Relief For Texas Home Equity Borrowers Sucked Into the Foreclosure Spiral
18/04/11 14:29 Filed in: Real Estate | foreclosure
I recently filed a federal class action suit against Wells Fargo and HSBC Bank relating to these defendants’ alleged misconduct towards Texas home equity loan borrowers under the HAMP loan modification program. Ellery G. Pennington And Laura M. Pennington, On Behalf Of Themselves And All Others v. HSBC Bank USA, National Association And Wells Fargo Bank, N.A., Civil Action No. 1:10-cv-785 (W.D.Tex.).
In additional to the usual litany of abuses alleged in cases against the big mortgage lenders and services (the long nightmare of the loan modification process that leads to nowhere), this uniquely Texas class action adds a state constitutional twist: Even though the Texas Constitution forbids modifications of home equity loans that include unpaid interest arrearages, Plaintiffs allege that Defendants caused or even required borrowers to incur interest arrearages as part of their HAMP (Home Affordable Modification Program) loan modification process. Then, after months or years of stringing borrowers along, Defendants would (we allege) deny borrowers a permanent loan modification because the Texas Constitution forbids including interest arrearages in the modified loan! The expression “catch-22” is often misused, but this is a classic instance.
Bear in mind that this only applies to Texas residents whose “mortgage” had been made into a home equity loan at some point. It does not apply to regular purchase-money mortgages. The Texas Constitution was amended in 1999 to allow home equity loans to be foreclosed on (that’s a shorthand for what the amendments do), but only under certain conditions. Any home equity loan that didn’t effectively pay down the principal couldn’t be foreclosed on. Thus, in cases of distressed borrowers, a modification to a home equity loan can’t roll unpaid past-due interest into the loan, according to the Texas Joint Financial Regulatory Agencies. The point is to prevent borrowers from sinking deeper and deeper into debt. The Pennington class action alleges that Wells Fargo and HSBC dangled just such modifications in front of their borrowers then snatched the promised loan mods away at the last minute, ruining people’s lives.
The latest complaint appears here.
NOTE: this blog entry corrects the date of the Texas Constitution amendments.
In additional to the usual litany of abuses alleged in cases against the big mortgage lenders and services (the long nightmare of the loan modification process that leads to nowhere), this uniquely Texas class action adds a state constitutional twist: Even though the Texas Constitution forbids modifications of home equity loans that include unpaid interest arrearages, Plaintiffs allege that Defendants caused or even required borrowers to incur interest arrearages as part of their HAMP (Home Affordable Modification Program) loan modification process. Then, after months or years of stringing borrowers along, Defendants would (we allege) deny borrowers a permanent loan modification because the Texas Constitution forbids including interest arrearages in the modified loan! The expression “catch-22” is often misused, but this is a classic instance.
Bear in mind that this only applies to Texas residents whose “mortgage” had been made into a home equity loan at some point. It does not apply to regular purchase-money mortgages. The Texas Constitution was amended in 1999 to allow home equity loans to be foreclosed on (that’s a shorthand for what the amendments do), but only under certain conditions. Any home equity loan that didn’t effectively pay down the principal couldn’t be foreclosed on. Thus, in cases of distressed borrowers, a modification to a home equity loan can’t roll unpaid past-due interest into the loan, according to the Texas Joint Financial Regulatory Agencies. The point is to prevent borrowers from sinking deeper and deeper into debt. The Pennington class action alleges that Wells Fargo and HSBC dangled just such modifications in front of their borrowers then snatched the promised loan mods away at the last minute, ruining people’s lives.
The latest complaint appears here.
NOTE: this blog entry corrects the date of the Texas Constitution amendments.
0 Comments