Last years’ exposure of Parallel Foreclosure victims, who were current in their mortgage payments, then forced to go behind to apply for the federal HAMP (Home Affordable Modification Program) actually lost their homes to foreclosure instead of reducing their mortgage payments. Horror stories of the man who committed suicide after foreclosure in the face of eviction and the Chicago man who refuses to leave his home after foreclosure abound. And this year, as mass foreclosures enter their fourth season, another crisis has been exposed. Many former homeowners who have lost their homes to foreclosure are now being hounded by collection agencies. Why? To pay their second mortgages, many of which were used to get them into the homes in the first place.
“In about 25 states, California included, it is illegal to collect on a mortgage that was used to fund the purchase of a home after foreclosure,” says Kenneth Eade, a Los Angeles based attorney, who runs an Internet web site called http://suepredatorylender.com. Today’s ABC News California Watch Report exposed the regular practice of a Texas collection agency who takes advantage of most people’s ignorance of this law and is collecting deficiencies on illegal mortgages. “Some of the nation’s largest banks are the biggest culprits,” said Eade, who adds, “if you find yourself in this position, not only can you avoid paying, you also may be able to sue for damages.” Consumer Acts, such as the Federal Fair Debt Collection Practices Act and Fair Credit Reporting Act can help. “These Acts prohibit debt collectors from unfair practices in collecting debt and falsely reporting your credit,” said Eade.
Home equity loans (HELOCs) are normally excluded from California’s anti-deficiency statute application, but when a HELOC masquerades as a purchase money loan (used to purchase the property) they apply. “Any loan taken out at the time of sale and used as a purchase money loan is a non-recourse loan in California,” according to Eade. “If you think you are a victim of this illegal practice, don’t pay-fight back,” he added.
By Kenneth Eade
Kenneth Eade is a Los Angeles California based attorney, specializing in international law, transactional and corporate law, complex business litigation, securities litigation, Contract Law, Corporate Law, General Commercial And Business Law Matters, Licensing Agreements, Mergers & Acquisitions. He is a member of the Bar of California, the federal District Court for the Central District of California, and the Ninth Circuit Court of Appeal. He holds a Juris Doctor in Law from Southwestern University School of Law, and a B.A. in Liberal Studies from California State University, Northridge. He is also an accomplished filmmaker.