Pre Foreclosure Mediation Settlement Saves Client over $100,000.00

A Shuster & Saben client’s investment of $1,600.00 in legal fees, will result in over $100,000.00 of savings from a pre-foreclosure mediation agreement negotiated by firm attorney Richard Shuster. The client came to the firm’s Melbourne, Florida office after their prior loan servicer, Chase, denied permanent loan modification of their mortgage. Chase had placed the client in a trial modification that reduced their monthly payment from over $3,000.00 to approximately $1,648.00. After the client made their monthly trial payments Chase refused to convert the loan from a HAMP trial modification to a permanent modification.

After meeting with the couple, attorney Shuster recommended submission of a qualified written request to the loan servicer to investigate whether Chase had a valid reason for denying permanent loan modification. The firm then submitted a Qualified Written Request (QWR) to Chase for a flat, one-time fee of $250.00. Chase’s response to Qualified Written Request revealed that the loan was owned by the Federal National Mortgage Association (FNMA or Fannie Mae) and that Chase alleged that the permanent modification was denied because their file was incomplete. The clients asserted that they submitted all of the requested documents. Some consumer advocates refer to incomplete file denials as the “dog ate my homework” excuse for not making permanent modifications.

After Chase denied permanent modification the client creased making further mortgage payments. The client, a couple nearing retirement age, realized that they could not wipe out their retirement savings to save a home in which they were significantly upside down and had no equity whatsoever.

A few months later, the loan owner, FNMA, transferred servicing of the loan from Chase to Lender Business Process Services (LBPS). When the client advised Shuster & Saben of the change of servicers the firm submitted an updated HAMP application and updated financial disclosures to LBPS. Thereafter LBPS requested pre-foreclosure mediation.

Firm attorney Richard Shuster welcomed the chance to mediate the case before any foreclosure action was filed against the client. Shuster explained that LBPS was proactive and responsible by saving FNMA (the loan owner) the expense of paying a filing fees and attorneys’ fees to file a foreclosure action against the homeowner. Lenders often ask for as much as $4,000.00 to be added to homeowners’ loan balances to pay for such expenses. Since our firm did not have to defend a lawsuit, the homeowners’ legal expenses were also much smaller.

The client hired Shuster & Saben to represent them at mediation under a written agreement that called for a fee of $350.00 together with a success bonus form $500.00 to $1,500.00 depending on the nature of the loan modification obtained. ($500.00 for a small loan modification up to a $1,500 for a loan modification with both interest and principal reduction). The result obtained, a loan modification that will reduce the client’s interest rate to 2% for the next 5 years and to 5% thereafter, qualified the firm for a $1,000 success bonus. The total cost to the client was $1,600 ($250 for QRW, $350 Mediation, $1,000 success bonus). The client’s new mortgage payment of $1,561.78 is a huge savings from their original payment of over $3,000.00 and is less than their prior trial modification payments. At the mediation, attorney Shuster insisted that conversion of the new trial modification to permanent modification be guaranteed in writing and would happen automatically so long as all payments were made. Under the loan modification obtained by Shuster & Saben, the client will save over $85,000.00 during the next five years and over $100,000 over the life of the loan. Shuster’s biggest bonus was two hugs, from the couple whose home was saved by this settlement agreement.

To review the redacted mediation agreement and redacted confirmation letter from LBPS please click the links below.

Mediation Agreement

LBPS Confirmation of HAMP Modification

Homeowner Gets Free House after IndyMac Bank Fails to Mediate in Good Faith

Daily Business Review, writer Vesselin Mitev reports that Suffolk County, N.Y. Judge Jeffrey A. Spinner, has judicially canceled the mortgage on homeowner Dana Yano-Horski’s home. The action was taken to sanction the lender’s “Unconscionable, vexations and opprobrious conduct” in its attempt to foreclose on the property.

Under applicable state law IndyMac was required to mediate with the homeowner before competing a foreclosure action. Judge Spinner was quoted as finding it “deeply troubling” that IndyMac spurned what would have been a “win-win” solution for all parties. Instead of negotiating the bank engaged in “harsh, repugnant, shocking and repulsive” treatment of the homeowner.

After the homeowners attempts to obtain mediation Judge Spinner ordered a bank representative to attend a mediation conference in September. At the mediation IndyMac loss mitigation manager Karen Dickinson “made it abundantly clear that that no form of mediation, resolution or settlement would be acceptable” to the bank.

The bank asserted that the borrower had previously defaulted on a forbearance agreement. The Court found that IndyMac never sent out the forbearance agreement. Judge Spinner noted “Defendant, through plaintiff’s duplicity found herself in the unique and uncomfortable position of being placed in default of the ‘agreement’ even before she had received it.”

Judge Spinner did more than just dismiss the lawsuit. If the lawsuit was dismissed without prejudice IndyMac could have re-filed the lawsuit and repeated in wrongful conduct. Judge Skinner concluded that the original principal of $292,500 “should be canceled, voided, and set aside.” The Judges order bars any attempt to collect on the note.

The Foreclosure Lawyers at Shuster & Saben applauds Justice Jeffrey Skinner’s courage. In Florida several counties including Dade County, Palm Beach County, Indian River County, and Brevard County have implemented mandatory mediation when the subject property is the homeowner’s primary residence. In a significant number of cases, particularly when homeowners are unrepresented some lenders attempt to avoid mediation or fail to mediate in good faith. In both Dade County and Indian River County our firm has moved for sanctions against lenders who fail to mediate in good faith.

Shuster & Saben Seek Sanctions against Bank of America on behalf of Sebastian, FL homeowner

For Immediate Release: On Tuesday, November 17, 2009, Shuster & Saben served a Motion For Sanctions against Bank of America, N.A. for failing to mediate in good faith with a Sebastian, Florida homeowner. The firm’s client, an elite estates and trusts paralegal (who spent over twenty years working with some of South Florida’s top law firms) attended mediation, in Vero Beach, pro-se, prior to hiring the foreclosure defense litigation department of Shuster & Saben, LLC.

Under the Administrative Order of 2009-01 of Indian River County Chief Judge Willaim Roby, lenders seeking to foreclose on the primary residence of Indian River County homeowners are required to conduct mediation prior to moving for summary judgment. Under the administrative order, the lender must have its counsel appear in person and a representative of the plaintiff/lender may appear by phone or in person. The administrative order requires that individual appearing for the lender must have “full authority to modify the existing loan and mortgage and to settle the foreclosure case.”

Prior to the mediation, the lender’s law firm, Kahane & Associates of Plantation, Florida filed a “Form A” identify Krystal Martin as the respresenative of the lender who would appear at the mediation. The subject homeowner, via federal express provided pertinent financial documents, a release of her tax returns, and a hardship letter to the loan servicer, Litton, so that Litton and Bank of America could evaluate modification of the loan prior to the mediation.

According to the firm’s client, when the mediation commenced for the first 30 minutes of the mediation Bank of America had no representative what so ever. The person listed on the “Form A”, Krystal Martin never appeared for the mediation and in her place, a representative of Litton, the servicer on the loan appeared by phone. Since the person appearing was not a Bank of America employee but only a employee of the loan servicer hired by Bank of America, it was apparent that the representative had no authority to do anything without talking to the lender. When the mediation began the Litton representative did not know the current balance on the loan. The lender’s attorney who signed the “Form A” did not bother to attend the mediation. In her place was a local Vero Beach attorney, Nina Ferraro, who is NOT an employee of Kahane & Associates (the law firm hired by Bank of America to bring the foreclosure). Ms. Ferraro had no prior involvement in the case and also did not have the borrower’s current balance.


Despite the homeowner having proof of delivery by Federal Express, the representative of Litton did not have the financial disclosures and hardship letter sent to Litton long before the mediation.

At mediation the lender’s representative could not make a single offer that was specific enough to form the basis of a written contract. There were no offers of interest rate reduction. There were no specific proposals that the borrower would know what her payment would be if the offer was accepted. There was no proposal for forbearance or even for lump sum payment to bring the loan current.
The mediator, who described herself as a real estate attorney, was more than willing to overlook the failure of the lawyer who signed the Form A to be present and the failure of Krystal Martin, (the person listed as Bank of America’s representative of the Form A) to appear. We find it troubling that the mediator did no suspend the mediation until the attorney and the listed representative with full authority was present. Instead the mediator wrote up a form stating that Bank of America had agreed to review the borrowers request for loan modification.

In the mediation of personal injury cases defendants and their insurance companies offer a specific amount of money to the injured party for the release of the pending claims. If the offer is accepted the accident victim knows exactly what they will receive and the insurance company knows how much it will have to pay. We believe that mediation of foreclosure cases should work the same way. In a foreclosure mediation the lender should make proposals that specifically state what the interest rate will be reduced to, whether the loan balance will be reduced, explain the disposition of late fees and attorney’s fees, specify the amount of the new payment and explain the terms for the dismissal of the case.

An example of an offer that is sufficiently specific that it could be accepted and form the basis of a settlement would be an offer to lower the current interest from 8.75% to 5.125%, with a corresponding reduction in monthly payments from $1,298.06 to $898.40 per month, no reduction of loan balance, lender waiver of accrued late fees, and borrower payment of $3,200.00 within seven days of execution as payment toward lender’s filing fees, court costs, and accrued interest. Such agreement should define that if the initial payment is made and subsequent mortgage payments are made for a set number of months (usually 3 to 6 months) then the foreclosure action will be dismissed.

It is acceptable for the lender to precondition loan modification upon the borrower to making three trial payments so long as the borrower receives a written offer that states the interest rate and payment amount the will apply once the three trial payments are made. The terms should specify that if the three trial payments are made in a timely basis then the borrower shall receive the modification. The lender should not use offer a modification to induce the borrower to make three payments only to deny the modification because some form or document was not received. Many borrowers have seen promises of loan modifications that never materialize and end up feeling like Charlie Brown after Lucy pulls away the football at the last possible moment.


It is troubling that the mediator who presided over the subject mediation considers the mediation a success when all Bank of America agreed to do was review the homeowner for loan modification, an action that they were required to do before the mediation. It would appear that the mediator is more concerned about form that substance. The lender and its counsel apparently feel that going through the motion of mediation is enough. We believe that Bank of America’s effort fell far short of mediating in good faith and have moved for sanctions so that the spirit and intent of Chief Judge Roby’s Mediation Order is complied with. Homeowners who have had foreclosure mediations in which no specific offers were made are encouraged to share their experiences in the comments section of this blog.