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Written by Jennifer Ngai Lavallee

Apr 17

2014

New and Improved System for D.C. Residents Facing Foreclosure

Updated May 13, 2014: Jen has published an article about these developments in the D.C. Bar Blog.

“Come to court, no matter what.” That is the overall message now being communicated to struggling homeowners via a new court notice accompanying all complaints to foreclose in the District. Effective immediately, homeowners who have been sued for foreclosure in D.C. Superior Court will be able to come to their first court date and request early mediation to try to resolve their case through a loan workout or other agreement, even if they have not yet filed an answer to the complaint.

This improved system is the result of a collaborative effort by Legal Aid, along with other advocates, and the Court to address the growing number of judicial foreclosure cases filed in the District. Outreach to homeowners and early, court-sponsored mediation at the outset of every case are only some of the components of a larger set of new foreclosure procedures that provide important protections for homeowners. Read more →

Jul 02

2012

Legal Aid Testifies before D.C. Council Committee on Public Services and Consumer Affairs about Foreclosure Mediation Law

Jen Ngai Lavallee, Staff Attorney

Last Thursday, June 28, Legal Aid testified before the D.C. Council Committee on Public Services and Consumer Affairs about the Saving D.C. Homes from Foreclosure Act and proposed legislative amendments.  The Act, initially passed as emergency legislation in the fall of 2010, requires lenders to offer mediation to distressed homeowners prior to moving forward with foreclosure.  Legal Aid testified in support of the mediation program and urged the Council to preserve, if not strengthen, certain provisions that Legal Aid argued are critical to the effectiveness and long-term success of the program — such as the requirements that lenders provide documentation of their standing and mediate in good faith.  Legal Aid also recommended that the Council use the current draft bill as an opportunity to improve the program by adding a mechanism for post-mediation judicial review, which would provide increased fairness and finality of the process to all parties involved.  Legal Aid’s written testimony can be accessed here.

Apr 11

2012

Legal Aid Foreclosure Clients Overcome Lender Barriers to Make Their Payments and Keep Their Homes

Jen Ngai Lavallee, Staff Attorney

In recent weeks, the public discourse surrounding the foreclosure crisis has shifted away from Wall Street and the lending industry’s bad acts, focusing instead on homeowners’ supposed “windfalls” as they stop paying their mortgages sometimes for months or years.  Presenting the foreclosure crisis through such a distorted lens is a disservice to all homeowners.  It creates artificially sharp divisions between those who are paying and those who aren’t, ignores the extraordinary hardships that caused so many homeowners to fall behind, and perhaps most importantly, deflects attention away from the financial institutions that not only bear significant responsibility for creating the mess in the first place, but also possess the greatest ability fix it.  Interestingly, nobody seems to talk about one of the reasons many homeowners in foreclosure aren’t paying – their banks won’t take their money.

In today’s blog entry, we feature three Legal Aid foreclosure clients whose ultimate goals and requests to their lenders were simple: let me pay so I can stay in my home.  In each case, it was the lender who created a barrier to payment and resolution – and only with extreme homeowner persistence, combined with significant advocacy and escalation efforts, did each homeowner ultimately prevail. Each of the clients’ names below has been changed to protect their identity.

     1.     Bank insists on dealing with deceased borrower

Ms. Burns lost a major income source, causing her to fall behind on her mortgage.  When she attempted to start making payments again a few months later, the bank sent the money back and informed her that it was moving forward with foreclosure.  A housing counselor tried to help Ms. Burns, but was blocked by the bank, which refused to speak with the counselor or Ms. Burns about the loan.  According to the bank, the only person with whom it could discuss the loan was Ms. Burns’s deceased husband, who had passed away ten years before.  The bank maintained its position even though Ms. Burns was the sole owner of the property and the bank had been taking her mortgage payments for a decade.  Upon taking the case, Legal Aid escalated the issue to bank supervisors, complained to local and federal regulatory authorities, and raised the issue with the bank’s foreclosure attorney.  The bank finally relented by allowing Ms. Burns to apply for a loan modification on behalf of her late husband’s estate.  She successfully completed a trial modification plan, obtained a permanent modification of her mortgage, and is now current with her payments and stable in her home.  (Case start to finish time: 12 months.)

2.      Send it again

Ms. Taylor, an elderly schoolteacher who had lost work hours due to medical disabilities, sought hardship assistance from her bank, and with Legal Aid’s help, was ultimately able to qualify for a permanent loan modification.  Her interest rate was reduced and she made her new mortgage payments on time each month.  However, as the months went by, Ms. Taylor continued to receive correspondence from the bank indicating that she was still in default and at risk of foreclosure.  For the first few months, the bank insisted that Ms. Taylor merely needed to continue waiting until its computer systems were updated to reflect the terms of the modification.  However, four months after Ms. Taylor signed the permanent modification agreement, a bank representative informed her that there had been a problem with the modification documents and she must go through the entire process again.  Legal Aid escalated the issue and demanded more information regarding the problematic documentation.  The bank eventually revealed that the modification documents were illegible – not due to any fault of Ms. Taylor, who had signed the bank’s documents and sent back the originals as required, but rather due to the bank’s illegible scanning of the documents and failure to retain the originals.  Legal Aid immediately provided the bank with a clear, duplicate copy, and the bank proceeded to finalize the modification that had previously come so close to falling apart.  How smoothly this process would have worked without the benefit of counsel is anyone’s guess. (Case start to finish time: 13 months.)

     3.      Just tell me how much to pay

Mr. Diaz came to Legal Aid with an imminent foreclosure sale of his home, which threatened to leave him and seven of his family members homeless.  The total remaining balance on the mortgage was relatively low, but with a sale date drawing near the bank would only accept payment of the full amount owed on the loan plus interest, fees and costs. Mr. Diaz did not have the money the bank was demanding at that time.  Legal Aid investigated and questioned the bank’s authority to foreclose on the home, ultimately resulting in cancellation of the sale.  Months later, Mr. Diaz’s financial situation changed such that he could pay off the entire remaining balance on the mortgage.  He desperately wanted to do so, so that he would never have to face a potential foreclosure again.  However, the bank then stated it was unable to tell Mr. Diaz how much to pay because he was not the named borrower on the mortgage, even though he owned the home and had been making the mortgage payments for years.  Mr. Diaz explained that the named borrower on the loan had gone missing years ago, that it would be impossible to locate him, and that all he wanted to do was pay the bank the entire remaining balance on the loan.  The bank would not budge.  Only after several months and significant escalations by Legal Aid did the bank ultimately relent and agree to provide the payoff figure.  Mr. Diaz promptly paid his entire remaining balance and now owns his home free and clear of any mortgages.  (Case start to finish time: 15 months.)

Legal Aid congratulates these clients on their persistence and thanks them for helping to share a much different perspective on the foreclosure crisis.

Jan 23

2012

Legal Aid Client Prevails in Debt Collection Matter by Demanding Compliance with Proof Requirements

Jen Ngai Lavellee, Staff Attorney

As a result of Legal Aid’s advocacy, a plaintiff debt collector recently agreed to dismiss a case against one of our clients that sought in excess of $10,000 in alleged debt, fees, and interest from credit card charges she allegedly made many years prior.

Ms. B came to Legal Aid because she had been sued for over $10,000 by a company that she did not recognize. The complaint stated that the lawsuit was based on her nonpayment of an old credit card debt and sought to collect that balance plus interest and attorney’s fees. Ms. B did not dispute having owned the credit card at issue, and she admitted that she had fallen behind on her payments several years ago after suffering a stroke. But she was not sure of the actual balance on the account, nor did she did not recognize the plaintiff as the same company that had issued the credit card to her decades ago. Because Ms. B’s only sources of income were social security and her small pension, she could not afford to pay anything on the debt. Ms. B. came to Legal Aid fearful of what would happen to her as a result of the lawsuit.

Legal Aid entered the case and asked the plaintiff — a debt-buyer company that purchases bad debts — for proof that it was the owner of Ms. B’s credit card account. In response, the plaintiff produced a series of documents intended to show that Ms. B’s credit card debt had been assigned or sold three different times in order to get from the original creditor to the plaintiff. However, the documentation did not identify Ms. B’s account, but instead showed only that hundreds or thousands of unidentified accounts were sold at once. It also contained dates that did not make sense with the alleged chronology of sales, and the plaintiff refused to include any of the actual assignment agreements.

Legal Aid argued to the Court that the problems with plaintiff’s documentation showed that it could not in fact prove it was the true owner of Ms. B’s credit card account and therefore lacked the legal standing to sue her on the debt. Legal Aid explained that ownership of the account was a critical issue, because if Ms. B paid the plaintiff to settle or otherwise satisfy the debt and a different company revealed itself as the true owner, Ms. B would suffer duplicate liability on the same debt. Legal Aid argued that allowing the plaintiff to move forward with the case and try to recover from Ms. B under the circumstances would be both unfair and legally incorrect.

At a pre-trial hearing before the judge, Legal Aid stressed in particular that the plaintiff’s documents presented serious reliability issues and that the plaintiff would not be able to present sufficient evidence at trial to prove its case. Both parties and the judge agreed that a decision in the case could have a significant impact on the standards of proof required of debt-buyer companies in the District of Columbia. After oral arguments in front of the judge were complete, the plaintiff opted to dismiss the case against Ms. B rather than proceed to trial, and it promised never to sue her on the same debt again.

Oct 19

2011

Foreclosure Prevention through Loan Modification Remains an Uphill Battle, Especially for Low-Income Homeowners

Jen Ngai Lavallee, Staff Attorney

Over the last couple of years, thousands of homeowners facing the threat of foreclosure have been trying to get loan modifications through the federal government’s Home Affordable Modification Program (“HAMP”). Numerous articles have highlighted some of the problems involving bank compliance with program guidelines. But a recent report published by Pro Publica indicates that, in addition to compliance issues at the servicer bank level, the lack of government enforcement and oversight of the program has also significantly limited HAMP’s effectiveness. The Pro Publica report summarizes findings regarding the quality of HAMP enforcement by Treasury and Freddie Mac against major banks, concluding that one of the main reasons the administration’s flagship foreclosure prevention program has been largely ineffective in helping homeowners get loan modifications is that “[t]he government’s supervision of the program has apparently ranged from nonexistent to weak.”

While bank non-compliance and ineffective oversight of the government’s loan modification program affect all struggling homeowners, the impact of these problems is significantly magnified when it comes to low-income homeowners, who often have limited or no access to internet, fax machines, phones, and copiers—many or all of which are necessary resources in the “paper chase” that has come to define the loan modification application process. Low-income homeowners are also among the most likely to become homeless after foreclosure.  On the flip side, when loan modification does work, it can have an enormous positive impact on the stability and livelihood of families living on the edge of poverty.

The experience of Legal Aid client, Ms. L, demonstrates both the hurdles that loan modification applicants face, as well as the enormous difference that a successful modification can have on the lives of those living in or near the brink of poverty. Ms. L came to Legal Aid fearful that she was about to lose her home of 21 years. After her mother had moved out and was unable to continue contributing to the household expenses, Ms. L fell behind on the mortgage and struggled to make ends meet for the four children she cared for on her own, including one child with permanent and severe disabilities.  She had tried to apply for a loan modification, but her bank had provided her with false information regarding her eligibility and blocked the review from moving forward.

Legal Aid reviewed Ms. L’s financial situation, which indicated that she was likely to qualify for a loan modification, and re-submitted a new application for loan modification on her behalf.  The bank again denied the application, however, claiming that Ms. L’s income was insufficient to support her mortgage even with a reduced interest rate. After investigating the matter further, Legal Aid determined that the bank had failed to count approximately $300 in food stamps as part of Ms. L’s income—even though loan modification program guidelines clearly indicated that food stamps were to be counted—and that the exclusion of Ms. L’s food stamp income was the determining factor in the denial of her application. When the bank persisted in refusing to count the food stamps, claiming that investor guidelines prohibited their inclusion, Legal Aid escalated the matter to the Fair Housing Administration, the U.S. Department of Housing and Urban Development, and the HAMP escalations team, highlighting the bank’s failure to comply with applicable program guidelines and arguing that a failure to count public assistance income under these circumstances was a violation of the Equal Credit Opportunity Act.

Despite Ms. L’s apparent eligibility and Legal Aid’s multiple attempts to get the attention of bank supervisors and government regulators with authority to review the situation, it took months of back and forth to obtain and complete a successful trial modification plan. Shortly thereafter, Ms. L finally obtained a permanent loan modification involving a reduction in her interest rate by more than two percent and the transfer of a portion of her loan balance to a no-interest subordinate loan with the Fair Housing Administration. Ms. L is now current on her mortgage and stable in her family home. Legal Aid congratulates Ms. L on obtaining her modification and for her tenacity in continuing with her foreclosure prevention efforts despite the multiple barriers the bank placed in her way.

While Ms. L was ultimately able to obtain a loan modification and stay in her home, thousands of other homeowners—including many low-income homeowners—continue to struggle.  Legal Aid is committed to continuing its advocacy on behalf of low-income DC homeowners facing foreclosure and to increase access to justice for those who need it most.

Sep 06

2011

The Connection Between Foreclosures and Health

Jen Ngai Lavelle, Staff Attorney

Since the launch of its Consumer Law Unit in 2008, Legal Aid has worked to help many low-income DC homeowners avoid foreclosure by litigating mortgage-related fraud cases, negotiating loan modifications, and conducting community outreach and education. With a rising number of foreclosures devastating individuals, families, and neighborhoods across the country, the gravity of the current foreclosure crisis and the importance of keeping people in their homes is easy to see. But according to new research findings, the link between foreclosure and well-being may be much broader and more far-reaching than meets the eye. This study, conducted by Janet Currie of Princeton University and Erdal Tekin of Georgia State University and described in the Wall Street Journal, looks beyond economic well-being and draws the connection between health problems and the increase in foreclosures in some of the hardest hit areas of the United States.

Aug 25

2011

Legal Aid Client Perseveres in Debt Collection Case and Finds Justice

Jen Ngai Lavelle, Staff Attorney

After enduring a multi-stage battle in a consumer case to which she should have never been a party, Legal Aid client Tangela Garnett finally prevailed in her fight against a company collecting on debt she simply did not owe.

In the fall of 2010, Ms. Garnett was shocked to learn from her employer that over $300 was being taken out of her paycheck every two weeks to pay a court judgment of approximately $3,000. Unaware of any such judgment against her, Ms. Garnett immediately went to the court clerk’s office to investigate. It was there she learned for the first time that in 2003, a debt collector had sued her on an alleged unpaid credit card debt — and that when she did not appear in court, a default judgment had been entered against her. Now, eight years later, the debt collector was garnishing her wages to collect on the amount of the judgment.

Ms. Garnett had never heard of the lawsuit. She had never been served, and the person described in the plaintiff’s affidavit of service did not match her description or that of anyone who would have been able to accept service on her behalf. Nor had she ever received any notice of the initial court date or entry of the judgment. Perhaps most unsettling was that she did not recognize the underlying credit card debt — the debt was not hers.

Ms. Garnett filed a motion to vacate the judgment and stop the garnishment, but the motion was denied. Legal Aid entered its appearance and moved for reconsideration, but the judge again denied the motion. While this was ongoing, Ms. Garnett continued to watch money being taken out of her paycheck — money that she normally relied on to pay for her housing, food, and other necessary expenses.

But Ms. Garnett and her Legal Aid attorney did not give up. They requested yet an additional level of review and ultimately prevailed, this time with the judge issuing an order vacating the 2003 judgment and remanding the case for a new trial. According to the judge’s order, the plaintiff debt collector had failed to provide sufficient proof of the underlying debt when it offered no documentation other than a self-serving affidavit of one of its own employees stating that Ms. Garnett owed the collection company the amount of money stated in the complaint. Therefore, ruled the judge, the judgment that the court had previously entered against Ms. Garnett — and that formed the basis of the wage garnishment — was invalid.

Ms. Garnett’s case was resolved prior to trial, when the plaintiff provided her a refund of the full amount garnished from her pay and dismissed all claims against her with prejudice. She now receives her entire paycheck every two weeks, and the debt collector cannot bring a new action against her based on the same debt.

 Legal Aid congratulates Ms. Garnett for her tenacity and her individual victory in this case, but it also recognizes there are countless other District residents who have been victims of what are at best, sloppy — and at worst, abusive — collections practices. Legal Aid will continue to fight on their behalf through litigation and advocacy to ensure that their rights are protected and interests are represented.

Aug 04

2011

Victory for Legal Aid Client Subjected to Abusive Debt Collection

Jen Ngai Lavelle, Staff Attorney

Last week, justice became real for a Legal Aid client whose daily life had been derailed by a company using highly illegal and abusive tactics to attempt to collect on a debt of less than $500.

Ms. H had originally come to Legal Aid because she was receiving multiple calls from debt collectors purporting to be law enforcement officials and threatening to throw her in jail over two checks — written for $150 and $300 — which had bounced.  The callers falsely identified themselves as investigators or police detectives and told her that she was guilty of committing check fraud.  Faced with the fear of imprisonment, Ms. H provided one caller with her personal bank account information so his company could withdraw the funds they claimed necessary to satisfy the debt.  She came to Legal Aid fearful of what would happen when the company learned she did not have enough funds in her bank account to cover the full amount.

In the span of only two months, Ms. H had received approximately 120 calls from the collection company, many of which included variations of the same threats of criminal prosecution.  The repeated and abusive behavior caused Ms. H, who was already disabled, to become depressed and anxious.  She developed insomnia and lost her ability to continue working at her part-time job.

Legal Aid filed a lawsuit on behalf of Ms. H against the company for violation of various local and federal debt collection and consumer protection laws.  At Ms. H’s court hearing, Legal Aid presented evidence of the abusive collection practices to the judge in the form of various witness testimony and tape recordings of sample collection calls.

After hearing the evidence, the judge found that the company had violated multiple provisions of local and federal consumer protection and debt collection laws and entered a judgment in favor of Ms. H for over $35,000, which included actual, statutory, and punitive damages.  The judge also ordered payment of almost $7,000 in attorney’s fees to Legal Aid, which does not charge any fees to its clients but may be awarded compensation in certain cases for the value of the legal services it provides. 

Legal Aid congratulates Ms. H for her victory in this case and thanks her for her role in helping to achieve a measure of justice for others in the District facing similar abuses in debt collection.

Jun 21

2011

DC’s New Foreclosure Mediation Program Goes Live

Jen Ngai, Staff Attorney

For homeowners in the District who are behind on their mortgages, paying attention to the mail is now more important than ever before.

Thanks to the Saving DC Homes from Foreclosure Act — a piece of emergency legislation passed by the DC Council last fall — lenders are now required to send mediation packets to homeowners offering them the chance to participate in mediation prior to moving forward with foreclosure.  The goal of the mediation program is to preserve homeownership and avoid foreclosures where alternatives, such as loan modification, are feasible.  In addition, the new mediation law requires lenders to prove their standing and to review homeowners for loan modification in good faith.

Although the mediation law technically took effect last fall (causing foreclosures of residential mortgages in DC to be suspended because the contents of the required mediation packet were not yet available), the accompanying regulations and forms issued by the Department of Insurance, Securities and Banking went into effect on May 25, 2011 – meaning that lenders may now resume foreclosure activity so long as they comply with the rules regarding pre-foreclosure mediation.

Now that the mediation program is “live,” it is only a matter of time before the immense backlog of loans in default begins to resurface – and many DC homeowners, especially those with lower incomes, will need the help of advocates more than ever.  Legal Aid is taking steps to reach out to homeowners letting them know what mediation is, how it works, and where they can get help if they cannot afford a lawyer.  As a part of that effort, Legal Aid recently ran internal bus ads providing information about the mediation program on over 300 WMATA metrobuses, using funding from an Equal Justice Works Innovation Grant.   The bus ads used the slogan, “Mediation – Choose it Or Lose It,” attempting to emphasize that homeowners must affirmatively opt in to mediation within the required timeframe in order to obtain the benefit of the new law.

Legal Aid’s Consumer Unit is available to help lower income homeowners opt in to mediation and to represent homeowners at the mediation sessions themselves.  In addition, Legal Aid is partnering with the law firm of Cohen Milstein Sellers & Toll, PLLC where several attorneys will offer their pro bono assistance and representation with mediation to homeowners referred by Legal Aid.  Applicants seeking assistance with this process should call Legal Aid’s foreclosure mediation intake line at (202) 386-6699.

Feb 17

2010

The Recovery Act at Work, One Year Later:

 

Jennifer Ngai  Equal Justice/AmeriCorps Fellow

Jennifer Ngai Equal Justice/AmeriCorps Fellow

Legal Aid’s EJW AmeriCorps Fellow Attends Obama and Biden Address at the White House

Yesterday, amidst a string of phone calls with banks and trustee’s attorneys, one call caught me by surprise in the best of ways – an invitation to come to the White House to hear President Obama and Vice President Biden give an address on the nation’s progress so far under the economic stimulus package.  When?  Today — the one-year anniversary of the Recovery Act.

 

David Stern, CEO of Equal Justice Works, and Cole McMahon, EJW’s AmeriCorps Senior Program Manager and Jen

David Stern, CEO of Equal Justice Works, Cole McMahon, EJW’s AmeriCorps Senior Program Manager and Jennifer Ngai

Through funding provided by the Recovery Act, I was able to join Legal Aid’s Consumer Law Program in October 2009 as an Equal Justice Works AmeriCorps Recovery Fellow.  My particular fellowship was created by a partnership between Equal Justice Works, the Institute for Foreclosure Legal Assistance (IFLA) and the Corporation for National and Community Service (CNCS) to increase legal representation to homeowners at risk of foreclosure.  I attended today’s White House event with David Stern, CEO of Equal Justice Works, and Cole McMahon, EJW’s AmeriCorps Senior Program Manager.

President Obama & Vice President Biden

President Obama & Vice President Biden

During his address, President Obama hailed the one-year anniversary of the passage of the economic stimulus and recovery package, acknowledging at first that the measure had not necessarily been politically popular, but then proceeding to highlight the benefits and successes of the package one after another.  From widespread tax breaks for working Americans, to job creation, to investment in progressive technology and infrastructure, the president noted the many ways in which Recovery Act funds have been used to address the deep economic trouble facing the country when he took office.  President Obama stated that the Recovery Act is largely responsible for the country averting a second Great Depression, noting that the economy has gone from shrinking by 6 percent to growing by about that same figure.  Vice President Biden’s remarks conveyed a consistent message – the Recovery Act is working.

Here at Legal Aid, we have seen some of the benefits of the Recovery Act first-hand, most notably with the dramatic expansion of our Consumer Law Program, which launched in September 2008 with the addition of Wendy Weinberg as supervising attorney.  Thanks in large part to the Equal Justice Works AmeriCorps Recovery Fellowship program, Legal Aid’s foreclosure practice is now able to serve low-income homeowners not only through litigation, but also through mediation with servicer banks to obtain mortgage modifications and through extensive community education and outreach.