Homeowner Stability Act provides Safe harbor from foreclosure for Distressed Homeowners. But Foreclosures continue, without regard for Treasury Directives

Foreclosure. What does it mean to individuals and families who have experienced it?

To start, an entire industry has taken root in this nation with only one goal. And that is to strip distressed homeowners of their hard earned equity so the purported "distressed homeowner rescue business" can turn a profit.

Homeowners are bombarded with letters from the Project Hope Counselors and the Attorney Generals Office advising them to avoid foreclosure rescue scams. But no one tells the homeowner how to protect themselves from fraudulent Servicers or the attorneys who work in foreclosure mills.

If you go to court, Judges roll their eyes and could care less if a distressed homeowner's house was foreclosed on illegally. They rule for the Servicer or the land speculator without even taking the time to review the laws that protect a distressed homeowner's right to retain ownership of their home. Below, thanks to the grace of God, (and a bit of excellent legal research) a family wins the right to apply for a modification through the Making Home Affordable Program to stop foreclosure proceedings on their home.


Background:

The American Recovery and Reinvestment Act of 2009 directives clearly state that borrowers currently at risk of foreclosure has the opportunity to apply for the HAMP. In fact, it states that servicers should not proceed with a foreclosure sale until the borrower has been evaluated for the program and, if eligible, an offer to participate in the HAMP has been made. 

Servicers must use reasonable efforts to contact borrowers facing foreclosure to determine their eligibility for the HAMP, including in-person contacts at the servicer’s discretion. 

Servicers must not conduct foreclosure sales on loans previously referred to foreclosure or refer new loans to foreclosure during the 30-day period that the borrower has to submit documents evidencing an intent to accept the Trial Period Plan offer. 

Except as noted herein, any foreclosure sale will be suspended for the duration of the Trial Period Plan, including any period of time between the borrower’s execution of the Trial Period Plan and the Trial Period Plan effective date. Link to U.S. Treasury Department Directive

But that's not what's happening. Millions of homes are being foreclosed on without any regard for the intent of the American Recovery and Reinvestment Act U.S. Treasury Department directives.

The result? Untold numbers of Americans have lost their homes through wrongful foreclosures due to fraudulent Servicer practices.

Here's a post by Nathan Reynolds

I am a mortgage broker of 10 years. My office has reviewed over 8000 credit reports on homeowners that do not qualify for a new conventional mortgage due to tighter lending practices and property values in the Chicagoland area. Every homeowner that my office deems unqualified to refinance is instructed to apply for President Obama's Home Affordable Modification Program. Unfortunately the participating servicers are not acting in good faith. Almost 100% of the homeowners that we refer to this program end up contacting us again to inform us of the run around their lenders are putting them through. I have dedicated tremendous time and resources in my efforts to help former clients and homeowners by offering direction and clarity to navigate the maze to save their homes. My wife is an attorney and together we have been successful in halting foreclosures by citing the HAMP Guidelines:

President Obama signed the American Recovery and Reinvestment Act of 2009 into law on February 17th. On April 6th 2009 the Treasury Department issued uniform guidance for loan modifications across the mortgage industry in supplemental directive 09-01.

In accordance to the underwriting guidelines for HAMP within this Law:

·All Fannie Mae-approved servicers must participate in the program for all Fannie Mae portfolio mortgages loans and MBS pool mortgage loans guaranteed by Fannie Mae.

·Any foreclosure action will be temporarily suspended during the trial period, or while borrowers are considered for alternative foreclosure prevention options. In the event that the Home Affordable Modification or alternative foreclosure prevention options fail, the foreclosure action may be resumed.

·Participating Servicers are required to service all eligible loans under the rules of the program unless explicitly prohibited by contract; servicers are required to use reasonable efforts to obtain waivers of limits on participation.

On April 21st 2009 the Treasury amended the supplemental directive 09-01 with Announcement (09-05R): Q3. How should borrowers who contact their servicers be handled with respect to HAMP if the servicer does not yet have the proper documents or is not yet equipped to evaluate the borrowers situation?

·Servicers are required to validate the homeowner’s eligibility for HAMP and capacity to pay. Servicers should begin the process of collecting the required documentation from the homeowner and the information necessary to establish an escrow account on non-escrowed loans. Based on the servicer’s understanding of the homeowner’s ability to pay, a servicer may place a homeowner on a forbearance plan pending its ability to execute a HAMP modification. Foreclosure actions (with the exception of those in Georgia, Hawaii, Missouri and Virginia), including initiation of new foreclosure actions, must be postponed for all borrowers that meet the minimum HAMP eligibility criteria. Q8. Must servicers suspend foreclosure or not initiate foreclosure for all borrowers who are potentially eligible for the HAMP?

·To ensure that a borrower currently in foreclosure or at risk of foreclosure has the opportunity to apply for a HAMP modification, servicers should not proceed with a foreclosure sale until the borrower has been evaluated for the program. Additionally, servicers are strongly encouraged not to initiate foreclosure until a borrower has been evaluated and determined to be ineligible for the program or the borrower fails to respond to a Trial Period Plan offer that has been made by the servicer.

Legally, banks and servicers must suspend foreclosure actions, including initiation of new foreclosure actions, and may not proceed with a foreclosure sale until the borrower has the opportunity to apply for a Home Affordable Modification Plan. THE COURTS HAVE NOT BEEN MADE AWARE OF THIS LAW

My wife is an attorney, she utilized the research on this law and appeared for a client that had a default judgment entered against them in a foreclosure matter in DuPage County. The foreclosure judgment was entered on May 2008 and subsequently set for June 09 to confirm the sale of the property.

My wife’s case was 57th on the call and I witnessed almost 56 judgments for foreclosure granted prior to her appearance. One woman even informed the judge that she had submitted her HAMP application to the servicer, but the judge still granted the banks judgment for foreclosure and instructed her that she had 90 days to try and modify. I prayed diligently in court that morning that once the judge was aware of the Federal Law he would rule in favor of the homeowner. When my wife successfully cited the HAMP guidelines the judge looked up the Economic Stability and Recovery Act online, he then granted the motion to vacate the order previously entered overturned the sale and allowed the homeowner time to submit an application for a HAMP modification.

The judge was not aware of the details of this law prior to hearing my wife's arguments and unfortunately his court had previously granted hundreds of judgments. The good news is, God answered our prayers and now this one judge is aware of the law! This homeowner hadn't even applied yet, but the Federal Law states an applicant has to be considered for a HAMP modification before a servicer can foreclose. To the best of my knowledge this was the very first time that this law had been cited in a foreclosure matter! I don't believe it was the Presidents intentions to have the court system enforce his law but Banks and Servicers are not acting in good faith.

My wife later had the opportunity to go before a Cook County judge with the same motion. However, she did not get an opportunity to do so because the Banks law firm withdrew their motion for foreclosure and sale completely!!!!! Apparently the Banks are aware of this Federal Law and did not want to try it in a court. The judge in the matter informed my wife that here motion was moot due to the fact the Plaintiff withdrew their motion for foreclosure and sale(Attorney representing the bank had not informed her firm of their actions), but he did get the opportunity to review here motion and questioned her citing!

The Bank and their Law Firm wisely chose not to have a judge render a decision on this Federal Law, but I am sure that they proceeded with every other foreclosure matter on the schedule that day!

This was a victory non the less, another judge is now aware of this Federal Law and eventually once all courts are made aware Foreclosures will have to be halted until the homeowner has an opportunity to be considered for a HAMP modification

God granted this victory without even having to fight for it! Now we just have to spread the word.

Link to Supplemental 09-08 - Servicer RequirementsHAMP Supplemental 0902
HAMP Supplemental 0901 

Wells Fargo's position on HAMP: