Distressed Housing FAQs

Question [Hardship Letters]. I am trying to do a short sale. The bank is asking me for a “hardship letter.” What is it they are looking for? Do I have to have some life changing event to qualify for help, such as divorce or some financial calamity?

Answer. I rarely, if ever, have seen a borrower’s “hardship” – or lack thereof – become an impediment to their securing a resolution of their distressed housing event through short sale or deed-in-lieu. I view the hardship letter as a sort of “price of admission” in order for the banks to “justify” their providing assistance. Despite what they might say to the contrary, many banks simply won’t help borrowers unless they are in some form of payment default. For those folks who may be making a respectable living, but are so strapped on a day-to-day basis because of a large mortgage payment, I believe this fact alone is a valid “hardship.” If this financial pressure is coupled with a desire or need to downsize, relocate, or other legitimate reasons, it should be included in the hardship letter. In most cases, folks who got their loans in 2005, 2006, or 2007, were in far stronger circumstance than they are today. That should be addressed. For example “When we first got our loan in 2005, we were both fully employed and our combined incomes could support the mortgage payments. That is not the case today.” Continue reading “Distressed Housing FAQs”

“Some borrowers default because they no longer possess the ability to repay their mortgage loans. However, there is a group of borrowers who may continue to possess the ability to repay but who elect to default for strategic reasons. These borrowers are commonly referred to as “strategic defaulters.” For purposes of this report, strategic defaulters have the financial means to make their monthly mortgage payments, but choose not to and walk away from their contractual commitments to pay.” FHFA’s Oversight of the Enterprises’ Efforts to Recover Losses from Foreclosure Sales – FHFA Office of Inspector General [Audit Report October 17, 2012]

The online website, DSNews,[1] recently posted an article announcing that “According to a recent survey that polled 1,026 U.S. adults, 32 percent stated they believe homeowners should be able to strategically default without facing consequences.” The survey was conducted by JZ Analytics, pollster John Zogby’s company. According to the article, Mr. Zogby personally found the results “alarming.” “What jumped out is how many Americans feel it is acceptable for homeowners to walk away from a mortgage and go into foreclosure. If Americans carry on with that mindset, it will continue to cause problems as the economy undergoes a slow recovery.”

What I found “alarming,” and what jumped out at me, was that Mr. Zogby, who supposedly has his finger on the pulse of America, would be surprised at all. So, in an effort to learn more about this senior analyst at JZ Analytics, I dug into the deepest recesses of the Internet, and the best I could determine was that he apparently has been on Mars for the last five years looking for signs of intelligent life that he could give polling surveys to. Given this professional hiatus, perhaps Mr. Zogby can be forgiven for his incredibly lunk-headed reaction to an incredibly complicated issue.

Unfortunately, we’ll never know the exact questions that were used in the polling or the demographics of the persons polled. I’m guessing Mr. Zogby gave the poll out along with party favors at a liquor-infused retreat for lending industry big shots at some Bahamian luxury resort.

But never mind ignorant polls, polling, and pollsters. The term “strategic default” is a pejorative term cooked up by Fannie, Freddie, and the lending and servicing industries to stigmatize the banks’ former clients as irresponsible deadbeats. [“Don’t bother using your own money for a downpayment; we’ll just piggyback another loan on top of your first one, so you can use the bank’s money to finance 100% of your home purchase – it’s virtually free, and you can refinance over and over again, and never have to pay it off!”] Technically, the term “strategic default,” includes an implicit assumption that the borrower can “afford” to make their loan payments, but consciously chooses not to do so.

But let’s look at the real picture:

The subprimers, no-doc-loan and stated-income crowd, washed out within months of their loan closing. They were financially unqualified from the start and both lender and borrower knew it. But as long as real estate values were going through the roof, there was always a “Plan B”; either refinance[2] out of the oppressive loan[3], or sell the property at a profit. This was in 2005; there was no such thing as a “strategic default” back then. There was no choice, no decision, and certainly no strategy. Within a month or two of funding, the Big Banks got their money back as the loans were packaged and sold into pass-through trusts as securities for investors to gobble up, believing the shills in the crowd ratings agencies’ assurances that they were AAA grade investments.
So who are the folks defaulting today? Having spoken with hundreds of Oregonians in various stages of distressed housing situations, I believe I know. [Mr. Zogby, are you listening?] They are the folks who, despite the loss of 40% – 50% of their home’s value; despite the loss of their entire downpayment; and despite the fact that they may owe the bank $100,000+ more than their home is worth, they’re still hanging on. In other words, they have become captive renters, unable to move forward; many used their retirement funds [at the cost of a 10% income tax surcharge]; their children’s 529 savings, and some even use their credit cards.
Not to be forgotten in an analysis of the term “strategic default,” is the meaning of the word “strategic.” Obviously, it suggests a conscious decision. In fact, it suggests more. It implies an intelligent, considered analysis. However, in the vernacular of the lending industry and their apologists, the term includes an inference that the borrower can “afford” to make the payment, but elects not to do so. Contrary to the short sighted analysis of some [Mr. Zogby, are you still listening?],the word “afford” is a highly relative term. For example, perhaps one can “afford” their mortgage payments, but at what long term cost? Here are some considerations that many folks factor into their decision to discontinue making their mortgage payments:
- The 3-Ds, Death, Divorce, and Debt. For example, when one loses a spouse or significant other, who was wholly or partially financially responsible for making ends meet. Divorce speaks for itself, and more loudly in times of financial stress than harmony. Debt plays a factor, when – as many folks did – strapped borrowers lived off their credit cards or lines of credit.
- Children. This is a broad topic. Here are a few aspects of the issue: (a) A young couple wants to have children, but their home, its location and/or size make that impossible. They need to move on, but are being suffocated by a home awash in negative equity. (b) School districts; a family wants to move into a district more suitable for their children. (c) Pregnancy; the family wants to move closer to friends and family to help raise the child. (d) Savings for children and their education; Homeowners are presented with a choice to pay for schooling, or for a mortgage that has thousands of dollars of negative equity that will not – for the next decade – ever become positive equity.
- Employment. During the economic downturn that has plagued this country since 2007, many folks lost jobs. Some still had jobs, but found better employment opportunities elsewhere. However, they did not have sufficient funds to bring to closing to pay off thousands of dollars of negative equity.
- Loan Modifications. Although some lenders may deny it, the truth is that before most lenders will even consider a loan modification, the borrower must be in default. I have had many clients who report that although they were not in default when they first sought the bank’s help to modify their loan, they were told they had to stop making payments. What they weren’t told was that it would damage their credit; that the bank would pile on late fees and other charges. Moreover, many such “modifications” were denied after a year or more of trying – and at the end, applicants were informed they did not qualify. But by then, the loan was so far delinquent that it was impossible for the homeowner to get current. [Riddle me this Batman Mr. Zogby: Does following the banks’ instruction to stop paying the mortgage count as a “strategic default”?]
- Life. In addition to the above, there are circumstances thrown at all of us by fate. Illness and accidents being prime examples. The vagaries of life can have catastrophic consequences on one’s ability to pay their mortgage. But unlike the days when banks actually held on to their own loans, now it’s pretty hard to go to your neighborhood banker for help. Rather, today, struggling borrowers are given 1-800 numbers answered by low-paid employees with bogus titles [e.g. “Office of the President and CEO”]. In some instances, these jobs have been outsourced, and the person at the other end of the line knows nothing beyond what’s in their script.

But wait, there’s more! Mr. Zogby’s above quote seems to equate not paying one’s mortgage with “going into foreclosure.” In fact, foreclosure does not necessarily follow from the act of not paying one’s mortgage. Many, many, folks are fully prepared to try to short sell their homes rather than being foreclosed.

This option presents several advantages for both lender and borrower: (a) A short sale is a much faster disposition option than any other pre-foreclosure alternative; (b) Certainly, it is much faster than waiting around to be foreclosed, which today occurs in fits and starts, as the Big Banks continue to be entangled in fiascos of their own making, such as MERS, robo-signing, borrower litigation, and a variety of other public relation embarrassments ; (c) A short sale is generally regarded by borrowers as having less of a stigma than being foreclosed; (d) Banks prefer the short sale process because that moves the property into the marketplace, where the carrying cost of taxes, insurance, and maintenance are shifted to new buyers. (d) Short sales are preferable to the banks over deeds-in-lieu-of-foreclosure, since, again, a short sale shifts the carrying costs to new buyers.

Not to be outdone in the Nuts and Dolts Department, Mr. Zogby’s effort at insightful comment to DSNews demonstrates a complete lack of understanding about today’s financial crisis. After climbing out on a shaky limb, he proceeds to saw it off thusly: “If Americans carry on with that [strategic default] mindset, it will continue to cause problems as the economy undergoes a slow recovery.”

Wrong, again, Boy Wonder. Today, our “slow recovery” isn’t the result of borrowers not paying their mortgages. In fact, if there were more folks who – for whatever good faith reason – chose to stop paying the mortgage on their underwater homes, they would get queued up faster for some form of pre-foreclosure disposition, such as a short sale or deed-in-lieu.

[BTW, I will accept almost any reason as a “good faith” reason. Remember, the bargain the banks cut with their borrowers and vice versa – which was memorialized in the promissory note and trust deed or mortgage – was that “If you don’t repay the loan, we get to take the home back and resell it to somebody else.” Also, remember that back in circa 2005 – 2007, both borrower and lender believed that skyrocketing property values eliminated any risk of payment default and foreclosure. At the time, no one, not even Alan Greenspan, saw what was to come from the “frothy” real estate market and essentially “free credit.” In other words, the assumption by all was that even if a borrower defaulted and was unable to refinance, the lender would get a property back that was worth more than when the loan was first made. To put a finer point on this Grand Bargain is to perhaps explain what it was not. It was not an agreement that borrowers must pay on a loan even if it no longer made any economic sense; it was not that repayment was “required” even if doing so was to the financial detriment, and possible fiscal ruin, of the borrower and his/ her family and future.

Rather, the deal between borrower and bank has always been clearly provided in the loan documents: “You pay off the loan and we will remove our lien from your property; You default and we get to take your property and resell it to satisfy your debt to us.” Nowhere in the loan documents is “strategic default” – whatever that is, addressed. – PCQ]

For Mr. Zogby and others who believe their expertise in one field qualifies them to make foolish statements in unrelated fields, the reason this country has undergone a “slow recovery” is thanks to our cracker jack government leaders who gave us HFA, HAMP, HARP [1.0 and 2.0], HAFA, First Time Buyer Incentives, and on and on, ad nauseum. The theory was to create the illusion that the Administration was actually doing something to help homeowners by throwing money at the problems, regardless of whether they worked. [This is discussed more fully here. – PCQ] But what the government didn’t do is FORCE – politically or otherwise – the Big Banks, who caused this crisis in the first place – to recast loans so they would work for homeowners. However, bank and servicer compliance is always voluntary. It’s all carrot, no stick.

The fact is that continental shift moves at light speed compared to loan modifications. The government has willingly permitted the Big Banks to game the system for the last five years. A crowning example of the government’s approach to helping consumers is to create the Dodd-Frank Act, a tome of 2,300 pages of gibberish that did nothing but leave the heaving lifting to the administrative process, where lender lobbyists could wine and dine their favorite political hack in order to emasculate the rulemaking. Today, over two years since enactment, the scorecard stands as follows: 63% of its rulemaking deadlines have already passed and only 29% of the required rulemakings have been finalized. Nice job. Virtually every government solution, including the faux $25 Billion National Mortgage Settlement, has been voluntary for the banks. The White House talks tough, but treats the lending industry more like Johnny Appleseed than John Dillinger. In short, Big Banks are permitted to cherry pick who, what, when, why, where, and which, borrowers they will help. The ones most in need of assistance never receive it. Default – or whatever pejorative one chooses to use, is the last resort.

When you couple the total failure of the government borrower assistance programs with the unemployment numbers, you get the real reason for our slow recovery. Homeowners are held hostage in homes they (a) can either no longer afford, or (b) need to move from for any number of reasons. Distress ensues. Job creation and relocation suffer. Confidence drops. Poll that Mr. Zogby!

Although I am not a fan of moral equivalency, no thoughtful discussion of “Strategic Default” is complete without comparing the plight of Beleaguered Borrowers with the fortunes of Big Bank execs for the last five years. Part Two will explore that topic.

[1] “DS” as in “Default Servicing.”

[2] Refinancing generally requires a 60% loan to value (“LTV”), but with market value appreciation, it was presumed that would occur.

[3] Many had “teaser” rates that were unrealistically low, and then adjusted to much higher rates. Some loans permitted borrowers to pay less than the stated interest rate, which meant that the deferred interest was added back to the principal and would also bear interest. These were the infamous “negatively amortizing” loans or “Neg-Ams.”

Over the course of the past two and one-half years, I’ve met with hundreds of folks experiencing the trauma of dealing with huge negative equity in their homes. In lay terms, they’re “underwater” – meaning that the value of their home has dropped below what they paid, and frequently is now less than what they owe. This has become a common phenomenon over the past five years. But frequently, being underwater is not the only problem. If it were, many homeowners would likely remain where they are. However, an additional circumstance, such as one of the feared 3-Ds, Death, Divorce, and Debt, is frequently an accompanying factor that has brought homeowners to my office.

This post will focus on the Scylla and Charybdis of home ownership today: Distressed housing coupled with a distressed marriage. Here are some tips, traps, caveats, and general observations that I’ve gleaned from distressed housing clients contemplating divorce:

I. GENERAL THOUGHTS
• Don’t keep looking in the rear-view mirror – you’ll drive off the road! How and why you got here is a concern that runs a distant second to where you’re now going. In most cases, the clients I’ve met who were anticipating divorce avoided the blame-game, and wanted to make the best of a difficult situation. This is a good thing; a collaborative, realistic and rational approach to a solution is much better than an adversarial one.
• Good information can be liberating. Fear thrives best when allowed to feed on misinformation. Most people are inundated with opinions, rumors, and horror stories about the foreclosure crisis. They need to separate fact from fiction before they can make informed decisions about what to do in their own personal situation. Armed with good information, I’ve seen clients make far better choices for their mutual best interests – even when they are planning to divorce. Continue reading “Distressed Housing, Distressed Marriage”

“Language and speech are the means by which people communicate with one another. However, with the Big Banks, their silence conveys the loudest message.” [Anonymous – sort of.]

In Part One, I analyzed the recent Oregonian article, titled: “Lenders not engaging in Oregon foreclosure mediation program.” The gist of my post addressed the process under SB 1552 by which borrowers were intended to be helped under the law. However, it seems that the Big Banks are refusing to participate in a major component of SB 1552 – the part dealing with “at risk” borrowers who have applied for mediation in an effort to find a “foreclosure avoidance mechanism” such as a modification, forbearance, short sale, deed-in-lieu or some other method to avoid foreclosure. Continue reading “SB 1552 – Why Don’t The Big Banks Wanna Play? [Part Two]”

“It’s one thing to be stubborn when relying on well-reasoned principle; it’s quite another to be stubborn relying on no principle.” Anonymous [Sort of.]

An interesting, though not surprising, article recently appeared in The Oregonian, titled: “Lenders not engaging in Oregon foreclosure mediation program.” Before discussing what’s behind the banks’ decision, it is necessary to understand that SB 1552, Oregon’s mandatory mediation law, is essentially focused on the following two groups:

Folks whose trust deed is being foreclosed non-judicially. That is, a Notice of Default has been recorded in the public records. This event triggers the mandatory mediation law, and requires lenders[1] to offer the borrower an opportunity to meet and mediate, to see if an agreement can be reached on a specific “foreclosure avoidance measure” [e.g. modification, deed-in-lieu, short sale, or any other such mechanism that avoids the foreclosure]. If the borrower timely responds, complies with other criteria, and pays a $200 filing fee, the foreclosing lender must participate. If the lender does not participate, or fails to do so in good faith,[2] it cannot receive the coveted “Certificate of Compliance” from the mediator. This Certificate must be recorded on the public record before the sale can occur. No Certificate, no foreclosure.[3]
Folks who are not in a formal non-judicial foreclosure, but due to their economic circumstances, are “at risk” of default under their note and trust deed. The law does not define at “at risk” borrower. Thus, it could be someone who is still current, but is on the cusp of defaulting due to the high cost of their mortgage payments; or it could be someone who hasn’t paid for a year, but the bank has not yet commenced any foreclosure. Thus, even if a bank routinely forecloses judicially, such as Wells Fargo, before the foreclosure is filed in court, an “at risk” borrower could request that Wells enter into mediation to see if the parties could agree on a foreclosure avoidance solution. But the sticking point in “at risk” mediations is that SB 1552 contains no sanction for lender non-compliance.[4]

The recent Oregonian article focused largely on folks in category No. 2, since clearly, banks that commence non-judicial foreclosures in Oregon must comply. So, with that preface, herewith are some snippets from the Oregonian article:

“The state’s contractor charged with running the mediation program told an advisory committee in Salem on Wednesday that 132 eligible homeowners applied for the program on the grounds that they are at risk of foreclosure. The law allows at-risk borrowers to request a meeting with their lender even before they’ve missed a payment. *** But none of the mortgage servicers responded to the requests within 15 days as required under the law that created the program.”
“When asked by The Oregonian for the reason, the answer was simple: ‘They just don’t want to play,” said Jonathan Conant, who is managing the state mediation program on behalf of the Florida-based Collins Center for Public Policy. He added that the five largest lenders operating in the state have indicated they won’t participate in the mediation process under any circumstances.’”
“Meanwhile, lenders have also stopped filing out-of-court foreclosures. More are proceeding with court-supervised foreclosures, avoiding the mediation program altogether through the traditionally slower and costlier judicial foreclosure process.”
According to the article, here’s what the Lender’s Lobby and Lackeys say:
- “There is just so much coming at these folks in terms of new requirements,” Markee[5] said. ‘Many of them are talking to their legal counsel and other learned people trying to make rational decisions about how to proceed with this issue.’” [Hmm. “Legal counsel and other learned people….” Now there’s a phrase that begs to be parsed. Hopefully, at least one such “learned” person will include someone schooled at the College of Common Sense. Just a small dose would hopefully convince the Big Banks that totally ignoring Oregonians’ pleas for help will backfire. More about this later. – PCQ]
- Markee and Kenneth Sherman Jr., general counsel for the Oregon Bankers Association, both told the advisory committee they couldn’t explain why mortgage servicers hadn’t responded to the requests for mediation. [Sorry guys – But as a fellow lawyer, I don’t believe that for a minute. First, you wouldn’t even talk to The Oregonian without your clients’ OK. Secondly, you wouldn’t be quoted saying anything without first having it vetted by your clients in advance. Third, to say you “don’t know,” really means that your Big Bank clients told you to say you “don’t know.” Fourth, you do know. The real reasons are pretty clear. But if struggling Oregon homeowners were told the real truth, they’d quickly decide that your industry should never be permitted to conduct business in this state again. More about this later. – PCQ]

Before moving on, let’s look at the actual text of the law. What follows is taken from Section 2(7)(a) of SB 1552, the “at risk” provisions. The references to “grantor” refer to the borrower; the “beneficiary” is the lender or servicer that is foreclosing; the “trustee” is the foreclosure trustee who actually conducts the non-judicial foreclosure process; and the “mediation service provider” is The Collins Center for Public Policy, which has been designated by the Oregon Attorney General to coordinate all mediations arising under SB 1552.

“A grantor that is at risk of default before the beneficiary or the trustee has filed a notice of default for recording under ORS 86.735 may notify the beneficiary or trustee in the trust deed or the beneficiary’s or trustee’s agent that the grantor wants to enter into mediation. Within 15 days after receiving the request, the beneficiary or trustee or the beneficiary’s or trustee’s agent shall respond to the grantor’s request and shall notify the Attorney General and the mediation service provider identified in subsection (2)(b) of this section. The response to the grantor must include contact information for the Attorney General and the mediation service provider.” [Emphasis mine.]
“A grantor that requests mediation *** may also notify the Attorney General and the mediation service provider of the request. The Attorney General shall post on the Department of Justice website contact information for the mediation service provider and an address or method by which the grantor may notify the Attorney General.”
“Within 10 days after receiving notice of the request *** the mediation service provider shall send a notice to the grantor and the beneficiary that, except with respect to the date by which the mediation service provider must send the notice, is otherwise in accordance with the provisions of subsection (3) of this section.”
“A beneficiary or beneficiary’s agent that receives a request under paragraph (a) of this subsection is subject to the same duties as are described in [the remaining applicable provisions of SB 1553].”

So when the 2012 Oregon Legislature said that when an “at risk” borrower requests mediation, “…the beneficiary or trustee or the beneficiary’s or trustee’s agent shall respond to the grantor’s request and shall notify the Attorney General and the mediation service provider….” [Emphasis mine.] – what did it mean?

As lawyers, we were taught that when certain legislative action is called for, it can be divided into those that are required versus those that are only permissive [or in legal parlance, those that are “precatory”]. For example, words like “shall” and “must” are mandatory. Compliance is compulsory. Words such as “may,” “should,” “can,” etc. are permissive. An example of a permissive statement in a will, might be: “I hope that my son and daughter will keep the house in the family.” It is purely a wish or desire; it is not a requirement. The will does not say that the son and daughter cannot sell the family home; to the contrary – they can do so without violating the terms of their inheritance.

However, as any sixth grader knows when his parents tell him that he “must do his homework before being allowed to play outside with his friends,” there is little room left for negotiation. So it is with the use of mandatory words such as “shall” in the “at risk” provisions of SB 1552. Had the Oregon Legislature intended for banks to have a choice in deciding whether or not to respond to an “at risk” borrower’s request to mediate, it could have easily said so by using permissive rather than mandatory words. By changing a single word, the mandate for how Big Banks are to deal with mediation requests from “at risk” Oregon homeowners would be entirely different. For instance, it could have said:

“Within 15 days after receiving the request, the beneficiary or trustee or the beneficiary’s or trustee’s agent may respond to the grantor’s request by notifying the Attorney General and the mediation service provider identified in subsection (2)(b) of this section.”

Clearly, such a simple change was within the power of the drafters of SB 1552. To put a finer point on all this, let’s look at other portions of the “at risk” provisions quoted above:

“A grantor that is at risk of default before the beneficiary or the trustee has filed a notice of default for recording under ORS 86.735 may notify the beneficiary or trustee in the trust deed or the beneficiary’s or trustee’s agent that the grantor wants to enter into mediation. [Emphasis mine.]
“A grantor that requests mediation *** may also notify the Attorney General and the mediation service provider of the request.” [Emphasis mine.]

Clearly, the use of the word “may” in these two instances, is because not all “at risk” borrowers” may want to mediate. And if they choose to mediate, they may not elect to notify the Attorney General. Those that do, can, and those that don’t, need not. These are voluntary choices; not mandatory imperatives.

Voilà! Now we know that the drafters of this legislation understood the difference between “shall” and “may”! They were used differently for a reason. Now was this all that difficult?

Remember, that both the lender and consumer lobbies were at the table when SB 1552 was negotiated. The Big Banks and their high paid lawyers could have pushed back on the choice of “shall” or “may” – but they didn’t. And so, when I hear lawyers, lobbyists and lender lackeys say that the Big Banks need to consult with “legal counsel and other learned people *** to make rational decisions about how to proceed…” I want to gag. Why the handwringing? “Shall” means “shall.” “May” means “may.” It’s not like we’re trying to interpret the First Amendment to the Constitution.

So when the mandatory mediation law says that banks “shall” respond, there is no room to rationally argue that they have a choice of not responding. Ignoring “at risk” Oregon homeowners who want to mediate a foreclosure avoidance solution clearly violates the spirit and intent of the law. And like so many other legal positions taken by Big Banks over the last five years, this too will come back to haunt them. [Continued in Part Two]

[1] This law does not apply to individuals, financial institutions, mortgage bankers, and consumer finance lenders that commenced 250 or fewer foreclosures in the preceding calendar year.

[2] In Big Bank lexicon, the term “good faith” is noticeably absent, so we can expect an argument from the lenders’ lobby and lackeys, as to exactly what that term requires of them.

[3] Note that 1552 only applies to non-judicial foreclosures. Thus, a lender could decide to avoid the mandatory mediation process altogether, and simply file the foreclosure in court, and proceed judicially.

[4] Lest someone say that this was a bonehead mistake, I think not. Legislative negotiations on such a volatile issue can result in an impasse, where the consumer lobby must say to itself, better to have the provision included, even without a built-in enforcement mechanism, than to have nothing at all. I agree. The fact that mandatory mediation is in the law at all, is a minor miracle. I’m comfortable with leaving it up to a judge to determine if it’s OK for the Big Banks to thumb their noses at Oregon’s distressed homeowners. So far, the courts have been lining up pretty consistently behind the Little Guy – Niday being the most recent example.

[5] Jim Markee, a lobbyist representing the Oregon Mortgage Lenders Association.

Compliments of several dedicated consumer attorneys, including Kelly Harpster, consumer attorney par excellence, and Sybil Hebb,lead attorney for the Oregon Law Center, a non-profit law firm for low income Oregonians, I am posting a Frequently Asked Questions publication discussing the recent Niday court ruling [which I have discussed here and here] as well as general issues regarding the infamous MERS company and important Oregon foreclosure information. Although it is not “legal advice,” this post contains information “You can take to the bank.” And after you take it to the bank, you can tell them what to do with it…. PCQ

1) What is MERS?

MERS stands for Mortgage Electronic Registry Systems, Inc. It is a private company that operates an electronic registry designed to track servicing rights and ownership of mortgage loans in the United States. MERS is owned by holding company MERSCORP, Inc. When MERS is named as a beneficiary in a trust deed, a related entity named MERSCORP records transfers

of the loan in a private database. Continue reading “FAQ on Niday Ruling & MERS/Non-Judicial Foreclosures in Oregon”

Economist [e·con·o·mist; noun] – An expert in the production, distribution and consumption of goods and services, but is a complete idiot when it comes to making good business decisions for homeowners awash in negative equity. Q-Law.com Unabridged Dictionary

The following July 26, 2012 article appearing on a default servicing website, dsnews.com[1] caught my attention the other day: “Economists in Survey Oppose Strategic Default, Principal Forgiveness.” Herewith, are some of the gems: Continue reading “More Nuts and Dolts”

[Door Slamming]

Her: “Honey, is that you? It’s awfully early for you to come home. Are you ill?”

Him: “Yeh, I know it’s early. I’m OK. I just didn’t feel like working anymore.”

Her: “What’s wrong? Don’t you enjoy your work kicking people out of their homes anymore? I thought you loved having Big Bank clients who specialized in that sort of thing.”

Him: “That was then, this is now. After a couple of years of writs of executions and evictions, the thrill is gone. I’m tired of watching U-Haul trailers getting packed up and children on the sidewalks crying. I never thought I’d say it, but maybe I’m starting to grow a conscience – hard as that sounds. Whatever it is, I’m beginning to wonder if I’m playing for the wrong team. I’m noticing how people kinda shy away from me at the cocktail parties now. Like I’m some kind of monster. I remember early on when we had our soirees, I was the life of the party, regaling everyone with stories of my latest foreclosure, and how I kept postponing the auction sales letting the beleaguered borrower think they were actually going to get a loan mod, and then at the last minute, when they were on the 99-yard line, I’d drop the hammer and foreclose ‘em. I had people rolling on the floor laughing. Now no one wants to hear about this anymore. I feel like the lonely Maytag Repairman.” Continue reading “A Curious Day At The Foreclosure Mill….”

For anyone who has sought a loan modification or some other pre-foreclosure solution to their distressed housing situation, they must surely recall the treatment – or lack of treatment – they received from their lender or servicer. In some instances, one knows in a heartbeat that the processing job has been outsourced to some third world country, where the communications break down before they start. In other instances, the processor has the monotone of one that has just taken a Valium before getting on the line. They have the same people skills as zombies reading teleprompters. Perhaps the most ridiculous ruse is the official title these folks are given, considering their low-level status on the corporate ladder: “Office of the CEO and President.” Given the number of employees carrying that title, this “Office” must be the size of a football stadium.

The question that has plagued me for the last several years has been, “Why don’t the Big Banks improve their customer relations?” For every distressed borrower they offend, they’ve not only lost a future customer, but possibly a half dozen more family and friends the borrower tells.

Well help may be on the way! Of course, not from the Big Banks and servicers. No, they’re far too busy and important to develop an outreach program that actually injects a sense of humanity into the process of helping others. In a sense, when it comes to aiding distressed homeowners, the job of Big Bank public relations has also been outsourced – this time to Fannie Mae.

As reported in DS News.com, Fannie Mae has announced a customer care training program:

“What we’ve learned through the housing crisis is that if everybody takes the responsibility to work together and act early, then we can prevent foreclosures and keep families in their homes in many cases,” said Leslie Peeler, SVP of Fannie Mae’s National Servicing Organization. “We want our servicers to be trusted counselors to their customers, from attentively collecting documents to advising them of their options and guiding them through the process.” [Underscore mine. – PCQ]

Well, Riddle Me This Batman: Where were you guys in 2008, 2009, 2010, 2011? Why is this just now occurring to you? Have you had an epiphany? Are you only now realizing that it helps to treat borrowers like human beings?

Here are some P.R. tips for Fannie’s servicer trainees:

Don’t lose the borrower’s paperwork;
Don’t insult them with requests to update information that cannot and does not change [such as a lifetime disability];
Don’t work with a borrower while at the same time initiating a foreclosure against them – that isn’t a trust-builder;
Don’t play the “trial modification” game, where you take their money, never credit it to their account, and then after 8-10 months, unceremoniously deny them for permanent mod for unspecific reasons;
Don’t state in your recorded voice-messages that you return all calls in 24 hours, if you have no intention of doing so;
Don’t give your supervisor’s name and number on your telephone greeting, and conveniently fail to include their extension;
Don’t….well, you get the point.

According to the DS News article:

“One key component of the program is to create a single point of contact in the call center for each customer to ensure that a relationship can be built between the homeowner and their servicer representative. A single point of contact can also help ensure that foreclosure prevention options are properly presented.” [Underscore mine. – PCQ]

Hmmm. But what good is a single point of contact, if they can’t seem to keep their job? I have one client seeking a modification and we’ve had five different “single points of contact” in less than a year. Where is the “relationship building” there?

Memo to Fannie Mae: Have as required reading for your trainees, Dale Carnegie’s “How to Win Friends And Influence People” and – as difficult as it may sound – Have them memorize the entire Golden Rule. Yes, all eleven words!

This is the second post of two, analyzing the recent Oregon Court of Appeals ruling on MERS. The first post can be found here. The Court’s written decision can be found here.

Issue Two

Can MERS act as a “Nominal Beneficiary” in the trust deed for purposes of avoiding the requirement under ORS 86.735(1) that to conduct a non-judicial foreclosure in Oregon, any successive assignments of the trust deed must be recorded?

Besides the epic battle between Good and Evil, Right and Wrong, Light and Darkness, reduced to its simplest form, the disagreement between Big Banks and Bantam Borrowers is this:

Borrowers maintain that ORS 86.735(1) means what it says, i.e. that before a non-judicial foreclosure may be lawfully commenced, any time the trust deed has been assigned, the event must be recorded in the county records.

Banks argue that since MERS is the “beneficiary” under the trust deed, the only assignment that is necessary to record is the one from MERS to the foreclosing bank. They say that all of the intermediary assignment that may or may not[1] have been electronically “registered” should not have to be recorded, since MERS is the nominal beneficiary for everyone, now and in the future. [This results in what I have referred to as the “Hail Mary Pass” in prior posts on the subject, here and here: When a borrower goes into default, MERS, as the “nominal beneficiary” for the original lender [and all successive transferees of the lender’s promissory note], makes a “single assignment” pass over the heads of the intermediate transferees, and the trust deed lands neatly in the waiting arms of another Big Bank to commence the foreclosure in its own name.] Continue reading “MERS Smackdown! Niday Analyzed – Part Two”