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Consumer Matters is a monthly e-newsletter prepared by The Arcia Law Firm, P.L., and is dedicated to provide you with vital information related to your health, consumer safety, and improved quality of life.  This newsletter will also provide you with recent verdict and settlement information in personal injury, medical malpractice, and other related legal matters.  Feel free to forward this newsletter to friends, family and colleagues that may be interested in its content.  If you would not like to receive any future copies of our informative newsletter, you may unsubscribe below where indicated.

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There are quite a few different opinions on what caused the real estate crisis we are facing today. Some experts blame the lenders for recklessly approving “no-income-no-asset” loans that borrowers could never afford. Others blame the borrowers for taking on far more debt than their means could realistically support. Whichever side is to blame, one thing is becoming increasingly evident – so-called loan modifications through a mortgage or real estate broker are not the answer. We see the signs urging you to “loan modify” everywhere -- on TV, radio, billboards, newspapers, and even on street signs. The reality behind the loan modification “craze” is almost as sobering as the real estate crash. In fact, more than half (55%) of loans modified in the first nine months of 2008 were 30 days or more late within six months, according to the Office of the Comptroller of the Currency (OCC). The problem? Even as lenders have become more willing to modify borrowers’ loans in the past year, many aren’t offering deals that borrowers can afford over the long term.


Here are five reasons why loan modifications fail:

  1. Modified loans often carry higher balances than the original loan.
    Because many lenders add unpaid interest and fees to the loan balance, homeowners often walk away with more mortgage debt than they originally incurred. A study by Alan White, an assistant professor of law at Valparaiso University found that an average of $10,800 was added to mortgages when they underwent a modification. Unfortunately, servicers that reduce loan principal are few and far between. In fact, just one company, Ocwen Financial Corporation, accounted for 70% of all principal reductions, according to White’s report.

  2. Modified loans often carry higher monthly payments.
    It should come as little surprise that with few lenders reducing principal — and most tacking on fees to the loan balance — nearly half of all loan modifications (45%) actually resulted in increasing a borrower’s monthly payment, according to White’s study. When you provide a modification that doesn’t actually reduce one’s payment, the chances are quite high that the person will fall into default again.

  3. Despite modifications, many homeowners are still underwater.
    As we are all painfully aware, real estate values in South Florida and elsewhere continue to plummet at a staggering pace.  Most borrowers with whom I consult owe their lenders far more than their home is actually worth.  Borrowers who owe more on their homes than they are worth have little incentive to stay there, even if their payments are lower.   The result is that even though the borrower goes through the time consuming process of a loan modification on their own, or through a loan modification company, it is often a fruitless act because they are still just paying interest to their lender.

  4. Homeowners accept unaffordable terms, and waive important legal rights. Desperate to keep their homes, many homeowners will accept loan modification offers they can’t really afford.   The terms offered by banks benefit the lender not the homeowners.  Within just several months after signing a loan modification agreement with their lender, homeowners are right back in the same or worse position than they were when they began the loan modification process.  More importantly, in the midst of their desperation, homeowners sign loan modification agreements that contain a waiver of rights that allows a lender, its assignee and its servicing company to erase any potential liability for violations of federal truth in lending laws, or under the Florida Fair Lending Act.  These serious violations by lenders were rampant from 2001 to 2007, and asserting them against a lender may be the most powerful negotiating tool in the homeowner’s favor.

  5. Navigating the system is difficult.
    Even though customer service reps are typically the first people homeowners get on the phone, they aren’t authorized to modify a loan.  These decisions have to be made by officers of the lender and sometimes need to be approved by a board of directors or investor groups.  Homeowners could be tied up in the loan modification process for months, complete several rounds of applications and financial statements, and wait hours on the phone to speak with a customer service representative that can only offer the homeowner “lip-service.” Worse yet, many homeowners seek help from so-called “loan-modification brokers” who charge upfront fees. Many of these firms are outright scams, taking the homeowner's money and doing nothing for them in return.

 

DON’T BE ANOTHER VICTIM OF
THE LOAN MODIFICATION INSANITY.

THE SOLUTION: TAKE A PROACTIVE APPROACH, AND PUT YOUR LENDER ON THE DEFENSIVE. 

Lender Owned

First of all, perform a detailed audit of your loan transaction through a qualified mortgage auditing firm.  These audits often reveal serious violations of Federal and State laws by the very same lenders and servicing companies that initiate foreclosure proceedings, and harass homeowners who fall behind on their mortgage payments. If you don’t know a reputable mortgage audit firm in your area, please contact the Arcia Law Firm, and we will do our best to point you in the right direction.

Banks, lenders and servicing companies will only negotiate fairly and justly with homeowners if you can demonstrate that they have violated the law and may be exposed to a judgment for significant damages.  Only a qualified law firm, with knowledge about the types of claims that a consumer has against his/her lender can create this very real threat in the eyes of banks, lenders and servicing companies.

The Federal Truth in Lending Act (TILA) requires lenders to provide truthful and complete disclosures to homeowners at closing regarding finance charges and rate of interest on the home loan.  The penalties for non-compliance with these requirements can be stiff if presented in a timely fashion, and may include rescission of the loan transaction.  Rescission means that the entire mortgage transaction is unwound, i.e., all fees, down payment, and closing costs for the home are refunded to the homeowner. 

Additionally, all principal and interest payments made are also refunded to the homeowner, putting the homeowner in the position he or she would have been if the loan never closed.  How’s that for negotiating leverage against your lender?
If your home purchase does not qualify for a rescission claim under TILA, you may still have a valid consumer fraud claim under Florida law, which can be supported through your lender’s truth in lending violations.  Moreover, if your home loan includes prepayment penalties for longer than 3 years, balloon payments that mature in less than 10 years, late fees that exceed five percent (5%) of the monthly payment, and/or an extension of credit regardless of borrower’s ability to pay, you may also have valid claims against your lender under the Florida Fair Lending Act (FFLA).

Both TILA and the FFLA provide homeowners with affirmative claims for relief against their lenders, and against all assignees who purchase the mortgage loans.  Properly asserting these claims through a qualified attorney, and following up with appropriate legal action, places the homeowner in a much stronger position to negotiate terms that are acceptable to the homeowner – not the lender – and provides the homeowner a much better chance that he or she will not fall back into default.

Even if you do not have a claim under TILA or the FFLA, your lender can be placed on the defensive if you can establish that they do not have the original note and attachments.  This deficiency could prevent your lender from ever maintaining a foreclosure action against you, and from taking your home. A knowledgeable attorney can obtain all loan information in the lender’s possession through a process called a Qualified Written Request (QWR).  During this QWR process the lender cannot report the account as overdue to any credit reporting agency. 

In addition to our personal injury practice, the Arcia Law Firm also represents dozens of homeowners in these types of consumer fraud and insufficient securitization cases against lenders, banks and servicing companies.  We only accept cases with violations of TILA, the Real Estate Settlement Procedures Act (RESPA), Home Owners Protection Act (HOEPA), and/or the FFLA, as confirmed by a certified mortgage audit firm.  If your home purchase loan or refinance took place between 2001 and 2007, if you are behind on your mortgage payments, if your home value is less than what you owe your lender, if you have been declared in default by your lender, or if you just received a foreclosure summons, don’t “loan modify” for a short term fix. 

Contact the Arcia Law Firm today at 1-800-770-7102, and we may be able to help you achieve a long term affordable solution to your personal mortgage crisis.  Likewise, if you know anyone that is facing a mortgage related crisis, or is undergoing a loan modification, tell them not to sign the modification agreement, and immediately forward this article to them.  It just may be the most important email you send them all year.

We are available to discuss your rights if you, a friend or loved one has been injured in an auto accident, or is the victim of medical malpractice. We also accept cases involving a slip & fall, wrongful death, product liability, business and real estate disputes.  Please call us today for a free consultation at 1-800-770-7102, email us at info@arcialawfirm.com, or visit our website www.arcialawfirm.com and complete our Free Evaluation form. 

Our Firm accepts and handles personal injury, medical malpractice and other legal matters in Pembroke Pines, Miramar, Davie, Cooper City , Ft. Lauderdale, Plantation, Sunrise, Coral Springs, Lauderhill, Weston, Southwest Ranches, Sunrise, Margate, Oakland Park, Hollywood, Lauderdale Lakes, Hallandale, Dania, Pembroke Park, Wilton Manors, West Palm Beach, Pompano Beach, Miami, Coral Gables, North Miami, Aventura, Sunny Isles, Bal Harbour, Hialeah, Miami Lakes

 

 

 

The Federal Truth in Lending Act (TILA) requires lenders to provide truthful and complete disclosures to homeowners at closing regarding finance charges and rate of interest on the home loan. 

 

 

 


This publication is intended to educate the general public about personal injury, medical malpractice, insurance, and small business issues.  It is not intended to be legal advice.  Every case is different.  The information in this newsletter may be freely copied as long as the newsletter is copied in its entirety.


Huntington Square III 3350 S.W. 148th Avenue Suite 405
Miramar, Florida 33027
Tel. 1-800-770-7102 Fax 954-438-4312
Email us: info@arcialawfirm.com

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