Max Gardner’s Bankruptcy Boot Camp was featured during a front-page article in the June 6th edition of the New Jersey Law Journal, which is the city’s oldest and most prestigious legal publication.
Check out the article below:
In the past, we’ve detailed the disturbing issue of zombie debt, that is debt which is discharged during the bankruptcy process but still erroneously sought by debt collectors afterwards.
Over the Memorial Day Weekend, the Houston Chronicle was the latest media source to report on zombie debt.
Be sure to give the article a read; it’s another close-to-heart reminder of how some shady debt collectors will just not let some debt die and further validates the need for organizations like ours to enforce consumer protection before, during and after filing bankruptcy.
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Check out our latest newsletter, which contains details and photos from the recent Boot Camp Dinner in Hollywood, California as well as Boot Camp news, including dates for the next session in early June and the first annual Thanksgiving Boot Camp for Boot Camp Graduates.
Other interesting tidbits in this newsletter include:
● Texas Judge Cites Boot Camp in Recent Decision;
● Bankruptcy Boot Camp Graduate Wins First Adversary Proceding;
● University Doctor Wins O. Max Gardner Award;
● Max to Speak at NACTT Seminar; and the
● Implode-A-Meter.
Yesterday, I was made aware that this blog has been selected to be featured in LexisNexis Bankruptcy Law’s “Top Blogs” section. This recognition is an honor, and the site is a good resource for bankruptcy news.
http://law.lexisnexis.com/practiceareas/commercial
http://law.lexisnexis.com/practiceareas/BankruptcyLawCenter
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It’s been quite a couple of days for O. Max Gardner III, Chief Litigator and Founding Partner of the National Consumer Bankruptcy Litigation Center (NCBLC).
On Saturday night, Gardner was scheduled to introduce Michelle Obama at the Palmer Park Obama Get Out the Vote Rally in Shelby, North Carolina. However, when Mrs. Obama got delayed in Asheville, Gardner stepped up at the last minute and delivered a riveting keynote address.
Just last night, U.S. Senator Barack Obama called Gardner and expressed gratitude for helping out his wife and delivering the rousing speech supporting his presidential candidacy. The Obama campaign has recommended that CNN contact Gardner for expert commentary on today’s primary results in North Carolina.
Air America Radio has also contacted Gardner following the excitement generated from his speech, and Max will be doing a live interview tonight on the station’s airwaves at 6:15 (EST). Shortly thereafter, Gardner will tape an interview with Air America Radio’s Joe Kennedy.
Be sure to tune in tonight to listen to Max talk about the North Carolina Democratic Primary and Senator Obama, and please check out the NCBLC blog in the next couple of days as we make the transcript of his speech from last weekend available.
Bankruptcy Boot Camp: Basic training in bogus mortgage fees
Sunday, Feb 24, 2008 - 09:40 AM Updated: 09:58 AMWSPA Channel 7 News
Greenville, South Carolina
By Heather Sullivan
People across the country are losing their homes in the mortgage meltdown. A leading attorney based in
Western North Carolina says its often due to hidden and illegal fees on their mortgages. That’s why he holds a Bankruptcy Boot Camp to teach other attorneys how to spot bogus fees. He shows you how you can spot them on your own mortgage, too, in this Seven On Your Side Consumer Watch.
Inside a quiet house on a hill in Polkville, North Carolina, attorneys are in basic training. It’s called Bankruptcy Boot Camp. They’re learning how to save homes from foreclosure.The drill sergeant is attorney O. Max Gardner III. Gardner, who is the grandson of a former North Carolina Governor and Undersecretary of the United States Treasury, has been fighting mortgage services in court for years. “What we’re trying to do is educate bankruptcy attorneys about how they can identify and find unlawful, illegal and unreasonable fees and charges that have been charged to the loans of their clients.”
Gardner says the fees are not usually charged by mortgage companies, but by the companies you send your payments to, the mortgage servicing companies. Said Gardner, “It may be a fee for allegedly driving by your house once a month. … It could be a fee for some legal service you didn’t know about. It may be a late charge that is being added to your account when a late charge is not justified.”
Inside the room where Gardner holds Boot Camp is what he calls the Wall of Shame, a series of framed checks he’s won in cases against loan servicing companies. “We’ve got some checks up here for $300,000, $400,000, $50, 000, $60,000 and $75,000,” points Gardner. He says the checks are from just about every loan servicing company out there. The fees start out small, but add up fast. Twenty dollars here may turn out to two hundred dollars there and after a year or so you have two thousand dollars on bogus fees and charges.
Said Gardner, “It can actually put somebody in default. They’re mortgage obligation can go into foreclosure when they’re not really in default and the pressure is on for them to do it more.” Gardner contends that many mortgage servicers “create default” just to claim and charge the additional bogus fees.
Attorney John LaRue traveled all the way from Indiana for Boot Camp so he can help his clients. Said LaRue, “We’ll be able to help them in retaining their homes, rewriting loans, even securing money judgments for them.”That’s the kind of basic training Gardner says attorneys will need in the war against the mortgage crisis. Here are some fees and violations Gardner says to watch out for on your mortgage:
*failing to credit payments to your account on a timely basis;
*applying payments to suspense accounts;
*adding late charges to your loan when you didn’t pay late;
*imposing charges and fees for bogus services;
*charging for insurance you already have and don’t need,
*overcharging for legal fees, property inspections and valuations; and
*failing to notify you when your payments change.
To protect yourself, whether you are in or out of bankruptcy, and whether or not your loan is current or in default,
Gardner suggests asking for a written statement of your payments every six months. If you see a fee you don’t recognize, he recommends sending the loan servicing company a written dispute by certified mail. If the fee is not resolved, you may need to contact an attorney.
Gardner said he starts out in any case with the assumption that whatever the mortgage servicer is saying is wrong. You’ll find more information about Bankruptcy Boot Camp here: http://www.maxbankruptcybootcamp.com/
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NYTimes.comLender Tells Judge It ‘Recreated’ Letters Tuesday January 8, 11:38 am ET By GRETCHEN MORGENSON
The Countrywide Financial Corporation fabricated documents related to the bankruptcy case of a Pennsylvania homeowner, court records show, raising new questions about the business practices of the giant mortgage lender at the center of the subprime mess.
The documents - three letters from Countrywide addressed to the homeowner - claimed that the borrower owed the company $4,700 because of discrepancies in escrow deductions. Countrywide’s local counsel described the letters to the court as “recreated,” raising concern from the federal bankruptcy judge overseeing the case, Thomas P. Agresti.
“These letters are a smoking gun that something is not right in Denmark,” Judge Agresti said in a Dec. 20 hearing in Pittsburgh.
The emergence of the fabricated documents comes as Countrywide confronts a rising tide of complaints from borrowers who claim that the company pushed them into risky loans. The matter in Pittsburgh is one of 300 bankruptcy cases in which Countrywide’s practices have come under scrutiny in western Pennsylvania.
Judge Agresti said that discovery should proceed so that those involved in the case, including the Chapter 13 trustee for the western district of Pennsylvania and the United States trustee, could determine how Countrywide’s systems might generate such documents.
A spokesman for the lender, Rick Simon, said: “It is not Countrywide’s policy to create or ‘fabricate’ any documents as evidence that they were sent if they had not been. We believe it will be shown in further discovery that the Countrywide bankruptcy technician who generated the documents at issue did so as an efficient way to convey the dates the escrow analyses were done and the calculations of the payments as a result of the analyses.”
The documents were generated in a case involving Sharon Diane Hill, a homeowner in Monroeville, Pa. Ms. Hill filed for Chapter 13 bankruptcy protection in March 2001 to try to save her home from foreclosure.
After meeting her mortgage obligations under the 60-month bankruptcy plan, Ms. Hill’s case was discharged and officially closed on March 9, 2007. Countrywide, the servicer on her loan, did not object to the discharge; court records from that date show she was current on her mortgage.
But one month later, Ms. Hill received a notice of intention to foreclose from Countrywide, stating that she was in default and owed the company $4,166.
Court records show that the amount claimed by Countrywide was from the period during which Ms. Hill was making regular payments under the auspices of the bankruptcy court. They included “monthly charges”
totaling $3,840 from November 2006 to April 2007, late charges of $128 and other charges of almost $200.
A lawyer representing Ms. Hill in her bankruptcy case, Kenneth Steidl, of Steidl and Steinberg in Pittsburgh, wrote Countrywide a few weeks later stating that Ms. Hill had been deemed current on her mortgage during the period in question. But in May, Countrywide sent Ms. Hill another notice stating that her loan was delinquent and demanding that she pay $4,715.58. Neither Mr. Steidl nor Julia Steidl, who has also represented Ms. Hill, returned phone calls seeking comment.
Justifying Ms. Hill’s arrears, Countrywide sent her lawyer copies of three letters on company letterhead addressed to the homeowner, as well as to Mr. Steidl and Ronda J. Winnecour, the Chapter 13 trustee for the western district of Pennsylvania.
The Countrywide letters were dated September 2003, October 2004 and March 2007 and showed changes in escrow requirements on Ms. Hill’s loan.
“This letter is to advise you that the escrow requirement has changed per the escrow analysis completed today,” each letter began.
But Mr. Steidl told the court he had never received the letters.
Furthermore, he noticed that his address on the first Countrywide letter was not the location of his office at the time, but an address he moved to later. Neither did the Chapter 13 trustee’s office have any record of receiving the letters, court records show.
When Mr. Steidl discussed this with Leslie E. Puida, Countrywide’s outside counsel on the case, he said Ms. Puida told him that the letters had been “recreated” by Countrywide to reflect the escrow discrepancies, the court transcript shows. During these discussions, Ms. Puida reduced the amount that Countrywide claimed Ms. Hill owed to $1,500 from $4,700.
Under questioning by the judge, Ms. Puida said that “a processor” at Countrywide had generated the letters to show how the escrow discrepancies arose. “They were not offered to prove that they had been sent,” Ms. Puida said. But she also said, under questioning from the court, that the letters did not carry a disclaimer indicating that they were not actual correspondence or that they had never been sent.
A Countrywide spokesman said that in bankruptcy cases, Countrywide’s automated systems are sometimes overridden, with technicians making manual adjustments “to comply with bankruptcy laws and the requirements in the jurisdiction in which a bankruptcy is pending.” Asked by Judge Agresti why Countrywide would go to the trouble of “creating a letter that was never sent,” Ms. Puida, its lawyer, said she did not know.
“I just, I can’t get over what I’m being told here about these recreations,” Judge Agresti said, “and what the purpose is or was and what was intended by them.”
Ms. Hill’s matter is one of 300 bankruptcy cases involving Countrywide that have come under scrutiny by Ms. Winnecour, the Chapter 13 trustee in Pittsburgh. On Oct. 9, she asked the court to sanction Countrywide, contending that the company had lost or destroyed more than $500,000 in checks paid by homeowners in bankruptcy from December 2005 to April 2007.
Ms. Winnecour said in court filings that she was concerned that even as Countrywide had misplaced or destroyed the checks, it levied charges on the borrowers, including late fees and legal costs. A spokesman in her office said she would not comment on the Hill case.
O. Max Gardner III, a lawyer in North Carolina who represents troubled borrowers, says that he routinely sees lenders pursue borrowers for additional money after their bankruptcies have been discharged and the courts have determined that the default has been cured and borrowers are current. Regarding the Hill matter, Mr. Gardner said: “The real problem in my mind when reading the transcript is that Countrywide’s lawyer could not explain how this happened.”
Since Nightline featured O. Max Gardner’s Bankruptcy Boot Camp on Friday night, the reaction has been strong and positive. Comments on the Nightline story itself include reviews from attorneys who have shared the eye-opening experience of Max’s Bankruptcy Boot Camp, real estate agents, people simply saying “thank you” for bringing this story to light and–sadly–a number of consumers with similar stories to tell about losing their homes to predatory lending practices.
For more commentary from the blogosphere, check out posts on Max’s Nightline appearance at:
Kansas Bankruptcy Law, Hojin’s SW Orlando Perspective and The Home Equity Theft Reporter.
Dec. 14, 3007—
It’s been a six-year battle for Mike Dillon, who is trying to save his home from a foreclosure the courts say should never have happened.
It began in 2001, when the company servicing Dillon’s loan was sold. According to Dillon, he made a payment in 2001 to his servicer, but it had been sold to Fairbanks Capital, Dillon said. Fairbanks told him his payment was not received.
“The payment disappeared,” said Dillon of Manchester, N.H. “The check never came back to me, and the first notification that I ever got from Fairbanks was a default notice saying that you owe us $2,000 plus. From there it was all downhill.”
Dillon admits to paying late but said he always paid the late fees. He contends he landed in loan default and on the doorstep of foreclosure because of deception by Fairbanks Capital.
In 2005, a New Hampshire judge barred Fairbanks from foreclosing on Dillon’s home, saying that Fairbanks created a “predatory scheme of penalties that generated the default.” Dillon said that while the ruling helped keep his house safe for now, he ultimately didn’t consider it a victory.
“It didn’t make up for the years of illegal fees they charged me,” Dillon said. “It didn’t make up for the damage to the credit report, it didn’t make up for anything.”
Fairbanks disagreed with the court’s ruling, but said it complied. Still, the company said, Dillon has refused to pay into a mandated escrow account, leaving him behind on years of mortgage payments, taxes, and insurance. He remains locked in litigation with the company.
Fairbanks has been sued before. In one case in 2003, the company voluntarily agreed to a $40 million settlement with thousands of Massachusetts customers, after the Federal Trade Commission and the U.S. Department of Housing and Urban Development said the company “assessed and collected improper or unwarranted fees.”
The FTC charged the company with failing to post mortgage payments on time, then charging customers late fees; charging customers for homeowner’s insurance when the homeowners already had a policy in place; and misrepresenting the amounts customers owed.
Since the settlement, the company was sold, changed management, and changed its name to Select Portfolio Servicing, or SPS. It says it’s now a leader in responsible servicing.
But many homeowners continue to find themselves in the same situation with their servicers. Some of them file for Chapter 13 bankruptcy, which protects them from creditors while allowing time to restructure their debt.
Bankruptcy Boot Camp
Attorney Max Gardner said bankruptcy courts have become an unlikely ally in exposing loan-service abuse.
At his idyllic rural retreat set in the gently rolling hills of western North Carolina, lawyers from around the country come to Gardner’s estate northwest of Charlotte to learn how to dissect their client’s records — rooting out the hidden fees mortgage servicers charge. Those fees can add up to tens of thousands of dollars and according to Gardner, are not only unreasonable but sometimes illegal.
“The fees are unreasonable fees, they’re unnecessary fees, they’re improper fees, and I’m saying they’re illegal fees because they’re not approved by the bankruptcy courts,” said Gardner. “The problem with these fees is that, you know, they’re secret fees, they’re secret charges.”
He believes this is just the tip of the iceberg, and that some homeowners might be getting taken advantage of, paying the fees when they don’t have to.
“These guys are smart and they are playing the odds,” said Gardner. “And the odds are that 95 percent of the people will have no idea exactly what’s going on. That 95 percent will just go ahead and pay it.”
Gardner’s goal is ambitious. He’s training an army of lawyers to go out onto the complex battlefield of credit servicing, and hopes that they in turn will train fellow lawyers in the same thing, spreading the knowledge to thousands.
“There is no way I can train 10,000 lawyers,” Gardner acknowledged. “But maybe 200 can train 2,000 and they can train 2,000 more and then 4,000 more and keep going.”
Bringing in the ‘Forensic Accountants’
Sometimes the legion of lawyers is not enough to sort through mortgage-service fees. Gardner says some fees seem so innocuous that often he has to bring in a forensic accountant to uncover what is legitimate and what is not. According to Gardner, the accountant almost always uncovers “bogus” fees.
“I don’t know of a case that he’s looked at that he didn’t find fees that shouldn’t have been charged,” Gardner said of the accountant, adding that the fees can range from “about $500 after a case is first filed, up until $28,000 or $29,0000 in cases I have had.”
And he’s not alone. When Katherine Porter, a professor at the University of Iowa studied 1,700 bankruptcy cases, she found that questionable fees had been added to almost half the loans looked at, and that they were missing important pieces of documentation, making it difficult to know what the homeowner is being charged for.
“The problem is, without that documentation, it is very hard for the homeowner or his bankruptcy attorney or the bankruptcy court to make sure that the debtor is being charged the right amount,” said Porter. “The law requires that documentation for a reason, because without that documentation you can’t be sure that you are being charged fairly.”
Bankruptcy judges have begun to respond. Gardner has a wall covered with copies of checks from judgments he’s won against a variety of mortgage-servicing companies.
“We display these checks on the wall to sort of give my boot campers some encouragement,” Gardner said. “That even though it’s very difficult, there is some financial incentive for them to do it.”
And he cautions that it’s not just financially distressed homeowners who find themselves the victims of mortgage servicing fraud. He warns all mortgage holders to be cautious.
“If you have a home mortgage you need to do the same thing whether you are in bankruptcy or not,” Gardener warned. “Whether you are AAA credit or single D credit. And you need to write your servicer at least once every six months and ask for your transaction history.”
He says the fees often are very small — $25, $100, $200 — but if they happen to thousands of customers they add up to millions of dollars in revenue for servicing companies. And, critics warn, with less business coming in from new loans, mortgage servicers will be even hungrier for other ways to make money.
Copyright © 2007 ABC News Internet Ventures
Mortgage crisis expected to cost Bay Area $5.4 billion next year
Kelly Zito, Chronicle Staff Writer
Tuesday, November 27, 2007
The subprime mortgage fiasco stands to cost the Bay Area economy more than $5.4 billion next year, according to the latest report intending to put a dollar figure on the rising wave of real estate foreclosures.
The lending crisis will cost the national economy $166 billion and 524,000 potential jobs, said the report, to be released today in Detroit at a meeting of the U.S. Conference of Mayors. In addition, homeowners across the country will lose $1.2 trillion in property values in 2008.
“Not that long ago, economists said housing was the backbone of our economy,” Douglas Palmer, the mayor of Trenton, N.J., and president of the mayors’ group, said in a statement. “Today the foreclosure crisis has the potential to break the back of our economy, as well as the back of millions of American families.”
The study, titled “The Mortgage Crisis: Economic and Fiscal Implications for Metro Areas” examined the gross metropolitan product (GMP) - the market value of all goods and services produced within a region - for 361 areas. The national subprime mortgage market began unraveling in earnest this year as home prices cooled and many borrowers who had squeaked into a home with an exotic mortgage found they could not make their payments.
As defaults and foreclosures rose, the market stumbled further. Investors pulled back from buying subprime mortgages - typically made to those with less-than-stellar credit scores - or any loans that smacked of risk, including “jumbo” loans, which are a key piece of the real estate market in the pricey Bay Area.
The mayors’ report did not forecast a recession, but it said 128 metropolitan areas - including the San Francisco-Oakland-Fremont metropolitan statistical area - would see GMP growth fall into the “sluggish” category of below 2 percent. Researchers said GMP in San Jose, Sunnyvale and Santa Clara would lose $1.8 billion, and GMP growth would slow to 2 percent, based on lower consumer spending, weak residential investment and falling income in the construction industries. Combined with estimated losses of $3.6 billion in the San Francisco area, the Bay Area stands to lose at least $5.4 billion, not including losses in close-by Northern California counties such as Napa and Solano.
By most estimates, the number of foreclosures could peak in 2008, when the next batch of mortgage interest rate resets is scheduled to occur. Many credit-impaired buyers, caught up in the homebuying frenzy of the past few years, took out exotic mortgages that carried extremely low teaser rates that reset far higher after the introductory period is over - usually two years.
Still, the Bay Area is faring far better than economically depressed regions such as Michigan, Indiana or areas with rampant over-building, such as Las Vegas or Florida. For example, the report forecast real GMP growth in Bay City, Mich., to slow 1.3 percent, or $83 million, due to the subprime fallout.
Economic growth will be cut by one-third in 65 metropolitan areas and by more than one-quarter in 143 regions. Certain cities in the Central Valley that have been hit hard by foreclosures and widespread new home building would see the largest losses in real GMP growth, researchers found. GMP growth in Merced, Madera and Salinas would fall by between 1.3 percent and 1.7 percent.
“We already had (GMP growth) slowing in California because of the real estate contraction, but the question now is the further exacerbation of the subprime problem, defaults and the like,” said Jim Diffley, managing director of regional services at Global Insight, the East Coast firm that prepared the survey.
One expert on the Bay Area economy, however, said the study overstates the size of the impact. First, economist Ken Rosen said, the GMP is inherently an imprecise measure that involves cobbling together varying economic indicators on a local level. Second, Rosen said he believes investors in subprime mortgages - who may be far afield - will likely bear the economic brunt of the subprime meltdown, not local economies. “Most of the loss is not to the homeowner, but to the owner of the mortgage, and they’re not regionally concentrated in the Bay Area,” Rosen said. “We’ve exported maybe a quarter of this loss to the rest of the world.”
Several recent studies have attempted to quantify the ripple effect of the subprime debacle. Last month, the Association of Community Organizations for Reform Now found that nearly 4,800 subprime loans made to Bay Area borrowers in 2006 probably will fall into foreclosure in the next couple of years, costing homeowners, cities and lenders as much as $1.5 billion. A report by another advocacy group found that foreclosures in the Bay Area could depress neighboring home values by as much as $11.6 billion.
And finally, research by the U.S. Senate Joint Economic Committee found that California homeowners are at risk of losing $23.6 billion in housing wealth if real estate prices continue to decline and foreclosures soar.
Many of these reports have the same goal: to persuade mortgage holders and loan services to agree to new payment terms with borrowers in an effort to reduce foreclosures and keep families in their homes - particularly those victims of mortgage fraud.
Earlier this month in an announcement with Gov. Arnold Schwarzenegger, four major subprime lenders promised to help California homeowners who could not afford skyrocketing mortgage payments. The four lenders - Countrywide, GMAC, Litton and HomeEq - said they would maintain the initial lower interest rates for some subprime borrowers whose rates are set to soar. That said, there are many questions about the timeline for the rate freeze, as well as how the process would be monitored and reported.
“The government in California has done the right thing,” Rosen said. “Loan modifications is a key thing preventing this from becoming a more widespread problem - it could prevent a quarter to a half of these foreclosures. It’s a very important, good start.”
