October 3, 2012

Apparently, the loan mod scam continues. The most recent one we have been asked to review comes from Ocwen Loan Servicing. (this is the one which Judge Arthur Schack in NY previously found would have to have offices as big as Madison Square Garden if they actually serviced all of the loans they claim to service). The “offer” is beyond laughable. What is sad is that homeowners continue to be taken in by these “offers”.

The Ocwen “offer” states, on the second page, that “Ocwen Loan Servicing will not proceed to foreclosure sale during the trial period if you are complying with the terms of the Trial Plan”. It is important to read that carefully: Ocwen will not proceed to SALE, and that is only if they determine that the homeowner is complying with the plan. Further, “sale” is only one phase of the foreclosure process. The next paragraph shows how illusory the “offer” really is:

“During the trial period, we may accept your trial period payments and apply them to your account, but that will not affect foreclosure proceedings that have already started”. So, even though Ocwen accepts payments, the foreclosure process continues. In fact, this paragraph provides that Ocwen accepts payments, but that “this does not waive our acceleration of your loan or waive the foreclosure action and related activities.” Notice how broad that language is: “the foreclosure action” and “related activities”. So, the homeowner makes payments, all the while Ocwen presses on with the foreclosure, agreeing only to hold any SALE in abeyance. Of course, as soon as the loan mod is denied or the homeowner is told they are not “complying” with the trial agreement, the sale goes forward, and we all know that we have seen instances where servicers are sent the exact money due and proven to be received by the servicer on the due date, only to have the servicer claim it was not, resulting in a “default” with the foreclosure pressing forward.

The agreement further states that “You agree that Ocwen Loan Servicing will hold each of your trial period payments that you make in a non-interest bearing account. Once there are enough funds in that account to make your full mortgage payment, we will apply the funds to your loan account to make that payment. At the end of the trial period, there may be funds left in your account because there is not enough to make a full mortgage payment. If so, we will apply those funds to your unpaid principal balance when we permanently modify your loan.” Note the repeated vague and conditional lauguage. What is a “full mortgage payment”? If they accelerated, is this the entire balance due to the end of the loan term? Does “when we modify your loan” mean that they will? Obviously what it means is if the loan is not modified, the agreement does not say where the money goes.

We have been advised that the approval rate for permanent loan mods is roughly 2% nationally. Given that, it is more than obvious where the trial payment money goes when the loan mod is not approved: you got it: you, the homeowner, pay for the foreclosure expenses.

If you receive one of these “offers”, have an attorney who does this kind of work review it. We have yet to see a real, bona fide “offer” which stops foreclosure while the trial process progresses, and the “offers” we have seen are illusory at best.

Jeff Barnes, Esq.,