Mortgage Companies Creating Hurricane Irma Forbearance Default

Residents of Pinellas, Hillsborough, and Pasco County and throughout the State of Florida know about the problems created by Hurricane Irma in September, 2017.  Some of the destruction left by Hurricane Irma was visible – fallen trees and broken fences.  But other impacts of the hurricane came by way of hits to the wallet – many Florida Residents lost time at work, and had trouble with making payments on their bills.

FHA Insured mortgages have particular protections to help consumers avoid default and foreclosure as a result of a hurricane. The mortgage companies are required to make accommodations:  The mortgage companies are obligated to give the consumer the option to put their loan in a forbearance, meaning that the borrowers could miss a few payments without a penalty.  Then the mortgage company is required to roll the forbearance into a modification so that the consumer didn’t have to come up with all of the missed payments all at the same time at the end of the forbearance.  During the forbearance, the mortgage company was not to be negatively reporting the agreed-on missed payment on the consumers’ credit report.

All sounds straight forward, right?  Its basically just a technically way to say that folks who where in a hurricane get a break for a could of months after a hurricane, and then go back to making their normal payments.

Unfortunately, we are finding that  the mortgage companies are not all been holding up their obligations exactly the way they are supposed to.  They are making it more difficult to qualify for a modification after the forbearance than what FHA requires resulting in additional “missed” payments due to the delay in finalizing the modification.  These additional “missed” payments are treated by the mortgage company as a “default,” which in turn is creating undue negative credit reporting and impairing the affected consumers’ credit.

Consumers shouldn’t have to be a victim to their mortgage companies’ negligence.  In a situation like this where your mortgage company is improperly preventing you from getting on track with your mortgage payments, impairing your credit, creating a default, and even threatening foreclosure, call us for a no-cost consultation to evaluate your rights – 727-538-4188.

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Consumer Protection Laws Have Teeth

A new Netflix series, “Dirty Money,” shows that consumer protection laws have some seriously sharp teeth to bite into creditors. Dirty Money’s second episode, “Pay Day,” follows the real life story of a man that’s a racecar driver by day and a payday-lending predator by night.

It is unbelievable to watch the payday-lending scheme unfold during the episode. The scheme starts with a consumer borrowing a certain amount of money for a short-term loan. Seems normal, right? The payday loan documentation spells out the amount borrowed, the finance charges, and how much the consumer can expect to pay over the life of the loan. Still seems fine. The consumer provides the payday lender with their bank account information to set up automatic withdrawals every payday. Not unusual– seems okay.

The next part is where the scheme breaks the law – despite the loan documents stating how much the consumer can expect to pay over the life of the loan, the small print stated (in very confusing words and phrases) that if the consumer did not pay back the full balance of the loan by their very next paycheck, they were charged a “service fee.” This cycle goes on for four paydays, and on the fifth payday, the payday lender automatically withdrawals the service fee and the first payment that is actually applied to the principal of the loan. The payday lender then continues to automatically withdraw the service fee for each payday that the loan isn’t paid back in full and the payment towards principal until the loan is fully satisfied.

To demonstrate the insane amount of money this scheme cost individual consumers, let’s look at a specific example – say a consumer borrows $500 to make ends meet. The payday loan document states that the total amount the borrower will end up paying over the life of the loan will be $650, including the $500 principal and $150 in finance charges. However, if the full $500 isn’t paid in full by the consumer’s next payday, the $75 “service fees” start, and on the fifth payday, the $75 “service fee” and another $50 payment is charged to the consumer’s bank account. This process continues until the principal of the loan is paid in full, which ends up costing the consumer a staggering total of about $1,975 for borrowing just $500. That’s $1,495 in finance charges. If this sounds like it’s against the law, that’s because it is.

The racecar driver payday-lending predator faced serious consequences for his illegal scheme. The Federal Trade Commission filed both civil and criminal charges against him. The civil charges resulted in a $1.3 billion judgment to cover the 1.5 million consumers’ out of pocket expenses that were illegally charged. The criminal charges resulted in a 16 year federal prison sentence. When the racecar driver payday-lending predator was asked if he was a moral person, his coldhearted response was, “I’m a business person.” Well, looks like he won’t be a business person anymore.

The moral of the story here is that consumer protection laws have seriously sharp teeth to bite into the creditors that violate them. The Federal Trade Commission used information from individual consumer TCPA and FDCPA lawsuits against the payday lender to build up their case against him, resulting in the final judgment and criminal charges.

If you feel like you have been taken advantage of by a creditor like the payday lending predator, let our office know. You have consumer rights that cannot be violated. We’d jump at the chance to look into your potential claims and have the opportunity to use the consumer protection laws to bite into the creditor that’s violating your individual rights.

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The Truth About Property Seizure and Debt Collectors

There are two ways a property can be seized because of debt. The easiest way is if you volunteered that property – like your home or a car – as collateral for a particular debt. This is called a secured debt and both your creditor and debt collector have the right to seize your property […]

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3 Major Steps Toward Eliminating Debt

Nearly everyone has been in debt at one point.  Just the fact that you carry a card around means that you have debt. Before this article goes into how you can best eliminate your debt, you have to first see that debt – in itself – is not bad.  In fact, this is sometimes the […]

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Affordable Ideas for Day Trips in Florida

Summer is right around the corner, so you must be looking for a great way to enjoy the beautiful weather without breaking the bank. Well, there are a lot of activities around Florida that can be fun and exciting and won’t cost you an exorbitant amount of money.  Whether you’re planning to hang out with friends, […]

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How Do I Get Debt Collectors to Stop Calling My Job?

Everyone incurs a debt at some point in their lives, and as much as they want to take responsibility for it, there are moments when debt collectors make it inconvenient for them. One of the most challenging and embarrassing obstacles is when debt collectors start calling their place of employment. Not only are they now […]

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Things You Shouldn’t Do If You’re Considering Bankruptcy

Filing for bankruptcy is hard enough as it is. Sometimes it can’t be helped if you find yourself in a difficult financial situation. If you’ve already considered all other options, and declaring bankruptcy is the only way out of your debts, then you should prepare for the process with the help of a Florida bankruptcy […]

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