Homeowners Need to Be Cautious of Pretender Defenders
When it comes to delaying the default foreclosure process, a common tactic homeowners have to be aware of is the “pretender defender” scam, according to the mortgage fraud examiners.
In order to execute this scheme, homeowners who are struggling to meet their monthly mortgage payments facing possible foreclosure use arguments during a lawsuit against lenders like “show me the note,” “securitization,” or “robo-signing” to prove an illegal action took place during the default process.
But Storm Bradford, founder of Reston, Va.-based Mortgage Fraud Examiners, a team of specially trained legal professionals created to provide borrowers and the legal community with assistance to help keep them in their homes, said homeowners and attorneys need to understand the concept of a promissory note in which a mortgage or deed of trust is actually a contract.
“Only exposure of contract breaches, legal errors, and/or tortious conduct underlying a mortgage transaction provides a sound strategic basis for liberating homeowners from the bondage of foreclosure,” says Bradford in a written statement.
Even though some of these terms homeowners use during their cases have some legal validity, in the end, the entity foreclosing against a distressed borrower corrects the defects and still is able to issue a foreclosure because they failed to repay the mortgage loan as agreed upon. Bradford said these types of defenses generally amount to nothing more than a “stall” tactic.
By only stalling the foreclosure process longer than it should be, homeowners who fall prey to pretender defenders are losing large sums of money. According to Bradford, some pretender defender attorneys bill their clients anywhere from $1,500 to $3,500 or more upfront, and $500 to $1,500 per month until they are foreclosed on.
Eventually, the client will lose their home and also $5,000 to $20,000 that could have been used for relocation after the foreclosure.
Additionally, several ethics counsel attorneys said foreclosure attorneys need to be careful during a pretender defender case because “failing to identify contract breaches, legal errors, and/or tortious conduct in the mortgage transaction may justify a homeowner suing a foreclosure defense attorney for malpractice or at least disgorgement of fees if the homeowner were to lose their property and these problems were later identified.”
Bradford claims that so many foreclosure attorneys can fall into the “pretender defender” category themselves because homeowners may claim these individuals cheated them out of victory by ignoring contract breaches, therefore underlying their mortgage transaction.
Therefore, homeowners must develop ways to determine whether an attorney can and will be able to identify contract anomalies within the mortgage transaction. “Asking a simple question, like how many cases have you won, would be a good starting point,” Bradford added.
For example, a pretender defender attorney may miss a valid defense during a case against a lender that could help a homeowner not be foreclosed upon. An FDIC lawsuit from last year proves that this is true. In this lawsuit, the FDIC had 292 appraisals performed by an appraisal management company for Washington Mutual analyzed. The FDIC found more than 75% of appraisals reviewed were found to contain multiple egregious violations of USPAP and applicable industry standards.
“Finding problems within the mortgage transaction is relatively easy; we find appraisal fraud in eight out of every ten mortgage transactions examined, which coincides with the findings of the FDIC, and that doesn’t include other types of tortious conduct, legal errors and contract breaches that are usually present,” Bradford said.
“So in most cases, the homeowner has a 90% chance or better of having something viable that puts them in the ‘driver’s seat’ to win their case,” Bradford continued. “Settlement could result in more favorable contract terms, financial compensation, and/or the house free and clear for the foreclosure victim.”
Based on experience from members of the Mortgage Fraud Examiners, the demonstration of a strong cause of action will lead the bank to ask for a settlement or the lawsuit could result in getting the house free and clear or money for the foreclosure victim as well as fees and costs for the attorney.
“There are many legal options available to homeowners facing foreclosure,” Bradford said. “However, the only process that works is to find a real legal dispute that a judge is willing to accept as a valid reason to slam the bank, such as contract breaches, tortious misconduct, legal errors, etc. Every mortgage transaction has unique facts, every claim has different applicable law, and only by properly examining the mortgage transaction is one going to find the answers.”