Saxon Settles HAMP Class Action for $4.5 Million… A win for homeowners, LOL

A class action law suit filed against Saxon Mortgage Services/Morgan Stanley alleged that the servicer improperly denied thousands of California homeowners loan modifications through the federal Home Affordable Modification Plan (HAMP), and as a result, some lost their homes to foreclosure unnecessarily. 

No kidding?  Well, now there’s a story I haven’t heard more than a few thousand times… this month. 

A servicer improperly denied homeowners when they applied for loan modifications?  Let me guess, did the servicer lose paperwork submitted by the homeowners multiple times?  Did they tell people they failed the NPV test without providing any reason as to why they failed the test?  Did they tell some homeowners they made too much money and then later that they didn’t make enough?  Or, did they just keep asking the homeowner for additional documents over and over again until the homeowners ran screaming from their homes?

Shocking, positively shocking… or it would be, if I were writing this back in 2009.  

It’s 2015, however, and reading a story about a servicer denying loan modifications and foreclosing when they shouldn’t have is like taking a walk down memory lane.  Is Treasury threatening to withhold payments under HAMP until the servicer gets their act together and learns how to deny loan modifications for more opaque reasons? 

Did the homeowners discover that their homes had been sold when they came home one day to find investors standing on their porches trying to peer into their windows?  Did they foreclose on any homes that they turned out not to own in the first place?  How many of the homeowners were foreclosed on while they were making trial payments?

Good times, right?

Is anyone even paying attention to this sort of story anymore?  Does anyone even care?  I mean, it’s only happened a few million times over the last so many years, so what’s the big deal?  So, the bank takes back a house after telling the homeowner that he or she has been approved for a loan modification… that sort of thing barely made headlines in 2010… today, it’s like hearing the weatherman report the weather in San Diego.  It’s sunny and 75 today… yawn.

The class was defined as “California borrowers who entered into Homeowners Affordable Modification Program TPPs with Saxon through Oct. 1, 2009, and made at least three trial period payments but did not receive HAMP loan modifications.”

Nice, so these folks were actually granted trial modifications, celebrated, then made their required three payments as agreed… and then got the proverbial rug pulled out from under them with no recourse… sorry about that, but it’s only a home… it’s not like we’re talking about something life-changing or that cost a lot.

According to a story on Law 360.com, “the settlement would pay the 1,365 class members who lost their homes after Saxon denied them permanent loan modifications roughly 30 percent of the trial payments they had made.”

However, the story then reported that “Saxon would pay approximately 2,705 class members an average of $1,663 each, before accounting for attorneys’ fees and other costs,” and that the settlement represented about 15 percent of the roughly $30 million in total trial payments made by the class. 

And then it said, “All plaintiffs would receive a base award of about $184, with tiered payments going to those who lost their homes in foreclosures or short sales without being offered loan modifications.”

Now, I would normally stop and try to figure out what the heck was being said in the three paragraphs above, but honestly, I don’t actually care what the details were, or for that matter whether someone receives $1,663 or $184 for having their home taken away from them while making the payments as requested by the servicer.  If it were me, and I got a check for $184 after losing my home while making payments, I think I’d be tempted to check the Internet to see how much small pox virus or Anthrax I could purchase with my winnings. 

What’s truly incredible though is that no one will do anything to seek revenge… in fact, no one will even complain out loud.

Think about this story for a moment… a thousand homeowners, give or take, were going through the loan modification process, when they were told “Congratulations, you’ve been approved for a trial modification.”  And then they all started making their payments and just when they were starting to sleep a little better than they had in many months, Saxon sold their homes anyway.

And some are getting $184… or $1,663… or whatever. 

Well, okay then… that should take care of it, I would think.  I mean, I bought our home in 1990 for $340,000… so it’s been about 25 years, during which time we’ve probably put a couple hundred grand into it for one reason or another.  So, if someone takes it back when they shouldn’t have, I really don’t think I need more than dinner for four at an Outback Steak House to call it even… well, minus legal fees and other costs, of course.

IN A RELATED STORY…

Housingwire recently reported that Morgan Stanley had reached an agreement with the US Department of Justice and US Attorney’s Office, Northern District of California, to pay $2.6 BILLION to “resolve certain claims the financial enforcers intended to bring against the investment bank.”

Huh?  Morgan Stanley agreed to pay $2.6 BILLION for claims that haven’t even been brought yet?  What in the world would someone have to do to justify a settlement of $2.6 BILLION?  HSBC only got hit with a $1.9 BILLION fine and they were caught redhanded money-laundering for terrorist groups and drug dealers. 

I remember last summer when Morgan Stanley agreed to pay $275 million to settle charges that it defrauded investors related to mortgage-backed securities.  Wow, that’s pretty good… $275 million… and I’ll bet that none of those investors even lost a house in the transaction.

FEELING IMPOTENT?

In this story about Morgan Stanley settling a class action lawsuit, however, we’ve got a couple thousand homeowners being tossed from their homes when they should not have been, and Morgan Stanley managed to settle for a paltry $4.5 million… or 30% of the trial payments that homeowners should never have paid in the first place?  People could get checks that would have a hard time paying for the cost of a tent, let alone a house.

And $4.5 million to Morgan Stanley is like me paying someone maybe 14¢… hard to even remember.  I don’t know, but how much would you like to wager that $4.5 million is Morgan Stanley’s annual budget for coffee stirrers?

Oh well… at least this story when contrasted with the one above about the investors, should give everyone a pretty good idea of just how important they’re aren’t.  I think if servicers would send someone to the door of each homeowner who applies for a loan modification and spit in their face, it would really set the tone and go a long way towards managing expectations. 

Investors, are apparently another breed, though… right?  Just the mere suggestion of a suit being filed sends them scurrying for their checkbooks.  Investors matter… homeowners do not.  I think that much is absolutely clear, don’t you?

By the way, the lawyers for the homeowner class were Daniel J. Mulligan of Jenkins Mulligan & Gabriel LLP and Peter B. Fredman of the Law Office of Peter Fredman.  And representing Saxon/Morgan Stanley was the law firm of Mammoth, Pervasive & Bland LLP, or something far too close.

So, be careful out there and remember: The church is near, but the road is icy.  The tavern is far, but we will walk carefully. 

Mandelman out.