Injustices at foreclosure mills
When homeowners are faced with the possibility of losing their homes, many will do whatever it takes in order to keep them, including exploring the option of modifying the mortgage to terms that they can afford. In fact, many states urge homeowners and the law firms that represent the mortgage to discuss the possibility of a modification before immediately jumping to foreclosure because, in many cases, it is more profitable for the investor to keep the mortgage loan live than it is to terminate it.
But the state of Colorado has recently received reports that many law firms, often referred to as foreclosure mills, are foregoing the legal steps needed to spur mortgage modification discussions in order to increase time to foreclosure.
Following the money trail
Prospect. org reports that this is because their compensation is negatively affected if a loan is modified rather than foreclosed, and that Colorado state Attorney General John Suthers is taking a closer look at the practices of foreclosure mills as there are several reports of falsifying documents, extraneous billing and destruction of evidence tied to the loan modification process, and money seems to be the key driver.
“The law firm is interfering with my client’s right to a modification,” said Blair Drazic, a Colorado attorney representing a similar mortgage modification case. “There’s so much money involved, it’s like the three monkeys—see no evil, hear no evil, speak no evil.”
It’s not just in Colorado
The Florida, Nevada and New York courts have found that several firms are utilizing technology to auto-sign and falsify documents rather than undergoing standard legal processes. The state of New York also previously required all mortgages at risk of foreclosure go through a settlement conference first in order for the home owner and investor to ascertain if a loan modification was a viable option; in order to set these conferences in motion, firms needed to file a “request for relief” but companies like the Steven J. Baum Law Firm stopped filing the requests, ultimately removing loan modification as an option altogether.
There are also reports of firms collaborating with vendors to pad prices for things like posting legal notices to the doors of foreclosed properties – for example, it typically costs $25 to post a notice but the firm would charge 12 times that amount which the homeowner would then be responsible for.
Colorado could set the precedent
At a time when the housing market is pushing to make a comeback, it makes sense for some home owners to exhaust all resources on keeping a mortgage on a home that has retained or exceeded a substantial amount of its value. The state of Colorado will continue its investigation into foreclosure mills conducting practices that bar homeowners from exploring mortgage modification options in order to bring in more profits as a business, and it may become the predecessor of more court cases to follow.