Wednesday, February 29, 2012

Mortgage Assistance May be on the Way for Some Illinois Homeowners

Having been closely involved in many cases where Illinois residents are facing the possibility of losing their homes, our Cook County foreclosure attorneys are well aware of how desperately people in the Chicagoland area need some kind of assistance with and relief from their mortgages.  Fortunately, it appears that the worries of tens of thousands of concerned homeowners have not fallen entirely on deaf ears in the state government.  This month, Governor Pat Quinn introduced a new state initiative called the Illinois Building Blocks Pilot Program (“Building Blocks”).  Building Blocks is designed to provide $40 million to help fund new job creation, as well as another $10 million to facilitate the purchase and improvement of Cook County homes. 

The program will focus on six specific communities within Cook County: Berwyn, Maywood, Park Forest, Riverdale, Chicago Heights and South Holland.  These communities were chosen because they are among those most severely affected by the economic downturn in the state.  Because they have some of the highest Illinois mortgage foreclosure rates, these areas are also in danger of seeing higher crime rates and even greater drops in home values.  As more foreclosures occur and more homes become property of the banks that financed their purchase, less and less people are actually living in these neighborhoods.  As a result, break-ins, burglaries, and vandalism have become more common.  These crimes can cause the values of homes in the surrounding area to drop, making it more difficult for homeowners with mortgage troubles to sell without taking a substantial loss and ultimately leading to even more foreclosures.  According to an article by Oak Leaves, a Chicago Sun-Times publication, the average home that is located on the same block as a foreclosed property drops between $8,000 and $10,000 in value.

The new Building Blocks program seeks to put an end to this cycle with the implementation of its three main components:

            (1) Home improvement funding in order to facilitate home sales;
            (2) Assistance for people who buy homes in the Building Blocks program's focus communities; and
            (3) Assistance for existing homeowners in the focus communities as a means to ward off more foreclosures and allow those homeowners to continue paying their mortgages.

The home improvement fund will begin by targeting approximately 500 local homes to be fixed-up and then sold.  As the renovated homes are sold, the money from those sales will then be invested back into the fund so that the same process may be used to market other houses.  The assistance for buyers will consist of grants of up to $10,000 to help purchasers with down payments and closing costs on homes within the included areas.  The Cook County homeowners' assistance will come in the form of loan counseling, mortgage restructuring, and even access to financial help for existing mortgages.  The state hopes that by intervening in ways that can stimulate purchasing in the locations that need it most, it can help stop the cycle of foreclosure and begin turning the Illinois real estate market around.

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(Photo courtesy of stevendepolo)

Tuesday, February 28, 2012

Homeowners Who Claim They Never Missed a Payment Challenge Mortgage Foreclosure

Those of us working in Oak Park mortgage foreclosure know that mortgage servicers have gone to extraordinary lengths in the past to take advantage of struggling homeowners so that they can meet their own bottom lines.  A recent article in the Post-Tribune reports another example of a mortgage company’s irresponsible and deceptive behavior.  A couple in Porter County, Indiana claims their home is being foreclosed upon, even though they apparently have never missed a mortgage payment. 

The two homeowners are suing their mortgage company, PHH Mortgage Services, to try to sort out the mess and hold the company accountable for the mistake.  Christopher and Holly Kozlowski originally filed their complaint in the United States District Court in Northern Illinois last year, but recently transferred the suit to the United States District Court in Hammond, located in Indiana.  The mortgage company is listed as a residential mortgage licensee in Illinois as well as in several other states.

According to the federal lawsuit, the couple signed an agreement at the end of 2009 with their mortgage company, PHH Mortgage Services, to lower their monthly payments.  As our Oak Park and River Forest foreclosure defense lawyers know, loan modifications such as the one the Kozlowskis entered into with their mortgage company are common and frequently benefit both lenders and homeowners.  Loan modifications typically make it easier for homeowners to stay current on their mortgages.

After reaching an agreement with PHH in 2009, the couple made the agreed-upon modified payments until they received a notice from PHH nearly a year later claiming that the homeowners were delinquent on their mortgage.  The company claimed it never received the couple’s signed documents regarding the modification, and planned to foreclose on the couple’s home.  The couple then sent the mortgage company a copy of a UPS receipt they say was for the package containing the signed documents and for which a PHH employee had signed.  Allegedly, PHH then told the couple at the end of 2010 that the foreclosure was a mistake.  Yet, only a month later, the couple was again told they would, in fact, be foreclosed upon.  According to the lawsuit, the company now claims the couple owes more than $42,000 on their mortgage.  The couple says they want the mortgage company to honor the contract regarding the modified loan payments (just as they were upholding their end of the bargain by making every modified payment) and to stop the foreclosure on their home. 

Believe it or not, this is not the first time our Chicago foreclosure attorneys have heard about such blatantly unscrupulous behavior from mortgage companies.  Mortgage companies frequently claim they have not received or cannot find paperwork that they actually have received.  In other instances, the problem may stem from a company’s lack of organization or accountability oversight in making sure that important paperwork is processed in a timely and efficient manner.  On the other hand, fraudulent lenders sometimes employ deceptive tactics to frustrate or wear down struggling homeowners.

If you are an Oak Park or River Forest resident who is concerned about losing your home, please consider contacting a qualified professional at the Emerson Law Firm to learn more about Illinois foreclosure protection laws.

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Friday, February 24, 2012

Citigroup Settles Mortgage Fraud Lawsuit with DOJ, Admits Wrongdoing

This week, financial giant Citigroup, Inc. admitted to taking advantage of a federal mortgage insurance program and will pay $158 million to settle the lawsuit lodged by the U.S. Department of Justice (DOJ).  According to the Los Angeles Times, Citigroup acknowledged that it provided misleading information about the quality of its mortgages to a federal insurance program run by the U.S. Department of Housing and Urban Development (HUD).  Those of us working in Oak Park foreclosure defense know that despite the apparently hefty sum, the settlement probably will not impede Citigroup’s ability to conduct “business as usual,” leaving little more than small comfort for the taxpayers who ended up paying for Citigroup’s fraudulent actions, or for the thousands of consumers who have lost their homes in the process. 

The trouble started because major banks, such as Citigroup and Bank of America—which recently settled a civil fraud case that alleged discriminatory lending against minorities for $25 billion—were part of a program that permitted the lenders to obtain automatic approval for government insurance for the mortgages they were issuing.  Their involvement in the program required the banks to aggressively pre-screen the mortgages in order to make sure they were not too risky.  They were also required to report any problems with the mortgages, including signs that they were in trouble.

DOJ’s complaint alleged that Citigroup systematically ignored the program’s rules, resulting in the government insuring lower-quality loans.  Although Citigroup’s failure to abide by the program’s rules is extremely troubling, it is even more concerning that employees in Citigroup’s mortgage unit allegedly asked members of the compliance department not to report problems with the mortgages.

The Los Angeles Times reports that the government’s complaint stated: “Citi’s quality-control reports became — and remain — a battleground within Citi, with those in Citi’s business production units applying what they describe as ‘brute force’ to pressure Citi’s quality-control managers to downgrade their findings.”

Citigroup’s deceit ultimately caused the federal government to back bad loans.  The government insurance program allowed Citigroup to give cheaper loans to less-credit-worthy borrowers and then to sell the loans to investors.  Behavior such as this directly led to the inflation of the mortgage bubble.

The settlement evolved out of a series of federal investigations into lenders providing mortgages insured by the Federal Housing Administration (FHA). The FHA is part of HUD and provides financing for single-family mortgages and multifamily projects.  In theory, the FHA is completely self-funded, but as we all know, taxpayers repeatedly have been called upon to foot the bill during the mortgage crisis.  Despite the settlement, Citigroup has defended its actions, and stated that the organization takes its quality assurance processes seriously.  The organization also stated that it intends to implement improvements to those processes.

While the Citigroup settlement is good news on one hand, the Oak Park and River Forest foreclosure lawyers at the Emerson Firm also understand that serious damage has already been done.  Ultimately 30% of the loans originated by Citigroup after 2004, as well as 47% of those in 2006 and 2007, ended up in default.  As a result, Citigroup’s fraudulent actions permanently jeopardized the homes and stability of many Chicagoland residents.

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Mortgage Fraud Still At Elevated Levels

(Photo courtesy of Dave Dugdale)

Monday, February 20, 2012

Federal and State Officials Announce $25 Billion Mortgage Servicing Settlement

As we previously discussed, federal and state officials announced a national-level agreement between the federal government and 49 state attorneys general to address mortgage loan servicing and foreclosure abuses.  Our Oak Park foreclosure defense lawyer knows this is a crucial deal is being heralded as providing financial relief to struggling homeowners.  The deal, which was approved by U.S. Attorney General Eric Holder and HUD Secretary Shaun Donovan, also establishes significant new homeowner protections for the future. 

Federal and state investigations into fraudulent lending and mortgage foreclosure practices were the impetus of the deal.  The final deal evolved out of a series of negotiations between financial servicers and government officials.  The servicers included Bank of America, JP Morgan Chase, Wells Fargo, Citigroup, and Ally Financial.  The total settlement amount is $25 billion, to be distributed according to specific settlement terms.  The settlement’s terms require a commitment of approximately $20 billion in financial relief for homeowners.  Additionally, the servicers must pay $5 billion in cash to the state and federal governments, including $1.5 billion to establish a Borrower Payment Fund that will provide payments to qualifying borrowers whose homes were sold or foreclosed between January 1, 2008 and December 31, 2011. 

The settlement amount also includes more than $766.5 million in monetary sanctions assessed by the Federal Reserve Board, which is responsible for implementing national monetary policy.  An additional $394 million of penalties from the Office of Comptroller of the Currency (OCC) will be held in abeyance provided four of the servicers make payments and take other actions under the settlement with a value equal to at least the penalty amounts assessed for each servicer by the OCC.

Illinois Attorney General Lisa Madigan stated that the deal provides much-needed mortgage relief for homeowners.  Strict new mortgage servicing standards will prevent future abuses in the foreclosure and servicing process.  For example, the servicers must conduct future business under new servicing standards, which include:

     1.  Restrictions on the default management process known as “dual tracking,”
     2.  A requirement for the institutions to provide a single point of contact for borrowers,
     3.  Specific protections for military service members,
     4.  Obligations concerning disclosures and practices related to force-placed insurance
     5.  Limitations on servicing fees.

The new standards also require servicers to establish updated foreclosure and bankruptcy documentation processes, enhanced servicer oversight of third party vendors, and adherence to a new set of loan modification timelines.

The national settlement is a landmark decision that should greatly benefit homeowners in the Chicago area.  However, those working in Oak Park and River Forest foreclosure know that the deal also left several issues unresolved and does not preclude: (1) criminal claims, (2) securities claims and claims related to the use of an electronic mortgage registry, (3) loan origination claims in connection with FHA-insured loans, except those covered specifically by this settlement, and (4) borrower claims.

For additional information on state-level recovery, please visit the Illinois Attorney General’s website here.  If you are a homeowner who is wondering whether you are eligible for assistance under the national settlement, please visit the Illinois AG’s website to utilize a number of helpful resources.  Consumers are also encouraged to call the Homeowner Helpline at 1-866-544-7151.  You can also visit for more information about the national settlement.  As always, the Oak Park foreclosure attorneys at our firm remain ready to help explain how all of these issues might affect your particular case.

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Thursday, February 16, 2012

National Mortgage Settlement May Help Some Homeowners Avoid Foreclosure

A national mortgage settlement between federal and state governments and several major banks across the United States may provide relief for homeowners who are currently facing the possibility of foreclosure or bankruptcy.  49 states – all but Oklahoma – agreed to the deal with Bank of America, Citigroup, J.P. Morgan Chase, Wells Fargo, and Ally Financial.  The $25 billion settlement came about as a result of a suit filed by United States Attorney General Eric Holder and state Attorneys General across the nation.  The suit alleged that the defendant banks engaged in dishonest and neglectful practices by failing to properly authenticate mortgage forms before granting loans to customers. 

Sadly, in spite of the seemingly large size of the settlement, our Oak Park foreclosuredefense lawyers know that many of the people in our local area who are struggling with mortgage payments will not be helped very much, if at all, by this settlement.  One reason for this is that nearly half of the settlement money - $12 billion – is already earmarked for the state of California.  In addition, loans from certain institutions such as Fannie Mae and Freddie Mac are not covered by the settlement, which precludes many homeowners from sharing in the settlement.  Even those homeowners who are covered by the settlement may still see little relief since it will take months or maybe even years to properly distribute the funds.  Because of the large number of people who are in mortgages they cannot afford, the assistance may not come fast enough to help them avoid foreclosure and get back on track with their monthly payments. 

A new website has been set up at, where homeowners can go to find out if they are eligible for any kind of mortgage relief or payment.  A relatively small portion of the funds have been earmarked for those who have already been on the losing side of a foreclosure proceeding, but the vast majority will be used for people who are currently struggling to make payments but have not yet lost their houses.  Hopefully, the funds will be distributed in time to help people get caught up on their payments and find a way to keep their homes. 

Unfortunately, our Oak Park and River Forest foreclosure lawyers know that despite this settlement, the problems faced by our community are far from being over.  In fact, according to an article published this week by the Rockford Register Star, Winnebago County Recorder Nancy McPherson has uncovered evidence that shows that the very practices that got the mortgage industry in trouble in the first place are still going on at various Illinois banks.  That means that even as assistance comes for some harmed by poor mortgage practices, others continue to walk down a path that may ultimately lead them into foreclosure and even bankruptcy.  Settlements like this one can only go so far towards helping people keep their homes.  What is really needed is a fundamental change in the industry, not just a temporary fix that comes after the fact. 

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Friday, February 10, 2012

Illinois AG Files New Lawsuits Targeting Companies Using Fraudulent Practices In Foreclosing On Homeowners In Crisis

On Monday, Illinois Attorney General Lisa Madigan filed another lawsuit against a company involved in alleged mortgage fraud.  In a press release, the AG’s Office stated that Nationwide Title Clearing (NTC)—a Florida-based company that prepares documents for mortgage servicers to use against borrowers who are in default, foreclosure, or bankruptcy—filed faulty documents with Illinois county recorders.  NTC works for many of the largest lenders and mortgage servicers.

AG Madigan condemned the company’s actions, stating, “The practices that NTC used were a key contributor to the mortgage crisis by undermining the integrity and accuracy of the mortgage servicing and foreclosure process.”  The practice to which AG Madigan refers has commonly become known as “robo-signing.”  During the housing crisis, reports surfaced that workers at companies involved in Illinois mortgage foreclosure were mass producing documents related to foreclosure or other related legal proceedings, often to hurry along the processing of mortgages and foreclosures.  Our Oak Park foreclosure defense lawyers know many workers were signing foreclosure papers without reading them and/or without verifying the accuracy of the information contained in the documents.  (To read more about the fraudulent practice of robo-signing in Illinois, see our prior post here.)  When they signed the documents, employees swore they possessed “personal knowledge” of the facts contained in the documents.  The documents were then filed in court, and judges and court officials relied on them in processing foreclosures. 

Rather than possessing personal knowledge, however, it turns out that employees were merely “rubber stamping” the documents so that foreclosure companies could push through as a many foreclosures as possible.

The lawsuit, which was filed in Cook County Circuit Court, alleges numerous violations of the Illinois Consumer Fraud and Deceptive Practices Act and the Uniform Deceptive Trade Practices Act.  In filing the lawsuit, AG Madigan hopes the court will require NTC to review and correct all documents it unlawfully created and recorded in Illinois, and pay back all revenues, profits and gains achieved in whole or in part due to unlawful practices.  The suit also seeks civil penalties of up to $50,000 per violation against the company.

AG Madigan’s lawsuit against NTC is only one among many that seeks to address the widespread and extremely damaging fraudulent practices that contributed to the nation’s financial meltdown.  Those working in our area to help residents fight Oak Park and River Forest mortgage foreclosure—representing homeowners’ interests in a short sale or home purchase, or evaluating a consumer’s bankruptcy options—know that AG Madigan has actively pursued companies and other bad actors that contributed to the financial crisis.  In addition to suing NTC, the Illinois AG’s Office also recently sued the national credit ratings agency Standard & Poor’s for its fraudulent role in assigning high ratings to risky mortgage-backed investments in the years leading up to the housing market crash.  That suit alleges that Standard & Poor’s “compromised its independence as a ratings agency by doling out high ratings to unworthy, risky investments as a corporate strategy to increase its revenue and market share.”

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Alleged Robo-Signers Indicted for Forging Mortgage Foreclosure Documents

Friday, February 3, 2012

Supreme Court Finds Binding Arbitration Clauses in Credit Card Agreements Permissible

A recent Supreme Court decision came as a major setback for credit card users and consumer protection advocates, who have been tirelessly fighting for the past several years to obtain stronger protections for consumers.  The 8-to-1 decision in CompuCredit Corporation v. Greenwood held that consumers who sign a credit card agreement containing an arbitration clause do not have the option to dispute any charges or fees in court.  Consumers will be bound to so-called adhesion clauses, which means they will be stuck with the terms laid out in agreements created by big companies.  Such clauses are one-sided and force consumers to bring any disputes to arbitration rather than providing them with the option of suing in court or filing class action lawsuits.

The decision also holds that arbitration clauses contained within credit card agreements trump a 1996 federal law that permitted disgruntled consumers to take disputes with credit card companies to court, reports ForbesChicago bankruptcy attorneys know that most credit card companies bury arbitration clauses in lengthy and complex agreements that customers must sign before they can obtain a credit card.  Because credit card companies design such agreements in their favor and consumers do not have the option to negotiate contract terms, the recent Supreme Court ruling gives credit card providers (as well as companies that provide borrowers with car and student loans) “an inordinate amount of power,” says Michael Calhoun, president of the Center for Responsible Lending.  Those working in Illinois bankruptcy law realize that when consumers do not possess legal recourse to challenge big companies, there is a serious imbalance in bargaining power.

Since the law gives credit card and other loan servicing companies the power to create one-sided agreements, virtually every consumer loan agreement now has an arbitration clause written into it.  Our Oak Park foreclosure defense lawyers know that there is one major exception to this.  Mandatory arbitration clauses in mortgage loan agreements are strictly prohibited.

Arbitration does have some advantages.  It can be quicker, cheaper, and more efficient than court proceedings for some consumers.  On the other hand, it can give banks and big companies a disproportionate amount of power over people who do not have as much influence in the system, including everyday consumers.  One problem, reports SmartMoney, is that there is not a lot of data on cases that go to arbitration because those cases are often kept private, making it difficult to evaluate the true impact of arbitration clauses on consumers.  The data that is available suggests few consumers are successful in arbitration.  For example, Public Citizen, a nonprofit consumer advocacy group, reports that California credit card users won just 4% of cases that went to arbitration while card issuers won 94% from 2003 to early 2007.

In recent years, binding arbitration clauses were becoming less popular, due in part to the efforts of consumer advocates.  After the CompuCredit decision, however, that trend may change.  Unfortunately, the Supreme Court’s ruling allows credit cards providers to adopt a “take it or leave it” attitude when it comes to constructing consumer contracts.  An attitude, it seems, that may be here to stay.

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Thursday, February 2, 2012

Unemployed Get a Break from Fannie Mae and Freddie Mac

Government-backed mortgage giants Fannie Mae and Freddie Mac announced a new effort earlier this month to mitigate the foreclosure crisis in the form of an unemployment forbearance program explained in Fannie and Freddie’s newly released guidelines.  The two organizations’ new guidelines mirror each other and were released only a week apart. 

Those of us working in Illinois foreclosure defense law see this is good news for people struggling during hard economic times, especially in recent years as individuals and families work to dig themselves out of difficult, long periods of unemployment.  The new program allows for flexibility by mortgage servicers to allow borrowers who are in financial trouble because of a lost job, often to the point of being near default on their mortgages.  The potential participant must have monthly housing expenses at least 31 percent of their monthly income to qualify.

The program works by reducing payments for a specified period while the borrower is unemployed.  Another great part of the new unemployment forbearance program is that while the borrower is enrolled in this program, the mortgage servicer is prohibited from proceeding with foreclosure.  Late fees cannot accrue against the borrower while enrolled in this program either.  If the borrower gets an additional loan modification from either the Home Affordable Modification Program or another Fannie or Freddie initiative, the guidelines provide that late fees will be waived.

Our Oak Park foreclosure defense lawyers were interested to find that a mortgage servicer can approve this forbearance program for an eligible borrower for up to six months without getting Fannie Mae or Freddie Mac’s approval.  This can be based upon verbal information provided by the borrower that is documented in their case file.  The mortgage servicer is required to determine the status of the borrower’s unemployment between day 120 and 135 of participation in the forbearance program.  There is a possibility of extending for another six months if the borrower remains unemployed.  Those extensions must be done on a case-by-case basis and submitted to Fannie Mae or Freddie Mac for review.  And the guidelines allow for only the one year forbearance maximum, so if the borrower is still unemployed after a year that is still the end of the line in terms of this program.

Our Oak Park foreclosure attorneys are hopeful that this program can assist those struggling in our area with longer term unemployment.  This could give crucial breathing room for the unemployed to keep their house while hunting for a new job.

This program specifically does not include second houses or investment properties, as it is only focused on helping the unemployed stay in their principle residence.  It is conditional on the unemployed borrower actively seeking employment while participating in the program.

Officially these new guidelines go into effect no later than March 1, 2012 for Fannie Mae and February 1, 2012 for Freddie Mac.  Fannie is encouraging mortgage servicers to put the guidelines, and accompanying programs such as this one, into affect as soon as possible though, hopefully even before the March 1 deadline. 

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Fannie Mae’s Missed Chances To Stop Robo-Signing Hurt Chicagoland Homeowners