Communiversity Foreclosure Workshop
We are trying to raise funds to host a foreclosure clinic for all community members who are in need. Meanwhile many good people are caught in a terrible and tragic situation. We would like to let these individuals know about several great resources currently available;
WHAT TO DO ONCE YOUR HOME IS IN FORCLOSURE
· THE FEDERAL TRUTH IN LENDING ACT
Can Provide Potential Relief for Homeowners IN FORECLOSURE:
(“TILA”) and the Real Estate Settlement Procedures Act (“RESPA”). These are guidelines mortgage companies must follow when originating loans.
Many residential mortgage loans have TILA and/or RESPA violations which can be used as leverage in negotiations, or litigated.
The Truth In Lending Act (“TILA”), and the Real Estate Settlement Procedures Act (“RESPA”) are violated daily by lenders and mortgage companies.
These laws are in place to protect the homeowner, but yet are often completely disregarded. Your loan may be unlawful, and you may be entitled to substantial damages whether or not you’re currently in foreclosure.
If you are in foreclosure, the Truth In Lending Act can possibly stop the foreclosure process immediately (without bankruptcy), & also put money back in your pocket. If TILA and/or RESPA violations are discovered in your loan documents, your lender may be eager to discontinue the unlawful foreclosure process and possibly settle any dispute.
FOR THE MOBILE CLINIC CONTACT
HOME CLINIC ( Home Owners Mobile Education)
The Home Clinic is a project provided by Housing Opportunities Collaborative (HOC), a coalition of nonprofit organizations and agencies in the San Diego region.
Distressed homeowners meet with local attorneys who have real estate, lending and mortgage industry experience will give services. Staff members of local HUD approved housing counseling and credit counseling agencies will also be available. The homeowners will get personal review of their mortgage/lending/escrow documents and will be referred to local HUD approved housing counseling agencies or to local law enforcement or to local attorneys for resolution. The attorneys are affiliated with the local Legal Aid Society pro bono program and with the members of the Ethnic Relations Diversity Committee of the San Diego County Bar Association.
The Home Clinic is a portal which enables the distressed homeowner access to existing resources and services. HOC’s Home Clinic pools attorneys, real estate and mortgage industry professionals, housing counseling agencies, fair housing agencies, and other public agencies into one location to give a one-stop shop of counseling resources. It aims to connect distressed homeowners to immediate legal assistance.
How Bankruptcy Can Help You With Foreclosure
By Attorney Stephen R. Elias
Learn how bankruptcy can avoid or stall the foreclosure of your home.
If you are facing foreclosure and cannot work out a deal or other alternative with the lender, bankruptcy may help.
If you get behind on your mortgage payments, a lender may take steps to foreclose -- that is, enforce the terms of the loan by selling the house at a public auction and taking payment of your loan out of the auction.
This won’t happen overnight. The foreclosure process typically starts after you fall behind on your payments for at least two months, and often three or four. That gives you time to try some alternate measures, such as loan forbearance, a short sale, or a deed in lieu of foreclosure. (For details on these options, see How to Avoid Foreclosure.)
But if you've already tried and failed with these measures, now is a good time to consider bankruptcy as a possibility for avoiding or stalling foreclosure. Here are some ways that filing for bankruptcy can help you.
The Automatic Stay: Delaying Foreclosure
When you file either a Chapter 13 or Chapter 7 bankruptcy, the court automatically issues an order (called the Order for Relief) that includes a wonderful thing known as the “automatic stay.” The automatic stay directs your creditors to cease their collection activities immediately, no excuses. If your home is scheduled for a foreclosure sale, the sale will be legally postponed while the bankruptcy is pending—typically for three to four months. However, there are two exceptions to this general rule:
Motion to lift the stay. If the lender obtains the bankruptcy court’s permission to proceed with the sale (by filing a “motion to lift the stay”), you may not get the full three to four months. But even then, the bankruptcy will typically postpone the sale by at least two months, or even more if the lender is slow in pursuing the motion to lift the automatic stay.
Foreclosure notice already filed. Unfortunately, bankruptcy’s automatic stay won’t stop the clock on the advance notice that most states require before a foreclosure sale can be held (or a motion to lift the stay can be filed). For example, before selling a home in California, a lender has to give the owner at least three months’ notice. If you receive a three-month notice of default, and then file for bankruptcy after two months have passed, the three-month period would elapse after you’d been in bankruptcy for only one month. At that time the lender could file a motion to lift the stay and ask the court for permission to schedule the foreclosure sale.
How Chapter 13 Bankruptcy Can Help
Many people will do whatever they can to stay in their home for the indefinite future. If that describes you, and you’re behind on your mortgage payments with no feasible way to get current, the only way to keep your home is to file a Chapter 13 bankruptcy.
How Chapter 13 works. Chapter 13 bankruptcy lets you pay off the “arrearage” (late, unpaid payments) over the length of a repayment plan you propose—five years in some cases. But you’ll need enough income to at least meet your current mortgage payment at the same time you’re paying off the arrearage. Assuming you make all the required payments up to the end of the repayment plan, you’ll avoid foreclosure and keep your home.
2nd and 3rd mortgage payments. Chapter 13 may also help you eliminate the payments on your second or third mortgage. That’s because, if your first mortgage is secured by the entire value of your home (which is possible if the home has dropped in value), you may no longer have any equity with which to secure the later mortgages. That allows the Chapter 13 court to “strip off” the second and third mortgages and recategorize them as unsecured debt – which, under Chapter 13, takes last priority and often does not have to be paid back at all. For more information on Chapter 13 bankruptcy, see Nolo’s Chapter 13 Bankruptcy Resource Center.
How Chapter 7 Bankruptcy Can Help
It may be that you’ll have to give up your home no matter what. In that case, filing for Chapter 7 bankruptcy will at least stall the sale and give you two or three more months to work things out with your lender. It will also help you save up some money during the process and cancel debt secured by your home.
Saving money. During a Chapter 7 bankruptcy, you can live in your home for free during at least some of the months while your bankruptcy is pending -- and perhaps several more after your case is closed. You can then use that money to help secure new shelter. (For more on this, see the blog post How Bankruptcy Can Be Used to Deal With Foreclosure.)
Canceling debt. Chapter 7 bankruptcy will also cancel all the debt that is secured by your home, including the mortgage, as well as any second mortgages and home equity loans.
Canceling tax liability for certain property loans. Thanks to a new law, you no longer face tax liability for losses your mortgage or home-improvement lender incurs as a result of your default, whether you file for bankruptcy or not. This new law applies to the 2007 tax year and the following two years. (See New Tax Break for People Who Default on Their Mortgage.)
However, the new tax law doesn’t shield you from tax liability for losses the lender incurs after the foreclosure sale if:
· * the loan is not a mortgage or was not used for home improvements (such as a home equity loan used to pay for a car or vacation), or
· * the mortgage or home equity loan is secured by property other than your principal residence (for example, a vacation home or rental property).
This is where Chapter 7 bankruptcy helps. It will exempt you from tax liability on losses the lender incurs if you default on these other loans. For more information on Chapter 7 bankruptcy, see Nolo’s Chapter 7 Bankruptcy Resource Center.
Chapter 7 Cannot Cancel the Foreclosure
With all this debt being cancelled, you may be wondering why the foreclosure on your home won’t be cancelled too. The trouble is, when you bought your home you probably signed two documents (at least) — a promissory note to repay the mortgage loan, and a security agreement that could be recorded as a lien to enforce performance on the promissory note.
Chapter 7 bankruptcy gets rid of your personal liability under the promissory note, but it doesn’t remove the lien. That’s the way Chapter 7 works. It gets rid of debt but not liens – you’ll still probably have to give up the house under the lien since that’s what provided collateral for the loan.
Chapter 7 Bankruptcy May Not Be Right For You
Not everyone can or should use Chapter 7 bankruptcy. Here’s why:
You could lose property you want to keep. Chapter 7 might cause you to lose property you don’t want to give up. As an example, if your wedding ring is particularly valuable, it may exceed the dollar amount of jewelry you’re allowed to keep in a bankruptcy (under something called the "jewelry exemption"). In that case, the bankruptcy trustee could order you to turn the ring over to be sold for the benefit of your creditors. For more on what property you can and can’t keep in Chapter 7 bankruptcy, see When Chapter 7 Isn’t the Right Choice.
You may not be eligible. Even if Chapter 7 bankruptcy would work for you, you may not be eligible. Under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, you are not eligible if your average gross income for the six-month period preceding the bankruptcy filing exceeds the state median income for the same size household. Nor are you eligible if your current income provides enough excess over your living expenses to fund a reasonable Chapter 13 repayment plan. For more information about how the new income eligibility test (the “means test”) works, see Who Can File for Chapter 7 Bankruptcy.
Bankruptcy’s Effect on Your Credit Score
Both bankruptcy and foreclosure will damage your credit score. However, sometimes bankruptcy is the preferable option when trying to rebuild credit. Here’s why:
A foreclosure will damage your credit score for many years, will not get rid of your other debt, and is particularly harmful if you are house shopping.
In contrast, discharging your debts in bankruptcy will harm your credit score, but can help you rebuild your score quicker than after a foreclosure. This is because bankruptcy will leave you solvent and debt-free – and therefore able to start rebuilding good credit sooner.
Keep in mind that the current mortgage meltdown and credit crunch (which are prevalent at the time this article is being written) may change the way bankruptcy and foreclosure affect credit ratings.
If All Else Fails: Relief From Debt and Tax Liability
If you’re certain you won’t be able to propose a Chapter 13 repayment plan that a bankruptcy judge will approve, and Chapter 7 will provide only a temporary delay from the foreclosure sale, then what’s the point of either?
If you have to lose your home -- a bitter result to be sure, but sometimes unavoidable -- you can at least view bankruptcy as the best way to get out from under your mortgage debt and tax liability. Bankruptcy also offers a way to save some money, which will help you find new shelter and weather the psychological and economic shocks that lie ahead.
To learn more about Chapter 13 bankruptcy and how it can help you avoid foreclosure, get Chapter 13 Bankruptcy: Repay Your Debts, by attorneys Robin Leonard and Stephen Elias (Nolo). For information on Chapter 7 bankruptcy, including forms and instructions for filing yourself, get How to File for Chapter 7 Bankruptcy, by attorneys Stephen R. Elias, Albin Renauer, and Robin Leonard (Nolo).
Attend Our Weekly Foreclosure Seminars;
Our next seminar is 3pm Sunday Febuary 22, 2009, Upstairs at the Hillstreet Coffee house; 524 S Coast Hwy. Oceanside, CA 92054
(760) 966-0985; call for
Seminar will cover the following topics
• How a homeowner can find HUD and Hope help in Spanish.
• How a homeowner can immediately stop their foreclosure sale by filing for an emergency federal injunction.
• Understanding how a federal bankruptcy can judicially lower a homeowner's payments and save their home from foreclosure.
• Multiple resources ; where and how a homeowner can find and consult local HUD, Hope and other non-profit agencies.
• Learn how a homeowner can determine if their loan has predatory lending violations.
• Why and how a forensic loan audit can help a homeowner in default.
• How a homeowner can request, obtain, and review the
loan documents from their lender.
• How a homeowner can demand a mortgage modification from their lender.
• Understanding what a loan rescission is, and how a homeowner can use RESPA* rights to demand one.
(Real Estate Settlement & Procedures Act)
Some excellent advice for all homeowners for dealing with lenders.
(Thanks to Pro Se in Colorado.)
We (borrowers) had a problem with the servicing of our loan (lender "never received payment" of a cashier's check). We wrote letters (Qualified Written Requests under RESPA, Section 6). Lender never responded to written correspondence from borrowers. Eventually, lender called borrowers and verbally informed them of a default on the mortgage loan, and threatened foreclosure if all money (including unwarranted attorney's fees) wasn't immediately paid.
Borrower read loan agreement, which provided for a Notice of Default with a 20-day Right to Cure to be sent via Certified Mail (with signature confirmation) at least 20 days before accelerating the loan. Borrowers paid the amount needed to cure the alleged default, except for the illegal attorney's fees. AFTER the alleged default was cured, lender, in complete disregard of the loan agreement, sent the loan to foreclosure, demanding sale by the Public Trustee to recover the amount due.
Simultaneously, lender placed a nearly $50,000 charge-off on borrowers' credit reports, where it remained on at least one credit report for the next 10 months.
Borrowers' other creditors cancelled their credit cards and put them on default interest rates. Borrowers couldn't mitigate their damages alone, and wrote to lender imploring help (remove charge off on credit reports, etc) for the next 15 months. Borrowers also filed complaints with the Colorado Attorney General and the Department of HUD. Lender fraudulently misrepresented material facts to both agencies, and based on those misrepresentations, the agencies closed the file on the borrowers' complaints.
Eventually, borrowers were forced into chapter 7 bankruptcy, as they just could not recover from the financial damage brought upon them by the illegal foreclosure proceedings and the credit report damage. Borrowers exempted their home in the bankruptcy, and are still living there. Borrowers had not heard from the lender, though the lender still holds a $50,000 lien on their home. Lender has actively been concealing borrowers' account since spring 2004.
Last fall, borrowers petitioned the bankruptcy court to abandon the asset of the claim against the lender. (Borrowers unknowingly forfeited their rights to the claim against lender by filing bankruptcy.) Simultaneously, borrowers filed a civil case in the federal court against the lender. Because borrowers have no money for an attorney, and make too much money to qualify for legal aid, borrowers have had to represent themselves, appearing pro se, in their court action.
This is definitely a modern day tale of David and Goliath. The mortgage company is one of the giants in the lending world...and the borrowers are just a middle class family trying to make ends meet.
Other borrowers need to be aware of the tactics these big companies use to put them in default. A "missing payment" translates to 30 days delinquent. If you plan on writing letters citing your RESPA rights, make sure you have documentation of when your letter is received by the lender. That is when the 20 day and 60 day time period begins for the lender to acknowledge and resolve your complaint, respectively.
But, be aware of this: lenders will claim that they have "no receipt of said letters of dispute", even when you can prove that they were signed for. It's good to keep all your papers together, because you may be sending them to government agencies, and/or using them in court. Keep your originals in a safe place.
Next, READ AND BECOME FAMILIAR WITH YOUR LOAN AGREEMENT. You need to know what your contract says, so that you'll know if the lender is violating it.
Write to your state's Attorney General (especially if you live in Colorado) if you feel that your lender has unfairly put your loan into default and/or foreclosure. Colorado has the highest foreclosure rate in the country. It doesn't help that a huge lender pays no attention to the written contract, thus breaching it, and causing irreparable consequential damages.
Lastly, DON'T BE EMBARRASSED TO TALK ABOUT IT. We had a 19 year favorable joint credit history utterly destroyed because we didn't want to tell anyone what was happening to us. Even still, we don't want to use our names...though we may soon need to tell our story publicly, in an effort to call attention to the wrongful acts of these predatory lenders.
Pro Se in Colorado
Government Resources for Preventing Foreclosure;
If your adjustable rate has pushed your mortgage payment to unaffordable levels, you may have some relief. In response to the crisis of people facing default on their home mortgages because their adjustable rate mortgages are no longer affordable, the Federal Housing Administration is coming out with the FHA Secure Refinance Program.
The new FHA Secure program would help home owners who have fallen behind on their home mortgage and are possibly facing foreclosure because of their new higher monthly payments. The new program would allow the delinquent home owners to refinance their Adjustable Rate Mortgages into a fixed rate FHA loan. The FHA Secure program is intended to help homeowners that may have been tricked into expensive Adjustable Rate Mortgages with teaser interest rates. If you qualify for an FHA mortgage your loan will be funded by a conventional mortgage lender.
Remember, FHA mortgage loans are insured by the Federal Housing Administration. The FHA does not lend money; they simply insure your debt with an approved FHA lender.
Because your mortgage is insured against default by the government, FHA loans offer significantly less risk for lenders, allowing homeowners, even those with poor credit, to qualify for lower mortgage rates. The FHA will accept homeowners with blemished credit… especially if you are working on improving your finances and can document your current situation. In the past, the FHA has not required borrowers to have a minimum credit score. Instead, they have focused on one's overall credit history.
Therefore, it may be possible to qualify even though you may have a low credit score, perhaps 500 (or less). If you are a homeowner with tarnished credit and are concerned that the current “mortgage crisis” will prevent you from refinancing before your lender begins adjusting your interest rate and payment amount, FHA backed mortgage refinancing could be your answer.
Apparently, the FHA's focus will remain on looking to the good credit profile of applicants rather than a credit score. And, until now, the FHA has not permitted delinquent borrowers to qualify for their loan program.
To qualify, you must show….
-That your loan is a non-FHA ARM.
-A history of on-time mortgage payments "prior" to the borrower's ARM loan resetting to the higher rate.
-The Arm loan interest rate must have either reset or be scheduled to reset between June 2005 and December 2009.
-Mortgage late payments are allowed after the reset date if they are directly related to your higher loan payment. In addition, if you are in a mortgage payment plan because of late payments and there is sufficient equity in the home, the late amounts can be rolled into the new loan.
-A minimum of 3% cash or equity in the home.
-A sustained history of employment.
-Sufficient income to make the new mortgage payment.
While the new program will help those borrowers who qualify save their homes, it is obviously not a free ride. It is designed for homeowner's who just need a little assistance in order to get out from underneath expensive ARM interest rates.
The FHA will not insure interest-only or Pay Option ARMs; and will not help home owners who have properties that have depreciated in value and are now worth less then the current mortgage balance. You must use an FHA approved lender to see if you qualify for the FHA Secure Refinance Program. For FHA lenders in your neighborhood, go to
Proposed, higher conforming mortgage limits seen aiding housing sector
$150 billion fiscal stimulus package that's winding its way through the U.S.
Congress will not represent a panacea for the U.S.'s economic ills, an
economist argued, but it will represent modest good news for one segment -- the
beleaguered housing sector.
The fiscal stimulus bill currently under discussion in the U.S. Senate calls for raising Fannie Mae and Freddie Mac's conforming loan limit to $729,750 through 2008 from the current $417,000.
Conforming loans are conventional, fixed-rate mortgages for good credit borrowers that banks make that are eligible for purchase by Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE). When Freddie and Fannie purchase these loans from banks, it "frees-up" money that the banks can use to grant mortgages to future borrowers, thus expanding the pool of funds available for mortgages.
Economist Steve Affinito told BloggingStocks Thursday that while it's important to underscore that the higher conforming loan ceiling will not eliminate the U.S. housing sector's recession, it is "a critical, essential step in the right direction," in his interpretation.
"There are two housing problems. One is homes at the higher end for which banks are not making loans, because they are considered 'jumbo loans' or non-conforming. Raising the conforming cap will encourage banks to make these loans, stimulating housing activity. That's good," Affinito said. "Some argue that raising the cap helps only luxury home buyers, but that is not the case, given the high price of middle-income housing in many U.S. markets. Also, after Fannie and Freddie purchase these loans, the banks can then use the reimbursed money to make loans to non-high-end home buyers, so it's easy to see how a higher ceiling will increase mortgage availability."
Fannie Mae stock gained 89 cents to $32.02 and Freddie Mac rose 61 cents to $28.51 in midday Thursday trading.
Further, Affinito said he favored raising the conforming loan limit "though at least 2009," but "it remains to be seen if the U.S. Senate and President Bush will go along with it." The Bush Administration's original bill, which was approved by the U.S. House earlier this week, calls for raising the conforming loan limit only through 2008.
The second housing problem concerns credit-impaired borrowers and people falling behind on their mortgage payments, Affinito said. A program more comprehensive than the U.S. Treasury's alliance of mortgage counselors, lenders and servicing companies, called HOPE NOW, is needed to assist those homeowners, he said. Affinito said early data indicates that "only about one half of potential borrowers in danger of foreclosure are being helped." Further, with an estimated $360-400 billion in adjustable rate subprime loans scheduled to reset in 2008, "we're going need another program to lower the percentage of foreclosures more," he said.
Admittedly, Affinito said no assistance can help borrowers who see no economic future with their homes and choose to go into foreclosure. "But many homeowners want to keep their homes, and that's what should be the public policy's focus."
"Clearly, the higher conforming loan limit is not a 100% solution for the housing sector, but it is a step in the right direction," Affinito said. "And given the many bad steps taken previously, this is a step we want to take."
Advice for Victims of Predatory Lending
The definition of predatory lending involves who really benefits in the mortgage transaction. The fact that the homeowner does NOT benefit is what turns a legal mortgage into a predatory lending practice which can and should be reported. There are many resources where one can report mortgage fraud and predatory lending. If uncertain whether a mortgage action is legal, or actually fraud or a form of predatory lending, then one should still report it and find out for sure. In many cases only a fine line divides actual fraud from an ethical and legal transaction
Some typical predatory lending tricks;
Steering & Coercing
Predatory Lenders use quite a number of different abusive practices when putting together a subprime loan. The possible targets for these practices are the elderly, low-income, or minority homeowners who, in many cases, would actually qualify for a regular prime loan. Fannie Mae estimates that possibly up to 50% of the subprime refinanced loans could have been prime loans – saving the borrowers thousands of dollars in fees and interest rates. The abuse of subprime loans in minority neighborhoods is evidenced by a government study in an African-American neighborhood showing over 51% of the refinanced mortgages being subprime, compared to only 9% in predominantly white neighborhoods. Borrowers are often subjected to very aggressive sales tactics to steer them or coerce them into refinancing when it isn't in their best interest. Many states are attempting to set up predatory lending laws to avert this type of activity.
A refinanced mortgage can be packed with excessive fees and/or unnecessary fees. A regular mortgage usually will have loan fees below 1% of the total loan amount. A predatory mortgage can have loan fees in excess of 5%. These excessive costs are tucked into the loan amount so the lender can easily disguise them, and these fees can put thousands of the homeowner's dollars into the predator's pockets. This practice falls within the definition of predatory lending.
Insurance and Other Unnecessary
Predators often add insurance and other unnecessary products to the loan amount. The insurance they either insist on or intimidate the borrower into buying can include regular mortgage insurance, fire and hazard insurance, life insurance, disability insurance, homeowner's insurance, and health insurance. The insurance can be extended to include all family members, not just the borrowers themselves. The premium for these items is also added onto the loan amount where the cost is not easily spotted by the borrower. And, of course, the predator earns large commissions every year on the premiums paid. A variation of this happens when three or five years of premium are paid in advance.
Abusive and Abnormal Prepayment
Only about 2% of normal conventional mortgages have a prepayment penalty that might be difficult to meet. Up to 80% of subprime mortgage have an abusive prepayment penalty. Why? This is one more way the predators can gouge an unsuspecting homeowner. The prepayment penalty is a fee the lender requires the borrower to pay if the borrower should pay off the mortgage loan early. The subprime borrower usually has less-than-perfect credit when originally taking out the mortgage, and the prepayment penalty is hidden in the fine print. Over the next few years the borrowers may manage to improve their credit and want to obtain a new mortgage that has lower interest and lower payments. However, the prepayment penalty on the original mortgage (which often equals 5% of the original loan) is so high that it eats up any equity the homeowners have built up and can even leave them owing more money. Homeowners often are trapped into keeping the original, high-interest mortgage. This is also another case where the lender gives a kickback to the mortgage broker for helping to include the high prepayment penalty in the mortgage. In the future, when the homeowner has to pay the prepayment penalty, the mortgage broker pockets more money.
Because the predators using high prepayment penalties channel the borrowers into subprime loans, the honest conventional lenders lose a great deal of prime loan business. This indirectly affects the fees they need to charge their regular prime borrowers. Everyone loses when predatory lenders have their way.
Another form of predatory lending practices occurs when Con-Artists find a homeowner whom they can talk or coerce into refinancing their mortgage, even though the homeowner gains nothing from the transaction. The process is called loan flipping. While the transaction might put a few thousand dollars into the homeowner's bank account, this amount is easily eaten up by the excessive fees, higher interest rate, and prepayment penalties of the new mortgage. A serious danger with loan flipping occurs when a balloon payment is inserted into the fine print. While the homeowners originally may have had twenty or thirty years to pay on the mortgage, under the loan flipping they might be signing for a two, three, or five year balloon payment. At the end of that time they need to find a way to refinance the house again or lose it completely. Of course, the 'expert Con-Artists' will be only to glad to do another loan flip and refinance it for them – once again pocketing thousands of dollars in the process and leaving the homeowner with even less equity in the property than before.
Another practice that falls within the definition of predatory lending happens when a lender hides words in the fine print that make it illegal for the homeowner to take legal action against the lender. The borrowers sign away their rights to sue the lender for any fraud, predatory actions or illegal actions. The only right the borrowers have is to take their grievances to arbitration. The arbitration process is totally in the hands of the lenders, usually conducted in secret without the borrowers having adequate representation. Although the borrowers can usually have legal counsel, they find it difficult to find anyone who will represent them because the lawyers are not guaranteed payment of their fees in arbitration like they are in court. Many arbitration cases are handled over the phone and when a small individual is pitted against a large corporation and the proceedings are confidential with no stenographic or written record of the facts, the borrower is at a true disadvantage. Most arbitration decisions are binding and the borrowers cannot appeal them.
More than 50% of the lenders are now including mandatory arbitration in their loan documents, and the borrowers remain unaware of the implications. Lenders favor arbitration because it eliminates a borrower's rights to do a class-action suit against the lender. The Fair Credit Reporting Act and the Truth in Lending Act have no bearing in an arbitration situation, only if one can go to court. And, some lenders keep their right to go to court but prohibit the borrower from doing so. The fees for arbitration can also be more expensive than filing a small claims court suit. Overall, the borrowers who sign a mandatory arbitration contract are bound to a very lopsided arrangement that rarely is in their best interest.
Predatory Lending Laws
Predatory lending laws are slowly being integrated into the legal systems of the federal government and the individual states. More than 35 states have already placed a legal limit on the maximum prepayment penalty that a homeowner should have to pay, and over half of the states have taken steps to limit predatory lending practices during the last five years. While the definition of predatory lending varies in each state, the awareness that individual citizens need to be protected by predatory lending laws is growing.
As more and more homeowners become aware that they have the right to report mortgage fraud and predatory lending, and policy makers, consumer advocates and civil rights leaders take stronger action against the Con-Artists specializing in predatory lending practices, then the elderly, minorities and those with less income are less likely to be prey for predators. Politicians on every level are becoming more aware of the need for predatory lending laws as the Con-Artists multiply, ultimately costing citizens billions of dollars. Organizations like the Center for Responsible Lending, the National Association of Mortgage Brokers, the Mortgage Bankers Association (MBA), and the American Bar Association actively work to promote predatory lending laws. They also know that educating the public is one of the strongest deterrents to mortgage fraud and predatory lending practices. These organizations are committed to providing this education.
Please don’t forget to keep checking back for updated resources and further suggestions and information,
& Good luck!