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.

Foreclosure Prevention Agreements & Settlement Conferences

By Andrew J Thompson

Indiana law offers a rare advantage to homeowners in foreclosure through its requirements for a Settlement Conference between the bank and the borrower.   The purpose of the Settlement Conference is for the parties to try to come to terms on a foreclosure prevention agreement, so that the homeowner is not forced to leave his or her home, without having a good way to get into other suitable housing.

The Indiana legislature has recognized that it is in the public interest for the state to modify the foreclosure to encourage mortgage modification alternatives.  The purpose of the changes in the law is to avoid unnecessary foreclosures of residential properties and provide greater stability to Indiana’s statewide and local economies by

(1) requiring early contact and communications among creditors, their agents, and debtors in order to engage in negotiations that could avoid foreclosure; and

(2) facilitating the modification of residential mortgages in appropriate circumstances.

A primary tool in accomplishing this purpose is the Foreclosure Prevention Agreement.  A Foreclosure Prevention Agreement is defined under Indiana law as a written agreement that:

(1) is executed by both the creditor and the debtor; and

(2) offers the debtor an individualized plan that may include:

(A) a temporary forbearance with respect to the mortgage;

(B) a reduction of any arrearage owed by the debtor;

(C) a reduction of the interest rate that applies to the mortgage;

(D) a repayment plan;

(E) a deed in lieu of foreclosure;

(F) reinstatement of the mortgage upon the debtor’s payment of any arrearage;

(G) a sale of the property; or

(H) any loss mitigation arrangement or debtor relief plan established by federal law, rule, regulation, or guideline.

The homeowner is required to prepare a “Loss Mitigation Package” that includes financial information about income, assets and debts that is sufficient for a creditor to make underwriting decisions about the debtor and any modification to the mortgage and to bring documents in support of this information to the Settlement Conference.

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Under Indiana Code 32-30-10.5-10 (4), in any foreclosure proceeding of which the homeowner has properly requested a settlement conference, the creditor is required to:

(A) In a foreclosure action filed after June 30, 2011, send the debtor, by certified mail a the following transaction history for the mortgage:

(i) A payment record substantiating the default, such as a payment history.

(ii) An itemization of all amounts claimed by the creditor as being owed on the mortgage, such as an account payoff statement.

(B) Bring the following to the settlement conference:

(i) A copy of the original note and mortgage.

(ii) A payment record substantiating the default, such as a payment history.

(iii) An itemization of all amounts claimed by the creditor as being owed on the mortgage, such as an account payoff statement.

(iv) Any other documentation that the court determines is needed.

For a free consultation concerning Settlement Conferences and Foreclosure Prevention Agreements under Indiana law, call the Thompson Law Office at (317) 564-4976 today.