Articles Posted in Bankruptcy and Foreclosures

The trial lawyers at Jacobs-Keeley have often noted the civil court system is skewed toward banks and other deep-pocketed entities. Even though courts are supposed to be one of those places where the playing field is even – justice being blind, and all that – there is much to suggest that is not the case.
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Just take the recent editorial penned by Sue Bell Cobb, the former Chief Justice of the Alabama Supreme Court from 2007 to 2011. In a long, detailed piece in Politico Magazine, she delves into the dangers of requiring judges to undergo cash-soaked elections. She says the amount of money and favors exchanged in state judicial races made her “ashamed” to have participated.

She took note of how she had no choice but to accept nearly $2 million from lobbyists and lawyers in order to win the 2006 race. Her opponent raised more than twice that much. Although she won, she says a question from a reporter left her disturbed. The reporter asked how it felt to have won the most expensive race in history, and how the people of the state could rest assured those contributions wouldn’t affect her decisions on the bench.
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A number of large financial institutions are preparing to settle with the U.S. Justice Department over allegations they engaged in a massive price-rigging scandal that involved many trillions of dollars in foreign currency trades.
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The Justice Department has promised the settlement in this case will be far tougher than those negotiated in the past over other alleged wrongdoings by banks. Of course, as The New York Times‘ editorial board recently pointed out, “tougher than the last” isn’t saying too much.

We’re talking about a system where banks have committed crimes involving not just the rigging of interest rates and foreign currency trades, but mortgage fraud, money laundering, securities fraud, conspiracy to aid tax evasion and foreclosure abuse. When banks struck settlements with the government for these actions, very rarely did they even have to concede they’d done anything wrong. Most of the time, prosecutions were deferred or foregone entirely in exchange for payment of fines or other penalties. In four cases, all involving foreign institutions, banks pleaded guilty to criminal charges, but none of the penalties had any real impact on the firms’ day-to-day operations. And how many top-level bank executives were held civilly and/or criminally? A grand total of zero.
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Democratic Senator Elizabeth Warren has been one of the very few voices in Washington that has consistently spoken out about systematic governmental failures in protecting average Americans. A Harvard professor and author, Warren ran the Congressional Oversight Panel, which supervised the bank bailout spending and helped launch the Consumer Financial Protection Bureau.
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In a recent interview with Salon.com writer Thomas Frank, Warren expounded on the failures of the Obama Administration and resulting protection of the Wall Street elite, at the expense of ordinary Americans who were losing their homes and their jobs throughout the Great Recession.

In the interview and her recent book, “A Fighting Chance,” she discusses how huge financial institutions spent more than a million dollars each day on lobbyists in the 12 months preceding the financial reform debates. Meanwhile, there are almost no advocates arguing for the rights of minimum wage and medium-wage workers.
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During the housing bubble, many homeowners took out home equity lines of credit to tap into the equity in their homes. Now, an increasing number of those home equity loans have been outstanding for 10 years, which means that borrowers are required to start paying back principal while before they were just able to pay the interest on the loans. Many homeowners are having a hard time making the higher payments, which means that their homes are potentially at risk of being foreclosed on. bricks-and-money-4-208866-m.jpg

For those facing this problem with the home equity loan coming due, they are not alone. MSN has indicated that the trend of missed payments could actually lead to another foreclosure crisis and more trouble for the big banks in the United States. Miami foreclosure lawyers can help those who are getting caught up in the home equity loan mess to hopefully avoid losing their homes even if their home equity payments rise.
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A federal bankruptcy judge has ordered banking giant Bank of America to pay $10,000 for every month it continues to hound a couple whose mortgage loan was discharged in bankruptcy.
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Our Miami foreclosure lawyers know that bankruptcy law is quite clear on what it expects of creditors in the wake of a bankruptcy filing, and that includes immediate orders to cease and desist collections efforts.

The fact that Bank of America failed to do this, according to U.S. Bankruptcy Court Judge Robert Drain in New York, was not some “stupid mistake.” Rather, he said, it’s obvious that these collections actions were a matter of policy at the company – a policy that violates federal bankruptcy law.
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As federal regulators are gearing up to issue sanctions against J.P. Morgan Chase & Co. for a litany of mistakes the financial giant made while collecting old debts, an internal review by the firm has proven what has already been alleged.
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Our Miami consumer rights lawyers understand that the bank analyzed some 1,000 lawsuits filed against credit card debtors. Of those, about 9 percent were found to have significant errors.

Those mistakes reportedly ranged from wrongly-applied fees and interest to some cases in which the listed balances were higher than what was actually owed, according to The Wall Street Journal.

Of course, the bank has tried to downplay these errors as “minimal impact” and “mostly small.” That may be true from the perspective of a multibillion dollar corporation. But as any individual who has had to go toe-to-toe with the bank in court will tell you, it’s typically no small matter. You figure in not only the debt at the core of the dispute, but also the costs incurred for legal fees and time spent on the case, it all adds up very quickly.

These abuses eerily reflect the problems associated with the robo-signing scandal that plagued the housing market. It would never have to light, either, if former Chase Vice President-turned-whistle-blower Linda Almonte would never have stepped forward. She was fired for shedding light on these problems, and has since filed a civil lawsuit against the company.

Today, 13 states and the Office of the Comptroller of the Currency are investigating the bank. Some have outright accused chase of unlawful and fraudulent methods. California has even filed a lawsuit against the bank alleging problems with some 100,000 credit card debt collection lawsuits in that state alone.

The agency halted its credit card debt collection lawsuits back in 2011 after the allegations first emerged.

So why was Chase so sloppy in the first place? Because it is easier to sell debt to a second-hand collector if a court judgment for payment has already been obtained. That meant that Chase was willing to go to extraordinary lengths – perhaps even break the law – in order to get those judgments. The vast majority of these people never fought back in these cases, so many may not realize that the lawsuit against them was full of mistakes. In fact, we believe Chase was counting on that. And you can bet Chase likely wasn’t the only one, though it’s the only firm that has so far been caught.

We would also venture a guess that the 9 percent error rate determined by the bank is likely a severe understatement. The problems are likely much more widespread.

Consider the results of Chase’s mistakes regarding foreclosure case errors. The consulting firm hired by the bank had analyzed more than 60,000 foreclosure lawsuits. Of those, the consultant estimated about 1 percent were flawed, affected by the robo-signing scandal. However, independent reviews revealed error rates that were much higher, at between 9 and 11 percent.
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When literary giant Mark Twain went broke and had to file for bankruptcy, he reportedly vowed to pay it all back just as soon as he could.
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Today, there is nothing to stop you from repaying your old credit card debts once they have been discharged by bankruptcy. However, our Miami consumer rights lawyers want to make sure you understand that there is usually little to be gained. That includes peace of mind.

While there may be some feelings of guilt associated with a bankruptcy filing stemming from out-of-control credit card debt, this mindset should be reconsidered.

First of all, many credit card companies set countless traps to make it very difficult for you to emerge debt-free. Hidden fees, surprise interest rate hikes and other tactics all contribute to consumer indebtedness. It’s very easy for someone who encounters a rough patch to become quickly overcome with credit card debt.

The second thing is, bankruptcy is not a moral failure. It’s often the most prudent financial decision you can make in order to secure the long-term stability of you and your family. It’s smart, not shameful.

Still, some people may feel strongly that they should one day repay this money. Unless you somehow find yourself ridiculously wealthy, here’s why such a move would be unwise:

  • You don’t have to pay it. That is, if you have filed for a Chapter 7 bankruptcy, that debt is gone. In fact, any creditor who so much as tries to send you a “friendly reminder” about that old debt after it’s been discharged can be sued for damages. The court does not take kindly to creditors who disobey strict no contact orders.
  • It’s not going to help your credit. Sure, the creditor may be happy to take your money, but it won’t make one bit of difference toward boosting your credit score. That’s because a successful Chapter 7 bankruptcy discharge will result in an order to creditors not to report ANY future account activity on those accounts to credit reporting agencies.Your good deeds will go unrewarded.
  • You’re actually hurting your own chances of recovery. Think about it: The whole reason you file for bankruptcy in the first place is because you couldn’t stay afloat. One of the best ways you can prevent this from happening again is to save up a healthy emergency fund. This can cushion the blow for future unexpected expenses. If you turn around and give that money to the credit card company, it only hurts you and may put you in a similarly precarious situation.
  • The agency you owed originally doesn’t even own that debt anymore. More than likely, it was sold after the account went past 180 days overdue.
  • You probably still have other debts pending. A Chapter 7 bankruptcy is a life raft. It will save you from a financial drowning. It won’t always leave you completely debt-free. The laws became stricter back in 2005, and there are some debts you can’t discharge. Those include child support and alimony payments, student loan debts and certain tax debts. This is where you should direct your focus. That, and then efforts to boost your savings and improve your overall financial health.

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Your credit report is often the make-it-or-break-it element of your financial future. In most cases, it is the foundation upon which creditors decide whether to sell you a car or a house or give you a job. It may even be the basis upon which you are given certain security clearances. booksandpages.jpg

However, as our Miami foreclosure lawyers have recently learned, an eight-year study by the Federal Trade Commission indicates that as many as 40 million Americans may be victims of errors. About half of those are considered significant.

You may think an honest mistake might be easy to rectify. You would be wrong. Not only that, these errors can cost you dearly.

Just like banking, credit reporting is a big business. The industry generates upwards of $4 billion annually, with three companies dominating: TransUnion, Equifax and Experian. These firms keep track of some 200 million Americans. These entities gather information on us and those with whom we do business, and then make money – a lot of it – selling that information. Buyers include not only banks but insurance companies, merchants and employers.

So these scores have a significant ripple effect on nearly every aspect of our lives. And yet, they have an error rate of 20 percent. An estimated one out of every 10 Americans is walking around with an error on their report that has served to damage their overall creditworthiness.

Of course, amid years of criticism, these firms have deflected the blame for any errors onto either merchants or banks, saying they had been given bad information.

But the attorney general’s office in Ohio, which launched its own investigation into widespread reports of error, says the bulk of the blame lies with the credit agencies themselves, which often may be guilty of violations of the Credit Reporting Act.

Specifically, the federal law is clear in that if consumers believe there is a mistake, that claim should be promptly and thoroughly investigated by the agency. That isn’t happening. Not only are these firms not conducting a “reasonable” investigation, per the federal law, they reportedly aren’t conducting any investigation whatsoever, the state attorney general’s office contends.

So the real problem is not even so much that there are errors, it’s that they refuse to fix them.

It’s estimated that some 8 million people file disputes with regard to their credit reports. However, most of those complaints are diverted to call centers in India, and even then, most are referred back to the reporting firm’s website – which aren’t specially equipped to handle complaints.

There is also an avenue to file complaints by mail, but the FTC learned most of those go absolutely nowhere.

Those that do get the problem fixed end up with cases that have dragged on for years – even in cases that involved a clear mistaken identity (something one would think would be a simple issue to solve).

There have even been multiple federal court cases in which individuals have won million-dollar judgments against these firms for clearly violating the law. However, it’s easier for these firms to simply pay-out the settlements that actually make it that far than to go through and clean up their policies and procedures to make them compliant the law.

The fact is, bankruptcy and foreclosure often go hand in hand. Faulty credit reporting can be an incredibly difficult thing to shake. We can help.
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The case of Pino v. Bank of New York, reached a disappointing conclusion earlier this month, when the Florida Supreme Court ruled that a bank should not be punished or held liable when it files fraudulent or flawed documentation in a foreclosure case, and then hurries to voluntarily dismiss it without prejudice. computerfrustration.jpg

Our Miami foreclosure lawyers of course aren’t surprised that yet again, banks have prevailed, but it paints a picture for potential clients of what you are up against in these cases.

It’s almost as if banks have gotten away with it by virtue of the fact that it happened so often. The question posed was not whether the court has the ability to sanction parties in a civil proceeding for filing fraudulent documents, but whether in such cases the court should have the ability to re-open the case, reverse a voluntary dismissal without prejudice and subsequently issue a dismissal with prejudice – as a sanction to the original party for having committed the fraud.

The court ruled that such action is not within the authority of the court.

Here’s what happened: Roman Pinto was a Florida resident who was sued for foreclosure back in 2010 for defaulting on his mortgage. However, when Pinto’s foreclosure defense attorney sought to challenge the validity of ownership documents filed by the bank (that is, to allege they were in fact fraudulent, as so many documents are in these cases), the bank suddenly moved to voluntarily dismiss the case without prejudice.

The judge in the case agreed – which mean the bank could subsequently re-file the case, sans fraudulent documents, with no penalties or sanctions at all for having done so in the first place.

Subsequently, Pino appealed his case to the Fourth District Court of Appeal, asserting that the court should put the original voluntarily dismissal aside – as it was requested solely because the bank knew it had been caught submitting false and fraudulent documents – and enter a new dismissal that would render the bank unable to take further action.

However, the Fourth District Court of Appeal held that a trial court did not have this authority in a case where the plaintiff (in this case the bank) had not yet had the opportunity to obtain any affirmative relief from the defendant (in this case the homeowner) prior to the case being dismissed.

Still, the appellate court requested that the state Supreme Court answer the question directly, as it was applicable to numerous cases throughout the state as an issue “of great public importance.”

The Florida Supreme Court certified the question in the negative. The justices reasoned that had the plaintiff actually obtained some form of affirmative relief from the defendant based on fraudulent conduct, then there would be an adverse impact on the defendant, who could then clearly be entitled to seek relief pursuant to Florida Rule of Civil Procedure 1.540(b)(3). But absent that, the court decided, a dismissal with prejudice would be improper.
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The federal government has filed a $1 billion civil lawsuit against Bank of America and its subsidiaries, claiming the company intended to remove specific quality controls with regard to loan origination – which played a huge part in the meltdown of the housing market. dollarsign1.jpg

Miami foreclosure attorneys know it’s no secret that lenders and banks were central to the creation and subsequent implosion of the housing bubble. What the filing in U.S. v. Bank of America, U.S. District Court, Southern District of New York, shows is some insight into just how elaborate and planned these schemes were.

Specifically, federal prosecutors are targeting the actions and processes of subsidiary Countrywide. Acting as a mortgage lender, the suit says the company put in place a loan orgination process that company insiders called “The Hustle.” According to the government, it started in 2007. The primary – and deliberate – goal was to remove the quality controls, or checks and balances, that stood in the way of the company churning out as many mortgages as possible. In order to accomplish this, Countrywide launched a program called Full Spectrum Lending.

The problem with this, of course as we now know, is that this process meant people who could never have actually afforded these loans were approved. But it wasn’t just the average Joe the banks were scamming. The government had been there to ensure those loans, as they had done for decades following the Great Depression. The government contends it was not aware that the loans, which had been approved according to what were supposed to be stringent measures, were actually high-risk liabilities. When the bottom fell out of the market, the federal housing agency was stuck holding a large portion of that tab.

Although the specific “hustle” scheme was started by Countrywide, which was independent in 2007, the Department of Justice claims that Bank of America, which acquired the company in 2009, continued the process, despite warnings by one top executive that it wouldn’t end well.

In fact, the former executive vice president of Countrywide, also a senior manager of the Countrywide division that kickstarted the “hustle” program, blew the whistle on the practice, saying he had pleaded with his fellow executives to drop the program. In fact, he was actually party to the original qui tam complaint (which means he filed it against his former employer, in conjunction with the government, and will now be in line for millions as a whistleblower).

At one time, Countrywide was the largest mortgage lender in the country, cranking out some $490 billion in mortgage loans in 2005. Subprime loans specifically were originated out of its Full Spectrum Lending division. The “hustle” was a number of steps taken to reduce processing time as well as underwriting oversight of conventional loans. They called these controls “toll gates,” viewed as obstacles to overcome. To help overcome this, the company eliminated checklists that had previously been mandatory and did away with all of its compliance specialists, who previously had been the ones who conducted quality control on each individual loan to make sure it met the proper criteria.

All of this begins to paint a picture of a very deliberate plot to defraud both taxpayers and consumers.

The government alleges the company specifically has violated the recently revamped federal False Claims Act.
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