Tuesday, August 25, 2015

Illegal Mortgage Servicing Results in $1.5 Million Fine

The Consumer Financial Protection Bureau (CFPB) has been busy in the last few months. The watchdog agency was created to monitor and enforce laws that protect consumers, and it appears that it is working to do just that. According to a recent article from HousingWire, the CFPB has levied a fine of $1.5 million against Residential Credit Solutions, a mortgage servicer that didn’t abide by the law.
Illegal Mortgage Servicing Allegations Against Residential Credit Solutions
Why did Residential Credit Solutions receive a whopping $1.5 million fine? The company was fined for illegally servicing of thousands of loans it acquired from other servicers. According to the article, the mortgage servicer broke the law in a number of ways, including:
  • Failing “to honor modifications for loans transferred from other servicers”;
  • Providing false information to consumers about unpaid loan balances, payment due dates, required payment amounts, and delinquency statuses;
  • Treating “consumers as if they were in default when they weren’t”;
  • Misrepresenting the amount of escrow surplus due to consumers; and
  • Forcing consumers “to waive their rights in order to get a repayment plan.”
The mortgage servicer is based out of Fort Worth, Texas, but it has consumers across the country. Residential Credit Solutions is known as a company that “specializes in servicing delinquent or default loans and so-called ‘credit-sensitive’ residential mortgage loans, where the borrower is at high risk for default.” The CFPB estimates that the mortgage servicer has assets totaling about $95 million. And since 2009, around 75,000 homeowners have seen their mortgage loans transferred to the Texas-based company.
Details of Mortgage Servicer’s Violations
One of the biggest problems, according to the CFPB, is the way in which Residential Credit Solutions handled loans that had already undergone modifications from other servicers. A number of its customers are said to have had trial loan modifications with their previous servicers, but when Residential Credit Solutions acquired those mortgages, it failed to honor the modifications.
Instead, the CFPB alleges that the Texas mortgage servicer “insisted that the consumer re-prove that he or she was qualified.” And if the CFPB is correct, then Residential Credit Solutions “effectively set consumers back as though they had not received a trial modification.” The CFPB described the position into which the mortgage servicer placed these consumers as a “trial period purgatory.” In connection to the issues surrounding loan modifications and other violations, the CFPB alleged that the Texas-based mortgage servicer effectively prevented consumers from saving or selling their homes through confusion and misrepresentation.
In addition to the fine, will the CFPB require any additional steps from Residential Credit Solutions? The article emphasizes that the mortgage servicer won’t be able to simply pay the $1.5 million and forget about the accusations against it. Rather, it will have to take some of the following steps to repair the harms it is alleged to have caused:
  • Engaging in outreach campaigns to help borrowers save their homes;
  • Honoring loss mitigation agreements entered into with prior servicers;
  • Creating a rigorous program to ensure accurate information in mortgage transfers; and
  • Making loss mitigation applications available to consumers electronically and at no cost.
If you believe you were treated unfairly by a lender or a mortgage servicer, it is important to discuss your case with an Oak Park consumer protection attorney. Contact the Emerson Law Firm today to learn more about how we can assist you with your claim.
See Related Blog Posts:
Deceptive Credit Card Collection Practices Come to an End

Wednesday, August 12, 2015

Stubborn Foreclosure Rates in Illinois

The foreclosure crisis, for all intents and purposes, appears to be over. Homeowners are not as concerned as they used to be about risks of foreclosure, and according to a recent article in USA Today, far fewer homes are “entering the foreclosure process now than before the housing bubble burst.”
However, foreclosure rates in certain states remain particularly “stubborn,” according to the article. By examining data contained in a RealtyTrac report, we can see that Illinois is near the top of the list of states that still have a markedly high rate of foreclosure. What’s going on in Illinois, and how long will it take before the foreclosure crisis truly comes to an end?
Home Loans in Foreclosure Originated Years Ago
By and large, home loans that are currently “in some state of foreclosure were originated between 2004 and 2008.” Many Americans purchased expensive houses with high price tags before the real estate market crashed, and since 2008 they have found themselves with seemingly valueless homes that are underwater.
A home that sold for $500,000 in 2006—for which a Chicago family took out a mortgage of $450,000—that is currently only valued at $200,000 means the owners could not even begin to recoup their investment if they sold the property. For some Chicagoans in this position over the last decade, it did not make sense to stay in the house. Other homebuyers in this situation attempted to make monthly mortgage payments on time, but the difficulties of the recession made this impossible.
Shouldn’t we see strong evidence of improvement by now? The data from RealtyTrac suggests that we are definitely seeing fewer foreclosure starts, but we are witnessing particularly lengthy time periods for completing the average foreclosure. On the one hand, “foreclosure starts (a first notice of loan default or notice that a lawsuit has been filed regarding the ownership of a property) are at a 10-year low.” That is the good news, but on the other hand, “it’s taking forever to get those bad, crisis-era loans through the system.”
RealtyTrac identified a current average of 629 days to complete a foreclosure, which is “the longest the foreclosure process has been since RealtyTrac started tracking the metric in 2007.”
Illinois Remains Hard-Hit By Foreclosures
In RealtyTrac’s calculations, Illinois is the fifth-worst state in the country when it comes to foreclosure issues. As the article points out, some aspects of Illinois’s foreclosure statistics are getting better. For instance, current foreclosure starts are below the level they were at in 2006, before the housing bubble burst. However, our state also had “a city in the top-10 metro areas . . .with the highest foreclosure rates in the first half of the year.” In Rockford, Illinois, one in every eighty-seven homes was reported to be “in some state of foreclosure.”
Other states that made the list with Illinois include, in order from best to worst:
  • Tennessee
  • South Carolina
  • Indiana
  • Ohio
  • Delaware
  • Nevada
  • Maryland
  • New Jersey
  • Florida
To see a visual representation of the continued problem of foreclosure time from start to finish, readers only need to look at a color-coded map provided by RealtyTrac. The states in darkest green are having the hardest time dealing with continuing foreclosure issues, and Illinois remains a dark green spot in the middle of the country. Currently, RealtyTrac estimates that there are more than 51,200 foreclosures in Illinois. When we compare that number with a figure from a state marked in light green, such as Mississippi, we can see the stark difference. In Mississippi, RealtyTrac estimates that only 523 foreclosures are currently on record.

If you have concerns about avoiding foreclosure or have questions about modifying your mortgage payments, you should contact an experienced Oak Park foreclosure defense attorney as soon as possible. An advocate at the Emerson Law Firm can help.
See Related Blog Posts:
Subprime Lending, Home Values, and the Reasons for Foreclosure