 revealed that robo-signing of mortgage documents in an attempt to prove ownership of loans and secure foreclosures – in other words, foreclosure fraud — was a widespread industry practice. Two years later, the five leading mortgage servicing companies, including Wells Fargo, paid $5 billion in fines and $20 billion in credits in return for federal and state prosecutors agreeing not to pursue civil charges.

With the jury award in the Wolf family case, we can now assess the true financial exposure on these banks and mortgage companies. There have been roughly 6 million foreclosures since the beginning of the financial crisis in 2008, and virtually all of them were completed with robo-signed, fabricated or fraudulent documents in one form or another. If we apply the $5.38 million jury award to all of those loans, you have a potential cost from the foreclosure fraud scandal of $32.28 trillion.

This obviously represents the extreme edge of the possible financial hit to the industry. A small number of foreclosures may have been completed properly. And while the settlement didn’t preclude individual civil lawsuits most foreclosure victims don’t have the wherewithal or fortitude for a protracted legal fight like the Wolf family did.

It’s law enforcement’s job to step in and protect the rights of vulnerable victims lacking resources. And the contrast between the penalty banks actually paid, and what they could have been put on the hook for, could not be more stark. The $25 billion National Mortgage Settlement – and calling it that is extremely generous, since banks got credit to pay off the penalty through routine activities like bulldozing blighted properties and donating homes to charity – represents roughly 0.08 percent of the total possible exposure.

That barely qualifies as a slap on the wrist for breaking the centuries-old American property rights system, and fraudulently mocking up foreclosure documents to cover it up.

Disclosure: I’ve written a book that will be released next May, Chain of Title, detailing these foreclosure fraud practices and the individuals who exposed them.

A Dad’s Story : Dream for My Child and Family

November 13th, 2015 by

“It was not his intention to go into default on his mortgage. Once things started going south he put on brave face. He kept telling his wife that he would work something out. His daughter asked him,”Dad will we lose the house?”

“No. We’re not going to lose the house,” he said to his daughter. 

He applied for a loan modification. Twice. The loan servicing company lost the paperwork the first time, and the second time he was flat out denied. The third time they gave him a loan modification. He paid the three trial payments. Then was denied for the permanent modification, and the bank moved forward on the modification.

When you’ve done your best for your family, and still can’t get the results you want, give us a call. We may be able to the one thing that everyone else has missed or overlooked to give you leverage you need with the the banks or loan servicer to get you to your desired outcome.

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This video ad from MetLife in Hong Kong underscores the fact our family is impacted by our choices. We have to and want to set the best example for them, but at the same time we must be strong enough to tell them the truth, and show that to live by our convictions, means that sometimes we have to fight for what is right.

Making a Federal Case of It: NJ Couple Fight Foreclosure in Federal Court

November 6th, 2015 by

Making a Federal Case of It: NJ Couple Fight Foreclosure in Federal Court

Click here for a free download from Denbeaux and Denbeaux to learn more on how federal laws help homeowners.

Jerome and Sandra Barnes’ house in Paterson Fed up with the slow pace – and what many people see as unjust actions — of foreclosures, some victims of the crisis are looking to go on the offensive, opt out of the New Jersey court system, and seek justice from federal courts. Jerome and Sandra Barnes of…

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