We sue banks for a living. Unfortunately, there are not many lawyers that can make that claim. Although we generally do not handle residential mortgage cases, we still like to share homeowner stories with happy endings. Too few “David vs. Goliath” stories end well these days, especially when the Goliath is a huge bank or loan servicer.
Earlier this month a federal jury in Bakersfield found in favor of homeowners Dora and Frank Cornejo and against Ocwen Loan Servicing, LLC. The story of this married couple bears retelling, if for no other reason to offer hope for homeowners.
The Cornejo’s purchased property in Bakersfield, California in 1992. Like most homeowners, they financed the purchase price through a bank. The bank secured its interest with a mortgage on the property. The loan was later assigned to someone else and at some point, Ocwen became the servicer of the loan.
For those not familiar with loan servicing, most banks no longer hold their own mortgages. After the property is financed, the loans are pooled and sold to investors. A servicer is appointed to collect the mortgage payments and make sure that taxes and insurance premiums are paid.
In 2014, the Cornejo’s found themselves underwater and struggling to make payments. That October, Ocwen notified the couple that they were in default.
Unlike many states, California has a homeowners’ bill of rights that carries the force of law. The rights afforded to California homeowners include a requirement that the lender or servicer discuss foreclosure alternatives. Two months elapsed before Ocwen sent the couple a form letter discussing foreclosure options and soliciting their participation in a loan modification program.
Several more months went by until March of 2015 when Ocwen called the couple by telephone to discuss loan modification options. According to their complaint, the Cornejo’s claim “at the conclusion of the call; [Ocwen] affirmatively represented to [them] that they had been ‘pre-approved’ for loan modification candidacy and requested that they furnish loan modification application paperwork as a mere formality for final approval. “
Even though Ocwen claimed that the Cornejo’s had been preapproved and even though the couple supplied all documentation requested of them, on April 29th Ocwen auctioned the property. Adding insult to injury, Ocwen acknowledged their modification application on the day after. (April 30th).
Even though the Cornejo’s application was pending and they had been approved, Ocwen auctioned off their home anyway.
We hear tragic stories like this every day. The Cornejo’s’ weren’t going to take this lying down, however. In California, it is illegal to proceed with a foreclosure or liquidation while the property is simultaneously going through a modification. This is called “dual tracking.”
Many states and HUD says that lenders must either foreclose or help the borrowers modify the loan terms. They can’t do both simultaneously.
Claiming they were a victim of a wrongful foreclosure based on dual tracking, the Cornejo’s’ sued Ocwen in the Superior Court of California on May 14th, 2015. Ocwen immediately removed the case to federal court. Banks tend to prefer federal court where they thing that judges are more favorable. That logic doesn’t always work, however.
Last week, a federal jury awarded the couple $39,642 in economic damages and additional $300,000 in emotional distress damages.
Only the jurors know how they calculated the loss figures. We believe that the jury factored in what the house was worth, how much was owed and then arrived at the difference which represents the couple’s equity. The jury didn’t stop there.
Losing one’s home is worth more than the $39,000 in equity. We believe that is why the jury awarded another $300,000.
Ocwen still has time to appeal. As of this writing, they have not taken any action nor have they made any public statements.
What This Case Means to Struggling Homeowners
We know from our experience that many banks don’t like loan modification programs. Even though these same banks took hundreds of billions of dollars in federal bailout funds, they simply don’t want to participate in the government sponsored loan modification programs such as HARP and HAMP.
If banks do offer a modification, it is often their own proprietary product, one that is designed to squeeze as much money as possible from the homeowners.
The Cornejo’s predicament is not uncommon. One person at the bank announces that a modification has been approved while another side of the bank or servicer is busy proceeding with a foreclosure. This so called dual tracking is usually illegal and always detrimental to the homeowner.
With proper paperwork and good notes, you can sue your bank and win. In this case, the jury made specific findings that the couple’s submission was complete and that they had timely submitted all paperwork for the modification.
Postscript. The purpose of this post is to offer hope to homeowners. Even with all their money and all their high priced lawyers, banks don’t always win.
Takeaways from this Post
If you are going through the loan modification process, consider these common sense rules.
- Save every scrap of paper. You may need this to show that you were promised a modification or prove you sent all necessary documents.
- Keep a diary and record the date, time and subject matter of every call or meeting.
- If a banker or servicers makes you a promise, note that in your diary and immediately send a detailed confirming email.
- Send all documents by courier or certified mail and get a s delivery signature.
- Remember that in many states you can’t collect emotional distress damages u less you were actually treated by a physician. Make sure you diary your treatment and any attendant expenses.
- Remember always that you can sue your bank and win!
MahanyLaw – America’s and Judge, Lang & Katers - Lender Liability Lawyers
The law firms of MahanyLaw and Judge, Lang & Katers are two independent national boutique law firms that come together to sue banks, trustees, noteholders and loan servicers. Although we rarely handle residential real estate matters, we will occasionally take up a wrongful foreclosure case.
We are also interested in suing banks in class action cases where a homeowner can show that many other homeowners are suffering an almost identical fate because of banking misconduct.
For more information, please send details to us in writing at [hidden email]. No phone inquiries please.
MahanyLaw and Judge, Lang & Katers – We Sue Banks