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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Nye Lavalle
Borrowers who negotiate loan terms with a mortgage broker in Spanish, must receive their loan documents in Spanish

Sign here on this here mortgage and real estate contract. I know you cannot speak nor read English, but that’s not a problem. Everything I have told you is in writing on this paperwork that you cannot read not can you or will you ever understand.

You can trust me, I am from your same country and speak the same language! Just sign here Jose. Would I do you wrong? I sold your sister, brother and son a home and we go to the same church!

Buy this house and I’ll get you the mortgage also. Don’t have a social security card? Heck, we make those silly things right here in house. Don’t worry if you cannot afford the home or the loan. You can’t speak English, nor can you read English and this will make it easy for me to swindle your life’s savings and and charge you the maximum commission possible and place in the most unaffordable and ridiculously hideous mortgage ever invented for people like me to swindle people like you.

How many times do you think this happened over the last few years? A LOT!

It seems as if lenders forgot to follow the law in their hastiness to make as many loans as possible to as many people as possible. I think the main underwriting guideline followed by most all lenders was the “breathe on the glass” qualification method. If it fogs, loan approved!

There is a little known law in the state of California that was set in place to protect non-English speaking borrowers against predatory lenders. The funny thing is that it was never, ever followed and I have yet to see one case of a lender or broker following this law.

You know what? I think it’s going top haunt them like Freddy Kruger on crack and instead of Nightmare on Elm Street it will be Nightmare in Santa Ana or Nightmare in Stockton.

The law in particular that relates to non-English speaking borrowers is California Civil Code 1632.

(f) At the time and place where a contract or agreement described in paragraph (1) or (2) of subdivision (b) is executed, a notice in any of the languages specified in subdivision (b) in which the contract or agreement was negotiated shall be conspicuously displayed to the effect that the person described in subdivision (b) is required to provide a contract or agreement in the language in which the contract or agreement was negotiated, or a translation of the disclosures required by law in the language in which the contract or agreement was negotiated, as the case may be. If a person described in subdivision (b) does business at more than one location or branch, the requirements of this section shall apply only with respect to the location or branch at which the language in which the contract or agreement was negotiated is used.
The law is very clear and it states that if a “contract” is negotiated in a foreign language then that contract needs to be written in that foreign language. If the loan is negotiated in Spanish, then the loan documents need to be in Spanish.

The reality is that this never happened and many of these borrowers are going into foreclosure when they have a legitimate defense and can fight back against this form of predatory lending.

California Civil Code 1632

According to data from the United States Census of 2000, of the more than 12 million Californians who speak a language other than English in the home, approximately 4.3 million speak an Asian dialect or another language other than Spanish. The top five languages other than English most widely spoken by Californians in their homes are Spanish, Chinese, Tagalog, Vietnamese, and Korean. Together, these languages are spoken by approximately 83 percent of all Californians who speak a language other than English in their homes.
(b) Any person engaged in a trade or business who negotiates primarily in Spanish, Chinese, Tagalog, Vietnamese, or Korean, orally or in writing, in the course of entering into any of the following, shall deliver to the other party to the contract or agreement and prior to the execution thereof, a translation of the contract or agreement in the language in which the contract or agreement was negotiated, which includes a translation of every term and condition in that contract or agreement:
(1) A contract or agreement subject to the provisions of Title 2 (commencing with Section 1801) of, and Chapter 2b (commencing with Section 2981) and Chapter 2d (commencing with Section 2985.7) of Title 14 of, Part 4 of Division 3.
(2) A loan or extension of credit secured other than by real property, or unsecured, for use primarily for personal, family or household purposes.
(3) A lease, sublease, rental contract or agreement, or other term of tenancy contract or agreement, for a period of longer than one month, covering a dwelling, an apartment, or mobilehome, or other dwelling unit normally occupied as a residence.
The law is very clear and it relates to most all contracts and in particular ones that involves real estate and mortgages.

The facts are that many of these people were severely taken advantage of and many were swindled by unscrupulous brokers and lenders. May times it was people of their same race and spoke the same language that used their heritage to gain the confidence of the non-English speaking borrower to fly under the radar and place them in high costs loans and homes that they never should have bought.

This is a serious law and one that needs appropriate attention in today’s foreclosure and predatory lending climate. I assume that there are many other states that have similar laws and these non-English speaking borrowers have an equitable defense against a foreclosure action or unlawful loan.

The law states that ”Regulation M” and “Regulation Z” mean any rule, regulation, or interpretation promulgated by the Board of Governors of the Federal Reserve System and any interpretation or approval issued by an official or employee duly authorized by the board to issue interpretations or approvals dealing with, respectively, consumer leasing or consumer lending, pursuant to the Federal Truth in Lending Act, as amended (15 U.S.C. Sec. 1601 et seq.).

Upon a failure to comply with the provisions of this section, the person aggrieved may rescind the contract or agreement in the manner provided by this chapter. When the contract for a consumer credit sale or consumer lease which has been sold and assigned to a financial institution is rescinded pursuant to this subdivision, the consumer shall make restitution to and have restitution made by the person with whom he or she made the contract, and shall give notice of rescission to the assignee. Notwithstanding that the contract was assigned without recourse, the assignment shall be deemed rescinded and the assignor shall promptly repurchase the contract from the assignee.

So what does this spell for lenders? “T-R-O-U-B-L-E” - “P-R-O-B-L-E-M-A-S”

Just think how many loans and real estate deals were made this way and how much liability is on the line in regards the the potential litigation that can be brought just based on this one law?

3 Responses
January 25th, 2008 at 5:26 am
There’s already case law out there on this, in case anyone is interested:
* Plata v. Long Beach Mortgage Co., 2005 U.S. Dist. LEXIS 38807, *23-26 (N.D. Cal. 2005);
* Munoz v. Int’l Home Capital Corp., 2004 U.S. Dist. LEXIS 26362, *25-28 (N.D. Cal. 2004);
* Gonzalez v. Ameriquest Mortgage Co., 2004 U.S. Dist. LEXIS 22705, *23-26 (N.D. Cal. 2004);
*Ruiz v. Decision One Mortgage Co., also in US Dist. ND Cal.
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Joe B

     I am not entirely sure this has much teeth. If these folks were represented by counsel, then THEIR COUNSEL has a problem, not the mortgage companies. I think that they will simply state that the documents were provided to their counsel, who is their representative. If counsel had an issue, they should have raised it on the spot, at closing, prior to signature, within the right of rescission period, etc. But some time later, I am not sure.

     I think in California, there are some juries that will rule with the non-English speaking buyers, but I think decent counsel will make this a very brief exercise.

     In either case, it will be an interesting situation to watch!

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Terrific revelation, Nye!!

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Nye Lavalle
Counsel? Who goes to counsel for closing these days, let alone poor people!
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Joe B

     Frankly, I cannot imagine anyone making a purchase of this size and not have proper counsel. Frankly Nye, it never crossed my mind that someone would not have counsel in the closing process. I certainly believe you, but I find it rather curious!

     As I said earlier, I do think this will be a rather interesting case to follow! I think there could be some very interesting outcomes; perhaps even precedent setting.

     Perhaps we could track it to see how these move forward...

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