Well worth the watch. Very creative and funny.

For mortgage companies pursuing a foreclosure, the costs can run exorbitantly high. Mortgage giant Freddie Mac has estimated that the average cost to a lender of foreclosing on a property is close to $60,000, with other estimates placing the total cost to the homeowner, lender, surrounding community, and local government close to $80,000.

Homeowners can use this knowledge when the attempting to negotiate with a lender for a short sale, mortgage modification, or any other solution. The point of loss mitigation, supposedly, is to reduce the loss on a defaulted loan by working with the borrowers to prevent it from going into foreclosure. Knowing how much foreclosure costs the lender is a powerful piece of information for homeowners.

But there is a big difference between paper losses and out of pocket expenses for lenders. Some of the losses on a foreclosure fall into one category, while the remaining fall into the other. Obviously, mortgage companies are concerned about out of pocket costs much more than paper losses that do not represent true outflows of money for the bank. So what costs are involved in a foreclosure?

Foreclosure sale fees. To initiate a lawsuit or begin a nonjudicial foreclosure, it costs the bank money for filing fees or newspaper publication of the sheriff sale. Many states require a lender publish a notice of default or notice of sale for 3-4 consecutive weeks, which the lenders have to pay for out of pocket.

Legal fees. Lenders always hire local attorneys to pursue foreclosure on a home, and attorneys, as most of us know, are not cheap. If the homeowners defend against the process for as long as possible, legal fees for the bank can run into the tens of thousands of dollars. While these are added to the total amount the homeowners owe, if the house is not saved, the bank ends up having to pay the attorneys out of pocket.

Eviction costs. The eviction process after a foreclosure and sheriff sale typically involves the bank initiating another lawsuit or paying the attorneys more to have the former owners removed from the house. Any of these costs, including any more filing fees or legal fees, will have to come out of the bank’s pocket.

Damage to property during foreclosure. Unfortunately, once homeowners know they will be foreclosed on and that the bank will no longer work with them to resolve the situation, they may take out their frustration at the bank on the house itself. There are always new horror stories of properties being gutted, stripped, or vandalized by the former owners. Repairs will either need to be paid for out of the bank’s pockets or taken as lower proceeds from a sale.

Damage to property after foreclosure. When properties sit abandoned, the best that happens is it falls into disrepair. Old conditions worsen and new ones appear due to deterioration and the effects of the weather. In the worst case, the home becomes a target for squatters who damage the property or thieves who strip it of its pipes, siding, and anything else of value. The bank will need to pay for repairs out of pocket or accept a lower sales price to compensate.

Property taxes. If the bank does not keep up with the local property taxes, it risks losing the house itself to a tax foreclosure. While taxes may be lower for non-owner occupied houses like those owned by mortgage companies, any taxes will need to be paid for each day that the bank owns the property. Once the property tax bill comes due, the lender will have to pay it out of its own pocket.

Homeowners insurance. Although banks may receive a far better deal for property insurance than what it forces homeowners to pay for through mortgage servicing fraud and other tactics, homeowners insurance will still need to be paid. This will come out of the bank’s own pocket, although the lender may own another company that provides the insurance, keeping the cost in house.

Maintenance. Keeping the property cleaned and maintained is one cost that banks typically avoid. Instead, they will allow the house to fall into disrepair and simply take less in proceeds on a sale. Although this is a paper loss to the banks, the longer the house is empty and not taken care of, the more it will deteriorate and the further the sales price will need to be to motivate any buyer to purchase it.

Commissions on sale. When a bank ends up as the owner of a property after a sheriff sale, it will typically find a local real estate agent to list the property with. Once the house sells, the broker will have to be paid a commission, reducing the lender’s proceeds from the sale.

When homeowners are negotiating for some solution to foreclosure, pointing out the vast costs to the bank may be one way to force the bank’s hand and offer a plan instead of going through with foreclosure. Even a $20,000 loss on the loan due to a short sale could represent a savings of nearly $40,000 to the bank in the long run. Banks threaten the loss of the house to homeowners if they don’t stop foreclosure — why can’t homeowners threaten the loss of $60,000 to the banks?

As a result of government intervention in the housing market, fraud has become rampant in the mortgage lending industry, and homeowners may be able to raise this issue when defending against a foreclosure lawsuit. Fraud is defined as an intentional deception which results in injury to a person. There are a number of elements of a fraud case in order to consider it fraud. These include the following:

• The statement must be a false and material misrepresentation.
• The person making the fraudulent statement must know it is false or be ignorant of its truth.
• The person making the statement must intend for the person to whom it is made to rely upon the that statement and in a manner reasonably contemplated.
• The person to whom the statement is made must be ignorant that the statement is, in fact, false.
• The person to whom the statement is made must have a right to rely on that statment or be reasonably justified in doing so.
• The person to whom the statement is made must suffer injury.

Fraud can occur in many ways during a mortgage transaction, and may often occur in several steps of a corrupted process. Any party to the transaction, from the real estate agent to the title company to the mortgage servicer, may be engaged in fraudulent activity. Any misrepresentation, concealment, nondisclosure of material fact, or misleading conduct may be considered fraudulent, depending on the circumstances of the case.

If a lender or mortgage broker has used some ingenious method to take advantage of homeowners, mislead them, or trick them, then fraud may be involved. There are even a number of different types of fraud. For instance, contructive (legal) fraud does not have to have an evil intent to cheat a borrower. Fraud in fact (positive fraud) is fraud that does have an evil intent and is specifically used to take advantage of someone.

Homeowners who think they have been defrauded by a party to their mortgage transaction may attempt to bring that party into the lawsuit, even if it is not the company suing them or proceeding with the foreclosure in the first place. It will be important, however, to prove that all the elements of fraud have been met in the case. For this reason, consulting an attorney may be advisable for borrowers wishing to make this defense to foreclosure.

One of the most well-known types of fraud in relation to mortgages is that of mortgage servicing fraud, where a servicer uses fraudulent tactics to push homeowners into foreclosure. This may be done through a number of ways, many of which are detailed in our mortgage servicing abuse articles. But too many homeowners have suspected their servicer of fraud for it to be all that uncommon. In fact, most of the biggest servicers have been sued for fraud and been found guilty or have settled out of court for hundreds of millions of dollars.

When homeowners are sold a home or given a loan by unlicensed representatives, it may help their foreclosure lawsuit defense to raise these issues in court. Governments throughout the country have imposed so many requirements on any person attempting to do business in banking, real estate, and mortgage lending, that it is almost too easy to find licensing violations. This is the good part about licensing laws for homeowners defending against foreclosure.

The bad part is that, despite all this government regulation, criminals can and do find their way into the lending industry and defraud large numbers of homeowners. Now that the economy has collapsed, some states have purged hundreds or thousands of mortgage licensees from the rolls who either had shady backgrounds or did not keep up on the requirements to hold a license. And all of the costs of licensing are passed along to the end consumers who buy properties and take out loans to finance them.

Thus, simply being licensed is really no guarantee of legitimacy or good faith dealing. And governments are often not equipped to go after small companies that break licensing laws, because it will cost the state much more than they can ever recover by prosecuting individuals not operating a scam on a large scale. Small time crooks who sell a few predatory loans may cause individual families thousands of dollars of damage, but may be too small of white collar criminals for government regulators to dedicate many resources to catch and prosecute.

However, it is still a good idea for homeowners to make sure that every party they deal with during their mortgage transaction is properly licensed. If they find out that no license was in place, and the lender knew about this factor or should have known about it, it may have a difficult time proving its right to foreclose on a property. And it may be vastly easier for borrowers to show conspiracy or predatory lending if parties acted together to create a situation in which it was impossible to pay the loan.

Mortgage brokers and real estate agents are currently licensed at the state level. There has been some talk of creating new federal mortgage broker licensing regulations, but this has not been put into place yet, and it is unlikely that the federal government will take over this much power from the states. Various federal agencies, though, do investigate financial and white collar crimes and may have some jurisdiction over practices engaged in by a mortgage or foreclosure scam company. Appraisers are similarly licensed at the state level, if at all.

Banks may be licensed either by the state or the federal government, depending on how large the institution is, how many states it operates in, and if it decided to be a federal or state bank. Banks, though, will often be regulated at both levels to some degree. The largest banks will be regulated more at the federal level by the Federal Reserve and the Office of the Comptroller of the Currency, while smaller banks will be licensed and overseen by state banking departments.

Although filing complaints with the proper regulatory agencies may not help in a current foreclosure lawsuit, especially if the unlicensed party has left the business and left town to avoid prosecution, it may help prevent that person from taking advantage of others in similar businesses and situation. As well, if homeowners can show that they were given a loan or sold a home by someone without a license, it may help bolster the rest of their case as to why the foreclosure is invalid.

When there are other legal issues in addition to a foreclosure, the housing situation becomes even more complicated. Especially in situations of divorce, separation, or even domestic abuse, there is a greater tendency for families to be broken apart and the basic issue of survival of either party to be questioned. And even worse, cases of divorce and domestic violence have been found to increase during times of high foreclosure rates and economic recession.

In these cases, there may be both a foreclosure lawsuit and a domestic relations lawsuit going on at the same time. The domestic relations case involves an abuser and a survivor, while the home defense case involves both of the former parties against the mortgage company. And neither case may help resolve the other, unless there is a more united front in the home defense case. In fact, a domestic relations case may limit the options the homeowners have for saving the property.

Especially if the abuser has stopped paying the mortgage, the legal counsel for the survivor may have to go to court to obtain an order that continuing payments are made. However, if a period of time has passed between the last payment and the court order, the servicing company may require far greater than just the regular monthly payment to be sent in. And lenders and servicing companies are not bound by the terms of a domestic relations order.

Some attorneys will attempt to bring the mortgage company into the domestic relations case, but this is not always successful. The times where it can be worth trying is if a stay of foreclosure or acceleration of the mortgage is needed for only a short period of time. In these instances, the domestic relations court may grant an injunction against the mortgage company based on the terms of the order. But it may be important to prove that payments will be made on time soon (within a period of a few months, at most).

Injunctive relief against a mortgage company may also be sought if the servicer refuses to accept payments from a survivor whose name is on the mortgage and the note. If a party's name is on the note, the lender is unable to refuse payment, despite a domestic relations court proceeding. In fact, the refusal to accept payments from a party listed on the note may bar future foreclosure proceedings or extend a redemption period guaranteed by law, as well as being a breach of certain duties lenders have towards homeowners.

In cases where a survivor's name is on the mortgage, but not on the note, the situation is slightly more complicated. In these cases, it may be best to have ownership rights and obligations of the note transferred to the survivor through an order in the domestic relations court. However, there is a danger that the party listed on the note to begin with may agree to a loan modification or other agreement that makes the loan unaffordable for the other party. Owners who are on the mortgage but not the note, however, may be able to file a Chapter 13 bankruptcy and cure the default, if the situation is appropriate.

Thankfully, the issue of mortgage acceleration just due to the transfer of the ownership rights in a domestic relations case is not something to worry about. Contract law and federal law usually prohibit the lender from accelerating a loan when there is a transfer of interest from an abuser to a survivor. The Garn-St. Germain Depository Act of 1982 prohibits acceleration when ownership is transferred between spouses, and the Equal Credit Opportunity Act prohibits discrimination on the basis of marital status.

Selling a property that is involved in a domestic relations case may be an option, but it generally requires court approval to get the legal authority to move ahead with this option. All ownership rights might need to be transferred to the seller, or a power of attorney granting rights to negotiate a sale may be necessary. Any remaining equity or debt, if there is a short sale, will need to be apportioned between the parties.

In all cases where the ownership of a home may be transferred or is in dispute due to a domestic relations lawsuit, it may be best to file a lis pendens on the property. This can prevent against equity stripping, further encumbering of the property, or transfer of the property. There may also be a court order which forbids withdrawing any additional funds from a home equity line of credit (HELOC) or obtaining any additional mortgages on the home.

Finally, if there are few other options than letting the house go into foreclosure, survivors of domestic relations disputes may be able to obtain a cash for keys offer from the lender. Tenants or former owners are offered these deals as a way for the lender to entice people remaining in the property not to cause any damage and to move out amicably. They often offer several thousand dollars in exchange for a clean house and the keys. Servicing companies should have few objections to paying a domestic violence survivor to move out of a property to avoid eviction after foreclosure.

There are a whole range of issues affecting a property in foreclosure, and many of these issues can be exacerbated or added onto if there is also a domestic relations dispute. Homeowners should have adequate legal counsel for both the foreclosure help and the domestic relations case in order to sort out as many of the details as possible. Foreclosure is complicated and stressful enough without piling on additional messy disputes and lawsuits.

Damages for pain and suffering may be awarded to foreclosure victims who have been taken advantage of in predatory lending or servcing abuse cases. Pain and suffering is a type of damages that a party to a lawsuit may recover for physical or mental pain and suffering. These would result from the wrong done to that individual as a result of the other party's actions.

Judges and juries have often awarded parties to a lawsuit with vast sums of money if they have suffered pain and suffering. Numerous cases appear in the media with a corporation being penalized with these damages, which can run into the millions of hundreds of millions of dollars.

The financial ability of the party who must pay damages for pain and suffering will, of course, be taken into account. This means that, if homeowners have been severely and flagrantly taken advantage of by their lender, the lender may be forced to pay many thousands of dollars more to the owners of the property than the mortgage is even worth.

Although homeowners who are defending a foreclosure lawsuit or initiating one to stop a nonjudicial foreclosure will have to prove in other ways why the lawsuit is invalid and should not be allowed to continue, it may be in their best interests to ask for monetary damages for pain and suffering if they have been taken advantage of.

Especially if some sort of fraud, predatory lending, or servicing abuse has been committed, courts may look more favorably on a request for damages for pain and suffering. Claiming this because foreclosure notice requirements have not been complied with may be more difficult for borrowers to show.

In any case, it may be best for homeowners to consult with an attorney to find out more about how damages for pain and suffering may be included in their lawsuit, if applicable.

When it comes to identity theft, credit card numbers and bank account information stolen through electronic means is becoming more popular than the traditional check fraud schemes. It seems that there is a new press release every day indicating a corporation has had customers' financial information stolen. Check forgeries and alterations, however, are still a problem in the banking world and an issue that consumers should be aware of.

Especially in difficult economic times, the loss or theft and cashing of a single check can cause enormous financial difficulties for a family. Even if the money is eventually recredited back to the banking customers, the time period in which it takes to file a dispute can ensure that the consumers fall behind on other bills or monthly obligations. This is why homeowners facing foreclosure should be aware of the different types of check fraud, in case they become a victim.

The first type is when a thief forgers a consumer's signature on a check and then cashes is. In these cases, it is the bank that will be forced to take the loss. The general theory is that, because the bank making the payment has the customer's signature on file on a signature card, pointing out a forgery should not be difficult. Of course, in practice banks never scrutinize signatures.

A forged signature is considered ineffective and can not bind the banking customer. Banks are allowed to withdraw funds from a consumer's account only if the check is properly payable, and a check with a forged signature does not count as properly payable. And the bank is in the position of being able to examine the consumer's signature card to be able to spot potential forgeries.

Thieves that forge indorsements of checks are also a problem in the banking industry. This may happen in cases where the check is lost or stolen after the customer has signed it. As with a forged signature, however, a check with a forged indorsement is not properly payable. If the bank debits the checking account, it should later be recredited for the amount of the check.

A final type of check fraud is when a check is altered after it has been written. The most frequent alternation, not surprisingly, is when the amount is changed. For example, $5.00 becomes $500, and "five dollars" is changed to "five hundred dollars" written on the check. In cases where the alternation is made fraudulently, the consumers may have no obligation at all. However, in other cases, the banking customer may be debited for the original intended amount of the check. Of course, this makes it worthwhile for wrongdoers to alter checks, in the hopes of getting away with the larger amount.

Forged signatures, forged indorsements, and alterations of checks are the three prominent types of check fraud that consumers should be aware of. If there is any suspicion that any of these actions have occurred, the first action should be to begin disputing the account debits with the bank. Many of these issues can be resolved by working with the bank, but there are also strict statutes of limitations in which to begin the process.

Homeowners in foreclosure are often woefully uninformed about the aspects of the banking and payment systems that exist in the country, as well as the regulations which govern those transactions. Especially in the case of servicing companies that lose payments or collection agencies which draft money unauthorized out of a bank account, a lack of awareness of these issues can cost consumers thousands of dollars or their homes.

The following are a few terms used in consumer banking transactions that many homeowners have come across but may not have understood what the acronyms stood for:

• ACH refers to the Automated Clearing House, which is a network designed to process electronic money transfers.
• Check 21 is a federal law which helps facilitate the transportation of bank checks via electronic image; it is designed to eliminate the use of the paper check in transactions.
• ECC refers to electronic check conversion, which is when a merchant takes a customer's check as a source document in an electronic funds transfer. The check is not used as a check, but only as the source document of an electronic transfer. The original check is actually destroyed or returned canceled to the consumer. This is a growing practice among merchants.
• EBT stands for Electronic Benefit Transfer and refers to needs-based government transfers. A federal mandate required the states to provide food stamps and other benefits via electronic transfer. This system typically uses debit or smart cards to fund a welfare recipient's account.

In the world of consumer banking and payments, there is a vast number of different types of transaction, whether on paper, electronically, over a land line or cell phone, over the internet, or through the use of various types of cards. In many instances, different laws govern each type of transaction, with some types of payments being regulated by numerous federal statutes. Only a sampling of these are listed below:

• Uniform Commercial Code
• Check 21 Act
• Regulation CC
• FTC Telemarketing Rule
• Electronic Fund Transfer Act
• National Automated Clearinghouses Association
• Truth in Lending Act
• Electronic Benefit Transfer
• Social Security and Supplemental Security Income
• EFT 99 Act

The law that most directly governs check transactions is the Uniform Commercial Code, Articles 3 and 4. Although some variations exist by state, the UCC has been adopted by every state. The articles were written with the intention of facilitating bank transfers and processing of checks -- not to provide protections to consumers. Other sections of the law and other regulations are written to protect banking customers.

Article 3 of the Uniform Commercial Code deals with negotiable instruments, which includes checks. There are two types of negotiable instruments: notes and drafts. A note is a promise to pay a loan or installment sales contract and include the promissory note borrowers sign when purchasing a home. A draft, on the other hand, is an order by the consumer for the bank to pay and includes checks that are payable on demand and which draw on an account at a particular bank.

Despite the UCC's intention of facilitating the processing of checks by banks, the regulation does impose a duty on all parties to act in good faith. To meet this duty, there is a two-part test. First, a subjective test asks if the bank acted dishonestly. Then, an objective test questions if the bank followed reasonable commercial standards. This duty does provide a level of protection to consumers if the bank did breach its duty of good faith.

The typical parties to a check transaction are the drawer who writes the check; the drawee bank which is ordered to pay the check; the payor bank which is what the drawee bank is referred to once the check is deposited; the payee to whom the check is made out to; and the holder which is the person or institution that is in possession of the check.

Over the next few weeks, many more articles will be added relating to consumer banking and payments, including payments to mortgage companies and issues relating to negotiable instruments such as promissory notes on real estate transactions. There are a whole list of protections that are available to borrowers in instances where they are required to make payments either via check or electronic transfer, and knowing about the payment and clearing systems in use in the country can help them defend against foreclosure or mortgage fraud.

One of the types of scams that the government is attempting to crack down on is foreclosure consultants offering bogus loan modification services to homeowners facing the loss of their homes. While the government is providing its own modification programs, it is also going after a number of fraudulent schemes that have been used to trick borrowers.

There are a large number of scams that target foreclosure victims, but the loan modification one may be the easiest for the criminals to engage in. The general way it works is that borrowers pay hundreds or thousands of dollars for the services of a loss mitigation company. After signing the agreement and taking the payment, however, the company provides almost no services, resulting in the homeowners losing the property.

Many mortgage modification scams are almost entirely made up of borrowers paying money to a company which then sits on the cash, performs almost no services, and simply disappears or denies giving a refund after the house is auctioned. There are hundreds of complaints about such companies, and it seems as if the attorney general of one state or another shuts down a new one every week.

However, there are some variations on the theme, as well. For instance, some loss mitigation companies will take homeowner money and obtain an unaffordable modification program, even if there is a chance to negotiate with the lender for a more beneficial arrangement. The company obtains the first, easiest modification possible, presents it to the borrowers, and declares its work done. Unfortunately, though, an unaffordable plan will not help homeowners remain in their houses.

Another variation on the scheme is simply to charge homeowners to attend loan modification seminars. This may be as part of a larger program to help them negotiate for better loan terms, although the seminars can cost upwards of several thousand dollars. If the borrowers do not attend the seminar, they will not receive help from the foreclosure scam company, which will blame the failure on the homeowners.

A final scam related to loan modifications that is being discovered more often is companies charging for loan audits that are performed by someone other than an attorney. Information provided in these audits is also often useless, as the claims that the homeowners are encouraged to raise are barred by the expiration of the statute of limitations for that particular argument. For thousands of dollars, borrowers are told what will not work in defending their properties.

Unfortunately, many homeowners are taken in by these and similar scams every day. States are most often behind in prosecuting and shutting down these companies because there are simply so many of them, and the dollar amounts they steal from borrowers are relatively small. Thus, it is up to the homeowners themselves to make sure they are dealing with a trustworthy company or individual who is offering them foreclosure help or negotiation services in the pursuit of a loan modification or other workout option.

In some states, land installment contracts are treated by the courts as mortgages. If this is the case, the homeowners must be given the same rights for reinstatement and redemption that would be allowed if the agreement was an actual mortgage and not just a land contract. This affords homeowners in these states additional protections against the stricter forfeiture process used in other jurisdictions.

If a lender forgives any part of the debt owed on a mortgage, there may be taxable income to the former homeowners. This includes waiving a potential deficiency judgment that may have been pursued after the foreclosure auction was completed.

In a small number of cases, borrowers may be liable for capital gains and forgiveness of debt income. This can happen if the house sells at auction for more than the homeowners' cost basis, but less than the total amount owed on the loan. The sales price higher than the basis will result in a capital gain, while forgiveness of debt on the amount over what the house was auctioned for can result in taxable income to the homeowners.

When homeowners are attempting to prove that they do not owe taxes on any income from forgiven debt, it may be a good idea to produce evidence of a lower fair market value for the property. If the owners have an appraisal or valuation done as of the date of the auction, there may be less of a deficiency that the IRS may treat as forgiven debt and taxable.

However, deficiencies for the majority of families suffering foreclosure may be a moot point for 2007 through 2009. Up to $2 million may be excluded from income for discharged acquisition indebtedness. This may be due to a decline of the property's value or the homeowners' financial circumstances. Furthermore, acquisition indebtedness is defined to include loans used to purchase, construct, or substantially improve a principal residence.

If homeowners dispute the amount of a discharged debt, it may be worth sending a formal dispute letter to the bank. Moreover, a bank may be convinced not to file a 1099-C with the IRS if the homeowners can prove there has been no discharge of debt that is not exempt. The penalty if a bank makes a mistake in this regard is minuscule, only $50. And the IRS does not even impose this fee if the reason for not reporting was due to "reasonable cause and not willful neglect."

The following are some miscellaneous legal issues that may affect a foreclosure case. These include the issue of putting a case into federal court from state court, as well as diversity jurisdiction. Finally, if homeowners win a case against a bank, and the case is appealed by the lender, the borrowers may be able to require the bank post a bond in order to move ahead.

Although some issues relating to a foreclosure lawsuit defense may involve federal laws, such as the Truth in Lending Act or Real Estate Settlement Procedures Act, many times federal courts do not have jurisdiction over a foreclosure or eviction case. These are matters that deal almost exclusively with state law and will more often be kept in state court.

However, some defendants to foreclosure may seek removal of a case from the federal court to the state court based on TIL or RESPA claims. In some of these instances, the argument is that the case would have been brought into the federal courts in the first place as the court of original jurisdiction over the homeowner's claims.

There is also an issue of diversity jurisdiction. In these cases, the homeowners must prove a number of circumstances to make the argument of diversity jurisdiction. These include showing that the parties to the lawsuit have diverse citizenship, as well as that the controversy is for more than $75,000. The amount of the controversy is considered to be the value of the object of the lawsuit.

In cases where the homeowners win a case against a bank, there is a good chance the lender will appeal the decision. In such situations, homeowners are well within their rights to request the court to require the bank to post a bond. In several cases, lenders have been required to do so in order to move ahead with their motions to the appellate court. This is similar to a homeowner being required to post a bond to bring an action into court to enjoin a nonjudicial foreclosure sale.

These are a few issues that some homeowners may come up against when attempting to defend their home or bring an action against the bank. In reality, they can be much more complicated than the standard foreclosure defenses, as they involve the lender's or homeowners' use of different court systems. Unfortunately, foreclosure is never as simple as homeowners would like. While these issues may be uncommon, they are not unheard of when dealing with a bank. This is, of course, one more reason that homeowners may wish to request professional foreclosure help when attempting to save a property.

When attempting to get information from a lender or servicing company, homeowners can take advantage of their legal opportunities under the Real Estate Settlement Procedures Act to send a Qualified Written Request (QWR). A QWR is meant to help borrowers raise disputes with their mortgage servicer and have those issues resolved in a timely manner.

Homeowners, however, may not know what questions to ask of the lender, or why they are requesting certain documents or records relating to the loan and its servicing. Most questions revolve around various disputes that borrowers may have with a creditor, including amounts owed, dates when payments were made, and the nature of the relationship between the company collecting payments and the true owner of the loan.

For instance, borrowers may wish to request a complete payment history including the dates that payments were made, as well as the amount the lender claims it receives. Also requested could be a breakdown of how the payment was applied, whether to principal, interest, taxes, property insurance, late fees, suspense accounts, or any other charges.

For homeowners facing foreclosure, a breakdown of all charges and fees on the account could be disputed, for which a QWR may be appropriate. Borrowers could request that all of the arrears and charges relating to the foreclosure be itemized and justified by the servicing company. This can be an especially difficult request for the bank to fulfill, as many often just make numbers up for delinquent accounts.

Any change in the monthly payment should also be carefully scrutinized and disputed if the homeowners did not specifically agree to it. Even if they did, if the amount does not look correct, it may be worth disputing and having the servicer check into the account. Homeowners can request the mortgage company to explain how the new amount due was calculated and why it was increased.

When an account is delinquent, servicers may often receive payments from homeowners but not credit them to the payoff. Instead, they are placed in a separate suspense account that simply holds funds that may eventually be credited to the loan, but which are not helping the borrowers get current with the loan. Homeowners can request an itemization of the expense account in order to discover the current balance and why funds were placed into it.

As with any foreclosure situation, there will be a whole range of issues that are specific just to that particular case. Thus, the issues described above should not be taken as an exhaustive list of QWR questions at all. Homeowners will inevitably run into their own issues when attempting to stop foreclosure, and they will be able to craft their own Qualified Written Request letter to the servicing company in order to attempt to resolve any disputes.

One request that homeowners have a legal right to send to their lender is a Qualified Written Request (QWR). The Real Estate Settlement Procedures Act gives borrowers the right to dispute information contained in an account, request information from the servicer or lender, and have their issues answered by the company in a reasonable amount of time. Many times, the bank will not enjoy disclosing such information to the homeowners.

The main reason that banks do not like homeowners sending such requests is that there may be a significant problem answering the questions. Especially if the mortgage company has not kept adequate records, made material mistakes, or has engaged in a practice of fraudulent servicing, a QWR may shed light on these activities that can jeopardize the foreclosure case.

The following is an example of a Qualified Written Request. The list of requests made by the borrowers in this sample is not exclusive, and many more issues can be raised if there is a dispute. Homeowners should be aware, however, that they should only request information that is disputed, as courts may not look kindly on sending a QWR just for the sake of sending one.

[YOUR STREET ADDRESS]
[YOUR CITY, STATE ZIP CODE]

[YOUR LENDER]
[YOUR LENDER’S STREET ADDRESS]
[YOUR LENDER’S STREET ADDRESS 2]
[YOUR LENDER’S CITY, STATE ZIP CODE]

[TODAY’S DATE]

Re: [YOUR LOAN NUMBER]

To Whom It May Concern:

I hereby request information about the fees, costs, and escrow accounting of my loan. This letter is a qualified written request (QWR), pursuant to the Real Estate Settlement Procedures Act (RESPA).

The information I request as part of this QWR is as follows:

[Describe the issue or question you have and/or what action you believe the lender should take. Attach copies of any related written materials. Describe any conversations with customer service regarding the issue and to whom you spoke. Describe any previous steps you have taken or attempts to resolve the issue. List a day time telephone number in case a customer service representative wishes to contact you.]

[EXAMPLE REQUESTS – THIS IS NOT A COMPREHENSIVE LIST – CUSTOMIZE IT FOR YOUR SITUATION]

The current interest rate on this account.

The date your firm began servicing the loan.

The previous servicer of this loan.

A breakdown of the current escrow charges showing how it is calculated and the reasons for any increase within the last 24 months.

A statement indicating which covenants of the mortgage and/or note authorize each charge.

Please provide a copy of all trust agreements pertaining to this account.

If this account is registered with MERS, state its MIN number.

Please provide a copy of all manuals pertaining to the servicing of this account.

The total amount of principal paid on the account up to the date of this letter.

The payment dates, purposes of payment, and recipient of any and all foreclosure fees and costs that have been charged to my account.

Etc.

I hereby dispute all late fees, charges, inspection fees, property appraisal fees, forced placed insurance charges, legal fees, and corporate advances charged to this account.

Additionally, I believe my account is in error for the following reasons:

[LIST REASONS HERE.]

I understand that under Section 6 of RESPA you are required to acknowledge my request within 20 business days and must try to resolve the issue within 60 business days.

Sincerely,

[YOUR SIGNATURE]
[YOUR NAME]

Again, the questions presented here are simply examples, as there are literally dozens of issues that may be disputed in a single case of mortgage servicing. A future article will look at many more issues and how they relate to foreclosure. They will also be requests that force the bank to prove it has been acting in accordance with the law and that it has the legal right and standing to pursue foreclosure against a home.

Homeowners often request that they be shown examples of letters they can send to their lender to fight foreclosure. The following is a template of a form letter than homeowners can send to their lenders to request that the original promissory note be made available for inspection. Whether the lender or servicing company will be able to comply with this request may mean the difference between defending a foreclosure lawsuit or losing the home.

[YOUR STREET ADDRESS]
[YOUR CITY, STATE ZIP CODE]

[YOUR LENDER]
[YOUR LENDER’S STREET ADDRESS]
[YOUR LENDER’S STREET ADDRESS 2]
[YOUR LENDER’S CITY, STATE ZIP CODE]

[TODAY’S DATE]

Re: [YOUR LOAN NUMBER]

To Whom It May Concern:

Please accept this letter as my formal request for a copy of my Promissory Note.

I am the owner of the real estate property located at [YOUR STREET ADDRESS, CITY, STATE ZIP CODE]. This property is security for a loan made by [ORIGINAL LENDER’S NAME], and was made on [DATE OF LOAN].

Within thirty (30) days of the date of this letter, please send me the Promissory Note for this loan for my own personal inspection.

If you have any questions or concerns relating to this matter, you may contact me via regular mail at the address listed above. Thank you for your prompt attention to this request.

Sincerely,

[YOUR SIGNATURE]
[YOUR NAME]

With all of the confusion of promissory notes and original mortgage paperwork that has been occurring in the mortgage industry over the past few years, this may be the exact request that lenders do not wish to receive from borrowers. Especially if there are other issues, such as an incomplete chain of title or conflicting land records, the servicer may be unable to prove it has legal possession of the documents.

If the company suing the borrowers for foreclosure can not show proof of possession of the original note, there may be difficult legal hurdles to clear for the lawsuit to go through. A lender or servicer that can not show it owns the note can not prove it has a dispute about a loan it can not prove it even has an interest in. Numerous cases so far have been thrown out of state and federal courts because lenders did not keep records of ownership.

Of course, simply sending such a request to the lender is no guarantee against losing the home. However, homeowners defending a foreclosure need to have as much information as possible, and as many different arguments as they can find as to why the lender should not be allowed to move ahead with sheriff sale and eviction. Sending a letter requesting the production of the promissory note is one more tool that can be utilized by homeowners.

As mentioned in a previous article, it can be very difficult for homeowners facing foreclosure to raise certain claims in court when the bank holding their loan has failed and been taken over by the Federal Deposit Insurance Corporation. Case law and federal statute give the FDIC broad immunity against a number of claims that could be raised by borrowers in regards to loans held by the failed institution.

However, there are also a number of exemptions to the broad immunity the FDIC enjoys. Four of them are significant and worth examining here, as homeowners in foreclosure may be able to use them to bring claims against the FDIC or successor financial institutions.

The first is called fraud in the factum, and refers to any case when one party to a transaction reasonably relies on a misrepresentation by another party. The misrepresentation will be as to the character or essential terms of the contract. Examples include alteration of a document or forgery. The FDIC nor its successor institutions are immune to claims of fraud in the factum, so homeowners may be able to bring these issues into court.

Second, Truth in Lending rescission claims are still allowed despite the FDIC's immunity protection. In fact, the Truth in Lending Act states that a borrower's rescission rights continue regardless of assignment of the loan or to whom the loan is assigned. This means that, even if the lender fails and the note is taken over by the government, rescission may still be an option if the other requirements under the statute are met. FDIC receivership of the bank's assets will not affect the claim.

Also, the FDIC does not have immunity protection from any transaction that is void. The federal statute granting FDIC immunity is intended to protect the government's interests in assets is acquires from the failed banks. A void transaction, though, does not create an interest in an asset, and the immunity protection can not be extended to assets in which the FDIC has no valid interest. In cases such as fraud in the factum, the transaction may be declared void, for instance.

Finally, there is a rule called the FTC Holder Rule that was designed to protect credit consumers from holder-in-due-course immunity, such as the FDIC has been granted. For this rule to apply, though, an FTC Holder Notice must be included in the consumer credit contract. It will be included in many transactions relating to a sales transaction. This might be a home improvement contract or other similar agreement. If the notice is included in the contract, the FDIC's immunity may not apply.

While the above defenses to broad FDIC immunity have survived most course, other claims have survived in a smaller number of cases. These include such issues as breach of contract, failure of consideration, challenges to the validity of a lien, homestead issues, unreasonable foreclosure sale, and state statutes regarding Unfair and Deceptive Acts and Practices. Homeowners should do their own legal research to determine if their claims may survive, or consult with a competent foreclosure attorney.

When homeowners find that they have become a mortgage customer of the government, falling into foreclosure can become extremely complicated. While the FDIC has taken some steps to assist borrowers in stopping foreclosure, the agency is granted broad immunity from many claims that may have been used to defend against the loss of the home in the first place. Thus, borrowers should educate themselves in regard to the issues surrounding the FDIC's administration of mortgage loans and foreclosure.

With the significant increase in bank failures due to the financial collapse of 2008, more loans are being taken over by the Federal Deposit Insurance Commission. While the government stepping in may make the transition of loans from failed banks to solvent banks a little easier, in cases of default and foreclosure the situation can become more complicated.

In 1942, the Supreme Court decided that any secret or implied agreements would be precluded that had the effect of reducing or diminishing the FDIC's interests. This has come to be known as the D'Oench, Duhme doctrine, and has been further codified into the federal statutes.

In many cases, if a bank transfers its assets to another financial institution or corporation, homeowners will be able to bring claims against the original lender or the assignee of the mortgage and note. But when a bank fails, it is taken over by the FDIC, a government agency which is granted immunity in many cases.

Federal regulations give the FDIC immunity from a number of claims. Homeowners may be unable to bring any claims against the FDIC for assets of the failed bank unless the agreement is in writing and meets a number of other requirements. These requirements are the following:

No agreement which tends to diminish or defeat the interest of the Corporation in any asset acquired by it under this section or section 11, either as security for a loan or by purchase or as receiver of any insured depository institution, shall be valid against the Corporation unless such agreement--

(A) is in writing,

(B) was executed by the depository institution and any person claiming an adverse interest thereunder, including the obligor, contemporaneously with the acquisition of the asset by the depository institution,

(C) was approved by the board of directors of the depository institution or its loan committee, which approval shall be reflected in the minutes of said board or committee, and

(D) has been, continuously, from the time of its execution, an official record of the depository institution.

There are also a number of additional common law doctrines that smaller courts have relied upon when granting the FDIC immunity from homeowner or debtor lawsuits. These are termed "super holder-in-due-course" or "federal holder-in-due-course" doctrines, and allow the FDIC to claim holder-in-due-course status even if it does not meet the requirements for such status under the Uniform Commercial Code.

This immunity also typically extends to any future financial institution that purchases the assets of the failed bank from the FDIC. In most cases, the government only temporarily takes over the bank, makes sure it can keep operating for the short term, and then sells the remaining assets to other banks. Companies that purchase mortgage loans or other debts will be given immunity from claims that the FDIC would be immune to, making it even more difficult for borrowers to hold anyone accountable for actions taken before the bank failed.

Thus, homeowners may have a very difficult time bringing claims against the FDIC for the actions of the failed bank. However, there are a number of exceptions to the broad grant of immunity. Although they may only apply in a small number of cases of foreclosure, it is worth the effort for homeowners to look into these exemptions and find out if their claims against the original lender or failed bank may survive the FDIC receiving the bank.

While reading about how the produce the note strategy is working in various states, I came across some descriptions of case law from Florida and decided to put together a short reference guide for anyone interested. While the foreclosure crisis continues, even more cases will be tried using this type of claim, and it is hopeful that foreclosing financial institutions will have to make stronger cases for having the legal right to sue.

As with all information relating to the law, researchers should make certain to determine if these cases are relevant to their own experience, are still current law, or have been reversed or overturned. New cases are decided everyday, changing and altering the law in numerous ways that it is virtually impossible to keep up with. But the following descriptions should be taken as informational in nature and purpose only.

Philogene v. ABN Amro Mortgage Group, Inc., 948 So. 2d 45, 45 (Fla. Dist. Ct. App. 2006) -- the current holder of the mortgage and note is, in a foreclosure case, always a party in interest.

State Street Bank and Trust Co. v. Lord, 851 So. 2d 790, 51 U.C.C. Rep. Serv. 2d 191 (Fla. Dist Ct. App. 2003) -- plaintiff could not enforce note or foreclose on mortgage because it never had actual or constructive possession of the original promissory note.

Jeff-Ray Corp. v. Jacobson, 566 So. 2d 885 (Fla. Dist. Ct. App. Sept. 12, 1990) -- assignment of mortgage not made until four months after foreclosure was filed; therefore, plaintiff was required to file new legal action.

Harmony Homes v. United States ex rel. Small Bus. Admin., 936 F. Supp. 907 (M.D. Fla. 1996) -- a lender that assigned interest in a property was not the proper party to file the lawsuit to begin foreclosure on the property.

Laing v. Gainey Builders, Inc., 184 So. 2d 897 (Fla. Dist. Ct. App. 1996) -- assignee of note and mortgage is considered the real party in interest in foreclosure case.

Lawyers Title Ins. Co. v. Novastar Mortgage, Inc., 862 So. 2d 793 (Fla. Dist. Ct. App. 2003) -- assignor improperly retained possession of note after assigning; however, assignee was the proper party to foreclose as assignment constituted constructive assignment even though the note itself did not change hands.

Dasma Invs., L.L.C. v. Realty Assocs. Fund III, L.P., 459 F. Supp. 2d 1294 (S.D. Fla. 2006) -- the plaintiff had only a one-page addendum to note and could not show complete original promissory note; court decided it had no standing to complain for foreclosure.

Looking at this list of deficiencies in lawsuits that lenders bring into court, it is difficult to imagine a case where the bank has properly protected its interest in a mortgage and note. There are dozens more cases from other state courts as well as the federal court system, where mortgage companies often attempt to have cases moved in order to make the process of defending the home more difficult for borrowers.

With all of the new federal regulations and laws that are coming out to help people in foreclosure and save the mortgage lending industry from itself, it can be difficult both for lending professionals and consumers to keep up. The following is a short update of new rules and laws being put into place by lawmakers and various federal agencies.

In July 2008, the Federal Reserve created a new category of mortgage loans in response to the subprime meltdown. These new mortgages are termed "higher-priced loans," and describe characteristics of the type of lending product that had been referred to as subprime mortgages. These new regulations went into effect on October 1, 2009.

The new Federal Reserve regulations dealing with higher-priced loans include protections for borrowers from lenders who make loans without regard to the ability to pay back the money borrowed, as well as prepayment penalties lasting longer than two years, and mortgages without escrow accounts set up.

Also, lenders are prohibited from engaging in a pattern of making loans to homeowners without taking into consideration their ability to repay the mortgage. Obviously, the lenders knew that they would be covered by the federal government if they made loans that would never be paid back, and the Fed is now attempting to limit this practice after the banks have received their initial bailouts.

The Department of Housing and Urban Development (HUD) has also released new regulations regarding the Good Faith Estimate (GFE) and HUD-1 settlement statement that are used in almost all real estate transactions. The new rules are designed to give more accurate disclosures to borrowers and make the paperwork more uniform.

The Good Faith Estimate will now be a standardized form, and lenders or mortgage brokers will be required to disclose the actual costs of the loan to borrowers. Previously, estimates were allowed to be used, but were often low-balled to make the loan look less expensive than it really was. As it got time to close the loan, the estimated fees would dramatically increase.

The HUD-1 settlement statement will also be standardized so that line numbers on the Good Faith Estimate match line numbers on the HUD-1. Loan term information will also now be included on the HUD-1, as well as detailed disclosures of escrow account requirements. A final page of the settlement statement will show how costs have changed from the initial GFE to the final closing.

As the housing crisis continues to get worse, we can all expect more regulations will be released, requiring more paperwork and disclosures to homeowners. Unfortunately, too few borrowers read and understand these disclosures in the first place, and the cost of following such laws are simply passed from the lenders onto the borrowers. It will still be up to homeowners themselves to make absolutely certain they understand how their mortgage product will affect their financial lives.

Many homeowners are becoming more aware of the defense to foreclosure that has come to be known as the "produce the note" strategy. This involves challenging the foreclosing lender or servicing company on its legal right to sue the borrowers in the first place. Essentially, if the bank can not prove that it owns the note and mortgage or deed of trust, it does not have the right to bring a foreclosure action against the homeowners.

However, not every challenge to produce the original loan documents has been successful, typically due to procedural errors or other easily correctable mistakes on the part of the borrowers. Homeowners should be aware of certain actions that have been taken in successful cases, so they have a better chance of having their own foreclosure thrown out of court for the bank's inability to prove legal standing.

First, if the homeowners are being sued by the lender in a judicial foreclosure state, it is important to deny in the answer to the complaint that the plaintiffs own the note and mortgage in the first place. This real party in interest issue can be raised through an affirmative action claim or by filing a motion with the court. However, if the homeowners do not raise the issue, the court will assume the issue of standing is not debated.

It is also important for homeowners to do their homework in checking the local land records for the property being foreclosed on. If there are documents recorded with the county indicating a different chain of title than the one the bank is trying to show through the lawsuit, the discrepancies may be enough to have the case thrown out until the foreclosing company can show it owns the note.

Banks will often submit unsupported affidavits when it will be difficult or impossible to produce the original note. But these documents can be challenged by the homeowners in their answer to the lawsuit. Simply having an officer of the foreclosing company state that it owns the original paperwork is not sufficient if it can not produce the note upon the borrowers' request.

Especially if there are other documents indicating another company may be attempting to collect on the mortgage, the issue of standing and who owns the original note become vital. If the court allows the lawsuit to move ahead without proof of standing, the borrowers may be in danger of being sued again by the correct party. Thus, it is important to keep and obtain any documents showing any other company's interest in the debt.

Finally, homeowners can demand that the lender produce evidence to show how, when, and whether the original documents had been assigned to the foreclosing party. Courts will be likely to look on this type of request as reasonable, especially if there are other questions of which company owns the loan or if there is other evidence (such as documents filed with the county) showing an incomplete chain of title.

In light of all the securitization and chopping up of rights to mortgages, the produce the note strategy of challenging the bank's right to bring a lawsuit against borrowers is becoming a more wide-spread defense to foreclosure. While it may not solve every homeowner's mortgage problems, it can delay a foreclosure by a period of months or years while the lender attempts to locate the relevant paperwork, time that the owners can use to save up money for moving expenses or to get back on track with payments.

Doing legal research can see like a difficult task for the average person. The law is written in a semi-foreign language where words and terms have vastly different meanings than the ones used in everyday communication.

On top of that, legal cases are being decided and indexed all the time, and it can be very difficult to find out what the current law is at any one time. New collections of cases and references to cases are published throughout the year.

Thankfully, the internet has made searching for court cases much easier in recent years. The following websites can be used to look up references to cases, decisions, as well as actual court documents, all without having to take a trip to the local courthouse or college law library.

Findlaw.com - http://www.findlaw.com/
NOLO.com - http://www.nolo.com/

US Code - http://www.findlaw.com/casecode/uscodes/
Code of Federal Regulations - http://www.findlaw.com/casecode/cfr.html
State Regulations - http://www.findlaw.com/casecode/state.html
State Statutes - http://www.law.cornell.edu/states/listing.html
State Statutes by Topic - http://topics.law.cornell.edu/wex/state_statutes

Supreme Court Case Opinions - http://www.law.cornell.edu/supct/index.html
Federal Court Case Opinions - http://www.law.cornell.edu/federal/opinions.html
State Court Case Opinions - http://www.law.cornell.edu/opinions.html#state

Bankruptcy documents - http://www.uscourts.gov/bkforms/index.html

There are also a number of books that describe how to do legal research in a law library or online. The most helpful one, in our recommendation, is Legal Research: How to Find & Understand the Law, by Stephen Elias and published by NOLO.

The following are some facts and statistics about the real estate market and the government's efforts in putting together effective plans to address the foreclosure crisis. Despite the government's programs, starting in October 2007, and continuing with the latest plan released earlier this year, the foreclosure rate has kept up its dramatic increase.

According to the Mortgage Bankers Association, more than one in every subprime mortgage loan was in foreclosure as of the fourth quarter of 2008. This is 13.71 percent of subprime loans, compared to prime loans in foreclosure at a rate of only 1.88% as of the same time.

Furthermore, more than one third of all subprime adjustable rate loans, as of the final quarter of 2008, were in a state of serious delinquency. This is more than three times the rate of delinquency for prime adjustable rate mortgages.

Under a new incentive program, Fannie Mae has begun paying attorneys who are able to qualify delinquent borrowers for loan modifications, repayment plans, or similar workout solutions as an alternative to foreclosing.

Due to the high rate of foreclosure, most workout plans are taking at least thirty days to be processed by lenders and servicing companies. Homeowners and those working for them should be aware of this significant time lag, especially if a foreclosure sale is on the horizon. It may be best to obtain a delay of any sheriff sale in order to apply for assistance without the threat of losing the home in a short period of time.

As early as October and December 2007, the US Treasury Department was putting together plans to solve the rising foreclosure rates on an industry-wide, voluntary basis. Unfortunately, as the number of people seriously behind in their mortgages kept increasing, no more resources were dedicated to assisting these borrowers, and delays led to more foreclosures.

Thus far, there have been at least five different programs to help homeowners stop foreclosure. These have been the Making Home Affordable Modification Program (HAMP), Making Home Affordable Refinance Program, Hope for Homeowners (H4H), HOPE NOW also known as the American Securitization Forum Plan, and Project Lifeline. Thus far, all have failed to seriously affect the foreclosure rate.

As foreclosures keep rising, the cheap money policies of the Federal Reserve, combined with the poor to nonexistent lending standards of the banks have proven to have far more negative impacts on the economy than any bureaucrat or regulator anticipated. Unfortunately, more cheap money policies have been some of the only fixes proposed and provided by the government, which has caused further downward pressure on the economy.

Obtaining a loan modification is the latest magical solution to foreclosure. One new government program after another has been released to help borrowers modify the terms of their mortgages to make them more affordable, and thousands of private companies have begun to offer assistance in qualifying for a loan mod. Obviously, if everyone who can make a payment was given such a program, the foreclosure crisis would have been solved before it began.

Unfortunately, though, the real world has foiled many of the designs of the mortgage industry central planners and regulators. All of the government programs have failed for a variety of reasons, including voluntary participation, lack of clearly defined rules for compliance by the lenders, and unaccountability. Even for the few mandatory participants, the same problems keep creeping up.

Homeowners should expect to run into at least three major issues when attempting to qualify for a loan modification. These problems should be considered before the borrowers decide whether to apply for a modification or not, as they may not apply to other solutions to foreclosure. Of course, some of them will apply to alternative plans to save the house.

First, homeowners will have to deal with unresponsive mortgage lenders and servicing companies. Loss mitigation departments of these large financial institutions have not dedicated the resources necessary to assist all of the borrowers attempting to apply for various solutions. This means that collection departments may call owners tens times a day, but any call made back to the loss mitigation department will not be answered in a timely fashion, if at all. Faxes containing personal financial information and application documents are routinely lost, as well.

Second, the documents governing the securitization process for the mortgage may restrict the number of loan modifications that can be offered. The pooling and servicing agreements (PSAs) may only allow a certain percentage of loans in a pool to be modified. Even if the borrowers can show financial ability to pay a modification plan, they may have to be turned down by the servicing company, unless the loan is moved out of the securitization pool.

A final consideration homeowners should make before applying for a mortgage modification is if they would require a principal reduction. Many loan mods would not be affordable for the long term without decreasing the amount the borrowers owe in total. However, any reduction of principal may be considered by the IRS as taxable income to the owners. This may result in a large, unaffordable tax bill that will cause the modification to fail is the borrowers can not make the monthly mortgage payment and pay the taxes for the forgiven debt.

While loan mods can be a great way for homeowners to modify their mortgages so they are more in line with the borrowers' current financial situations and market conditions, there are also a number of drawbacks. If the servicer takes too long to respond, the foreclosure will proceed anyway. If the PSA does not allow for any more modifications, qualified borrowers may be turned away. And if there is a large tax bill due to the modification, it may be impossible to pay the mortgage and the taxes.