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We practice CONSUMER BANKRUPTCY law exclusively. 

One of the top Bankruptcy Filers

in the Orlando Area

One of the top Bankruptcy Filers

in the Orlando Area

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  4.  » Recent loan modification lawsuits provide lessons for consumers

Many Florida residents and others around the country struggle to make their mortgage payments each month. In some cases, consumers have sought a loan modification from their lenders to potentially reduce the amount of required monthly payments. However, there have been a number of court cases challenging if some of these modifications are legally binding.

Lawsuits are being brought against loan originators and loan service companies. Consumers often complain that fraud or other unfair practices were committed in the process of mortgage foreclosures. In other instances, the claim is made that an oral promise to modify a loan was made. However, these lawsuits are typically dismissed. It is important to understand some of the reasons why as many seek loan modifications.

While some homeowners argue that they made an oral agreement, most states require that the modifications be written and signed to be legally binding. Other issues regarding the contract arise around electronic signatures and whether an individual actually has the authority to sign a contract. Another area of contention involves the creation of a part performance exception if payments are made after a loan modification request is submitted. Courts also deal with the issue of communication that is noncommittal. It is noted by the court that servicers should clearly state that no agreement is binding unless written and signed by all parties involved.

In most situations, lenders and servicers are not considered negligent in handing the modification requests. However, if evidence exists, a fraud claim may be made if intentional misrepresentation is proven. Unfairness is not recognized by the court and any allegation of fraud must be supported by dates and facts.

While it appears most lawsuits against loan providers or services regarding a loan modification are dismissed, it is important to still seek help when Florida residents have experienced injustice in the process. A knowledgeable bankruptcy attorney can review the documents and assess the situation to determine if a specific case should be pursued. In addition, a loan modification may be the best method of helping someone get back on track financially. An experienced lawyer will ensure that the proper documentation is submitted and the process is completed as required by law.

Source: huffingtonpost.com, “Legal Lessons From Current Mortgage Loan Modification Litigation“, Brad Reid, June 19, 2017