BullyIn a recent article appearing at the online site “nationalmortgagenews.com” there appeared a short blurb titled “Altisource Opens Technology Office in India.” For those who have never heard of Altisource, they are one of the few major members on the Pantheon of Scoundrels, or POS, for short.  On their website, they proudly boast:

Altisource provides services to some of the most respected organizations in their industries, including one of the nation’s largest sub-prime servicers….

Continue reading “Altisource And Its New “Disruptive Enterprise Software””


“SunTrust had no effective document management system in place to process and retain the borrowers’ applications and supporting documentation. When the HAMP applications poured in, SunTrust put them in stacks on the floor without organization. At one point, the stacks of opened and unprocessed HAMP applications were so voluminous that their weight buckled the floor.”  [Page 12, Restitution and Remediation Agreement between Suntrust and the U.S. Department of Justice, July 3, 2104.] Continue reading “SunTrustMortgage – In Trouble With The Feds!”

FAQs PicFor those folks still holding their breath about whether the Mortgage Forgiveness Tax Relief Act (“the Act”) will be extended, there are strong signs that it will occur. 
On, Thursday, April 3, 2014, the Senate Finance Committee, chaired by Sen. Ron Wyden D-Or, took up the “tax extenders” issue, which includes the Act. Tax extenders” is a fancy term for political pork served up for certain favored groups that have the ear of various politicians.  But rather than being accused of doling out permanent tax breaks for special interests, these perks are created on a “temporary” basis [wink, wink], and then quietly “extended” annually ad infinitumContinue reading “Will The Mortgage Forgiveness Act Be Extended?”


Congrats to Terry Scannell, the attorney who convinced a Washington County jury last Thursday, July 18, 2013, to rule in favor of his clients, Bela and Eva Lengyel, in one of the first – if not the first – wrongful foreclosures cases in Oregon.  The fact that it is occurring only now, 5+ years after the credit and housing crash that gave us the Great Recession, speaks to the difficulty of these cases, and the perseverance of both attorney and clients. Continue reading “Chase Chased & Caught – Slapdown!”

eelIn a recent article in Mortgage Servicing News here, we learn that apparently 49 state attorneys general were unable to draft the terms of the $25 billion National Mortgage Settlement in a way the Big Banks couldn’t slip through them like the eels they are.  It seems that notwithstanding the AGs’ collective belief the banks would stop dual-tracking -that insidious practice of putting someone into a loan mod program while foreclosing them at the same time – it still continues. Continue reading “Ever Wonder Why the Big Banks Lose Your Loan Mod Paperwork? Wonder No More!”

Taxing Matters(Disclaimer – The following post is for informational purposes only.  I am not a tax lawyer or CPA.  In all cases of debt cancellation, readers are strongly encouraged to seek competent advice from a tax professional familiar with their specific situation.  The material below is a summary only.  For specifics consult your tax advisor.)

One of the basic rules of tax law is that cancellation of debt is a taxable event. For the lay person, cancellation of debt is the same as forgiveness of debt.   It makes no difference how the cancellation occurred.  It could be voluntary – through a short sale or deed in lieu of foreclosure, or certain loan modifications – or involuntary – through a foreclosure.  In the tax lawyer’s lexicon, “cancellation of debt” is referred to as “COD” – like the fish – just harder to swallow.

However, with the housing  and credit crisis forcing many people into foreclosure and pre-foreclosure events that resulted in significant debt cancellation, the Mortgage Debt Relief Act of 2007 was enacted.  Subject to certain exceptions, this law permits taxpayers to exclude taxable income arising from the discharge of debt on their principal residence.  It also applies to certain loan modification events where the debt is either forgiven, or restructured in a significant manner, such that it triggers a taxable event.  For many taxpayers, this new federal law was a “codsend,” if you will.

Here are some of its main features: Continue reading “QUERIN LAW: Tax on Cancellation of Debt in Distressed Housing (2013)”

“To be forewarned is to be forearmed.”

The term “deficiency” arises in the context of a borrower’s default to their lender.  It refers to the difference between what the lender/servicer recovers, e.g. through short sale, deed-in-lieu-of-foreclosure (“DIL”), or foreclosure, and the total debt owing.  Let’s go through each one, and see how and when the issue is likely to arise:

1.     Short Sales. This is a sale of the distressed property where the net sale proceeds [after deducting costs of sale, such as real estate commissions, escrow, title insurance and recording fees] are insufficient to pay the total indebtedness due, i.e. principal, interest, late fees, and lender advances, such as property taxes and insurance. The difference between the amount recovered and the amount due is the “deficiency.” Continue reading “Borrower Exposure to Deficiency Risk”

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:

• 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:

  1. 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]
  2.  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.