Is your mortgage interest rate legal?

For most people the answer is yes, but even in 2017 I still come across clients with usurious (and illegal) mortgage interest rates. If your residential mortgage interest rate is several points above prime, keep reading!

Pennsylvania’s Loan Interest and Protection Law

Pennsylvania’s Loan Interest and Protection Law, 41 P.S. 101, et, seq., establishes a ceiling on interest rates for residential mortgage loans in Pennsylvania. To fall under the protections of this law, your mortgage loan must meet several criteria. First, the loan must be considered a “residential mortgage”. A “residential mortgage” is defined by the law as follows:

“Residential mortgage” means an obligation to pay a sum of money in an original bona fide principal amount of the base figure or less, evidenced by a security document and secured by a lien upon real property located within this Commonwealth containing two or fewer residential units or on which two or fewer residential units are to be constructed and shall include such an obligation on a residential condominium unit.

The definition can basically be distilled down to two requirements: 1) the property is a one or two-family residential home or condominium, and 2) the original principal amount of the mortgage is less than the “base figure”. What is the base figure? It is an amount adjusted annually by the Pennsylvania Department of Banking and published in the Pennsylvania Bulletin. For 2017, this amount is $244,856.00.

Finally, loans insured by the Federal Housing Administration, Veterans Administration, or other United States government agency are exempt from this law, provided that the mortgage is subject to a maximum interest rate established by that agency. So if you have an FHA or VA loan, then the Pennsylvania interest rate cap does not apply; however, the interest rate caps established by the Department of Housing and Urban Development do apply.

So what is the maximum interest rate?

Assuming your loan falls under the protections of Pennsylvania law, then the maximum interest rate “shall be equal to the Monthly Index of Long Term United States Government Bond Yields for the second preceding calendar month plus an additional two and one-half per cent per annum rounded off to the nearest quarter of one per cent per annum.” To simplify things, the maximum rate is published monthly by the Department of Banking in the Pennsylvania Bulletin.

What happens if my rate is usurious?

If you have been charged usurious mortgage interest, the law provides you with some relief. First, the law states that you do not have to pay the excess interest, provided that you give proper notice to your mortgage lender. Second, you are entitled to sue your lender and recover up to triple the excessive interest. The recovery of triple interest is limited, however, to a four year period. So if you have been paying excessive interest for more than four years, your recovery may be limited. Finally, you are entitled to an award of reasonable attorney’s fees.

Do you think you have been the victim of a mortgage lender? Call The Mays Law Firm PC today (215) 792-4321, for a free consultation.

Avoid Forensic Loan Audit Scams

There is never a shortage of people willing to exploit homeowners in foreclosure. According to the Federal Trade Commission, one such scam is the “forensic mortgage loan audit.” These forensic loan audits are also referred to as “mortgage securitization audits” or simply “forensic audits”.

The Forensic Loan Audit Scam

It works like this, the homeowner pays someone hundreds or even thousands of dollars in exchange for a forensic loan audit report from an “auditor” that supposedly determines whether or not your lender has complied with state and federal lending laws. The claimed purpose behind the audit is typically to defend against a foreclosure filed by the homeowner’s bank. The reports will typically have a disclaimer that they are not legal advice, but then go on to set out all sorts of alleged violations of the law. These “audits”, however, are completely useless in defending a foreclosure in Pennsylvania, and here’s why:

1) It is inadmissible in Court. Unless your bank’s attorney slept through evidence class in law school, this forensic loan audit report will not be admitted into evidence at trial. The written report itself is hearsay and, therefore, inadmissible. If your “auditor” was present at trial, he or she could certainly testify about the opinions stated in the report… that is IF the auditor is qualified as an expert by the Court.
2) Alleged Truth in Lending Act (TILA) and Real Estate Settlement Procedures Act (RESPA) violations won’t typically save your home from foreclosure. As the FTC points out, you can sue your lender for violations of TILA and RESPA (assuming that they did, in fact, violate those laws). But, even if you win that doesn’t mean the foreclosure will stop or that your lender has to modify your loan. In fact, if you were successful in canceling your mortgage under TILA, you would have to give the bank its money back, which means you could lose your home even if you win! If you suspect that our lender violated TILA or RESPA, you would be better served consulting with an experience attorney than ordering an expensive “forensic audit”.
3) Securitizing a mortgage doesn’t make it invalid under Pennsylvania law. Most these audits are aimed at trying to convince the homeowner that their loan was “securitized” and that there was some sort of inherent flaw in the way that the loan was packaged and sold to investors. The bottom line is that many loans are, in fact, securitized, but Pennsylvania Courts have not recognized this as a defense to mortgage foreclosure.
4) The information in these audits can typically be found on the Internet for free. That’s right, most (if not all) of the information in these so-called “audits” are simply taken from public records available to anyone with a computer and Internet access. Which begs the question, why are the audits so expensive?

If you’re in foreclosure it can be difficult to tell scams from the real offers of help. There are a number of legitimate government programs that can help, free of charge. And, if you do need assistance or legal advice in defending your mortgage foreclosure in Court, you should seek out an experienced attorney admitted in your jurisdiction.

Avoid Mortgage Modification Scams

If you’re in foreclosure, prepare to be inundated with solicitations offering to help you modify your loan. Some are legitimate, but many are scams. Fortunately, it’s easy to tell the difference if you take a brief moment to familiarize yourself with The Mortgage Assistance Relief Services Rule, or MARS Rule.

The MARS Rule

Yesterday, a homeowner told me she received a solicitation from a company offering to help her apply for a mortgage modification for the low, low price of $4,000.00. They offered to begin work on the mortgage modification just as soon as she made a down payment of $1,500.00. This is precisely the sort of scam that is illegal under the MARS Rule. In response to scores of unscrupulous people taking advantage of homeowners in foreclosure, the Federal Trade Commission (FTC) implemented the MARS Rule. The full text of the Rule can be found at 12 C.F.R. Part 1015, but here are a few important points you need to know:

1. It is illegal to ask for a fee in advance to assist you in applying for a loan modification or other work out option with your bank. Attorneys are an exception to this rule, provided that they are licensed in your jurisdiction and deposit the fee in a trust account, separate from their own funds. This is probably the biggest red flag. Unless you are hiring an attorney, nobody can ask you for a fee unless they obtain an offer from your lender and you decide to accept that offer. 
2. If anyone makes a promise or guarantee of a mortgage modification with your lender, run away. The MARS Rule actually prohibits companies from misrepresenting, “[t]he likelihood of negotiating, obtaining, or arranging” a workout option with your bank. And, if the person is offering you a “money-back guarantee”, just remember my first point…advance fees are illegal!
3. No legitimate housing counselor will advise you to stop paying your mortgage payments. This too is illegal. If a company tries to convince you to stop paying your mortgage in order to obtain a mortgage modification, you need to seek out a legitimate HUD-approved housing counseling agency.

Should You Really Pay Anything For Mortgage Assistance Anyway?

I’m an attorney after all, so I like making money. But, HUD-approved housing counselors are free and it’s hard to beat that price. I’ve worked with HUD-approved counselors throughout Pennsylvania and, in my experience, they are professional and effective. They can help you gather the financial documentation you need and apply for a mortgage modification with you bank. You can find a list of housing counselors in your area on HUD’s website. Once your application is submitted,  a little red tape can be expected. If you have a compliant lender, however, you should have a decision on your application within 4 weeks of submitting a completed application.

If the red tape becomes too tough to cut, or your lender isn’t complying with federal loss mitigation regulations, then it’s time to consult with an experienced foreclosure attorney to move things along. There are things that attorneys can do (such as sue a non-compliant mortgage servicer) that a housing counselor cannot do. If you need help cutting through the red tape, call The Mays Law Firm PC at (215) 792-4321 to schedule a free consultation.

Defending Your Own Foreclosure? It Could Cost You.

The internet is filled with do-it-yourself articles encouraging homeowners to defend themselves against their bank’s foreclosure action without the assistance of an attorney. Most of these articles focus on issues of standing, or whether or not the bank has the necessary documents to foreclose. But, there is more to a foreclosure than just issues of standing, a lot more. There are a number of federal and state laws governing debt collection, federal and state laws governing residential foreclosures, state rules of civil procedure, local rules of civil procedure and, perhaps most importantly, rules of evidence. If you defend yourself based on internet how-to articles, it could end up costing you more than your realize.

To illustrate my point, I took a look at an appeal decided a few days ago by the Pennsylvania Superior Court. The homeowner appealed a foreclosure judgment entered against her (without an attorney) on grounds that the bank did not have standing to foreclose. The homeowner lost the appeal, and tragically for this homeowner, she did not recognize that the business records the bank filed with the court to obtain the judgment are likely objectionable hearsay under the Pennsylvania Rules of Evidence, and would have been inadmissible…had she raised a proper objection.

In this case, the bank filed a payment history and an affidavit attempting to certify that the payment history is a business record under Rule 803(6) of the Pennsylvania Rules of Evidence. Here is an excerpt from the banks’ motion for summary judgment:

Defending A Foreclosure Without An Attorney Could Cost You.

The banks motion for summary judgment contain 17 pages of payment history records, along with an affidavit signed by an employee at Seterus, Inc, a third-party mortgage servicer, alleging to have “personal knowledge” of the documents. The first few pages of the records appear to be generated by Seterus:

This is what hearsay looks like!

But, half way through the payment history, it becomes obvious that only a small portion of the document is made by Seterus. The remainder of the payment history was actually made by a separate third-party servicer. A few pages in, and the documents begins to look like this:

One of these doesn’t look like the other. Can you spot the hearsay?

So what does all this mean? What was being offered as a business record of one mortgage servicer, was actually two separate business records made by two separate servicers. And, without additional evidence, such as an affidavit from both servicers, the payment history is inadmissible hearsay. If you want a more in depth explanation, read Commonwealth Financial Systems v. Smith and U.S. Bank v. Pautenis.

If your home is in foreclosure, trying to represent yourself could end up costing you more than hiring an experienced foreclosure attorney. The Mays Law Firm PC offers a free, no-obligation consultation to review your case. Call (215) 792-4321 now to schedule your consultation.

5 Tips To Help You In The Mortgage Modification Process.

Today, most mortgage servicers offer mortgage modification programs. In most cases, your mortgage servicer will request that you complete a Request for Mortgage Assitance, or RMA. If your servicer hasn’t already provided you with the form, it can be found at www.makinghomeaffordable.gov. I have had the opportunity to attend hundreds of court-supervised conciliation conferences in residential mortgage foreclosure diversion programs throughout Pennsylvania, and I wanted to take a few moments and offer some tips to help you through the mortgage modification process:

1. Submit all documents as a complete package. The quickest way to get your submission reviewed by your mortgage servicer is to gather all of the documents requested by your mortgage servicer, and submit all of them together as one, complete package. Regulations established by the Consumer Finance Protection Bureau (CFPB) require that the servicer review your package and notify you of any missing documents within five days, but servicers frequently miss this deadline. Often, you may never receive timely notification from your mortgage servicer that your submission is incomplete. If your package “ages”, or sits idle too long, you may be stuck back at square one, and have to resubmit everything all over again. To avoid this, I recommend making every effort to gather all of the necessary documentation required by your lender and submitting it as one complete package.

2. Double check that 4506T. Your lender will require that you provide them with an IRS Form 4506T, Request for Transcript of Tax Return. Make sure that the form is completely filled out, this includes putting the information for your mortgage servicer in line 5. Your lender won’t fill in any missing blanks, so if you don’t fill this form out completely (and correctly) you can expect delays.

3. Taxes done? While we’re on the subject of taxes, if you have any unfiled tax returns, now is the time to do them. More likely than not, your lender will want copies of your signed tax returns from the past couple of years, in addition to the 4506T. If you were not required by law to file with the IRS, then make sure you write a letter, signed and dated, to your servicer explaining the reason(s) why you were not required to file.

4. Follow up, constantly. Once you provide a request for mortgage assistance to your lender, they have 5 days to review the submission for missing documents. Once your servicer receives the completed package, they have 30 days to review you for foreclosure alternatives. If it’s been more than 30 days since you submitted a package to your lender, follow up. Your RMA just might be sitting in someone’s inbox, collecting dust.

5. Is your mortgage servicer not following the CFPB Guidelines? Let the CFPB know about it. If your mortgage servicer is not following CFPB Guidelines for mortgage assistance, don’t be afraid to file a complaint against your servicer with the CFPB. It’s easy to submit online, and if the process is stalled, it could help move it along. You can file a complaint on the CFPB’s website.