Hat tip to Susie for sending in this latimes.com article:

For example, Jean C. Wilcox of Irvine has sued EMC Mortgage Corp., accusing it of stringing her along for three years while making several offers to modify her nearly $800,000 loan, losing documents repeatedly and never intending to permanently change the terms of the mortgage. An EMC spokesman declined to comment.

“It was just ‘extend and pretend,’ ” said Wilcox’s lawyer, Anthony Lanza of Irvine. “And it was like they had the fax machine hooked up to a shredder.”

Anaheim lawyer Damian Nassiri said his firm had filed about 100 lawsuits against mortgage lenders since 2007. Earlier suits alleged that lenders misrepresented terms of mortgages or engaged in other shady practices to foist abusive loans on borrowers. Most of his firm’s suits now accuse lenders of dealing in bad faith with borrowers who have become delinquent on loans.

Worse, Nassiri said, in cases where foreclosure was inevitable, banks misled borrowers into accepting trial loan modifications. The intent, he claimed, was “to get some kind of money out of them” while stalling actions to seize the homes.

“There are too many bad loans for the banks to handle, and they can’t dump all these properties out on the market all at once because we would have another Depression,” Nassiri said.

Similar allegations of breaches of contract and acting in bad faith have cropped up in lawsuits around the nation, said Anthony Laura, a Washington lawyer who represents lenders accused of wrongdoing and tracks litigation trends.

Some suits allege that the problem is so widespread that courts should certify the plaintiffs as representing an entire class of aggrieved borrowers. Wilcox’s suit, for example, seeks class-action status on behalf of other California borrowers with similar complaints about EMC.

Boston consumer lawyer Gary Klein, a longtime antagonist of mortgage lenders, has filed suits seeking class-action status against the top three loan servicers — Bank of America Corp., Wells Fargo & Co. and JPMorgan Chase & Co. — and others.

A multidistrict panel of federal judges on Oct. 8 consolidated eight such suits, including two from California, for pretrial proceedings in federal court in Boston.

The suits allege that trial loan modifications extended by Bank of America under the Obama administration’s anti-foreclosure plan were contracts that the bank violated by denying permanent modifications to borrowers who fulfilled their obligations.

In court documents filed in one of the cases, Bank of America said the plaintiffs mistakenly believed they were guaranteed loan modifications if they made three trial payments under the government’s program.

“A borrower must actually qualify, including income verification, an analysis of the modified loan’s affordability and other factors,” the bank said in the filings.

Wilcox said she had about $250,000 in equity in her home when EMC first offered to modify her loan and would have sold the house had she not relied on the company’s promises for a permanent modification. Now it’s not clear whether any equity remains.

“You’re paying out all this money,” she said, “and all the time the value of your house keeps going down.”

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Jim the Realtor
Jim is a long-time local realtor who comments daily here on his blog, bubbleinfo.com which began in September, 2005. Stick around!

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