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Jul
09

HOEPA Loans and TILA Mortgage Rescission

By | Featured, Truth in Lending

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HOEPA Stands for the Home Ownership and Equity Protection Act

HOEPA is an amendment to TILA that deals with the substantive abuses of creditors offering higher costing home loans to residents in certain geographic areas. The statute was enacted to ensure that consumers most vulnerable to abuse would be afforded a safety net without impeding the flow of credit altogether.

There are certain trigger points to determine if a loan is a “HOEPA or Section 32″ Home Loan.

Triggers for HOEPA Coverage

APR more than 10% above comparable Treasury security rate (8% on first-lien loans closing on or after October 1, 2002) on the 15th day of the month before the lender received the loan application. 12 C.F.R. 226.32(a)(1)(i); 66 Fed. Reg. 65,617 (2001).

“Points and fees” exceeding 8% of the “total loan amount.” 12 C.F.R. 226.32(a)(1)(ii).

Some examples of Points are:

All prepaid finance charges. 12 C.F.R. 226.32(b)(1)(i);

All compensation paid to mortgage brokers. 12 C.F.R. 226.32(b)(1)(ii);

All items paid to the lender or to a lender affiliate. 12 C.F.R. 226.32(b)(1)(iii);

Disclosure Requirements

A special HOEPA disclosure notice must be delivered to the consumer at least three business days prior to the closing of the loan. 15 U.S.C. § 1639(b); 12 C.F.R. 226.31(c). A signed statement to the effect that the consumer received the HOEPA notice creates a rebuttable presumption only. 15 U.S.C. § 1635(c).  The notice must inform the consumer that he/she need not enter into the loan, and that if he/she does enter the loan, he/she could lose the home and any money put in it. 15 U.S.C. § 1639(a); 12 C.F.R. 226.32(c)(1).

The notice must also include an accurate statement of APR, monthly payment and balloon payment amount, and maximum payment amount on a variable-rate loan. 15 U.S.C. § 1639(a)(2); 12 C.F.R. 226.32(c)(2)-(4); Official Staff Commentary 12 C.F.R. 226.32(c)(3)-2.

Prohibited Terms

The following terms or actions are prohibited (or limited) by the statute and Regulation Z: prepayment penalties, default interest rate, balloon payments, negative amortization, prepaid payments, negligent lending, direct payments to home improvement contractors. 15 U.S.C. § 1639(c)-(h); 12 C.F.R. 226.32(d). 

Remedies

Failure to deliver the required HOEPA notice or inclusion of a prohibited term triggers an extended (three-year) right of rescission (described above; also called TILA Mortgage Rescission). 15 U.S.C. § 1639(j); 12 C.F.R. 226.23(a)(3) n.48.;

In addition to regular TILA monetary damage remedies, HOEPA violations give rise to “enhanced” monetary damages under 15 U.S.C. § 1640(a)(4), namely, all payments made by the borrower. 

PLEASE NOTE: Remember that if you have a HOEPA rescission case, this effectively gives you a double deduction– you get to deduct all payments made twice before getting to your “HOEPA-adjusted” tender amount (once in calculating the TILA tender amount, and once in calculating HOEPA damages). Also, if you’re beyond three years and can’t rescind, you can still raise a HOEPA claim and deduct all payments made in the nature of defense by recoupment.

As with any TILA violation, the rescission remedy runs against any assignee of the loan. 15 U.S.C. § 1641(c). In addition, where the loan documents demonstrate that the loan is covered by HOEPA coverage, assignees “shall be subject to all claims and defenses with respect to that mortgage that the consumer could assert against the creditor.” 15 U.S.C. § 1641(d)(1). This provision mirrors the FTC Holder Rule and creates assignee liability for all state and federal claims and defenses. For monetary damages claims under TILA, it provides an exception to general rule that violations must appear on the face of the documents. 

Statute of Limitations

  • 1 year for affirmative claims.15 U.S.C. § 1640(e);
  • 3 years for rescission.Beach v. Ocwen, 523 U.S. 410 (1998);
  • Unlimited as a defense to foreclosure in the nature of a claim in defense by recoupment
Jul
08

Beware of Scam “Forensic” Loan Auditors/Companies

By | Featured, Forensic Loan Audits, Truth in Lending

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Ok, here we go go again… now the scams have hit the loan auditing industry. Most of these fakers are ex-mortgage brokers who didn’t make it in the mortgage industry and are now looking for a new way to make money. There are a few good auditors out there who have really put in the time, effort and research to actually know the laws and know how to properly state the elements of these violations in a manner that can actually help a homeowner in a foreclosure matter (and can help an attorney bring these violations as affirmative defenses or counterclaims in a foreclosure case).

 TILA or supposed “Forensic” Audits that use standardized check-off lists without providing a mathematical determination of the TILA Disclosure Statement and amounts are NOT Forensic Audits.  A check-off list  or automated/software-driven TILA Audit describing potential violations as “Serious,” or “Moderate” is incompetent and useless.  A Forensic TILA Audit must provide accurate TILA; Regulation Z citations, case law precendent, as well as actual computation of all settlement service fees properly allocated in the TILA Disclosure Statement or the Audit will NOT withstand scrutiny by legal authorities.  Do not be fooled by imitations using standardized check-off lists.

There is absolutely nothing “forensic” about plugging loan data into some software and having it spit out a report. But that is exactly what most of these fakers are doing and they are charging anywhere from $395 to $995 based on what I have seen so far.

If the loan audit will NOT stand up to legal scrutiny then you have wasted your money and someone has scammed you into believing you were paying for something that would help you. Why would  you pay for a loan audit that would not stand up to legal scrutiny?

The software driven report serves a limited purpose and I use a popular banking compliance software for my audits as well but this software-driven report is only a small piece of my actual audit and findings report. A true forensic auditor examines every document relevant to the loan and looks at signatures, dates, parties on the documents, who provided those disclosures or documents and also obtains the story from the client because every loan is a story. It involved people and usually quite a bit of communication between the borrower and the indispensable parties to the transaction.

I have myself setup for Google Alerts on a number of search terms so I go to these other websites pretty frequently. I also get clients who have dealt with some of these fraudsters and now want my help to clean up the mess and the wasted money. Hopefully this post will cause those who read it to really do some good checking before they part with hard-earned money.

Bottom line is to make sure you follow your gut. Do your homework, ask questions, ask for references. A good auditor will most likely have attorneys they work for and consult for.

Feel free to contact me if you have any other questions on this topic or would like a sample of my audit reports. You’ll be able to see the true forensic nature of a good audit vs. these computer-generated reports.

May
19

Foreclosure Rights – Basics in Homeowner Foreclosure Defense

By | Foreclosure Defense Research, Foreclosure Rights, Forensic Loan Audits, Truth in Lending

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By Lane Houk
May 19, 2009

I realized this morning that it’s been a while since I’ve covered the basics of foreclosure defense. For those of you readers who are behind in their mortgage and trying to work something out with the lender (who is usually just the servicer of your loan, not the owner),  you should beware that MOST of these institutions do not deal with you, the homeowner in good faith. Every time I see the news media covering some ridiculous thing they call “reporting” of the facts, fair and balanced or whatever, what they “report” is that banks are hurting, the government is going to save the “people” from this mess and servicers are doing everything they can to help. Call this number, call that number and you’ll get help. Go to this government site, or that for more information… yadda yadda yadda.

If you’re reading this right now then you or someone you know is in serious hard times, you’re thinking that it must just be you and your family having such a hard time because the news is telling you how many people are getting help, you’re just not one of them.

Try again. I’m in this fight everyday with regular American people. Hard working types… and they’re trying to survive right now. But it’s not easy. Hopefully this blog can help you get pointed in the right direction…

Regarding foreclosure, you first need to know: If you’re state is a judicial state or non-judicial state. It makes a big difference in HOW the foreclosure process plays itself out. CLICK HERE for a great resource chart on this.

Basically, if you’re in a judicial state, the party claiming a right to foreclose files a lawsuit in the local court system and you’ll get served with that lawsuit. Defend yourself. In what other lawsuit would you just lay down and die. A wise person defends them self against any and all lawsuits that are filed against them. Right?

If you’re in a non-judicial state, no court case is needed. It usually starts by the part serving you with a Notice of Default. The deed in your name is probably being held in trust and will be turned over within a statutory time frame once the state laws have been followed to do so.

My expertise is in the Florida process. Florida is a judicial state. So for this article’s sake, I’ll go through the foreclosure process for Florida.

Step Two: You’ve been served with foreclosure papers (ie. the complaint). Now what? You have 20 days to respond to this lawsuit (30 days in some states). You also have 30 days to dispute the debt under your federal rights found in the Fair Debt Collection Practices Act (you may also have state collection laws that afford your rights as well). So, in other words, you have a right to dispute the exact amount they claim that you owe THEM.

Remember. You have 20 days to respond. Don’t mess around with this. If you’re in danger of missing that deadline, at least file a Motion for Enlargement of Time which is legalese for “I need more time to get my answer filed because I’m still searching for counsel to take my case.”

Which leads me to Step Three: Get an attorney! Hire one, find one but please make sure they know foreclosure defense, really. Ask them how many cases they’ve taken. Be wise, hire an attorney. If they’re being fair to you and not gouging you on the fees, hiring them will save you money, not cost you. Contact me if you don’t understand why or how…

Step Four: Read the entire complaint you were served. You need to read it and try to understand it. Don’t be fool in life… there are far too many people who just don’t take the time to learn and understand how things work. Some because of fear, some become of laziness. Neither is good, ever, but especially when you’re being sued for a lot of money.

What comes next is kind of like a game of ping pong. They file the complaint… you answer the complaint, ball is back on their side, you wait to see what they hit back at you, etc. etc.

This is also the point where every case takes on a life of its own. There’s really no set way that a foreclosure case goes from here. However, generally speaking, the Plaintiff in the case is going to attempt to get a “Summary Judgment” in the case. This is legalese for quick judgment against you. No issues of material fact present. They win, you lose and you have future financial liability with the deficiency if one will exist after they sell the home.

I’ll make the biggest point of the article right here: Most of the Plaintiff’s in these cases DO NOT, I repeat, DO NOT own the Note that they say you defaulted on. These plaintiffs are either servicers or trustees – both agents for a securitized trust. More than this, I see sloppy, missing and even fabricated paperwork filed by the attorneys representing these big institutions; or they have outsourcing companies to do their dirty (paper) work. You know, plausible deniability stuff. Just beware… if they don’t own the loan, they’ll act like they do and create documents (like an assignment of mortgage) out of thin air to make it look like they do. If you think I’m kidding, just CLICK HERE to read an article by Peg Brickley from Dow Jones and posted online at the Wall Street Journal; this article briefly exposes just a bit of what companies like Fidelity National Information Services are doing in the loan default business boon.

A good auditor/investigator knows what to look for, what documents to inspect and where to find the securitized trust documents – or how to get them.

If you and your attorney are successful in defeating summary judgment, this is a big victory. This is what a good attorney is going to do first. Win the smaller battles and you might win the war. Summary judgment is the first battle in a foreclosure case. Look at every other type of civil or criminal case in our court systems and you’ll find that Summary Judgment is rarely granted. I said rarely and you can check that.

Now compare that with civil foreclosure cases… what you’ll find is that Florida judges are granting plaintiff’s motion for summary judgment in MOST cases. Foreclosure is just another type of civil case… why the MAJOR disparity in this? You think the judges don’t have an opinion about this. There are some rare good ones who actually appreciate the law and respect due process rights of citizens and aren’t going to let these institutions just walk into court and do whatever they want with no respect for the lawful process a foreclosure is supposed to go through.

So to have the best chance at defeating summary judgment, the defendant needs to establish (for the record) genuine issues of material fact. These are your affirmative defenses and there are many standard ones that attorneys should be using and there are some “big bullets” if you will that can be quantified through a forensic analysis and audit of all loan documents, notices and disclosures by the lender, servicer, broker, title company, etc. It’s a rare occasion that I don’t find violations. These violations are absolute issues of material fact. Summary judgment would be improper and there is well established case law on this in Florida.

Once summary judgment is denied, this foreclosure case has to go to a full trial. A good attorney files comprehensive discovery on your case. I mean comprehensive too. I want every document that pertains to this loan. It’s all material… I want the transfer records of the Note, the PSA, the Prospectus and Registration Statement, the accounting records, etc. etc. etc.

These documents once requested need to be produced or the court can be moved to compel the plaintiff to produce. Yes, their attorney will try to make some garbage up about the information requested is proprietary or can’t be produced due to privilege or whatever. This is when you can tell these guys just thumb their nose at due process and say we don’t think the consumer deserves it or has a right to it. This is also when you know they’re hiding something. First off, it’s not proprietary knowledge, its PUBLIC DISCLOSURE! It’s a loan that you say some six to seven figure number is owed by the defendant, the documents for these transactions have to be disclosed to the SEC, the IRS, shareholders, certificate holders, trustees, servicers, custodians, master servicers, depositors, issuers and several other federal agencies. But the borrower has no right to see these documents and have them produced for the record in the lawsuit against them. Right. Give me a break.

This game of ping pong can carry on for many months and often times a year and more. The bottom line to this: YOU HAVE FORECLOSURE RIGHTS! You have a right to due process. You have a right to defend yourself and you should! Find the professionals to help you and fight the war on the home front!

© Lane A. Houk – 2009- All Rights Reserved

May
17

Recoupment: A Powerful Claim in Foreclosure Defense

By | Foreclosure Defense Research, Foreclosure Rights, Forensic Loan Audits, Homeowner Resources, Truth in Lending

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By Lane Houk
May 18, 2009

If you are a practicing attorney: Are you using Defense by Recoupment under 15 U.S.C. 1640(e) as a strong affirmative defense for your clients?
If you are a consumer: Have you had your loan (from day of application to current) audited by a forensic consumer debt analyst?
  
I get a fair amount of “conspiracy theory ” calls or emails people who would swear that the CIA was covertly involved in the loan they signed for and that all measures of fraud occurred against them by everyone involved and… you get the point. My first question to this person is always: “Great, so are you prepared for the $15,000+ retainer a good attorney is going to want to spend their time investigating, quantifying, pleading and trying a case like that? Well, you know the answer…
 
Others have read (or have heard) that a loan audit and violations of the TILA can only help you if it’s a refinance loan on a primary residence in the last three (3) years. To have the EXTENDED RIGHT TO RESCIND, these conditions must be in place but rescission isn’t the only thing that can help someone in (or in danger of) foreclosure.
 
When it comes to defending yourself against foreclosure the first order of business is to establish clear and genuine issues of material fact in the case. In a Florida foreclosure defense strategy, the client wants to quantify these genuine issues of material fact in the foreclosure case because no judge should ever grant a motion for summary judgment. Why?
 
In the state of Florida, there is extensive established law that prevents summary judgment from being granted when there are outstanding issues of material fact. Johnson v. Boca Raton Community Hosp., Inc., 985 So.2d 141, Murphy v. Young Men’s Christian Association of Lake Wales, Inc.,  974 So.2d 565.  A “material fact,” for summary judgment purposes, is a fact that is essential to the resolution of the legal questions raised in the case, Continental Concrete, Inc. v. Lakes at La Paz III Ltd. Partnership, 758 So.2d 1214.
 
Successfully defeating summary judgment is a big score in favor of the consumer and can greatly improve the chances of obtaining a viable and fair workout and thus ultimately, avoiding foreclosure.
  
So, one area of practice Lane Houk and his team help consumer attorneys with is by completing a forensic loan audit on the client’s loan documents from the day they applied for that loan through to current day. Why would a foreclosure client want this done? Let’s think about it…
  1. Often times, the client did not receive proper “pre-closing disclosures” under both Truth in Lending laws (TILA) and Real Estate Settlement Procedures Act (RESPA);
  2. Especially when there was a mortgage broker or interim lender involved
  3. The actual “lender” in the transaction was under same timeframe obligations to make specific disclosures to client from the day they received application
  4. The many servicing abuses which could have taken place from day of closing to current
  5. Insufficient amount of certain disclosure violations
  6. Escrow mishandling abuses (I’ve seen people nearly lose their house to a bona fide mistake the bank made but wouldn’t budge until a good attorney got involved)
  7. The list goes on…
Under the TILA civil liability section [15 U.S.C. 1640(e)] regarding violations it says that any action under that section may be brought in any United States district court, or in any other court of competent jurisdiction, within one year from the date of the occurrence of the violation. But, that subsection does not bar a person from asserting a violation of this subchapter in an action to collect the debt which was brought more than one year from the date of the occurrence of the violation as a matter of defense by recoupment…
 
A consumer can only bring an action for damages within one year from the date of closing. However, the consumer is not barred from bringing a claim as a “matter of defense by recoupment” in a foreclosure action because a foreclosure action is an action to collect the debt. (ie. almost all foreclosure complaints are served with some level of disclosure that “this is an action to collect on a debt”) however NOT disclosing that does not necessarily preclude that any such action is NOT an attempt to collect on the debt.)
 
Any such quantified claim of a violation of the TILA (Truth in Lending Act) from an expert audit report should be brought as an affirmative defense by the attorney. This is a rock solid issue of material fact. No summary judgment. The lender will have to bring the action all the way through to trial. This should give you much greater leverage to obtain a workout. At the very least, this give you/your client much greater time in the house and time to try to work something out that works for both parties; something that is much needed these days because I still see a great deal of servicer abuse/misprepresenations happening every single day.
 
When it comes to auditors, remember that as with any professional, most often you will get what you pay for. If you have some company offering you an audit for a couple hundred bucks, you’re going to get that level of expertise and report back. A good expert auditor and their service should be in the $750.00-1000 price range. More or less than that just be careful.
 
I hope this little insight gives you some ideas on how you can help yourself in a foreclosure case. If you want more information on forensic loan audit, please call me at (800) 985-4685 ext. 2 or by email at Lane@thePatriotsWar.com
 

© Lane A. Houk – 2009– All Rights Reserved