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New California Foreclosure Ruling

February 22nd, 2016 4:31 PM by Gregg Mower

You may have herd of the term “predatory lenders” a term largely coined by Attorneys.  But now California has opened the door for more litigation against lenders, so we might now be faced with Predatory Attorneys (Oxymoron).  Yes, on February 18 of 2016 the California Supreme Court rendered a decision in the case of Yvanova v. New Century Mortgage Corp that essentially opens the door for Predatory Attorneys to try and sue lenders on the grounds of wrongful foreclosure.  So just what does that mean to us that try and help consumers obtain funding for their home?  Well it means that more and more lenders are going to look at California as a toxic lending ground and stay away.  This will essentially limit the amount of small to medium size lenders that will enter the market in California offering consumers less choices in home loan products and higher interest rates.  It’s a simple concept, a lender perceives that they have a higher possibility of being sued by operating in a particular area, they will tend to stay away which really is an unintended consequence to the court ruling above.  I heard a story on our local news radio station this morning that prompted me to research this court ruling as the story was done by an attorney that is known for their predatory legal practices.  I want to make sure that if you are going to seek legal advice due to that story or the court ruling that you are not going to be fleeced by a Predatory Attorney.

What does this new Supreme Court ruling actually mean if you have had a foreclosure in the past?  First, in order to find out if you have a case against a lender you must first retain an attorney or law firm (be careful billable hours are generally $250-$450 an hour) to see if your situation can be reversed.  But, what if you let the house go in 2011 or 2012 or earlier, is it worth your time to seek retribution?  I would say absolutely not unless you really want to make attorneys richer.  You see, if you let your home go to foreclosure that long ago, yes, you still have to answer to it, but it is generally in your past at this point.   With a foreclosure in 2011 or 2012 you now have the ability to get a new home loan with an FHA loan.  I know that some foreclosures were handled wrong in this industry but the defense of lenders there was an overwhelming volume of foreclosures that lenders had to take care of at the same time.  Am I saying that was right, absolutely not, I am simply stating the facts that as Real Estate prices declined rapidly in the years between 2006-2010 and people had their home mortgaged at a higher amount than their home turned out to be worth and some good people lost their homes.  Some homeowners decided that they could not make up the difference in equity anytime soon so they let their home go to foreclosure.  Others lost their jobs or had significant decreases in their income during that time and could no longer make their payments and they could not sell because they owed more than their homes were worth so their homes went to foreclosure.  Lenders were forced to deal with a flood of legal foreclosure proceedings that they did not have the resources to deal with, so mistakes were made.   Financial institutions are not in the best of health still and I fear that there will be frivolous predatory lawsuits now filed that will send some lenders out of the state or out of business creating less opportunity for good people that need financing to be able to get a home loan. 

You may have had to deal with a foreclosure in your life and it may have been embarrassing and a financial nightmare.  But that is now in your past, it was not your fault that circumstances changed in your life and the Real Estate Markets failed, but here you are today alive and well with some bumps and bruises you still have to deal with but you have made it through the toughest part.  So for now to seek any legal retribution at this point would simply cost you more money and force you to dig up old issues that are now behind you.  There are new loan products that can help those of you who have gone through a foreclosure to obtain a new home even just out of foreclosure.  If you are considering legal action against a Lender you must think of not only yourself and how you were wronged but you need to ask the question of yourself and your counsel, if you can obtain the outcome you desire by litigating.     

There will be some of you reading this stomping your feet mad as hell that have been severely wronged by a lender and you think I am defending them.   I am not I was once told by a divorce attorney many years ago that I would be better off in the long run by just giving in to the fight as the fight was going to cost me more than I had potential to receive, he was right.  So if you choose to fight remember that and you need to analyze your situation and see if it is worth the time am money to hire a law firm to take your case.  You have to determine what you wish the outcome to be and see if that outcome is even a possibility within the law.  Then the outcome is what needs to be analyze, do you want your mortgage forgiven, do you want the house back and resume payments, do you want your credit fixed, or do you just want to punish that lender that made mistakes by punitive damages (damages awarded to you from a court of law to make up for what you lost).  I know this sounds harsh and I am not a proponent of lenders necessarily as I am a Broker who simply arranges loans for clients to sell to lenders and the more choices I have for my clients the better the products I can deliver.  I am a proponent of the consumer and that they are treated fairly and have choices and pay fair prices.  My fear in this new court ruling is that people will migrate to attorneys to try and “fix” their situation and simply get taken for their money and get nothing in return.  If you have been wronged in a foreclosure, or more importantly, if you are currently being wronged ask yourself what do you want the outcome to be then find out how much it will cost you to achieve that outcome and how long will it take.  Then analyze if that is worth it for you. 

If you decide to seek legal opinion, please watch out for what I deem as predatory law firms.  These are law firms that have fancy offices and treat you like you are right and have a “great case” just to get you to sign an agreement or engagement letter.   These law firms will invite you in to their office, offer you a drink or food, listen intently to your story and feed you full of hope to get you to sign their engagement letter.  These law firms will set you up on a monthly payment plan to “help you with your finances”.  It will all look great until you find out that your case will take several years even to be seen in the courts, if at all.  In the mean time you have spent thousands of dollars in some cases tens of thousands of dollars.  To avoid this situation, ask for references of past cases and check them out.  Research the internet for any red flags, such as disgruntled customers, complaints to the state bar, actual lawsuits against the firm for their practices.   Don’t be fooled by so-called experts that have radio shows or TV shows, sometimes those very people are the biggest crooks.  I would really hate to see you get taken by a lawyer for their own personal gains as they have the ability to hide behind the law and your ignorance of the law.  In fact, I have an independent contractor that works with me and his Godmother was taken by a local Roseville firm for $25,000 to work on a loan modification and the exact scam was done to her as I explained earlier, she had to employ another law firm to complete her modification.   She was sold on a payment plan by the Roseville law firm who advertises on the local news radio station and has a talk show on that same station.  She is resigned that she will never see that money again and she is retired and at 70+ years old will never be able to recuperate her money back, so be careful if you are seeking an attorney to represent you against a lender.   So in the sole searching you must be going through, I can only offer this advice, be careful and read everything you sign whether it is from a lender or an Attorney as in my 30 years of being in the Lending and Real Estate Business I do know there are bad apples everywhere you turn and I want everyone to have fair representation.  

Posted by Gregg Mower on February 22nd, 2016 4:31 PM

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