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Mortgage Servicing and Loan Modifications: 11.11.4.2 Settlement Should Specify Nature of All Damages

In all cases, attorneys should take care to specify the source of the damages. Replacement for out-of-pocket costs will be non-taxable; replacement for lost income, occasioned by, for example, time off work, will be taxable. Out-of-pocket costs may include repairs made to a home, return of excess interest paid, the inflated value of a purchased home, as well as more mundane out-of-pocket expenses, such as medical bills and transportation costs.

Mortgage Servicing and Loan Modifications: 11.11.5 Attorney Fees

Defendants often seek to “divide and conquer” by offering a settlement that does not include attorney fees, or includes an inadequate proposal for fees creating a conflict between the homeowner and the homeowner’s attorney. This can be a significant problem in foreclosure defense cases where a settlement offer from the defendant may simply provide for a modification of the loan (e.g., write down of principal and/or reduction of interest) without any cash payment.

Mortgage Servicing and Loan Modifications: 11.11.9 Other Considerations

Change the account number: Most servicers use automated recordkeeping systems. Unless a thorough purge of the existing computer records is done, it is likely that, at some point, when the servicer generates a payment statement or history, some of the forgiven fees in the loan modification may get picked up and swept into the client’s current information.

Mortgage Servicing and Loan Modifications: 11.12.2 Historical Context

The law of preemption has changed over time and was curtailed significantly by the Dodd-Frank Wall Street Reform Act of 2010 (hereinafter the Dodd-Frank Act).831 The Dodd-Frank reforms became effective on July 21, 2011. Prior to that date, the rules governing preemption for national banks differed somewhat from those governing preemption for federal savings associations.832

Mortgage Servicing and Loan Modifications: 11.12.3 Current Preemption Statutory Standard

In 2010, Congress passed the Dodd-Frank Act, which cut back on federal banking agencies’ power to preempt state law. It abolished the OTS, and adopted more restrictive standards for preemption of state law, applicable both to the National Bank Act and to HOLA. Under the current standard, which became effective on July 21, 2011, the NBA and HOLA permit preemption of state consumer finance laws only if:

Mortgage Servicing and Loan Modifications: 11.12.4 The OCC’s Current Preemption Regulation

Any analysis of the scope or application of the Dodd-Frank Act’s preemption provision is complicated by the preemption rules published by the Office of the Comptroller of the Currency (OCC). On July 21, 2011, the OCC published amendments to its 2004 preemption rules,845 purporting to conform them to the Dodd-Frank Act’s requirements. There are, however, significant questions about the scope and validity of the OCC’s 2011 preemption regulations.

Mortgage Servicing and Loan Modifications: 11.2.1 Client Interview

The client interview process is critical in evaluating the homeowner’s potential defenses to foreclosure and affirmative claims. The initial interview defines the scope of the legal services needed based on the problem and the homeowner’s goals. The first client interview also shapes the homeowner’s perception of the lawyer.

Mortgage Servicing and Loan Modifications: 11.3.1 Introduction

Foreclosure cases often involve hundreds, if not thousands, of pages of documents. Ensuring that documents necessary to prove your case are admissible is critical to a successful case. Conversely, excluding inadmissible documents offered by a lender or mortgage servicer can also affect the case outcome. This section considers the application of the Federal Rules of Evidence to various common foreclosure related documents.

Mortgage Servicing and Loan Modifications: 11.6 Bond Requirements

The Federal Rules of Civil Procedure and many state rules of civil procedure permit courts to issue preliminary injunctions or temporary restraining orders only if the movant gives security in an amount the court considers proper.406 Federal Rule of Civil Procedure 65(c) allows a court to grant preliminary injunctive relief “only if the movant gives security in an amount that the court considers proper to pay the costs and damages sustained by any party found to have been wrong

Mortgage Servicing and Loan Modifications: 11.7.1 Introduction

A number of doctrines may limit the ability of federal courts to decide or revisit certain matters. In particular, the homeowner’s ability to challenge a mortgage transaction or foreclosure in federal court is complicated when there is a related state court proceeding. These issues may arise when the homeowner files an action in federal court to rescind or challenge a mortgage transaction and there is a threatened, pending, or concluded action in state court to foreclose on the home or to evict the homeowner.

Mortgage Servicing and Loan Modifications: 11.8 The Merrill Doctrine

Special issues arise when a servicer acts on behalf of a loan owner that is a federal governmental entity. Most often, this occurs when one of the GSEs, such as Fannie Mae or Freddie Mac, owns the borrower’s mortgage loan. In these situations, a court-created rule known as the Merrill doctrine may limit application of otherwise controlling agency principles.

Mortgage Servicing and Loan Modifications: 11.2.2.1 Overview

Mortgage loans typically involve a thick stack of paperwork. Some of these documents are required by federal or state law. Others are used because of industry custom or lender practice. Some documents, such as a pooling and servicing agreement or an assignment, may be generated after the loan closing as the loan travels through the secondary mortgage market. Mortgage servicers also generate records, such as payment histories and escrow account information, which may be relevant to a homeowner’s claims.

Mortgage Servicing and Loan Modifications: ALASKA

Alaska Stat. § 18.56.135

Scope: Mortgage loans purchased by the Alaska Housing Finance Corporation (AHFC) under a residential loan program authorized by this statute and serviced by an institution other than the AHFC.

Exclusions: None specified.