Sue Your Lender, Save Your Home

Brad Dickinson illustrationFor homeowners struggling to keep up with their mortgage payments, their best hope may be negotiating a lower, more affordable monthly payment while they try to get their financial houses back in order. That's the aim of the government's Home Affordable Modification Program, which encourages lenders to modify loan payments.

It sounds simple: To modify your mortgage, you fill out the paperwork and move forward, right? Don't count on it, say some homeowners who have been there, tried that. Lenders, if they do anything to help you at all, might accept you into the temporary mortgage reduction program, but what happens when you've made those reduced payments and your lender renegs on the deal and forecloses on the home anyway? HAMP officials have been tightening the rules for lenders to make it harder for them to string borrowers along. But in the meantime, many homeowners are fighting back, the American way: by suing and screaming.

More people are taking their lender to court or contacting their congressman, or sometimes both. We looked at some homeowners who have chosen one of these routes -- and won.
Some lenders and loan servicers believe they can make more money by foreclosing on a home than by modifying a mortgage, so they give excuses for not doling out permanent modifications while trying to appear as if they're trying to help. For others, they just give homeowners the "runaround."

That's exactly what retired "Real Housewives of Orange County" cast member Jeana Keough was probably feeling before she launched a campaign against her lender.

Keough says her 7-bedroom, 9-bath Coto de Caza home (left) finally has been saved from foreclosure through a loan modification. But it wasn't easy, as the banks didn't comply until she made a lot of noise, reported the Orange County Register. She says of her efforts, "I am more than a bimbo on a Reality TV show." (Plus, she knows how to leverage her status).

After acknowledging her financial woes last summer, Keough originally listed the home for $5.5 million, reported Luxist, about a half-million dollars above its then-value in an apparent attempt to help buy her time as she fought the system. But once Keough's home had been scheduled for auction, it was last listed on various online services at $3.9 million, reported the Orange County Register.

"With the possible sale of my house at auction, and the crazy people coming out of the woodwork to buy my $4.5 million dollar house for $1.3, you find out who your friends are," she wrote to Jon Lansner at the Register.

WaMu/Chase had originally denied accepting her into the permanent home mortgage modification program after she says she worked with them for six months. "They said I didn't fit the program, I am a fighter so I called my friend Jason Cougenhour at HUD, our illustrious Congressman, and our Governor's office, and found out that 75 percent of the people in loan mod's weren't getting accepted. That incensed me. I talked and wrote, harassed, gave speeches, encouraged people to write email blasts. ... I am happy to say Chase has stopped foreclosure, and made my payments affordable."

Now, we all aren't living in multi-million-dollar homes and able to broadcast our woes on a reality TV show to get action done, but that isn't to say you also couldn't complain to your state representatives.

Las Vegas Sen. Harry Reid, D-Nev., said his office has handled hundreds of calls from homeowners complaining about lenders' unwillingness to work with them. They gripe about the difficulty of reaching lenders, reported the Las Vegas Review Journal.

"One of the biggest complaints I get from people fighting to stay in their homes is that they can't get anyone on the phone to talk to them," Reid said. "These people are just looking to get someone on the phone who can help navigate these troubled waters."

Reid said he knew he wouldn't be able to help everyone, so he sent letters to lenders urging them to be more responsive. The senator's efforts resulted in 19 Nevada homeowners getting a loan modification or workout plan from the bank; another 40 or so have been assigned to a workout negotiator.

Gloria Lucas, who lives on a retirement pension with her husband and two teenage grandchildren, says Reid's efforts helped her. She had gotten no where after calling Wells Fargo and Wachovia almost weekly seeking help in lowering her $1,322 payment. So Lucas called Reid's Las Vegas office. Within three weeks she was receiving phone calls and documents from the bank. Her payment was reduced to less than $800 a month with 18 percent, or a little less than $30,000, forgiven on the mortgage balance.

But if political clout doesn't work, you can always sue.

At least four Boston-area homeowners are suing Wells Fargo and Bank of America, claiming the banks haven't done what they promised.

One lawsuit claims that the plaintiffs followed all the Federal rules and guidelines set by the lender to lead to a permanent mortgage modification, "only to be given the shaft at the end of the mandated trial period," reported Charles Feldman for Walletpop.

"When a large financial institution promises to modify an eligible loan to prevent foreclosure, homeowners who live up to their end of the bargain expect that promise to be kept," the homeowner's attorney, Gary Klein, said in his complaint obtained by the Boston Globe.

Although the cases for the Bostonians are still ongoing, many Californians have received positive results from their legal pursuits.

Federal lawsuits over the Truth in Lending Act or wrongful foreclosure in California have skyrocketed in the past five years, from just 29 in 2005 to 1,395 last year, reported the San Jose Mercury News.

Two weeks before their Sunnyvale home was to be auctioned off, Sonia Leverman and her sons seized on a desperate David-vs.-Goliath legal strategy and won after everything else had failed.

The Levermans' saw the monthly mortgage payments on their three-bedroom, $655,000 ranch home jump from $2,500 to $4,353 when the rate changed--right on the heels of the husband losing his job and the sons' work hours cut back, reported the Mercury News.

The family entered a temporary modification plan with the lender, but filed suit after Litton Loan Servicing refused to grant them a permanent loan modification. The loan servicer claimed their third trial payment was late - even though the Leverman's had a Western Union receipt showing it arrived on time.

As a result, the Levermans finally hired an attorney who filed suit in California's court system against Litton, alleging breach of contract. As a result, the family is back on track for a permanent modification. However, they owe more than the house is now worth and they're out $5,000 to attorney Los Gatos lawyer Wendell J. Jones. But I am sure they see that as money well spent. "Only when I got involved and filed a lawsuit did the lender come to the table," Jones said.

Sheree R. Curry is an award-winning business journalist who resides in a Minneapolis suburb.
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