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Short sale / Loan modification tip 197: Sue Your Lender

I saw this article appear in the New York Times.

States Are Pondering Fraud Suits Against Banks – DealBook Blog –

I mentioned in a recent article I commented on the fact that often times loan servicers have a higher incentive to foreclose than save borrowers and mortgage investors huge sums of money by aggressively offering and working loan modification/ short sale work outs.

This has lead to massive blights to neighborhoods.  Entire states and communities have been hit hard financially.  With new case law starting with 2005 U.S. Supreme decision, states are aggressively pursueing mortgage companies for the fraud they have perpetrated in knowingling writing bad loans and selling them off as good loans.  Using these suits they hope to force banks / servicers to start taking care of the problems instead of letting everything foreclose.

I have experienced first hand as a short sale specialist here in the North East Ohio, lender apathy and how sueing your lender can be the best solution when diplomacy fails to get results (see this article).  One example of this is a short sale I did with Countrywide (now Bank of America).  We submitted an offer and fought with Countrywide tooth and nail for 8 months all the while foreclosure looming.  My client hired an attorney and got the foreclosure case thrown out of court on a technicality the very next week I got a call from the office of the president and we had the offer we were working on approved and within several days.

What changed?  The easy and cheap thing for a servicer to do is to just foreclose.  But when that started looking expensive the servicer decided it would be easier and cheaper just to approve the short sale and get everything taken care of.

Likewise there are many companies that specialize in doing something called a forensic loan audit and then sueing the lender to force their hand and get quick results for both loan modifications and short sales.  I haven’t found any of these companies that I completely trust but I am testing out a locally based attorney firm with one of my clients and will let folks know how that works on the short sale we are working using their services now.

1 comment to Short sale / Loan modification tip 197: Sue Your Lender

  • We have been performing compliance audits since 2003 and now provide litigation assistance to attys. nationwide in preparing consumer mortgage defense lawsuits via an atty. whom we have worked with for years specifically focusing on this area of laws.

    I agree with you to some great extent…very few companies out there that we have found to be ethical.

    Linda J.Rougeux

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