One of the most common reasons that people file for bankruptcy in West Virginia and elsewhere is to stop a mortgage lender from foreclosing on their home. After the height of the financial collapse, many of the same mortgage lenders who convinced applicants to buy expensive homes would use aggressive and misleading efforts to foreclose upon them. The National Mortgage Settlement agreement signed by 49 states (including West Virginia) was supposed to solve this problem. But one recent article states that the mortgage lenders have just found a new way to foreclose that lets them escape culpability.
The National Mortgage Settlement involved the five major mortgage lenders: Bank of America, Citibank, Ally/GMAC Mortgage, JP Morgan Chase, and Wells Fargo. Among other things, the mortgage lenders agreed to: (1) provide immediate aid to homeowners needing loan modifications; (2) provide immediate aid to homeowners who were current in their payments, but had mortgages that exceeded the homes’ value; (3) provide payments to those who lost their homes in foreclosure; and (4) reform their servicing standards.
However, a relatively new mortgage servicer, Nationstar, may be letting these lenders make an end-run around the settlement. Because the right to service the mortgage loans can be sold, many of the big mortgage lenders have been selling their rights to service the loans to Nationstar, which can then ignore all of the safeguards put in place. At the same time, the big mortgage lenders could avoid the new, higher capital requirements tied to holding servicing assets, allowing them to give larger dividends to their shareholders. Nationstar is just the most prominent of many budding service companies; the list includes Green Tree, Walter Investment Management, and Ocwen.
As a result, families who should have benefited from the settlement are instead being abused. One California family paid their mortgage on time since purchasing their home in 2003. They obtained a loan modification with their mortgage lender, but when the lender sold servicing rights to Nationstar, Nationstar refused to honor the modification. Nationstar returned the family’s mortgage payment in full and then sold the home right out from under them. When questioned, Nationstar claimed that the family never notarized a page of their modification, which was a lie. Nationstar also frequently fails to inform homeowners of the servicing change, so families continue to send money to the old servicers, which leads to “late charges” with Nationstar.
The tactics involved are pretty outrageous, and it is clear that there needs to be routine monitoring of the mortgage business, as well as tighter regulations that prevent such abuse. Given how slow legislation is implemented, it remains to be seen when much-needed reforms will take place. Until then, many homeowners end up filing for Chapter 13 bankruptcy, which stops all foreclosure efforts and allows them to make substantial payments on their mortgage loans over a three- to five-year period. If you find yourself in a situation where your home could be foreclosed upon, contact an experienced West Virginia bankruptcy attorney as soon as possible.
The Wolfe Law Firm has been providing legal services for nearly 25 years. Located in Elkins, West Virginia, the firm provides services in the areas of personal injury, criminal defense, bankruptcy, and mediation. If you are looking for an experienced West Virginia attorney, contact us today.