Borrowers in two states have gone to federal court to secure their piece of the government's loan modification program. In two more states, servicers are defending their right to use a third party to file foreclosures. Meanwhile, as a U.S. congresswoman calls for more lawsuits against lenders, two law firms are vowing to throw more litigation at mortgage servicers.
A class action filed in Minnesota federal court against U.S. Treasury Secretary Timothy F. Geithner, Fannie Mae and Freddie Mac and several servicers has been dismissed. The case alleges that the plaintiffs were denied access to the Home Affordable Modification Program. A motion for a preliminary injunction was denied.
The lead plaintiff, Nichole Williams, financed a home purchase in 2004 and refinanced the loan in 2007. She was laid off from her position as a legal assistant in 2007. Her servicer, Homecomings Financial, denied a HAMP loan modification request. Another borrower, Johnson Sendolo, financed a 2005 home purchase and lost his job last year. Ocwen Loan Servicing LLC denied his HAMP modification.
The two had claimed it was their constitutional right to benefit from the HAMP. They cited the defendants' failure to provide written notification of an adverse decision. The servicers also allegedly failed to give them an opportunity to appeal the decisions.
The judge noted that statutes cited by the plaintiffs did not "create an absolute duty on the part of the secretary to consent to loan modifications," adding that the secretary is allowed some discretion in determining HAMP net present values. She also concluded that modifications are not an entitlement, and Congress did not intend to mandate modifications.
A similar case was filed on Nov. 9 by four New York City borrowers in U.S. District Court for the District of Columbia against Aurora Loan Services LLC, Secretary Geithner and several other agencies over denied HAMP access.
In Massachusetts, Wells Fargo and U.S. Bank will appeal a recent decision by a Massachusetts Land Court that two securitization trustees had foreclosed before the loans had been properly assigned. The Associated Press reported that initial papers preserving the right to appeal were filed in appellate court Oct. 29, while impacted lenders were scheduled to meet last week.
The Massachusetts case could reportedly impact thousands of mortgages.
In Nevada, a U.S. Bankruptcy judge questioned the validity of the Mortgage Electronic Registration Systems Inc. registry, the Las Vegas Sun reported. Nearly 1 million mortgages in the state are handled by MERS. The issue is reportedly prompting a class action by a group of Nevada borrowers and follows a similar case before the Kansas Supreme Court.
One firm praising the challenged to MERS is MFI-Boston, which said in an October announcement, "The lender must now prove that he or she has a legitimate claim in order to foreclose."
The Law offices of Kaufman, Englett and Lynd LLC hopes to throw a monkey wrench in servicers' efforts to resolve delinquent mortgages. The Orlando, Fla.-based firm announced last month that it now represents borrowers in California lawsuits that capitalize on violations of the Truth-in-Lending Act, violations of the Real Estate Settlement Procedures Act and predatory lending practices.
Kaufman Englett claims that although California does not require lenders to obtain a judge's approval in a foreclosure action, its attorneys will get foreclosures in front of a judge. The strategy "could change the way foreclosures are handled in the State of California for the foreseeable future."
United Law Group recently said it provided more than $1 million in free services to more than 30 borrowers. The Irvine, Calif.-based firm said that it is focused on compelling judges to establish precedents for California Civil Code Section 2923.5 -- which provides protections to borrowers on home loans made from Jan. 1, 2003, to Dec. 31, 2007.
"Even though 2923.5 clearly requires the courts to take additional steps to help homeowners, most deny requests to stay foreclosure or eviction proceedings pending the outcome of litigation," the press release stated. "United Law Group has filed appeals in several cases where the firm believes appellate review will benefit California homeowners."
U.S. Rep. Maxine Waters is calling for more litigation against lenders, the LA Sentinel reported. The congresswoman reportedly praised state attorneys general and civil rights group for "taking the lead in preventing foreclosures by filing lawsuits against the originators of these predatory loans."
Nichole Williams, Johnson Sendolo, Carey Koppenberg, Carrie Strohmayer, on behalf of themselves and all others similarly situated, V. Timothy F. Geithner, as United States Secretary of the Treasury, U.S. Department of the Treasury, The Federal Housing Finance Agency, as Conservator for the Federal National Mortgage Association, d/b/a Fannie Mae and the Federal Home Loan Mortgage Corporation, d/b/a Freddie Mac, Federal National Mortgage Association, d/b/a Fannie Mae, Federal Home Loan Mortgage Corporation, d/b/a Freddie Mac, Ocwen Loan Servicing, LLC, GMAC Mortgage, f/d/b/a Homecomings Financial, and U.S. Bank.
Case Number: 09-1959 ADM/JJG, July 28, 2009 (U.S. District Court District of Minnesota).
EDWARDS et al v. AURORA LOAN SERVICES, LLC et al.
Case No. 1:09-cv-02100-HHK, Nov. 9, 2009 (U.S. District Court for the District of Columbia).
U.S. Bank National Association v. Ibanez.
08 MISC 384283 (KCL) (Massachusetts Land Court).
Wells Fargo Bank v. Larace.
08 MISC 386755 (KCL) (Massachusetts Land Court).