The following scenario is unfortunately common for people in foreclosure: Homeowners experience a financial hardship, default on their mortgage, and the lending bank files a lawsuit. Then the homeowners’ situation improves and they apply for a loan “modification,” which basically just allows people to restart their mortgage payments and keep their homes. The homeowners repeatedly apply but never have their applications even reviewed. They are given various explanations from someone in a call center in another country: The homeowners did not submit certain documents; the homeowners earn too little money; another representative contrarily says the homeowners make too much money to qualify.
The bottom line is people have money and want to pay, but the banks refuse. It happens all the time. Once a bank starts the foreclosure process, it has no duty to let homeowners resume their mortgage.
My first trial was a mortgage foreclosure defense case, and we were faced with similar facts. Our client handed us copies of the checks he sent the lender for the months that were allegedly unpaid. The checks had been cashed by the bank. Still, the lender would not reverse the foreclosure process.
That’s when I learned that bureaucracy and irrationality define behemoth financial institutions. Consumer protection attorneys around the country are faced with:
- foreclosures when there were no missed payments;
- denied modification applications despite being overqualified;
- ejectment lawsuits where the bank has no evidence it even owns the loan.
These experiences appear to be the industry standard. Earlier this year Wells Fargo made headlines for having deceptive practices. The allegations were that Wells Fargo was opening accounts for customers who never consented. This kind of behavior is obvious fraud, also known by attorneys as malfeasance.
Nonfeasance is more subtle conduct than malfeasance but can be just as damaging. Nonfeasance simply means failing to take actions required by law. Foreclosing on someone because of mistaken documentation is not intentional fraud—but it is deceptive when a bank fails even to investigate its mistake.
Most states (including Pennsylvania and New Jersey, where I practice) have laws that protect consumers against systemic, deceptive behavior in addition to fraud.
During my first trial, the bank flew in its key witness from across the country. He was a “records custodian” who testified about the homeowner’s late payments. All we had to do in response was bring in the dated checks that were cashed by the bank, and we won the trial.
My amazing attorney skills are not the reason we won. It was because the bank’s procedures were so sloppy that it was foreclosing on a person who had actually paid. The homeowner went on to sue his lender for filing a frivolous foreclosure action. Now that company is facing hundreds of thousands of dollars in litigation exposure when it could have accepted our client’s money long ago.
The reality is that banks operate in ways that make no financial sense. Banks are not charities, but it is particularly egregious when they refuse “win-win” deals where families keep their homes and the banks make money.
Have you had a similar experience? Please share your thoughts: firstname.lastname@example.org.