Mortgage or Loan Servicers may be sued by Lenders if they agree to modify a loan or mortgage to forestall foreclosure on Borrowers' homes. In other words, Mortgage Servicers can be sued for doing a good thing. Lenders may sue such Mortgage Servicers for Breach of Contract or Breach of Fiduciary Duties -- owed only to the Lenders. In the current age, fear of being sued is for many an unrelenting terror. Such is the headshaking news posted, for example, on December 3, 2008 on www.insuranceclaimsbadfaith.typepad.com.
The financial fiasco is not easy to understand, for a lot of reasons. For one thing, if a person is a liberal arts major from a working family, like the author is, then learning the language of finance may be something like learning a second language. Help is on the way, as they say. One of the usually undefined words recently in vogue is "servicers". Here is a friendly and useful working definition, friendly and useful to liberal arts majors and working families alike:
Servicers act as a bridge between lenders and borrowers, taking in mortgage interest payments from borrowers, often paying property taxes and distributing income to the investors who own the real estate.
The U.S. Congress may step in to provide some protection to Loan and Mortgage Servicers that do the right thing. Immunity protections are among the amendments which are going to be offered to the Troubled Assets Relief Program ("TARP") of the Emergency Economic Stabilization Act of 2008. The amendments will be offered by the Chair of the U.S. House Financial Services Committee, Rep. Barney Frank (D-Mass.). See January 9, 2009 Press Release Outline of Legislation to Amend TARP.
Most of the press regarding these proposed amendments has concentrated on other features such as restricting executive compensation and banning the use of corporate jets. See, e.g., Andrew Ward, "Frank Moves to Tighten TARP Aid" (Financial Times.com, Friday, January 9, 2009); Tom Petruno, "Money & Co." Web Log, "Frank Wants More Bank Pay Restrictions, And No Private Jets" (Posted at Los Angeles Times Online, Friday, January 9, 2009).
The news addressed in this post, however, is that which may have a major effect on Immunity for certain Servicers. The potential consequences of adopting these amendments are great. And they are potentially very beneficial.
The above January 9, 2009 Press Release Outline of the proposed amendments in this area reveals that if enacted, Federal Law will extend Immunity from "liability" for Servicers who extend "loan modifications":
The Federally conferred Immunity will apply "regardless of any provision in a servicing agreement," i.e., regardless of any contract provision in the agreement between the Lender and the Servicer; and
Unsuccessful Plaintiffs who dare to sue protected Servicers will have to pay the successful Servicers' Attorney's Fees in addition to Court Costs.
Immunity Laws like these may go a very long way toward easing the Credit Crisis, reducing the number of Foreclosures displacing Homeowners from their homes, and providing a new application of Federal Immunity Laws to people other than wiretappers and 21st Century "Black and Tans" and other thugs. While there may be other effects which cannot yet be known, in general terms enactment of Federal Laws like these would in short lead to more than a few welcome developments.
Please Read The Disclaimer.
This sounds confusing for me.
LLC
Posted by: lucas law group | May 19, 2009 at 02:46 AM