9
Surprising Facts about Arizona
Mortgage
and
Home
Foreclosure
by Arizona Mortgage Foreclosure Defense Attorney
Joe Volin
1.
Your Mortgage Company Probably Is Not Your Mortgage Company.
Almost everyone believes that their mortgage
company is the company they make the mortgage payment to.
It used to be that way but times have changed.
Today most mortgages are “securitized.”
This is a complex financial transaction that sells the rights
to the payments you make on your mortgage.
It also explains many of the problems in today’s financial
crisis.
To understand this you first need to know who is
involved. The company you
took out the mortgage with is called the “originator” of the mortgage.
The originator sells the mortgage, usually right away, to a
company called the “sponsor.”
The sponsor is the dealmaker and organizes the
transaction to sell a group mortgages as investments, usually to Wall
Street investors, pension groups, and insurance companies.
Usually another company called the “depositor”
first buys the mortgages from the sponsor and then immediately turns
around and transfers the package of loans and mortgages to the trustee
of a trust. The trust
issues bonds that are bought by investors.
The investors are so far removed from the actual
mortgage that they really do not have any say in the transaction.
Many times the performance of the package of loans is
guaranteed by organizations such as Fannie Mae and Freddie Mac.
The rules of this transaction are governed by an
agreement between the parties.
That agreement is called a Pooling and Service Agreement.
By now you are probably wondering when I am going
to explain why your mortgage company is not your mortgage company.
Well, there is one more player in this game.
It is called the “mortgage servicer.”
The mortgage servicer is the company most of us think of as our
mortgage company. They
are hired by the trustee to be in charge of collecting the mortgage
payments and paying it to the trust that then uses the money to pay
interest on the bonds. To
make it more complicated, these servicing rights are often bought and
sold. Sometimes the
mortgage is initially sold by a company that retains the right to
service the mortgage.
You really do not owe the money on your mortgage
to the mortgage servicer.
The servicer has been hired to collect the payments by the trust that
owns the mortgage.
2.
The Mortgage Might Not be Enforceable in
Bankruptcy.
There are a lot of laws that govern the sale of a
mortgage. One thing is
for sure. Only the holder
of the mortgage has the right to legally enforce the collection of the
mortgage note and foreclose if payments are not made.
Recent lawsuits have documented many cases where
the originator, sponsor, or depositor have failed to properly transfer
the mortgage to the investment trust.
Once a bankruptcy is filed it is illegal for any
of these companies to do anything that would affect the property of
the person filing the bankruptcy.
Trying to fix their mistakes after a bankruptcy filing just
does not work.
The end result is that the mortgage is not
enforceable in a bankruptcy.
The bankruptcy freezes things the way they are on the day the
bankruptcy is filed. This
can allow you the opportunity to level the playing field.
It does not mean you get a free house.
It just means that the house mortgage will be treated as an
unsecured debt and probably allow you to keep it for a lot less money.
3.
Chances Are Good That The Mortgage Company
Lost Your Mortgage and Cannot Enforce The Right To Foreclose.
Bankruptcy Judge Samuel L. Bufford
and former Judge R. Glen Ayers observed in their notes to the
presentation “Where’s the Note, Who’s the Holder” at the American
Bankruptcy Institute that there may be good reason to believe
speculation that as many as one-third of the “securitized” mortgage
notes have been lost or destroyed.
The reason that this matters is that
the Uniform Commercial Code, which has been adopted in
Arizona
and every other state in the country, only allows the owner of the
mortgage to enforce it.
There are rules for enforcing a lost or destroyed mortgage but they
can be very difficult to comply with.
In Federal Court, which the
Bankruptcy Court is part of, a claim for a mortgage default can only
be brought by what is called a “real party in interest.”
This is the company that owns the mortgage.
It is not, and cannot be, the mortgage servicer.
Unless they have the original mortgage, it can be very
difficult to prove who owns it.
Challenging the mortgage company’s
right to enforce the mortgage by making them prove that they own it
and have the right to enforce it can really turn the tables.
4.
You Might Have The Right To Cancel Your
Mortgage and Only Owe What The Property Is Worth In Bankruptcy.
Numerous laws govern real estate transactions.
One of the most important is called the Truth in Lending Act.
It contains the right to rescind, or cancel, the mortgage when
the mortgage company violates some important provisions of the law.
These provisions include how the interest rate is disclosed and
being given a notice of the right to cancel.
The law also allows for money damages for many violations.
Again, proving these violations will not give you
a free house. But it can
allow you to force a fairer agreement on the mortgage company
especially when the right to rescind is combined with a bankruptcy
filing. The bankruptcy
filing allows the mortgage company’s right to a return of the loan
proceeds to be treated as an unsecured claim.
This can result in a big saving for you while allowing you to
keep your house.
5.
You May Have A Right To Sue Your Mortgage
Company.
Other laws provide you with the right to sue your
mortgage company for money for mistakes they commonly make.
A real eye opener is an article by Katherine M. Porter,
College of Law,
University
of Iowa, called
Misbehavior and Mistake in Bankruptcy Mortgage Claims.
She shows how common it is for mortgage companies to add
fraudulent charges and fees to mortgage accounts both in and out of
the bankruptcy system.
Most of these practices are violations of the Real Estate Settlement
Procedures Act, the Truth in Lending Law, and the Unfair Trade
Practices Act. Mortgage
companies get away with it because consumers, and often their lawyers,
don’t know how to fight back.
6.
Your Mortgage Servicer Makes More Money When
You Default.
Ever wonder why so many people are told why they
need to be behind on payments before the mortgage company will even
consider a loan modification?
Once you understand that the mortgage servicer
does not get to keep the mortgage payments, but does get to keep the
late fees, inspection fees, and other escrow charges, the answer is
easy. Their right to keep
these payments is outlined in the Pooling and Service Agreement.
The amount of money the mortgage company makes by
servicing a current mortgage is very modest.
But, there is not much work to do.
Most of it is done by computer and it just a matter of
collecting the payments and sending them on.
The late fees are a significant source of income
for mortgage servicers.
The income of the mortgage servicer goes up when a customer is behind
and that income stays up if the customer stays behind.
7.
Your Mortgage Servicer May Not Have The Legal
Right To Do A Loan Modification.
This goes back to the separation of the ownership
of your mortgage from the servicing of your mortgage.
The servicer’s rights are outlined in the contract that governs
what it can and cannot do.
That agreement is called the Pooling and Service Agreement.
Copies of many of these agreements are available on the
Securities and Exchange Commissions website at
www.sec.gov .
These agreements limit the
rights of the servicer to modify the terms of the mortgage.
The amount of discretion the mortgage servicer has varies from
agreement to agreement.
Some of the agreements allow a certain percentage of the loans to be
modified. Others don’t
allow any modification at all.
Often times, the mortgage servicer has more discretion to
settle, or modify, the mortgage as part of a legal settlement.
8.
The Mortgage Industry Is Not Really Interested
In Voluntarily Modifying Your Mortgage.
The mortgage industry’s statistics prove beyond
any doubt that the idea of a meaningful loan modification for the
consumer is a farce.
The Comptroller of the Currency, Administrator of
National Banks, a part of the U.S. Department of the Treasury, reports
that out of all the loan modifications in the first quarter of 2009
only 1.8% involved any principal balance reduction. Even more
surprising is that all but 4 of the loan modifications involving a
principal reduction were held by portfolio lenders.
Portfolio lenders are companies that lend their own money and
that do not sell the mortgage to investors.
In other words, your chances of getting a
voluntary mortgage modification that reduces the principal balance are
less than the odds of getting hit by lightening.
9.
Many Second Mortgages Can Be Eliminated In
Bankruptcy.
A Chapter 13 bankruptcy allows a consumer to
eliminate a second mortgage when the value of the property is less
than the amount owed on the first mortgage.
In today’s real estate market a significant percentage of
second mortgages are nothing but negative equity.
What
Can You Do About It?
If you are in danger of losing your home to an
Arizona Home Foreclosure you have a legal and constitutional right to
defend and make the mortgage company prove its case.
Challenging the mortgage company’s right to foreclose on your
home may uncover numerous claims that you have a legal right to
recover for. I cannot
promise you that we can defeat every mortgage foreclosure.
I can promise you that we can make sure that your rights are
protected, that you are given every legal right to stay in your home
for as long as possible and given every opportunity to save the house
by bringing lawful claims against the mortgage company.
We generally handle these disputes in the bankruptcy Court
through Chapter 13. It is
the one Court that really evens the playing field and will put an
immediate stop to any pending foreclosure.
To learn more and discuss your situation in detail, please call
and schedule a free initial meeting.
Free
Appointment with an Arizona Mortgage
Foreclosure Defense
Attorney
480-820-0800
John Joseph Volin, P.C.,
designated as a Federal Debt Relief Agency by an
Act of Congress and the President of the United States, has proudly assisted
consumers seeking relief under the U.S. Bankruptcy Code for over 23
years.
|
