What is the Value of Consumer Time in Getting the Run Around With Servicers?

Jan 15, 2014

I recently received exactly that question, from one of the readers who made a donation to the blog to get a direct answer. I thought I would share the answer with you and invite other comments.

First the question, as phrased: Is a consumer’s time worth anything when applying for a loan mod, in any state, under any legal theory you have heard of?

My Answer:

The simple answer to your question is “NO.” The time of consumers appears to be worthless in virtually all settings despite the most egregious behavior on the part of vendors, banks or anyone else. I have not received any reports from anyone to the contrary. BUT many Servicer abuses DO result in damage payouts both in the “large” bank settlements we have seen in the news and in individual lawsuits that are nearly always done under seal and confidentiality.

Your anger is probably justified and the parties you have contacted have most likely been playing with you. But there is a real question about the identity of the creditor, and therefore the legal authority of the “Servicer.” The authority of the Servicer comes from a contract to act on behalf of the REMIC Trust. But if the trust was never funded and the actual lender is a group of investors whose money was mismanaged (as alleged in many federal and investor lawsuits) it might also be true that the Servicer is a “volunteer.”

As such, the Servicer might not have actual access to the real money trail and the real creditors and thus be unable or unwilling to actually “consider” a modification. Many lawyers are reporting success in getting damages for Servicer abuses, violations of TILA and RESPA etc. Danielle Kelley, Esq. has had considerable success in enforcing modifications that were approved for a trial period after the homeowner made the required trial payments. Judges are refusing to allow foreclosure after the settlement or modification agreement has been executed.

I would recommend that you obtain the title and securitization report, an expert declaration addressed to your issues and that you consider consulting with an attorney to challenge the Servicer and the named creditor on the authenticity of their claims. In my law practice we have several clients who are current on their mortgage and have sued the parties that have been identified as the creditor. They allege fraud, slander of title etc. Others have gone the bankruptcy route where they petition for Chapter 11 reorganization or Chapter 11 liquidation.

One thing to be careful about is the unlawful practice of law by the Servicer. They are advising homeowners in an indirect way to stop making payments in order to “qualify” for consideration of a modification. This is a way to trick homeowners into default and foreclosure based upon the correct assumption that most homeowners will not escrow the payments that were withheld and will get deeper and deeper into default.

Your question goes to a deeper issue. If you were to file suit based upon the value of your time it might break ground for thousands of other people. The fact is your time DOES have a value. If you were tricked into spending time that was futile because of internal policies and goals of the banks (just to wear you out), I think most lawyers would agree that under existing law, there is a valid cause of action, despite the obvious reluctance of the courts to allow it. It would probably need to be carefully worded to avoid pitfalls that would cause your lawsuit to be dismissed.

Lastly there are often state programs that were federally funded that could be of assistance but nobody talks about them. Right here in Florida we have a distressed homeowners fund that hardly anyone has touched. in Arizona the same thing has happened — $300 million and hardly any homeowners have applied for relief. And I might add that the servicers are subject to regulation, and compliance with the OCC consent judgments, that might be the basis for equitable or legal relief.

This is for information purposes only. Do not to take any action without consultation with a lawyer that is licensed to practice in the geographical area in which your property(ies) is located.

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