In April 2014, a lawsuit was unsealed that accuses OneWest Bank, formerly known as IndyMac Bancorp, of abusing the 2009 Home Affordable Modification Program (U.S. ex rel Fisher v. OneWest Bank FSB, U.S. District Court, Southern District of New York, No. 12-09352).
The program gives mortgage lenders financial incentives to perform loan modifications to qualified homeowners. According to court papers, OneWest failed to itemize the new loans, resulting in about $58.3 million in fraudulent payments. The lawsuit seeks triple damages under the False Claims Act, which allows individuals to sue contractors that allegedly defrauded the government.
A OneWest spokesman called the claims “groundless” and added that regular audits failed to detect any irregularities.
Although the government passed out over $200 million in HAMP and Making Homes Affordable money, less than a third of all applicants are approved for a loan modification. Many times, qualified homeowners are denied for technical or even fabricated reasons: failure to timely submit documents, an income that’s one or two percent above or below program requirements, making a payment a day or two late, and so on. Servicers often claim documents were not submitted or not submitted on time, and when confronted with a fax confirmation or a return receipt from the post office they claim that they lost the documents or that they are now out of date.
The banks often encourage these applicants to reapply, assuring the distressed homeowners that they have “prequalified” for another program. Too many times, the same thing happens. Eventually, the account acquires so much delinquency (because the lender refuses to accept partial payments) that the bank determines it is impossible for the homeowner to catch up. Foreclosure follows.
Applying for a loan modification through Chapter 13 bankruptcy is a better deal. First, the Court and the Trustee oversee the bankruptcy process, not the lender. Documents are exchanged by counsel with a mediator. The Court’s mediation order requires compliance by the bank. While the bank is still not required to grant a modification, they are required to comply with the Court’s order, which includes requesting any necessary documentation well in advance of the mediation. If they show up to mediation and claim they cannot consider a modification because they do not have documentation they did not request in advance, that can be reported to the Court, and the Court can punish the bank, which can include everything from making them pay everyone for the wasted time to stripping their lien and treating their claim as unsecured. Second, even if the lender will not modify the loan, you can pay back the arrearage over five years, and while you do pay interest over that time, the lender cannot assess late fees or bogus charges as long as you make your payments to the Chapter 13 Trustee on time. Third, there is an automatic stay. You don’t have to prove anything in court, and you don’t have to rely on the bank’s promises to stop the sale date.
For a free consultation with attorneys who can save your home, contact our office in Melbourne, Florida.