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Mortgage Foreclosure: Beware of Mortgage Servicers’ Tricks and Dodges.

Posted By Cliff Tuttle | September 5, 2009

Posted by Cliff Tuttle (c) 2009

SUMMARY: Mortgage servicers are either fooling around without making workout deals, aggravating judges and stranding borrowers in foreclosure, or defaulting on their own workout plans. If this is happening to you, hire a lawyer who knows what to do about, pronto.

The New York Times reports that judges, particularly in Bankruptcy Court, are getting peeved with mortgage servicers, particularly mentioning Wells Fargo. Borrowers and their lawyers trying to arrange workouts are getting upset as well, with good reason. Here is a post on the subject that appeared on a listserve for real estate lawyers called “Dirt” that is pretty typical:

Out of work Borrower is in foreclosure. Borrower gets job and negotiates workout with servicer/lender (not sure who owns the loan but talking to HSBC). Foreclosure is cancelled and 60 days foreclosure hold is put on account.

In early July, HSBC sends email setting out terms of workout and requests “qualifying payment” within 30 days and then make August payment and modification paperwork will be sent.

Meanwhile, the collection arm of HSBC keeps calling and threatening to foreclose. Borrower tells them they have a workout and collection arm says “No, you don’t. and you are going to lose your home.” Borrower explains that apparently the left hand doesn’t know what the right hand is doing and asks them to get in contact with workout department.

Borrower wires qualifying payment and 2 weeks later HSBC returns the wire. When borrower calls regarding this return of the qualifying payment wire, supervisor in workout department tells them that “it hasn’t been changed in the computer yet (still showing in foreclosure), let’s start over and make qualifying payment and send me the Fed Wire No. Supervisor assures borrower that the wire will not be returned and that the computer shows 60 days hold on foreclosure. Borrower wires payment on August 4th, emails Fed Wire No and hears nothing further.

Borrower calls on August 31st to see if they are supposed to make Sept payment and is transferred to voice mail and leaves a message. No one returns their calls or email. Borrower goes ahead and wires payment on Sept 1.

On Sept 3rd, the qualifying payment from August 4th is returned with text on wire return “Rtn of your Fed wire ref (Fed wire no of Aug wire) dd8/04/09 Sender’s ref per BB K Req Per Default and Doreen Beza Res Holding Time. Most likely, whoever got the voice mail saw the wire and had it returned. (probably collection/default department).

As of today, the Sept 1st payment has not been returned.

Sounds like the work out and collection arms of HSBC are not communicating and the collection/default department returns the borrowers’ wire as soon as they see it.

This is Missouri property, so it is non-judical foreclosure state. Borrower is concerned that they collection/default department is going to start foreclosure as soon as the 60 days is up and of course, the fee is added to the loan balance.

Any suggestions or solutions? Does borrower need to file law suit to get HSBC to “change their computer” and finalize the modification and if so what causes of action do they have?

The short answer is that there is a breach of contract by the servicer. The servicer made a deal, then refused to honor it. In such a situation is absolutely imperative for the borrower to get the matter before a judge in a context where the court can grant relief to the borrower. How that happens will vary from state to state. However, the homeowner cannot do it alone. An experienced lawyer (experienced in this field of the law) is required. And yes, if you can afford to pay under a reasonable workout plan and have equity in the property, you can afford a lawyer. The alternative is to lose the house. Do it and don’t wait.



CLIFF TUTTLE has been a Pennsylvania lawyer for over 45 years and (inter alia) is a real estate litigator and legal writer. The posts in this blog are intended to provide general information about legal topics of interest to lawyers and consumers with a Pittsburgh and Western Pennsylvania focus. However, this information does not constitute legal advice and there is no lawyer-client relationship created when you read this blog. You are encouraged to leave comments but be aware that posted comments can be read by others. If you wish to contact me in privacy, please use the Contact Form located immediately below this message. I will reply promptly and in strict confidence.

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