Home » 2012 » February

Independent Foreclosure Review: What is it and should I do it?

You might have received or might not have received a notice in the mail from the OCC and Federal Reserve Board that suggest that you qualify for an Independent Foreclosure Review.  Then, you probably said to yourself, “What is this all about?”  Many of you probably think it is another shame from a company quickly formed to make a quick buck off your suffering.  The truth is—it is actually from your Federal Government and it is real.

In April 2011, the Federal Reserve Board issued enforcement action against four large mortgage servicers: GMAC Mortgage, HSBC Finance Corporation, SunTrust Mortgage and EMC Mortgage.  The enforcement action required that these four companies and their affiliates to hire independent consultants to review foreclosures that occurred between 2009 and 2010.

During the years of 2009 and 2010, foreclosure sales often occurred with electronic documents that were either not property signed.  Additionally, mortgages were transfer between mortgage companies without original signatures.  In other words, the banks did not have the appropriate documentation in order to legally foreclosure on a property as well sell a property at an auction.

As a result, the Federal Reserve Board is forcing these companies to complete this review to see if they caused any harm.  The servicers are required to compensate borrowers for financial injury resulting from deficiencies in their foreclosure processes.  It is possible that you could receive financial compensation even if your home has gone to foreclosure sale already.  So, if you were thinking that no one was looking out for you, the reality is that some is looking out for you.

The deadline for filing the review is July 31, 2012.  You will need to provide set of documents to determine if you were injured.  You can do the review on your own or seek help in submitting the documentation to ensure that your review is conducted.

If you faced a foreclosure during this period, you should take a chance and get your circumstances reviewed.

How to Strip a Judgment Lien from your property


Many homeowners have found themselves in the position of owing money on a debt that they simply cannot repay.  As a result, the homeowner is sued by a Creditor and, shortly thereafter, a corresponding judgment enters against the homeowner. When this happens, the Plaintiff often will attempt to collect the money from the judgment by requesting an execution or judicial lien be issued against the homeowner and will then place the judicial lien on the homeowner’s house or car.

Many of my bankruptcy clients have come to me after this type of lien has been recorded against their property.  A possible solution to this problem arises after a homeowner’s unsecured debts have been discharged in bankruptcy.  The reason is simple; the homeowner has a lien against the property and intends to file a bankruptcy case in order to discharge the lien and other unsecured debts, so that the homeowner will not owe any money to any creditors.

After a Chapter 7 discharge, a Debtor may avoid a judicial lien by filing a motion with the Bankruptcy Court.  The legal theory pursuant to 11 U.S.C. § 522(f) is simple; to the extent a lien impairs an exemption to which the Debtor otherwise would have been entitled under the Bankruptcy laws, the Bankruptcy Court will grant a Chapter 7 Debtor’s motion seeking to avoid a judicial lien if the Debtor’s equity in the property is less than the amount protected under the applicable state and federal exemptions.  More specifically, under the Massachusetts Homestead Act, which currently allows protection of up to $500,000 in value for the land and buildings, where the Debtor recorded the declaration of homestead prior to the judgment lien attaching to the property (M.G.L. c. 188 § 1) and where the Creditor’s lien fully impaired the Debtor’s equity in the property.  In re Lyons, 355 B.R. 287 (2006).  Additionally, if a car has less then $3,450 in equity a judicial lien can also be stripped from that property.

By way of example, if a Debtor’s home was valued at $325,000 and a mortgage was owed with a payoff of $175,000, then, so long as the Debtor filed a Declaration of Homestead prior to a judicial lien of $50,000 being attached to the property and the Debtor filed a Chapter 7 bankruptcy, that Debtor would be entitled to protect all of the equity in the property and, as such, the judicial lien would impair that exemption.  Since the lien impairs the exemption, the Debtor could file a Motion with the Bankruptcy Court to strip the judicial lien in the Chapter 7 or Chapter 13 case and, upon the discharge of all unsecured debt, the lien would also be stripped.  Thereafter, the order could be filed and recorded at the appropriate registry of deeds, demonstrating that the lien has been discharged.

It should be noted that under Massachusetts Law, if you prepare and file a declaration of homestead at the registry of deeds in your county, you can get a half million dollars in protection against unsecured creditors.  However, as of March 2011, even if you never recorded the document you can still receive up to $125,000 in protection.

In summary, when your home or car has a judicial lien (as opposed to a mortgage or car loan) attached to it in order to collect on a judgment, you can ask the Bankruptcy Court to remove the lien if it impairs the exemption allowed under the Bankruptcy Code.

This article was drafted by Attorney Michael Goldstein

Do you know who really owns your mortgage?

So who holds the title to your house? Every month you have to pay your mortgage to some anonymous bank or lender. This is the payment that you promised to make each month in exchange for the privilege of being able to buy your house or condominium. What most home owners don’t know is that they don’t really owe anything to that specific lender that they send thousands of dollars to each month. In reality, that company never actually loaned you any money for your home. In truth, that big bank is actually just servicing the “true” investor of your mortgage. The ironic thing is in most cases, you don’t even know who is in point of fact getting your hard earned money.

The issue of who owns your mortgage is especially important in the event that a bank is trying to foreclose upon your house. One of the reasons for this is that in order to conduct a foreclosure, many states, including Massachusetts, requires that the party conducting the foreclosure prove that they have standing to foreclose. That is, they must demonstrate the proper paperwork to show they actually own the mortgage and have a right to foreclose.

This become a major issue, back in the mid 2000’s when capital investors started selling hundreds if not thousands of residential mortgages and bundling them together in securities, and selling them as packages. What happened is that so many mortgages were buddle together that in many situations, the paperwork was not transferred and now the original proof of ownership is lost forever. Making the situation much worse, many banks created foraged counterfeit documents assigning mortgages to cover their tracks. The problem is that the bank must prove everything was done properly and that the owners must be able to prove they hold the notes in order to transfer title, or foreclose.

You can try to find out who owns your mortgage by making a request authorized by section 1641(f)(2) of the Federal Truth in Lending Act to your loan servicer. The problem is the loan servicer in many cases won’t tell you, or worse yet, doesn’t have a clue. More specifically, the act states, “Upon the request of the obligor, the servicer shall provide the obligor, to the best knowledge of the servicer, with the name, address and telephone number of the owner of the obligation or the master servicer of the obligation.” Additionally, the Helping Families Save Their Homes Act of 2009 amended the Truth in Lending Act to provide a remedy for non-compliance of such a request whereby borrowers can recover actual damages, statutory damages, costs and fees.

Being educated with the proper information relative to the true ownership of your home loan is very important should you decide to try to negotiate a loan modification, short sale, deed in lieu or some other form debt relief or foreclosure prevention. Additionally, this is a major issue upon paying off your mortgage in order to get the title to the house. You must know who has the obligation to provide you that title, and to ensure the title can be legally transferred. To that end, if you are considering any sort of workout with your lender, you may want to seek the advice of an attorney in your state to make the proper requests, such as the Phillips Law Offices, in Massachusetts, Rhode Island, and Maryland.

How to respond to being sued by debt collectors

In these uncertain financial times, many consumers like you have incurred a sizeable sum of debt on their American Express, Visa, and MasterCard credit cards, hospitals and medical providers, or even personal loans.  In general, the debt was incurred due to some financial hardship such as unemployment, a divorce, a major illness that is physically limiting, or other similar circumstances.  Regardless of the reason, you simply cannot afford to make all of your payments to your creditors, and, as a result, you have fallen behind on your payments.  You have fallen so far behind that the collection agencies have stopped sending harassing letters and making intimidating phone calls, because your creditors have come to the realization that you are not going to pay them.  Unfortunately, the next step is that the creditor files a lawsuit against you for breach of contract, and you are served with a summons to answer a complaint filed in the court.  Now that this has happened, what’s your next move?

Whatever choices you are considering, do not ignore the problem.  It is a common and easy mistake to make but even though you may believe, or at least hope, that if you ignore the lawsuit it will go away on its own, it will not.  If you do not respond to a complaint filed in court within 20 days of receipt of the summon, the Plaintiff has the right under Massachusetts law to petition the court to enter a default judgment against you, which basically states that you decided not to defend against the claim and, by your silence, you have admitted that everything in the compliant is true and accurate.  If a default judgment enters, then the Plaintiff will next request an execution be rendered, which will increase the judgment by 12% each year as interest, until the balance and interest is paid in full.  Moreover, the collection agency can use this execution to have a lien placed against your house, seize your tax refund and money right out of your bank account, and even have your employer send a portion of your weekly wages to the creditor.

So how do you, as a person who cannot afford to pay everything back, ensure this default judgment and execution does not happen to you?  The first thing you should do is seek the advice of a lawyer who practices consumer debt and bankruptcy law.  However, if you choose to not retain counsel, you will have four options.

First, you can file an answer to the complaint by objecting to some, if not all, of the allegations and require the Plaintiff to prove each and every element of the breach of contract.  Second, as a Defendant, you can challenge that the collection agency has the right to sue you and make them prove that they in fact own the debt they are trying to collect.  This type of challenge is done by requiring the Plaintiff to demonstrate by way of notices, assignments, and other paperwork, that everything has been done appropriately.

If you choose not to answer the complaint, you can try to negotiate with the collector and settle the matter for a lump sum of money, or even a monthly payment.  The crucial element in doing this is to make sure that if you do settle the account, it is settled in full and no deficiency or uncollected part of the debt can be sold to yet another collection agency.

Fourth and finally, if you are incapable of settling the matter with your creditor, and don’t believe you can successfully fight in Court, you can file for bankruptcy protection.  If you file a bankruptcy, any attempt to collect a debt against you will be stopped as soon as you file your bankruptcy case.  The provision of the law that stops the case is called the automatic stay.  Presuming your bankruptcy goes through and you receive your discharge of debt, you will not be obligated to pay back any unsecured obligation.

So to summarize, if you take delivery of a summons to answer a complaint, you should take a very proactive approach to resolving it or a judgment and execution can, and in all likelihood will, follow you for the next twenty years.

The forgoing article on how to handle a breach of contract suit by an unsecured creditor was written by Attorney Michael Goldstein.