Counsel’s Corner: Are Loan Mod Lawsuits Just Stall Tactics?

DSNews.com

David G. Marowske has been an attorney with Potestivo & Associates, P.C.since 2002.He represents mortgage servicers, lenders and banks in litigation covering a broad spectrum from Mortgage Fraud, Title Litigation, and Creditors Rights to matters filed by debtors for origination issues such as RESPA and TILA to matters for Wrongful Foreclosure and Illegal Lock-Out. Marowske is a member of the Legal League 100 Advisory Council. He recently spoke with DS News about cases in which borrowers are trying to force servicers into accepting a loan modification.

What have you noticed about the lawsuits filed by borrowers facing foreclosure?

When borrowers who are facing foreclosure are initiating litigation, they are typically using it as a tool to try and force the lender to the table to prevent the foreclosure and enter into some type of modification. It's very rare that we deal with a borrower who is just seeking monetary damages. Most of the borrowers who file the lawsuits want to keep their homes and are basically trying to do whatever they can to keep them. The majority of the litigation that we deal with involves borrowers trying to force the lender or servicer to enter into a modification of some sort.

That's a common recurring theme we see being litigated. We see a lot of regulation acts litigation with respect to RESPA and the submission of a complete loan modification application within the required time frame, which is more than 37 days prior to sale. of the majority of cases we see are where the borrower alleges, “We submitted a loan modification application, and we either a) didn't receive a response, or b) we didn't like the response that the lender or servicer gave us.”

Have you noticed more issues with loan modification applications where RESPA is concerned?

It has stayed mostly the same. What we see more of is that people are litigating because they don't like the results. In these situations they're being declined, and they're appealing the decision made by the servicer during the review process. Whether or not a loan modification package is complete is quite easily discernible just by reviewing the documents that have either been sent to the servicer or reviewing what the borrower has in their possession that they are submitting as evidence in litigation. Those cases are easier to litigate. It's the cases where the borrowers allege, “the servicer used incorrect information” or “the servicer didn't process the information correctly” that are more challenging.

How are most of these cases resolved? Do you find that most people stay in their homes?

I would say no in these types of situations. We're already dealing with borrowers that have already expended most of their options. They are at the end of the rope. A lot of them are sold a bill of goods by an attorney who may not be honest with them, and they do not necessarily realize what the outcome is going to be. I don't know what promises are being made by the borrower's attorney in a case like that, but I would imagine a lot of these lawsuits are just done to stall and give the borrower a little bit more time to do whatever they need to do to move on. Most of the litigation that we deal with is either a stall tactic or to place them into a loan modification. Occasionally, you get a few genuine cases where a proposed modification is presented to them, they accept the offer, and they are put back into a performing loan.

Have you noticed any difference at all in day-to-day operations since the passage of TRID last October?

From a litigation standpoint, not yet.