Mortgage Fraud

By Andrew J Thompson

Because of the nature of mortgage transactions, it can be difficult to determine a case where a homeowner has been defrauded by a lender, broker or title agent in  a mortgage transaction.  But it does happen, and it happens far more often than homeowner’s realize or know.

What is a Case for Fraud?

First, to prove fraud there must be some material misrepresentation or omission of fact.  Actual representations of fact demonstrate the potential of actual fraud, and when the representation is visible, a case becomes easy to prove.

But in most cases, there is limited or no contact between the lender and borrower, and very little contact between the borrower and title agent, in fact it is common that the borrower only meets or talks to the title agent at the closing – and for a very brief period of time.

But omissions of fact, that can be determined from examination of all the evidence surrounding the mortgage transaction itself, if the situation meets other requirements, also can constitute fraud – or perhaps something treated in the law as “constructive fraud”.

Either way, the representation or omission must have occurred either intentionally or knowingly on the part of the party to be held liable for their actions.  If the party did not know and was not accountable for knowing that the misrepresentation or omission occurred, it cannot be guilty of fraud. But if it knew or should have known that important facts relating to the transaction were not disclosed, or were misrepresented to the borrower, fraudulent behavior was in play.

Fraud, however, must also cause the borrower to suffer harm.  This can come in many forms.  For example, it the borrower was eligible for a significantly lower payment at better rates on the loan, if the borrower accepted money based on an appraisal that was inappropriate given the market conditions at the time of a loan – and borrowed more than they should have and lost equity in the house because the appraisal was wrong, even if the borrower’s finances did not justify the loan and they could never get to a position they could repay the loan, these are examples of how fraudulent conduct could case harm to a borrower.

But the homeowner must actually suffer a loss at the hands of the borrower or other party to recover for fraud.  If the above scenarios present only hypothetical losses, the homeowner is not entitled to recovery.  But if they can prove at last $1 of actual loss because of the fraudulent conduct, the defrauded party is entitled to recovery.  At that point, a major case is opened up – for the recovery of actual losses and potentially punitive damages as well.

In other articles, we will discuss how fraud is proven, other claims that may be available to a homeowner, and what to do when you suspect fraud has occurred with respect to your own mortgage.

If you would like assistance with an investigation or assessment of potential fraud relating to your own mortgage, please contact the Thompson Law Office at (317) 564-4976, or email the author at: andrew@thompsonlawindiana.com

When Do You Need an Attorney?

By Andrew J Thompson

When a bank or your lender threaten you with foreclosure, it can get very uncomfortable in a hurry.  I’ve represented dozens of homeowners, borrowers and private lenders in mortgage protection and mortgage fraud cases, very few of whom have hired me in the early stages following a claimed default.  Usually, they don’t need to at this stage.  But that can change in a hurry and it can change with profound implications.

If you hire an attorney before you have the need for legal defense, you will expend badly needed financial resources trying to protect against claims that aren’t yet ripe.  But if you wait too long, the consequences can be dire.  In my experience, I have learned that I can help just about any homeowner if they come to me early enough.  But I have also had plenty of cases where it’s too late, or there just aren’t the resources at hand to defend the case in the way it needs defended. So how exactly does this play out, and what are the factors that dictate when an attorney can and should make a difference in your case?  Below is a summary of what is likely to happen at various stages of proceedings and how it is that an attorney should help, or alternatively may not or may not be able to help  under the circumstances.

DEFAULT/PRE-FORECLOSURE

Until the bank has indicated it intends to move ahead with foreclosure proceedings, you generally do not need an attorney working for you.  If you are considering a loan modification, or have applied for one, you know there is much paperwork involved, and hiring an attorney will usually do little for you except increase the cost of defending yourself.

There are exceptions, however.  If your claims against the lender are so clear that you have a suit to file against it (them), then you should hire an attorney sooner rather than later to pursue your rights, rather than sleeping on them until the bank establishes the upper hand against you.  Pre-emptive strikes can be very important in foreclosure litigation because the lender often takes advantage of the procedural tools (Trial Rules) at its disposal that enable it to move quickly and short circuit your rights of defense against foreclosure.  I have seen this happen to an unsuspecting homeowner many times over, so don’t let it happen to you.

NOTICE OF INTENT TO FORECLOSE

At this juncture, before a case is filed against you, but upon seeing a pre-foreclosure intent letter, it is wise at least to consult with an attorney to know your rights and help you decide on your own next steps, while wisely considering what to do more immediately.  Most typically I would say this is generally too early to hire counsel, and any earlier makes little sense except in the situation where you need to find an attorney to prosecute your own claims against the lender,

RECEIVING A SUMMONS

If things ever get to this point, it is time to hire counsel and to be as aggressive as you can defending your rights – whether as to ownership of the property, for a proper accounting of the loan, or otherwise.  The Summons means this is serious buisness.  You’ve been sued!  But chances are very high that if you use the special rules to your advantage.  You should not try to Answer a Complaint on your own, and you should not to begin staging a defense to the suit without the assistance  of counsel.

SETTLEMENT CONFERENCES/MEDIATION

In some ways the structure of a settlement conference lends itself to handling it without the aid of counsel, but the problem is the lender will take advantage of the rules if you don’t have someone on your side who knows what to look for.

POST-JUDGMENT PROCEEDINGS

Whether   it’s Default, Summary Judgment, or even a judgment at trial – in a foreclosure proceeding, the bank is going to want to  get the property sold and you out of the house – probably as soon as it can.  While it’s too late usually at this stage to make a difference, an effective attorney may still be able to employ a strategy that will buy considerable time in your favor.

All things considered, don’t delay.  There are so many good, viable defenses to a foreclosure action available to you, make use of them in the best way you can.  If you’d like the opinion of a seasoned experience mortgage defense attorney or may need actual representation, please call (317) 564-4976 to set an appointment speak with the author.

Can You Keep Your Home after a Short Sale?

By Andrew J Thompson

One of the requirements for any short sale is that the property must be owner occupied.   Obviously, this is a requirement imposed upon the seller.  Another requirement is that the buyer must not be a “related party”.  This means a spouse, ex-spouse, parent, child, sibling, or possibly a partner, employer, landlord, or even a friend. The lender has great latitude in determining who fits the definition of a related party.

OK, so let’s say you’re living in a home you bought for $250,000 several years ago.  The market has reduced the value of the home to around $175,000 today, you’ve fallen behind on your mortgage, and the bank says you now owe them around $325,000.  Regardless of income, a loan modification probably doesn’t make sense at this point.

But you could reasonably make payments on what the house is worth today, and have faithfully tried to work with the bank ever since you fell behind.   The house is very attractive at the price to a third party buyer-investor.  You don’t know who this is, but chances are good your realtor will know what the buyer is looking as much as he/she knows your situation, and they may well be looking for a good renter – and the best renter might just happen to be you.

Is this plausible?  Basically it depends on the underwriting requirements of the lender.  If they will allow it, or have no means of prohibiting it, then yes, it could be plausible.  The problem is they have to approve the short sale, and if they feel like they will get a little less than they could through another form of sale, they are not likely to approve it – or it could take a very long time to get approval.

But if it takes a long time – so what?  What do you lose when this happens?  Probably not very much, if anything.  It just means additional months you are living in your own home and that you cannot make payments while you do.

The scenario is definitely one worth exploring if your hope for a loan modification is minimal, and if it seems your potential for recourse against the lender – as in most cases – is minimal.

Our firm has helped dozens of homeowners in foreclosure situations figure out ways to save heir homes.  If you think there may be a way we can help you, please call us at (317) 564-4976 for a free consultation.

Your Indiana Attorney – Foreclosure Defense

Attorney Andrew Thompson of Thompson Law Office in Carmel Indiana briefly explains procedures to foreclosure defense.

Your Indiana Attorney – Fighting a Foreclosure in Court

Attorney Andrew Thompson from the Thompson Law Office in Carmel Indiana breifly discusses a situation where we was defending a client in court.

The Value of Quiet Title Actions

By Andrew J Thompson

(For more information on this topic, contact the author at andrew@businesslawindiana.com or by calling the Thompson Law Office at (877) 365-1776.)

Many homeowners have struggled with the large, national banks, trying to work out terms of a loan modification to save their home after they have fallen into default on a mortgage.  The process is laden with disruption and uncertainty as the banks fumble through mountains of paper, making a foregone underwriting decision on whether or not the homeowner qualifies for better terms and the opportunity to get out from under the problem.

The whole process, whether it is the loan modification consideration controlled by the bank, or foreclosure litigation within the court system, seems as if it is orchestrated from start to finish with the bank in charge of it all.   The courts often add reinforcement to this notion by deferring to the banks or their attorneys in how the proceedings in a foreclosure case unfold.

A “Quiet Title” action is one brought against all lienholders on the property in order to remove any liens that cannot be susbtantiated in a court of law, to address the order of priority of the liens that are valdily placed on the property, and to remedy any defects within a lien that is valid in and of itself, but where a mistake has been made in documentation or recording of the note.

Whenever there is a purchase money mortgage recorded against the property, any action to quiet title (other than foreclosure of the mortgage itself) can be very, very difficult.  The purchase money lender essentially has an extraordniary priority based on its consideration for lending the money that was used to buy the home.  This presents an interesting dilemma for homeowners when the bank’s actions have been so poorly managed, or even worse, and the homoewners have been left in a position rendering them unable to pay for the home they bought, because they unwittingly agreed to pay far more than its market value.  (This usally happens without a homeowner knowing, because of inflated appraisals, and other improper steps that the owner(s) could not have known about.)

When a homeonwer tries to take corrective action, the bank brings in an army of staff and of hired attorneys to defend its actions, however wrong they know they were.  And the basic defense, that most people accept is “you bought the house with this loan and agreed to pay it back, you either pay it back or lose the house”.

But in recent years, the terms of loans have become so oppressive, even to well-educated buyers, that once they go into default, it is difficult or nearly impossible to cure the arrearage and get it back on track.

Quiet Title actions are then a necessary tool for consideration, even if they are extremely difficult to prosecute.  The threat or reality of a quiet title claim forces the bank to think through the possibility that their own lien could be shown to be defective and removed – and in many cases, rightly so!

Banks are guilty of many errors in the lending process.  Many of these errors are much more substantive than their armies of attorneys will allow.  What if a note is dated far differently from the mortgage securing the note?  What if the notary signatures are on different pages than the signatures of the borrower?  What if signatures are not witnessed or attested?  Are these things important?

Consider the closing process itself.  Do the appraisals fully substantiate the market value of the home?  Was the homeonwer apprised of his rights?  Did the closing agent have proper authority to carry out the transaction that was done?

There are many more possibilities.  When the banks have failed in their duties, they created an economic distortion that many homeowners could not bear.  They need ot be accountable for their own actions and to the parites they misled.  This is the value of a Quiet Title action.

Protection from a Sheriff Sale

By Andrew J Thompson

The most important thing you can do to protect yourself from losing your home in a Sheriff Sale is to be pro-active in presenting your legal defense at every step of the foreclosure process.  If you have tried to work with your bank alone, however, without the help of an attorney, it’s likely you’ve fallen short of protecting yourself in the best way you can.

If you have an attorney, who defends your rights on every point of contention, it is unlikely a court will decide you have slept on your rights, or failed in your efforts to meet your obligations (if in fact you have tried to meet them), and allow a Sheriff Sale to proceed.  On the other hand, if you wait until a Sheriff Sale has occurred or is about to, before having an attorney do anything on your behalf, the court is very likely to conclude you have had plenty of opportunity, and never shown the court you truly would do what you could to keep your home.

If you have fallen behind on a mortgage, there are things an attorney can do for you at each stage of the process:

  1. BEFORE A FORECLOSURE ACTION IS FILED: It’s wise to engage an attorney as soon as you reach a point where you cannot deal with the bank and get a sound resolution to your problem.  This usually occurs the first time you have trouble applying for a loan modification.  The banks are not good at explaining why there is a hang up in the process, and you may have some options or defenses to their claims against you for an arrearage, that can only be adequately presented if you start when they arise.
  2. AFTER RECEIVING A SUMMONS: Within 20 days after receiving a Summons, you should consult with and engage a lawyer.  This is the point at which the attorney can typically do the most to help you.  Why?  It is the one opportunity you have to deny the bank’s allegations.  But more important even than that are two critical steps in the process you can only engage within 20-60 days of receiving the summons: 1) the opportunity to file a counterclaim against the bank for what it may have done wrong, and 2) scheduling a settlement conference to seek a foreclosure prevention agreement.
  3. UPON A MOTION FOR SUMMARY JUDGMENT BY THE BANK: If the bank seeks summary judgment, and it usually does at some point, it is trying to avoid the expense and risk of going to trial by getting the judge to rule in its favor on the paper filed with the court, rather than evidence that could be presented at trial.  A skilled attorney can help you avoid summary judgment by pointing out factual issues that need to be addressed before the bank’s claim warrants a judgment in its favor.  If you prevail at this juncture, there is a very good chance the bank will never take a judgment against you and you will have the opportunity to negotiate a settlement that will work for you. (You may have to tender payments to the court to show good faith on your part in the meantime, however.)
  4. AFTER FORECLOSURE OR DEFAULT JUDGMENT IS TAKEN: This is a point when fast action is critical.  If you get something done before a Sheriff Sale is scheduled, you may never face that prospect.  But your options have been narrowed considerably by now and you have to think much more tactically with your attorney’s help.
  5. ONCE A SHERIFF SALE IS SCHEDULED: Like the preceding step, but much more obviously, this is a point when you need to act.  Your attorney needs to leverage his ability to slow down or “stay” the process and get the bank to consider a settlement that doesn’t end up in it taking back a property it probably doesn’t want.
  6. POST SALE, BUT BEFORE AN EVICTION: Even at this late stage, we have seen homeowners keep their homes indefinitely by showing some good faith and using their attorney to plead their case before the court.  You can save your home at any point in the process, but it gets tougher with each marker the bank passes on the road to taking possession of your home.

Take advantage of the resources you have.  Your attorney can be the best help you find in the process of avoiding the loss of your home through foreclosure.

Andrew J Thompson is an attorney with 22 years experience in business, family and real estate law, practicing in Indianapolis, IN.  You may reach his firm, the Thompson Law Office, by calling (317) 564-4976 to schedule a free consultation.