Predatory Lending Laws and Lender Paid MI
by Stuart in Tallahassee, FL and by Tom in Indianapolis, IN
Ask Kate about predatory lending laws, Homeowners Protection Act of 1998, and Lender Paid Mortgage Insurance (LPMI): Big-box banks claiming borrower-induced mortgage fraud is responsible for the foreclosure crisis need to look more closely at their own practices. I'm talking about credit enhancements which at face value sound innocuous.
Homeowners Protection Act of 1998
But not so and here's why! Credit enhancements are a hidden form of mortgage insurance placed on a home loan after closing. This secretive MI requires no up-front disclosure to the borrower nor any after closing.
How could this not
be in violation of the Homeowners Protection Act of 1998 which explains PMI cancellation rules!
Of course you might think if this hidden MI is being paid by the investor, what's the harm? Well, when the real estate market fell through the roof and homeowners with underwater mortgages sought out financing, many were shocked to be told they were not qualified for the Making Home Affordable HARP refinance program.
Why? Because after closing, a rare form of PMI had been placed on their loan. Shocked homeowners, who were never told they had PMI, cried foul. But there was no available remedy, preventing them from taking advantage of plummeting rates.
HARP Refinance at a Hefty Cost
A few years later, it appears Fannie Mae and Freddie Mac are finally allowing mortgages with credit enhancements to be refinanced. But at a hefty cost!
Homeowners with the previously undisclosed credit enhancements will be required to carry mortgage insurance, either Borrower Paid Mortgage Insurance (BPMI) which results in higher payments, or Lender Paid Mortgage Insurance (LPMI) which increases interest rates.
This sudden cost of the mortgage insurance often offsets the benefit of a lower interest rate.
Okay, now let's meet Stuart, a homeowner from Florida who found out that he was the unlucky recipient of credit enhancement.
Lender Paid Mortgage Insurance and Credit Enhancement Violates Home Owners Protection Act of 1998 By Stuart from Tallahassee, FL
Good morning Kate,
Fannie Mae told me I had a 'credit enhancement' on my loan, a term they created as an opportunity to circumvent the Homeowners Protection Act of 1998.
The term 'credit enhancement' does not appear in my loan documents.
The problem with my loan is that the lender (Lehman Brothers) did not take out the Lender Paid Mortgage Insurance (LPMI). Fannie Mae took out the LPMI after the loan closed.
The loan closed on May 31, 2006 and FNMA took out LPMI on June 1, 2006 - 18 hours after the loan closed. This clearly shows that Fannie Mae planned to take out LPMI from the onset, a clear violation of the intent of the Homeowners Protection Act of 1998.
I have checked all of my loan documents and I was never given a PMI or LPMI disclosure form or informed I was paying a higher rate. Somehow LPMI was buried in my loan. FNMA is stating I must convert LPMI to Borrower Paid Mortgage Insurance which would add $243 per month to my payment.
Is a lawsuit needed? Another homeowner has filed a lawsuit based upon similar issues and won an out of court sealed settlement.
Thank you in advance, Stuart
Ask Kate answers: Lender Paid Mortgage Insurance and Credit Enhancement Violates Homeowners Protection Act of 1998
Only an attorney can tell you if a lawsuit is warranted.
However, I have been expecting homeowners and attorneys across the nation to take Fannie Mae and Freddie Mac to court after undisclosed mortgage insurance foiled attempts at the HARP refinance plan
Read more about homeowners with Freddie Mac credit enhancements at Unique New HARP 2 Refinance Plan Questions
. (Scroll down to the comment section near the end of the page.)
Predatory Lending Practices, Even After Surrendering House in Bankruptcy By Tom from Indianapolis, Indiana
My ex-partner who was also a co-debtor on my home in New York is applying for HAMP loan modification by forging my name on the documents, even though I already surrendered the house in bankruptcy.
I am stage 4 cancer patient. We owned the property together but were never married. Now I have a domestic order against my partner and moved to Indiana.
But before I moved, this person applied for the HAMP modification loan and signed my name to papers without my knowledge.
So I was forced to file chapter 7 bankruptcy (I did the BK with my friend's help) and surrender the house (my only debt) while my partner was bouncing checks, not paying the house payments for 2 years, and refusing to sell our home.
Surrender was granted by the bankruptcy court and was discharged.
But just the other day, the co-debtor made a house payment. So once again, the loan servicer (Greentree), sent them the modification paperwork with MY name on it and only sent me a payment record.
Now this person is signing my name to HAMP modification paperwork. I know my name is being forged because I have proof from online where they said I MYSELF applied and sent me a thank you. What do I do about this?
NYS Financial Services is NO help. When I talked to Greentree, they would only repeat to me to make a payment. But they won't tell me WHO IS signing my name.
I moved, have cancer, a chapter 7 bankruptcy court approved surrender, and Greentree STILL lets this person sign MY name to a discharged loan. How do I get this person ARRESTED for identity and/or mortgage fraud.
Of course I would hire a lawyer but I have stage 4 cancer and no money.
Ask Kate answers: Predatory Lending Practices, Even After Surrendering House in Bankruptcy
I'm sorry to hear how you are suffering from predatory lending practices, even after losing your home.
Right away, file a complaint with the Attorney General in New York. Along with your story, include the loan number, property address, and the lender's name.
But before filing, make a copy of the letter. Then send it online to the Consumer Financial Protection Bureau, the Better Business Bureau, your federal representatives, the White House, and state elected officials.
I've made it easy...
How to Contact Washington D.C., Write Your Government Agencies, and File a Mortgage Complaint
You have the power to make a change! Contact your elected representatives and government agencies to tell your story, file a complaint, express an opinion, and request changes that affect homeownership.
1. Submit a complaint with the Consumer Financial Protection Bureau, established by Congress to protect consumers, or you can call 855-411-2372.
2. Go to WhiteHouse.gov, 'Contact Us' to reach Corresponding with the White House. This is is a quick and simple way to write the President, telling about your struggles with homeownership and ask for specific change.
3. Go to Senate.gov, 'Find Your Senators', scroll down to your state and click. You will be given your US Senators with contact information. Send the same letter you sent to the White House.
4. Go to House.gov, 'Find Your Representative' and fill in your zip code. You will be given your House of Representatives with contact information. Send the same letter you sent to the White House and Senate.
5. Go to State.gov Of course, first fill in your state's name. Then on your state website, do a search (for example, 'mortgage help') to find contact information. Send the same letter you sent to the White House, Senate, and House of Representatives.
6. Call your Better Business Bureau to report specific companies. For example, report Rust Consulting to the BBB if you did not receive your settlement check.
Next, seek out a pro bono attorney to join you in going after Greentree.
I wish you much success. Please keep in touch and let me know of your progress. You can also go here to read about the 2013 National Mortgage Settlement Update
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