FDCPA and Those Calls to Clients

In 2007, Ohio replaced its Code of Professional Conduct with the Ohio Rules of Professional Conduct.  I was almost certain that a "Servicer" contacting the client during litigation violated the new ethical rules.  Today, when another client called distraught over receiving a telephone call from the "Servicer", I decided I needed to review the Rules again.  Turns out that Rule 4.2 comment [4] actually allows such contact between the clients.

4.2 Comment [4]Parties to a matter may communicate directly with each other, and a lawyer is not prohibited from advising a client concerning a communication that the client is legally entitled to make.

Upon further reflection, I had to question whether the contact was from a party to the litigation.  Since it was from the Servicer and not the Plaintiff this was not communication by a party.

I then reviewed the Ohio Consumer Protection Acts, and could not find any prohibition against clients being contacted directly by debt collectors.  I then turned to the Fair Debt Collection Practices Act (FDCPA) 15 U.S.C. §§ 1692-1692p.

I believe that the "servicer" would be a debt collector, and the FDCPA prohibits debt collectors from contacting consumers who are represented by counsel.  I did not see any definition of consumer which rendered the FDCPA inapplicable to mortgage debt.  Further, the cases that I reviewed involving FDCPA did not apply the statute to the Lender as it was collecting its own debt.  However, when a 'servicer" contact the client, it may be a debt collector because it is not an affiliate of the Lender.  A Lender that originated the loan only to immediately sell the loan and retain the "servicing rights" would be a debt collector.

The FDCPA prohibits a debt collector from directly contacting a consumer who is represented by counsel. 

Without the prior consent of the consumer given directly to the debt collector or the express permission of a court of competent jurisdiction, a debt collector may not communicate with a consumer in connection with the col­lection of any debt—

if the debt collector knows the consumer is represented by an attorney with respect to such debt and has knowl­edge of, or can readily ascertain, such attorney’s name and address, unless the attorney fails to respond within a reasonable period of time to a communication from the debt collector or unless the attorney consents to direct communication with the consumer; 15 U.S.C. 1692c.

The FDCPA provides civil damages up to $1,000 plus attorney fees.  I think it may be a good point of practice to advise opposing counsel to inform Plaintiff's "servicer" that it is not to directly communicate with the client.  This may avoid some aggravation for the client.  When the servicer contacts the Homeowner despite the requested warning, the servicer may be liable for civil damages under teh FDCPA.  Since the driving force behind many foreclosures seems to be the money that "servicers" make such a FDCPA claim may provide some leverage to thos erepresenting Homeowners Facing Foreclosure.

I am certain that many others have already thought of this and are (1) successfully using it or (2) are aware of the downfall of this strategy and avoid it.  I would ask for those reading this with experience on the issue reply and educate me accordingly.  

Free Advice to Homeowners Facing Foreclosure

Today, I will again be in the office at 6:00 p.m. to answer any question of a Homeowner Defending a Foreclosure complaint.  I subscribe to a number of foreclosure websites and blogs, and I receive articles written by very knowledgeable and caring experts.  Most of those articles address very technical issues, or discuss the issue on a large national scale.  These articles present issues that may exist in a Homeowner's case, but the articles do noy provide easy how to information as to how these issues may apply to an individual case.

What I am trying to do is explain the process to people going through it the first time.  Litigation is complex.  Homeowners not only have to deal with the complexity of litigation, they also have to deal with the frightening experience and threat of losing their home.  

Foreclosure Defense seems to have created a cottage industry for companies and individuals to prey upon the difficult circumstances of these Homeowners.  Many Homeowners have be subjected to high pressure, fast talking, "too good to be true" sales pitches.  That is why I invite Homeowners Facing Foreclosure to come to my office and I will try to answer your questions.  Its FREE. 

The Tension Between HAMP and the One Year Guideline

 The Making Home Affordable Program, Version 3.3, As of September 1, 2011.

In February 2009, the Obama Administration introduced the Making Home Affordable Program, a plan to stabilize the housing market and help struggling homeowners get relief and avoid foreclosure. In March 2009, the Treasury Department (Treasury) issued uniform guidance for loan modifications across the mortgage industry and subsequently updated and expanded that guidance in a series of policy announcements.

A number of attorneys will talk about HAMP and some of the requirements, but many, including myself, have, or at least had,  no idea where to locate the Guidelines, what authority existed for the Guidelines or the Federal Regulation creating the guidelines.  According to the guidelines, the Federal authorityb comes from the following:

As part of Helping Families Save Their Homes Act of 2009 (HFSTHA), Congress established the Servicer Safe Harbor by amending the Truth in Lending Act for the purpose of providing a safe harbor to enable such servicers to modify and refinance mortgage

The United States Department of Housing and Urban Development describes the authority the same as the guidelines.
Legal Authority: Section 230(b) of the National Housing Act (12 U.S.C. 1715u(b)), as amended by the Helping Families Save Their Homes Act of 2009, Division A of Public Law 111-22.

Administering Office: Assistant Secretary for Housing-Federal Housing Commissioner, U.S. Department of Housing and Urban Development, Washington, DC 20410-8000.
Information Source: Administering Office.

The HAMP Program and other relief efforts are overseen by the Special Inspector General for the Troubled Assets Relief Program, SIGTARP, which was established by Section 121 of the Emergency Economic Stabilization Act of 2008 ("EESA").
Under EESA, the Special Inspector General has the duty, among other things, to conduct, supervise and coordinate audits and investigations of the purchase, management and sale of assets under the Troubled Asset Relief Program ("TARP").
 loans under a "qualified loss mitigation plan."

Now that we know where to find the guidelines there are several provision that are helpful to Homeowners facing Foreclosure.

3.2 Suspension of Foreclosure Proceedings in Process

With respect to a borrower who submits a request for HAMP consideration after a loan has been referred to foreclosure, the servicer must, immediately upon the borrower’s acceptance of a TPP based on verified income, and for the duration of the trial period, take those actions within its authority that are necessary to halt further activity and events in the foreclosure process, whether judicial or non-judicial, including but not limited to refraining from scheduling a sale or causing a judgment to be entered.

The servicer will not be in violation of this section to the extent that: (a) a court with jurisdiction over the foreclosure proceeding (if any), or the bankruptcy court in a bankruptcy case, or the public official charged with carrying out the activity or event, fails or refuses to halt some or all activities or events in the matter after the servicer has made reasonable efforts to move the court or request the public official for a cessation of the activity or event; (b) the servicer must take 

some action to protect the interests of the owner, investor, guarantor or servicer of the loan in response to action taken by the borrower or other parties in the foreclosure process; or (c) there is not sufficient time following the borrower’s acceptance of the TPP for the servicer to halt the activity or event, provided that in no event shall the servicer permit a sale to go forward. The servicer must document in the servicing file if any of the foregoing exceptions to the requirement to halt an existing foreclosure sale is applicable.

3.3 Suspension of Scheduled Foreclosure Sale

When a borrower submits a request for HAMP consideration after a foreclosure sale date has been scheduled and the request is received no later than midnight of the seventh business day prior to the foreclosure sale date (Deadline), the servicer must suspend the sale as necessary to evaluate the borrower for HAMP. Servicers are not required to suspend a foreclosure sale when: (1) a request for HAMP consideration is received after the Deadline; (2) a borrower received a permanent modification and lost good standing (as described in Section 9.4); (3) a borrower received a TPP offer and failed to make one or more payments under the TPP by the last day of the month in which it was due; or (4) a borrower was evaluated based upon an Initial Package and determined to be ineligible under HAMP requirements.

The servicer will not be in violation of this section to the extent that a court with jurisdiction over the foreclosure proceeding (if any), or the bankruptcy court in a bankruptcy case, or the public official charged with carrying out the activity or event, fails or refuses to halt the sale after the servicer has made reasonable efforts to move the court or request the public official for a cessation of the sale. The servicer must document in the servicing system and/or mortgage file if the foregoing exception to the requirement to suspend an existing foreclosure sale is applicable.
Unfortunately for Homeowners facing foreclosure in Ohio there is an unintended tension between the Federal Government's desire to assist Homeowners Facing Foreclosure and the Ohio Supreme Court's Rules of Superintendence for Ohio Courts.  Rlue 35 requires a Case Management Section of the Supreme ourt to create and Audit Statistical Reports.  Rule 37 requires Judges to file statistical reports on a periodica basis.  Rule 39 creates time guidelines for the disposition of cases which shall be set forth on the statistical report forms.  Statistical Refport Form A, Section III, C (5) defines reporting case known as Foreclosure.

5. Foreclosures - Column E. This category is used for cases that involve the enforcement of a lien, mortgage, trust deed, or other similar instrument in any method provided by law. A case will be reported as terminated upon filing of foreclosure entry. Whether the case proceeds to the sale of the property has no influence on the termination of the case for reporting

purposes. 

Statistical Report Form A- Section III D(21) provides that the time period for the disposition of cases shall be listed immediately above line 21.  Rule 22 states: These time guidelines are mandatory and it is expected that all cases will be terminated within the applicable guideline.

General Division – Form A:

 Mandatory Time Guidelines

Professional Tort                    24 months

Product Liability                     24 months

Other Torts                              24 months

Worker’s Compensation       12 months

Foreclosures                            12 months

Administrative Appeals          9 months

Complex Litigation                  36 months

Other Civil                                24 months

Criminal                                       6 months
The Ohio Supreme Court publishes the statstical reports on its website, under the pull down menu of Reports and Publications.  The 2009 Statistical reports provides an overviw of a period of ten years of statistical reports,  See it here
http://www.sconet.state.oh.us/Publications/annrep/09OCS/2009OCS.pdf

The report also provides an insight into the Supreme Court's use of the statistical reports to evaluate the Courts of Ohio.  The key indicators are set forth in the 2009 Ohio Courts Statistical Summary, see the following excerpt.

General Notes Concerning Performance Measures

When analyzing the work of Ohio courts and judges, the Case Management Section of the Supreme Court regularly evaluates two key performance measures readily available using caseload statistics reported by the courts: clearance rates and overage rates. Both measures can be applied to a court’s overall docket, individual case types or groups of case types.

Clearance Rate

This measure identifies how well a court keeps up with its incoming caseload. It is calculated as follows:

Clearance rates can be calculated over any time period, as long as the incoming and outgoing values apply to that same time period. However, calculating clearance rates on a monthly basis is less valuable due to the ordinary variations that are seen when this data is viewed over a short time span.

Using monthly caseload statistical reports submitted by judges, the total number of outgoing cases is determined using the reported “Total Terminations” values. The total number of incoming cases is determined using the sum of the reported “New Cases Filed” and “Cases Transferred in, Reactivated, or Redesignated” values. The ratio of outgoing cases to incoming cases (produced using the above formula) is ordinarily multiplied by 100 and expressed as percentage. The target is a clearance rate of 100 percent.  A clearance rate of 100 percent means a court terminated over a given time period exactly as many cases as it took in during that same time period. If a court’s clearance rate is regularly less than 100 percent over an extended period of time, the court will develop a backlog because the pace of incoming cases exceeds the pace of outgoing cases.

While valuable, clearance rates alone do not accurately depict a court’s success in moving its entire docket forward in a timely fashion. A court may regularly demonstrate a 100 percent or greater clearance rate while simultaneously keeping a sizable number of cases from being disposed of within applicable time standards. Accordingly, clearance rates should,

where practicable, be viewed alongside a measure that gauges the extent to which a court’s caseload is pending beyond time standards, such as the overage rate.

Clearance Rate =   Total number of outgoing cases

                                  Total number of incoming cases

 

Overage Rate

This measure identifies the extent to which a court’s pending caseload lags past applicable time standards, or, overage. To put it another way, it measures the size of a court’s backlog. It is calculated as follows: Using the monthly caseload statistical reports submitted by judges, the total number of cases pending beyond the time guideline is determined

using the reported “Cases Pending Beyond Time Guideline” value, and the total number of cases pending is determined using the reported “Pending End of Period” value. The result is multiplied by 100 and expressed as a percentage.

In 2008, the Supreme Court, in

Disciplinary Counsel v. Sargeant, 118 Ohio St.3d 322, 2008-Ohio-2330, identified an overage rate of 10 percent or greater as an indication of a case management problem.
The 2009 Statistical Summary demonstrates that a county which handled 200 cases in 1997, and had 1800 to 2000 foreclosures filed in 2009 would be required to clear (clearance rate) 1600 more foreclosures within one year (overage rate).  There is an increase of 1600 cases with no new Judges, no new Magistrates, and most likely fewer Clerk of Court staff person.

Foreclosures must be completed within one year.  There are now many more foreclosures filed each year.  The Banks are using this pressure to overwhelm the Court system.  This causes a tension between HAMP which says foreclosures are to be stayed vs. the Ohio Supreme Court guidelines which require cases to be completed in a year.  As a result "Duel Tracking" must take place in Ohio, because the Courts can not afford to stay cases and still comply with the Ohio Supreme Court time guidelines. 

Duel Tracking is not inherently evil, but the Banks convince the Homeowners that they do not need an attorney.  The homeowner does not need to worry about the foreclosure.  However, when the time is up, the Court is going to dispose of the case. 

The oddity of the Supreme Court Guidelines is that the case is considered closed regardless of whether the Home goes to Sheriff's sale.  So Courts that are racing to comply with Supreme Court statistical reporting requirements are much more likely to cancel a Sheriff's sale due to HAMP modification.  Unfortunately for Homeowners, attorneys have trouble even finding the HAMP guidelines and statutory authority.  So Homeowners finally seek out counsel after the decree of foreclosure, and the attorney says there's nothing I can do for you now; its too late.

 

LIFEGUARDS WHO PROVIDE ONLY SWIMMING LESSONS

I am a lawyer.  I think Homeowners facing Foreclosure should contact an attorney.  However, I tried putting myself in the shoes of someone trying to seek out information to defend a foreclosure complaint.  I first looked at the summons that is attached to the complaint in Ohio.  It directs you to Save The Dream.  It gives you a telephone number; I called the number.  I asked straight up how do I find an attorney to help me.  The person on the other end of the telephone did not know. They did not provide that type of assistance, but he was able to set up an appointment at an office near me.   He gave me the address, but I declined the assistance.

I then located the address on the internet and the agency that was located at the address was a Credit Counseling Center.  I did not speak with anyone at the Center, but I have discussed a number of foreclosure cases with people who have gone to credit counseling.  The Credit Counseling Agency does not provide the names of attorneys who could provide assistance.  They provide credit counseling that will guide the individuals through the various governmental programs that will assist the Homeowner Facing Foreclosure.  These credit counselors assist the Homeowners while the Homeowners work with the Lender/Plaintiff.  (While the Homeowners need a lifeline, all they are given is an opportunity to take swimming lessons.). 

In Northeastern Ohio there are a number of billboards encouraging people to contact an agency for assistance.  The telephone numbers on most of the billboards, lead the person to Neighborworks, the National Federation of Credit Counseling, ESOP (Encouraging and Strengthening Ohio's People).  I was at a meeting with several individuals from ESOP, and I wanted to know how they put people in contact with attorneys.  The individuals I met with had no attorney resources to whom they could refer a Homeowner facing Foreclosure.  The ESOP representatives had no where to turn when their loan modification options for Homeowners facing Foreclosure ran out.  I gave them a number of my business cards and suggested that I could be a resource.  It has been almost a year and those representatives have never needed my assistance.

I have run into attorneys who work for Legal Aid Societies.  These attorneys are diligent, hard working and caring people.  They eductae themselves on the issues and are prepared to place the Lender/Plaintiff in a position to offer a reasonable loan modification.  The problem: in order to qualify for assistance from legal aid your income has to be below a certain level.  Those Homeowners may obtain a level playing field, but the Lender/ Plaintiff can simply run the numbers and say that the Homeowner facing Foreclosure does not qualify.  Those Homeowners Facing Foreclosure who have income to support a loan modification or otherwise defend the foreclosure complaint do not qualify for assistance from the attorneys at the Legal Aid Society.

Homeowners Facing Foreclosure, who contact a governemental agency for assistance, are told that by participating in a loan modification program the foreclosure complaint will be stopped.  I originally thought that this was misinformation purposefully provided to Homeowners Facing Foreclosure.  Upon closer inspection the HUD guidelines require the Lender to take no further action to proceed toward a judgment in foreclosure or toward the Sheriff Sale.  The Federal Governmental Agency that provides the assistance states that the Lender is not to proceed, but no one tells the Court that the Homeowner is pursuing a loan modification. No one tells the Homeowner that they need to contact the Court.  As a result, the Homeowner Facing Foreclosure pursues a loan modification which remains active until the foreclosure judgment or Sheriff's sale has occurred.  Now, that the Homeowner facing Foreclosure has "waived" most of their rights as a result of not participating in the foreclosure litigation, the Homeowner facing Foreclosure will receive notification that the loan modification has been denied.

Homeowners Facing Foreclosure, who are fortunate enough to find one of the many websites/ blogs that provide information to the Homeowners, must be overwhelmed with all of the inform that is provided.  As an attorney, I find the information provided helpful.  However, if I place myself as a Homeowner facing Foreclosure, I do not know where to start.  Most of the information is at the Calculus Level, and I am looking for the answer to 2+2.  Even the websites providing information encourage the Homeowner to contact an attorney and provide lists of trusted attorneys. But that  information is not front and center, and therefore must be overlooked.

I must assume that being a Homeowner Facing Foreclosure trying to find help places so much pressure, fear and anxiety upon the Homeowner that it is difficult to know where to turn.  I encourage Homeowners to educate themselves, seek assistance from all agencies available, but to also participate in the legal system.

Free Foreclosure Defense Advice Continues

I recently posted my willingness to offer free foreclosure defense advice to anyone who showed up at my office on Thursday evenings at 6:00 p.m.  In reviewing the post again, the message was not clear and the size of the text made it difficult to read, so maybe that is why no one has showed up on the first two Thursdays beginning at 6:00p.m.

I will be in my office and will answer any question anyone has regarding the foreclosure complaint and legal process.  It seems like most homeowners try to defend the complaint on their own and become confused and/or miss some important step along the way.  Homeowners facing foreclosure often wait until the Sheriff's Sale is approaching or after they have received an eviction notice before they contact an attorney.  (I am amazed at how many homeowners will send money to a "loan modifciation" company located out of state before they will consult with a local attorney.)

I do not believe a Homeowner is adequately equipped to defend the foreclosure on their own, but if the Homeowner is going to attempt to do it on their own, then I can at least be here as a resource.  It would seem that there have been so many "Foreclosure Rescue Scams" that homeowners have become wary and refuse to even talk to attorneys.  Hopefully, I can help some.

FREE FORECLOSURE DEFENSE ADVICE

FREE

FORECLOSURE

DEFENSE

ADVICE

I DO NOT RECOMMEND THAT ANY HOMEOWNER SHOULD ATTEMPT TO

DEFEND THE FORECLOSURE COMPLAINT ON THEIR OWN, BUT IF YOU ARE GOING TO DO IT YOU MIGHT AS WELL DO IT RIGHT.

NO COFFEE; NO DOUGHNUTS, JUST ME ANSWERING QUESTIONS YOU MIGHT HAVE REGARDING YOUR LITIGATION.

THURSDAY EVENINGS AT 6:00 P.M. BEGINNING May 31, 2012

Appearance counsel for Homeowners

I am not suggesting that Attorneys start doing this.  Instead, I am just floating an idea for people to comment on and critique.  There are probably a number of ethical rules that would prevent someone from actually doing it.  But what would happen if attorneys who practiced foreclosure defense just showed up at the Courthouse.  These attorneys could sit in the Courtrooms from 9:00 to 11:00 and again at 1:00 to 2:00.  When a case was called the attorney would wait to make certain that the Defendant did not stand or that another attorney was not present to represent the Defendant.  When it was clear that no one was there on behalf of the Defendant, the Attorney would simply state that he was there on behalf of the Defendant; that he had not had an opportunity to speak with Defendant regarding the matter but that he would ask the Court for an additional 30 days within which to file an answer.  The Court rarely requires Civil Rule 6 "good cause" and the Court would likely grant an extension of time. 

The Attorney would then have 30 days to contact the Defendant and see if the Defendant was interested in defending the foreclosure.  If the defendant was not interested, the attorney had obtained an additional 30 days for the Defendant to determine his next move.  No harm no foul.

If the Attorney was succesful in contacting the Defendant and the Defendant was interested in defending the foreclosure, then the Attorney could offer his services.  The attorney would not be causing delay merely for the sake of delay, as almost every foreclosure case that I have reviewed has some portion that has a defensible issue.  I am certain that the Supreme Court and Disciplinary Counsel would be concerned about the undue pressure that would result from this type of direct contact (soliciatation) by an attorney with a potential client. Maybe we should request an ehical opinion on the issue?

I do not see a great difference between the above and "appearance counsel" who have no authority and no contact with the client prior to walking into the Courtroom on behalf of the Plaintiff.  If the defendant does not appear, the appearance counsel is able to complete his task; hand the proposed entry to the court.  If the Defendant does appear, then appearance counsel stands there siliently while the Court resets the matter giving the Defendant time to either file an answer or retain an attorney.

If Attorneys could act as "appearance counsel", then the biggest obstacle to defending the foreclosure complaint would be avoided; getting the Homeowner facing foreclosure to take some inital action.  Almost every Homeowner Facing Foreclosure wants to defend their home.  The Homeowners are simply too scared to take the initial step.  One or two "appearance counsel" could prevent foreclosures in an entire county.  A network of "appearance counsel" across the entire State could combine their efforts and a handful of Foreclosure Defense Attorneys could prevent foreclosures in the State of Ohio.  With foreclosures piling up in the Courts,  the Ohio Supreme Court would have to extend the time for the Courts to resolve a foreclosure case.  As prosecuting foreclosures to a conclusion became more time consuming fewer law firms would agree to handle foreclosures.  Finally, the banks would have to make legitimate business decisions on a case by case basis.  No more governmental programs.  Bankers simply deciding that some cash flow is better than no cash flow.

Again, this is only an idea that has been posted for suggestions, comments, and ethical reviews.  While we are waiting for a decision on the propriety of "appearance counsel" for Defendants facing foreclosure, maybe we can get Homeowners tol start contacting an attorney for help.