Comments (27) | Add a comment
Lenders feel pressure in foreclosure process
Tools
LAS VEGAS REVIEW-JOURNAL
The Nevada Supreme Court altered the foreclosure mediation landscape in dramatic fashion earlier this month when, in two separate cases, justices made it clear lenders must follow two simple rules -- bring all relevant documents to the table and make sure someone with loan modification authorization is readily available.
A homeowner's lawyer in one of those cases, Terry Thomas of Reno, plans to test the waters Monday by asking Washoe County District Judge Patrick Flanagan to impose a $1 million fine against a banker who a mediator found acted in bad faith.
"Lenders were saying the rules were not really mandatory," said Thomas, who represents about a dozen homeowners facing foreclosure in the Reno area.
Now, lenders have been forewarned that the rules are not optional, and the two Nevada judges who review failed mediations have been put on notice that they must sanction lenders who fail to strictly comply with those rules.
Thomas will suggest the money go to a charity such as the Salvation Army or Red Cross, but for lenders the point would be made: Negotiate in good faith or pay a high price.
THE BANKS' PERSPECTIVE
Bill Uffelman, president of the Nevada Bankers Association, said lenders believe the rules lean too far in favor of borrowers who might have a bad loan but nonetheless signed a contract to repay.
And those bad loans -- the subprime deals that can turn a tough-to-meet $1,200 mortgage payment into an impossible-to-pay $3,000 obligation -- are no longer the cause of most foreclosures.
"Those are gone," Uffelman said. "The junk mortgages Countrywide and WAMU and others were so good at being bad at are gone."
While those mortgages represent a fair number of the state's 90,000 foreclosures, Uffelman said, the continued fallout could be blamed on the devastated economy and high unemployment.
Uffelman also said the state Supreme Court's recent opinions expose lenders to potentially harsh monetary sanctions for minor noncompliance, like a document missing a page or a missed deadline, while borrowers face few demands to produce evidence.
"Where's the balance?" he said. "As the law is written, all a homeowner has to do is show up and they win."
The high court's recent decisions clearly state mediators and judges must hold bankers in strict compliance, a point Uffelman said he believes will encourage borrowers' lawyers to hunt for technical flaws instead of looking for a fair resolution.
IS THE LAW CONSTITUTIONAL?
Lenders believe some requirements of the Foreclosure Mediation Program and the laws that give it its authority violate the rights of the banking industry, Uffelman said.
Foreclosing "is a civil matter, not a criminal matter, but sometimes you feel like you're in the criminal arena, and you feel like you're guilty until proved innocent," he said. "The borrower breaks the contract and doesn't pay his mortgage, but lenders are blamed."
Yet Uffelman acknowledged many homeowners stopped paying mortgages on the advice of their lenders, particularly those with government-backed mortgages.
"To qualify for help with these federal programs, they have to be behind so many months and yes, they were told to quit paying. If you're not behind, you don't get to go to that party."
Too many homeowners, however, quit paying not because they could no longer make their mortgage payment but because "they want the same deal their neighbor got," he said.
Lenders also opposed the rule that gives District Court judges the authority to modify a loan from the bench as a sanction against lenders who acted in bad faith.
Judges could slash the principal amount of a loan and alter other terms that would essentially force lenders to take a huge loss on the loan, Uffelman said.
But if mortgage companies challenged the constitutionality of the state's foreclosure laws, they risk a halt on foreclosures that could last years while the issue was tied up in appeals courts.
District judges Donald Mosley in Clark County and Flanagan in Washoe County are the only judges in Nevada who review failed mediations, and both refuse to modify loans.
Doing so, according to Mosley, constitutes an illegal taking. Flanagan has made similar comments.
SANCTIONS KEY CONCERN TO BOTH SIDES
Thomas said the high court's rulings send an unmistakable message to lenders, but homeowners who can't afford to file an appeal "are screwed," he said, making it all the more important for district judges to hold lenders accountable when they fail to abide by the program.
Mosley and Flanagan will have to start enforcing the law, "or lenders will continue to scoff at the system," Thomas said.
He said the $1 million sanction he seeks is not aimed at a lender whose noncompliance is minor, but rather one who exhibited contempt for the program, and by extension the state Supreme Court, which created the foreclosure program following the 2009 legislative session.
The lender, whom he did not identify, skipped two mediation sessions.
"My clients just get stonewalled," Thomas said. "They are already in financial peril, and they pay thousands of dollars just to get to a mediation, and the lender doesn't care about the rules. This does real harm to real people."
Thomas also criticized Mosley and Flanagan, saying it isn't their job to rule on the constitutionality of a law, but to follow the law.
"The Supreme Court is the arbiter of what is constitutional," he said, "and I believe (justices) have to make a ruling on that. I believe the Supreme Court does not believe modifying loans from the bench is an illegal taking."
Uffelman said sanctions are unreasonable when the lender's noncompliance is minor, but he has no sympathy for lenders who aren't the true owners of a mortgage and therefore have no right to foreclose.
"If you can't prove you're the lender, what the hell are you doing?" he said.
Uffelman said the public has a false perception that that problem is widespread.
"I think 99 percent of mortgages can be proved up, and I can guarantee there's not 100 percent perfection, no question in my mind. But statistically those numbers are pretty small," he said.
DO BANKS HAVE TO MODIFY A LOAN?
Las Vegas attorney Troy Fox thinks the high court's dual opinions will force lenders to help people.
"This is a wake-up call to the banks," Fox said. "The court is basically saying, 'We want them to try to help people.' When you try to take someone's home away and put them in the street, you better do so in good faith."
Fox said the opinions would serve as a guide for judges, who now know without a doubt that lenders have to produce all documents.
"When you talk about property rights, details matter," he said.
But that doesn't mean everyone deserves or qualifies for a mortgage modification, Uffelman said. "Sometimes the numbers just don't add up, and they have to give up the home. That doesn't mean lenders acted in bad faith."
So, what if Mosley and Flanagan continue to refuse to modify from the bench?
"If we challenge them too hard we risk the failure of the program," Fox said. "We could bring the entire process to a halt."
From the viewpoint of borrowers and their attorneys, banks don't hold all the blame for the foreclosure crisis, but their behavior isn't making them any friends.
"What makes banks look bad is they do this over and over and over again and still plow forward with foreclosing," Fox said.
Uffelman also said there is more than enough blame to go around. He said despite the bad publicity, banks sympathize with borrowers.
"We're dealing with people, real people who are out of work, or with a reduced income living in homes worth half what they were worth when they bought. It's a tough deal, but this too shall pass."
Contact Doug McMurdo at dmcmurdo@reviewjournal.com or 702-224-5512.
Comments
Terms & Conditions
The following comments are provided by readers and are the sole responsiblity of the authors. The Review-Journal does not review comments before publication nor guarantee their accuracy. By publishing a comment here you agree to abide by the comment policy. If you see a comment that violates the policy, please use the Report Abuse button.
Some comments may not display immediately due to an automatic filter. These comments will be reviewed within 24 hours. Please do not submit a comment more than once.
Note: Comments made by reporters and editors of the Las Vegas Review-Journal are presented with a yellow background.
RSS
Twitter
Facebook
Lawyers are going to be the downfall of this nation.
Americans crave closure! A closure from everything that gang of "smart" Wall Street buddies did to bring this country to its knees. The banksters destroyed our lifes, our dreams, our home equity, our credit ratings, our pension funds! They sold our mortgages to the whole world, they took our sanity...Did they really think that everything will run smoothly forever?!
You know what their biggest mistake is - they've created the most dangerous weapon of them all - a people that got nothing to lose!
MA's people are NO LONGER SILENT: http://t.co/YIstmGb
How do you find good refinance rates? I like "123 Refinance". They gave me the option of selecting various rates with different problems. I choose the lowest rate of 3.29% BTW Remember to call and verify the loan rate. Search online to find them.
About a month ago in the Business Section of the Bee there was a small article about a Congressional Committee releasing more funds to the Small Business Administration to encourage banks and enhance loans to small business's. These small business's are the ones most likely to hire locally. It was determined the "banks" themselves were using the money to pay back their bailout money. So it seems taxpayers bailed them out and now give them money through the SBA to pay back those same loans. "Bankers don't care about anything except bankers" is so very true.
http://cashadvancesus.com/obama-blames-lenders-for-failure/
The lenders are in way over their heads. It was easy to rubber stamp a mortgage back 'in the day'. No rules, no income verification, no nothing! Now, the houses just sit vacant while the bankers scratch their heads and wonder what to do next. Thanks to Obama, the banks got bailed out. I guess that's why there is no sense of urgency. My neighbor's house has been vacant for 11 months. Not one person from the bank has been to the house to even look at it. Not one.
"this was done" under the signature of bj clinton. that in response to requests to "bundle"/to mask the true quality of those ninja loans demanded by "community activists". as the empty suit. that "stimulus" under the banner of "everybody deserves a house" created today's astronomical inventory of foreclosed, oughta be foreclosed, and "non-performing" mortgages. the concept of selling/trading in financial assets is the stock and bond markets. why not mortgages or other debt instruments as u.s. bonds as well ? perhaps those that bit off more than they can chew would demand that the worldwide stock and bond exchanges be closed ? the poster who's wage was cut in half... perhaps that's the fair market value of the job. and if the delinquent borrower's skill and energy only pays that 50% sounds like the poster needs 2 such jobs. who hasn't held at least 2 jobs at the same time ? even jobs that were "beneath them" ? no matter, the delinquent borrower's plight must not become a burden on the rest of us. no more than the little pig that built with brick should financially reward the other that chose to build with straw. we reap as we sow.
@ths...actually, the problem is exactly that there is no clear owner to the houses. The banks have "securitized" and "collateralized" the mortgages into millions of tiny pieces and there is not one bank or lender who actually "owns the note". This was done on purpose by banks for the sole reason of making more money in a fashion which was essentially untraceable without any safeguards as there are for normal mortgages.
those who "bet on the come" are fair grist for dice game dealers. leftists have been laughing at their frugal ancestors. for decades. those grandparent "d.p.'s" who saved before they bought. who did without until they could afford it no matter the larger economy. the liberals laughed at those peewee imported cars that began showing up in numbers in the 1960's. who's laughing now ?
Call me what you want: freeloader, unethical, a person with no morals - I don't care anymore. I bought a home I COULD afford UNTIL my pay decreased by 50%. Get over yourselves. I'm glad you didn't take a 50% paycut and you can still sit on your high horses talking about morals, ethics, and signed contracts. But the smart one's know when to walk. I'll pay for it - lousy credit for 10 years - but I'll take that hit. I know the blame goes all around including borrowers, but I FEEL the banks, our government, and Wall Street played a big role in our economy tanking. That's why I am making them take some of the blame/resposibility/loss along WITH me. Call me (well, a huge number of us) what you want - we're over it (and you). If you someday fond yourself in a similar position to mine, you'll be the biggest hypocrite around (and no, I don't want you to be in my position). Just be happy you are where you are and leave us freeloading unethicals alone.
Real Estate investing can be a very dangerous investment when not done correctly which is why if anyone is interested in investing in real estate, such as foreclosures, they should have the proper training. For more information on products and classes for foreclosure investing, visit http://www.alexismcgee.com and http://www.foreclosures.com.