When ever someone tells me that they have been trying for a long time to modify their mortgage I have to ask how do you modify fraud? The fact is you can’t, to do so will usually only serve to make matters worse. In this article you might notice that I have no admiration for modification companies and for good reason as you will clearly see.
I have spoken with hundreds of distressed homeowners over the past several years and I literally cannot count how many times I have heard the person on the phone tell me that they have sent in several application packages, each time getting a letter from the mortgage servicer stating that the servicer did not receive one of the pages, or the applicant failed to fill in this blank or that blank, or for some other reason the application has to be redone over and over again. Why is this?
The mortgage servicer or modification company who submits an application for loan modification gets paid handsomely for every application they submit, so it’s little wonder why they want to submit as many as they can. It’s free money for the servicer, and another way to squeeze as much blood out of this turnip as they can before foreclosing on the loan.
Since the beginning of the mortgage crisis there have been a multitude of companies and individuals that have popped up that have tried belly up to the trough to cash in on the misfortune of an already distressed homeowner. These parasites thrive on adding insult to injury, because more often than not, the homeowner is placed in a worse situation than they were in before the alleged modification. Modifying an unenforceable mortgage is in itself fraud. In most cases it is a feeble attempt to cover up the fraud and continue with business as usual.
I many cases I have dealt with I have had homeowners tell me that they have submitted multiple applications each time having to start all over again, and then one day they check the mail only to get a letter saying that their application for a modification has been denied, and in another envelope they receive notice that their loan has been foreclosed on and the mortgage servicer has the property scheduled for sale at the earliest opportunity.
In this author’s opinion these vultures are just as bad as, or worse than the banks that committed the fraud in the first place.
At some point we have to stop and ask the question, are loan modifications even legal?
It would appear not. On December 4th, 2013 in the case of Frankie Sims, et al., v. Carrington Mortgage Services L.L.C., Texas attorney Patrick Sutton performed a masterful job at arguing the constitutionality of loan modification before the Texas Supreme Court. I would suspect that this argument is applicable in all sister states. This is where a homeowner’s due diligence comes in to research their states’ constitutions to locate similar language.
Attorney Sutton argues that modifying an existing loan is conflicts with the Texas Constitution, Article XVI, § 50(a)(6)(A)-(Q) et seq. In his brief before the Texas Supreme Court, Attorney Sutton asks the following qualified questions;
1. After an initial extension of credit, if a home equity lender enters into a new agreement with the borrower that capitalizes past-due interest, fees, property taxes, or insurance premiums into the principal of the loan but neither satisfies nor replaces the original note, is the transaction a modification or a refinance for purposes of section 50 of Article XVI of the Texas Constitution? If the transaction is a modification rather than a refinance, the following questions also arise:
2. Does the capitalization of past-due interest, fees, property taxes, or insurance premiums constitute an impermissible “advance of additional funds” under section 153.14(2)(B) of the Texas Administrative Code?
3. Must such a modification comply with the requirements of section 50(a)(6), including subsection (B), which mandates that a home equity loan have a maximum loan-to-value ratio of 80%?
4. Do repeated modifications like those in this case convert a home equity loan into an open-end account that must comply with section 50(t)?
Here is a link to the case history – http://dockets.justia.com/docket/texas/txndce/4:2012cv00087/215164
Here is a link to the oral argument Attorney Patrick Sutton offered to the Texas Supreme Court; http://texassupremecourt.mediasite.com/mediasite/Play/7bb4023612064bac9da82e4b5baabe5c1d
Also see the attached pleading submitted before the Texas Supreme Court by Attorney Sutton in re Sims v Carrington.