Over the past three years while writing this blog, I have combed every source I came across for avenues that could possibly help homeowners keep their homes, reduce their payments or avoid foreclosure. I have written about loan modifications, federal loan modifications, loan restructuring, short payoffs and forensic loan analysis, trying to see if any of these cold provide a solution to the housing crisis we are facing. In the end, though some of these helped some individuals a bit, nothing has actually made much of a difference.
Ultimately, I have come to believe, banks are not going to help homeowners because it is not in their financial interest. Because of TARP and really for PR purposes, banks have done a few loan mods, helped a few homeowners avoid foreclosure and participated in a few forums to help individual property owners. In the aggregate, though, their efforts have been puny in the face of massive numbers of underwater homes. Their public pronouncements about their interest in remedying the situation have clearly been hypocritical in light of the little they have done.
Banks have become the most hated institutions in America and for good reason.
Quite some time ago, I came to the conclusion that only massive legal force would give homeowners any leverage in dealing with banks. Forensic loan audits seemed for a while to provide this. Legal firms analyzed individual loans uncovering in the process RESPA violations, fraud, and numerous questionable actions in almost every loan done since around 2002. The attorney would then send this information to regulating agencies and to the fraudulent bank, expecting some repentant reaction.
But, when faced by an individual attorney representing an individual homeowners, each bank’s response was, “So what? What do you intend to do about it?” Since lawsuits are very expensive, the banks were aware individuals behind in their mortgage payments were highly unlikely to file suit.
What To Do?
Finally, we may have some recourse. It seems that across the country many attorneys have been filing suit against banks for their fraudulent actions and, little by little, the database of suits has been growing. At this point, more than three years into the crisis, attorneys have banded together to file on behalf of individual homeowners and, if a suit against that individual’s bank already exists, to add him to the list of plaintiffs.
This seems the only way to go. Joining such a suit costs money, of course, and no results can be guaranteed, but to me it seems like the best solution so far.
Here are some of the benefits of mortgage litigation.
- A lawsuit is filed-a judge decides the merits of a case, not the banks
- If it goes to trial, banks know that juries now universally favor homeowners
- This is not a loan modification–the banks do not control the outcome
If the attorney or legal firm accepts the case, the demand is always to completely tear up the note or mortgage on the property. While this is not always the outcome or even usually, the next demand is for the note to be re-written to 70% of current value of the property. Of course, another outcome is always that the homeowner and his attorney might lose the suit. That is possible but highly unlikely.