Mortgage Servicing Fraud
occurs post loan origination when mortgage servicers use false statements and book-keeping entries, fabricated assignments, forged signatures and utter counterfeit intangible Notes to take a homeowner's property and equity.
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Hello,

I am trying to research if I have any shot at a case against Litton Loan Servicing, due to a horribly botched Deed in Lieu in 2008.

I will try to keep it simple, but here are the basics:

I hired an attorney who "negotiated" a Deed in Lieu with Litton Loan.  I received notifciation from Litton that they accepted the DIL in June of 2008, asking me to return a notarized form by June 30.  I did so and fulfilled all their requirements and returned the form via certified mail and received confirmation of the receipt by the deadline.

Six months after I received notice of their acceptance of the DIL, the DIL still had not been completed/executed and I was continuing to get notifications of foreclosure proceedings. 

I called weekly, then daily as I started to realize that nothing was being done on my case, and endured countless contentious conversations with less-than-helpful and often downright abusive employees who were unable to provide me any information as to why this was not being processed.  I finally managed to push enough to the point where someone admitted that they had "dropped the ball" and never completed the DIL.  Several days after that conversation, the DIL was completed.

Instead of this showing up on my credit as something that the lender and I had agreed to, and that I made every attempt to "work with them", instead my credit report shows that I entered foreclosure proceedings.  I could be wrong but I feel that if they had executed the DIL in a timely matter, that would have given me six additional months to start rebuiliding my credit.  Meaning, instead of enduring six months of black mark after black mark each time I passed another 30 days of not paying, I could have taken the "hit" in one fell swoop and then started to rebuild right away in July of 08, not December of 08.

I called a consumer rights attorney in Florida (where this happened) and he said he's willing to take the case but is not confident of the result.  He also said that he could not take the case on contingency initially and would need a retainer. 

I'm more than willing to pay a retainer and invest some serious funds in this, if I have a shot at all at repairing my credit. 

Is there a better attorney I should be talking to?  Does anyone here have any thoughts about my likelyhood of getting anywhere with this case?  Or would it simply be a waste of money and an exercise in futility?

Please know that I am more than willing to hear your honest thoughts, even if it's bad news. 

Thank you in advance.
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William A. Roper, Jr.
Jessica:

First, let me clarify that I am NOT AN ATTORNEY and this is NOT legal advice.

I am therefore giving you a LAY reaction to the situation you present and you may not like my answer.

Most leading business schools require both undergraduate and graduate business students to take at least a foundation course in business law.  This course is NOT intended to prepare business students to be lawyers, but rather to recognize many basic aspects of the law so that the students can safely navigate business transactions between consultations with lawyers.

I recall that the textbook used in my first undergraduate course in law was entitled "Introduction To Law and the Legal Process".  It was written by four Wharton professors, one of whom taught the class I took in 1975.

That course was one of the single most useful courses I took while at Wharton.

A rather fundamental subject covered in this course was some basic contract law.  I certainly do NOT remember all of it, but I remember enough that I have avoided getting myself stuck in legal morasses as a consequence of misunderstanding. 

Central to contract law is that a contract comes into being through offer and acceptance.  One party offers to make a contract and the other must accept that offer before the contract comes into being.  The acceptance can come in a variety of forms.  Sometimes merely acting as if one intends to be bound or acting as if there is a contract is enough.  But this is often NOT the case where the express language of the written contract states that both parties must SIGN the instrument before the contract comes into being.

Typically, if one party signs a proposed contract and forwards it to the other for signature, the party signing is offering to make a contract.  And until the other party accepts, usually by signing, no contract comes into being.

This isn't just some arcane principle taught only to lawyers.  Pretty much every undergraduate business student OUGHT TO BE acquainted with this idea and frankly sophisticated adults are expected to understand it.

The fact situation you present seems to me to suggest that you offered a workout through the deed in lieu, but that you didn't get a response.  The counterparty had your offer IN HAND, which it might have either accepted or repudiated, but DID NOTHING.

If I had been in this situation, I would have followed up with additional communications, to include threatening to WITHDRAW the offer if it wasn't accepted by some reasonable date certain.

In failing to follow through, it seems to me that you acquiesced in leaving your offer OPEN, but failing to secure the other party's agreement.

Now I think that the servicer was dirty and rotten and probably INTENTIONALLY was holding the deed in lieu and MIGHT have simply IGNORED the offer had it appeared to be in their interest to walk away from this deal.  They preyed upon your ignorance.  But this is probably neither a crime nor even civilly actionable.

*

In my LAY view, based upon the facts recited, you have a very weak cause of action against the servicer or mortgage investor.  To put this another way, if I was on a jury hearing these facts, I would tend to vote AGAINST a finding that the servicer had breached some duty to you.

But that does NOT mean that you do not have a valid cause of action.  What I find perplexing about the fact situation is the lack of follow through by the attorney you employed to negotiate the deed in lieu.

Once you employed that attorney, it was the attorney's responsibility to obtain the servicer's response and to get a signature on the agreed workout to close out this transaction.  The attorney certainly KNEW that the other party needed to sign to accept.  In failing to follow through, the attorney left you at risk and allowed your credit to remain impaired for longer than was necessary.

Of course, much depends upon what the retainer agreement with the attorney said, what you asked the attorney to do and what the attorney AGREED to do.  And you may very well have a proof problem.  Even if you orally asked the attorney to negotiate the deed in lieu and he or she agreed to do so, you may have difficulty PROVING that the attorney failed in his or her duties.

You also face another problem in making out a case against the attorney.  That is, typically when someone breaches a contract or even a duty, a person has some obligation to mitigate the damages.  So when you first noticed that the Lender hadn't returned the signed workout agreement, you probably had some duty to go back to your lawyer and advise him or her that the agreement didn't seem to be concluded.  And in failing to do so, you allowed much time to elapse and damages to run that might have been avoided by simply contacting the lawyer and having the lawyer follow through!

Moreover, you probably wouldn't get any attorney to take a legal malpractice case of this sort on retainer as there really wouldn't be much money in it and the case would be speculative at best.  And if you paid a lawyer to bring such a case, it would really be uneconomic.  I am doubtful that you would recover much if anything and you would probably be throwing good money after bad.

*

I think that there is probably some middle ground here and that you might be able to get the most economic and best result by simply reapproaching the attorney who negotiated the deed in lieu on your behalf and explaining what happened.  I would approach this in a friendly, upbeat and understanding way, rather than presenting this as a major failing or malpractice issue.

You might want to send a letter, but you really need to take much care in how you word it.  The ideal letter would not CONCEDE any lapse on your part, but rather would focus on some of the bare facts, reviewing that you had retained the lawyer to negotiate the workout, that you had believed that he had arranged an agreement, but that the Lender had not timely signed and that this was now further impairing your credit.  You would request the attorney's intervention with the Lender to get the credit report CORRECTED.

This is easier to do than you might imagine, though usually the process is one with which consumer debt lawyers would be well familiar, but which might be unfamliar to others.

Typically, a consumer can DISPUTE an item appearing on a credit report.  The credit bureau then sends a letter to the creditor asking them about the disputed item.  The creditor has a certain amount of time to respond.  If the creditor does NOT respond in time, the disputed item must be REMOVED.

If you play your cards right and get the attorney engaged in the process, the attorney can contact the creditor and identify that you have been wronged and imply that he might file a legal action if the item is NOT corrected.  If you then followed up by DISPUTING the item, the creditor can essentially assist in its correction by simply NOT RESPONDING to the dispute letter.

From the standpoint of the creditor, they would want to defend what they thought was a truthful and just report to the credit bureau.  But they would NOT want to be going out of pocket litigating over a credit report in respect of a matter already settled.

The danger to the creditor is NOT so much that they might LOSE such litigation, but rather that it might cost them hundreds or thousands to DEFEND against such a suit.

If your attorney is capable and a good negotiator, I would think that the matter could be resolved with a couple of letters, a phone call or two and no suit at all.  You might even discover that the fact of the default disappears from your credit report altogether!

Be diplomatic in the letter to the attorney and appeal to the attorney's sense of fairness.  Depending upon the specific facts as to what you asked the attorney to do and what the attorney agreed to do, you should also consider whether you think it is reasonable and fair to PAY the attorney to do this additional work or whether you believe this is your DUE.

If you approached the attorney and ASKED HIM to follow up and offered to PAY, it seems to me to be inconceivable that the attorney wouldn't at least write a letter or two on your behalf.  If you want the attorney to do this without further compensation, you need to use your best persuasive skills.

You could also ask another lawyer to write such letters on your behalf.  You might get to the desired result simply BLUFFING without ever filing suit.

IF you filed suit, my instinct would be to ask for a very small amount of compensatory damages and to bring the matter in some small claims court.  You might be surprised that the Lender might have to pay a lawyer several hundreds of dollars to DEFEND such a suit.  A corporation cannot appear pro se.  It MUST be represented by an attorney.

They might not even answer and you might be able to get a default judgment against them.  Filing a suit would probably get their attention.  But this wouldn't be a suit I would want to LITIGATE.  This would be a suit I would want to SETTLE, getting the creditor to simply AGREE not to reassert the facts which you dispute and these would then probably come OFF the credit report.

*

BEFORE DOING ANYTHING ELSE, CAREFULLY READ THE RETAINER AGREEMENT AND CORRESPONDENCE (IF ANY) WITH YOUR LAWYER, AS WELL AS THE ACTUAL LANGUAGE OF THE WORKOUT AGREEMENT.  YOU MAY FIND THAT THE AGREEMENT CONTAINS PROTECTIVE LANGUAGE WHICH PRECLUDES YOUR SUING OVER THE CREDIT REPORTING ISSUES.

NOTE:  AS MENTIONED ABOVE, I AM NOT A LAWYER AND THIS IS NOT LEGAL ADVICE!
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Hi there,

Thank you so much for the suggestions.  Yes, I completely understand this is not legal advice. 

I still need to go back and re-read most of your response and I truly appreciate the time you put into it.

I just wanted to quickly reply and let you know that it did occur to me that the attorney failed me in that he didn't follow through on my case to completion.  I did want to let you know that I DID contact him repeatedly and said, I'm still getting notices, what do I do, why isn't this done yet?  He claimed to have made several follow-up phone calls to Litton and that he kept getting the same response, which was that they were "working on it" and there was nothing we could do to move it along.

So, I did try, and didn't just sit there waiting....

I'm going to return to re-read your response which seems like it has a lot of good information.

The attorney I spoke with said that if we had any chance at all, it would be via the Fair Credit Reporting Act.  Any thoughts on that?

And, what about all of these lost documents I'm reading/hearing about?  I do know that some document (I'll need to go back through my notes to find out which one) was lost in my case, and they had to re-issue it to complete the DIL....I have NO idea if this is helpful to me at all.

THANK YOU.  --Jessica
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