Jan 22

By John Skiba – JD Supra

Debt collection phone calls…this is one of the top reasons people file for bankruptcy – so that they can avoid having to deal with debt collectors and all the garbage that goes with it. The thing is, you shouldn’t have to file for bankruptcy to get debt collectors to simply follow the law. Just because you have fallen behind on your bills doesn’t mean that a debt collector has free rein to do and say what they want. You can take control of the debt collection process while you work out a solution to your debt problem.

The law recognizes that that there is a power imbalance between consumers and debt collectors. And too often people just accept the abuse because they somehow feel they “deserve it” simply because they have fallen behind on their bills. To remedy this imbalance and put the parties on a level playing field congress passed the Fair Debt Collection Practices Act, usually know as the FDCPA. [read more]

Jan 21

By Jenifer McKim and Jess Aloe – The Boston Globe

When Guillermo Galindo lost his two-family Revere home to foreclosure in 2009, the soft-spoken Colombian thought he had finally freed himself from the flood of threatening collection letters from his lender and a ballooning, untenable debt.

All of his savings, scraped together over years delivering medicine for local pharmacies, were gone, along with the home he bought in 2005 for $410,000. Devastated, the 54-year-old immigrant, along with his wife and 3-year-old daughter, packed their belongings and moved into a small apartment, hoping to rebuild.

But that hope evaporated in a matter of months, when Galindo received a letter from a lawyer saying he owed $136,547 on the family home he’d left behind.

The lawyer represented a mortgage insurance company that Galindo had paid premiums to for years. He’d never given his insurance policy much thought — it was just something he needed to buy to qualify for a mortgage, since he couldn’t afford a big down payment. He thought it would help him if he got in a bind.

Too late, Galindo realized that the policy protected only the bank, and nothing prevented the insurer from coming after him for losses related to the foreclosure on his former home in Revere.

“I have to fight every day to find my food and not go to welfare, and then I have to pay $140,000?” Galindo asked. “What did I pay insurance for? It was a rip off.”

What Galindo considers a rip off is an insurance industry practice that has the potential to flatten tens of thousands of former homeowners just as they are getting back on their financial feet. The New England Center for Investigative Reporting has found that more than 200 Massachusetts residents and thousands more across the United States have been pursued by mortgage insurers for losses ranging from tens of thousands of dollars to more than $200,000 since the foreclosure crisis began about seven years ago.

Private mortgage insurance was created to help less wealthy people buy homes by reducing the risk to mortgage lenders if the borrower defaults. Generally, home buyers who make less than a 20 percent down payment must buy the insurance, which typically costs $30 to $70 for every $100,000 borrowed; the policy pays the bank for some of its losses if the borrower doesn’t pay the mortgage and the house goes into foreclosure. [read more]

Jan 19

By Kate Berry – Mortgage Servicing News

Just the suggestion that California might suspend Ocwen Financial’s license has led to a mass sell-off of the mortgage servicer’s shares, so imagine how its operations and finances would be affected if the state makes good on the threat.

Industry observers say the embattled Atlanta servicer would likely have to farm out its large California portfolio to a third party, disrupting its relationship with borrowers in the state and depriving it of fees and cash flow on roughly $95 billion of servicing rights. In a worst-case scenario, Ocwen — historically an active acquirer of other lenders’ servicing rights — would be so starved for cash that it would need to start unloading servicing assets, they said.

Ocwen’s shares, which have already taken a beating over the last year, plunged nearly 50% earlier this week after a spokesman for California’s Department of Business Oversight told CNBC and other news outlets that Ocwen was stonewalling an investigation into its foreclosure practices. He added that Ocwen’s refusal to cooperate could result in the state yanking its license to do business there.

It’s yet another dust-up for a company that, in just the last several weeks, has come under heightened scrutiny from the national mortgage settlement monitor and was forced to pay $150 million to settle allegations in New York that it backdated thousands of foreclosure letters to distressed borrowers. As a condition of that settlement with New York’s top banking regulator Benjamin Lawsky, William Erbey, Ocwen’s founder and vice chairman, agreed to step down after 30 years with the company. [read more]

Jan 16

By Greg Stohr – Bloomberg

The U.S. Supreme Court gave homeowners more ability to cancel their mortgages if lenders don’t provide the required disclosures, in a setback for the banking industry.

The dispute centered on the three-year deadline for borrowers seeking to rescind their mortgages. The justices today said unanimously that borrowers don’t have to file suit within three years and instead can meet the deadline by sending a letter to lenders.

The issue is one that the banking industry says has arisen frequently in recent years with borrowers who are in default on their mortgages and are facing foreclosure.

The Supreme Court ruling is a victory for Larry and Cheryle Jesinoski, who in 2007 refinanced their Eagan, Minnesota, home for $611,000 with Countrywide Home Loans Inc., now part of Bank of America Corp. (BAC)

Exactly three years later, the Jesinoskis sent the lender a written notice that they wanted to rescind the accord, saying they hadn’t received copies of two disclosure forms required under federal law. Bank of America refused to cancel the mortgage, and the Jesinoskis sued. [read more]

Jan 15

By Antoine Gara – Forbes

California regulators are seeking to suspend the mortgage license of Ocwen Financial, after the servicing giant did not adequately respond to repeated information requests into its compliance with the state’s Homeowner Bill of Rights. Suspension proceedings began in October, Tom Dresslar, a spokesperson for the California Department of Business Oversight told Forbes on Tuesday.

“Since the early part of last year, we have been asking Ocwen to provide the information we need to determine their compliance with the Homeowners Bill of Rights. They have repeatedly failed to comply with those requests,” Dresslar said. “At this point, we are seeking a suspension of their license. This matter is before an administrative law judge.”

After a series of complaints tied to Ocwen’s servicing of mortgages in California, state regulators began investigating the company to ensure its compliance with the California Homeowners Bill of Rights, a set of laws to protect against abusive foreclosure practices, in addition to the state’s Residential Mortgage Lending Act. According to a report from The Los Angeles Times, California examiners asked Ocwen to provide information on 1,320 mortgage loans under investigation. However, Ocwen repeatedly failed to respond.

In October, Jan Lynn Owen, Commissioner of Business Oversight, filed a formal complaint against Ocwen. According to the L.A. Times, an administrative law judge will preside over settlement conferences in February. Nonetheless, a hearing on the suspension of Ocwen’s California licence is scheduled for July.

About a mortgage license suspension, Dresslar said, “the commissioner would give Ocwen a reasonable period of time to transition their portfolio to other providers.” He also noted that the regulator’s complaints were specific to Ocwen and not representative of widespread non-compliance among mortgage servicers. [read more]

Jan 13

By Mike Masnick – TechDirt

Yesterday was the two year anniversary of Aaron Swartz’s unfortunate suicide. Today, Carl Malamud, the leading champion of freeing up public documents and laws, has announced a National Day of PACER Protest, to be held on May 1st, with the “winner” (explained below) to get the Aaron Swartz Memorial PACER Cup. Malamud’s discussion of this is pretty long, but well worth reading. If you don’t recall, Malamud and Swartz have spoken out against PACER in the past many times (as have we). PACER, of course, is the horrific, antiquated paywall system by which the federal courts lock up tons of public documents and only make them available at 10 cents per page (with some exceptions). We rack up hefty PACER bills here at Techdirt all the time.

PACER, itself, is of dubious legality. The law that established PACER says that the fees collected can only be used for the system itself, yet the system is so profitable that the money flows back into other areas of the judicial system, and the Administrative Office of the US Courts doesn’t want to give up on its cash cow. The system itself is painful to use — slow with a horrible interface — before we even get to the ridiculousness of 10 cents per page. A few years back, the courts tested letting certain libraries have free access to PACER, leading Aaron Swartz to stop by one of the libraries and set up a system to download a bunch of these documents. The Administrative Office called the FBI on him, though (of course) he hadn’t actually broken any laws so he wasn’t charged with anything. This also resulted in the “pilot program” being cut off and the libraries losing their free access.

Still the documents he did get out became the initial seed for the RECAP collection, available at the Internet Archive, which any PACER user can now add to using RECAP the law, a simple browser add-on that automatically uploads documents you view on PACER to the Internet Archive’s collection.

Malamud describes a three-pronged strategy to knock down that PACER paywall, which he dubs the “red, white and blue” teams. The red team involves filing lawsuits challenging PACER’s legality. The blue team, which Malamud will undertake himself, involves asking a bunch of courts for an exemption to PACER for some research that he’s working on (and has been for some time, involving privacy issues related to PACER). [read more]