In an insightful and intelligent
article for the Harvard Law and Policy Review, Rachel Labush, a staff attorney
at Community Legal Services of Philadelphia, shared her experience defending
low-income homeowners facing foreclosure in Philadelphia. She explains
how she holds mortgage companies to the terms of the contracts they have
signed and to the laws that govern their conduct.
Here’s what happens: the Federal Housing Administration (FHA) is
supposed to provide loans to help low- to moderate-income minority homebuyers,
as well as first-time homebuyers, access home ownership affordably. The
benefit of this program is twofold: borrowers are given the assurance
that they cannot be foreclosed upon without being reviewed for a loan
modification or other “loss mitigation” option, and the lender
is insured against default by FHA insurance. Under the Distressed Asset
Sales Program (DASP), mortgage company may assign FHA loans that are in
default to the U.S. Department of Housing and Urban Development (HUD)
and cash in on the insurance before completing a foreclosure. After the
HUD takes over the mortgage, it strips it of its protections and auctions
it off to private investors.
The problem is that this process is happening without the homeowners ever
even being made aware that they have options to avoid the foreclosure.
People who qualify for loan modifications, forbearance, or repayment plans
are still having their mortgages stripped of FHA protections, some even
while in the middle of applying for relief. Lenders are not doing their
part to ensure that homeowners are properly reviewed for assistance, and
people are wrongfully losing their homes because of it. According to the
article, more than 400 properties in Philadelphia have gone through DASP,
and none of these homeowners had been notified before their mortgages
were stripped of the FHA protection they paid for.
More than 101,000 former FHA loans have been sold to HUD through DASP,
with HUD essentially rewarding bad servicing with insurance payouts. In
Philadelphia, the new investors who have purchased these mortgages have
done everything from refuse to reduce or defer any part of the debt, to
demanding a year of “trial payments” before allowing a modification,
or requiring huge down payments to even be considered for a modification.
If and when a modification is offered, the terms are far inferior to those
the borrower should have received through the FHA. This is blatant consumer
abuse, but unfortunately, many homeowners do not have the resources to fight it.
If you are facing foreclosure in Chicago or the surrounding areas, you should
immediately contact an attorney to ensure that your rights are fully protected. Sulaiman
Law Group, LTD is well versed in foreclosure law and can potentially help
you keep your home.
To learn more about how we can help, please
contact our firm today at (312) 313-1613.