Chapter/ Trick #5 - Shell Game
A shell game takes its name from an old confidence trick where the con artist puts a pea under a shell and then switches the shells around quickly, while you try to guess what shell the pea is under. It's a short con used to swindle people out of money based on fraud. There are many such confidence games involved in mortgage servicing.
Shell Game #1 - the disappearing mortgage payment
Mortgage servicers will often claim that you didn't pay when you did, throwing you into default when you are not really in default. This occurs when the servicer take your payment and doesn't apply it to your mortgage, maybe doesn't cash it so they can claim it was never received, but instead starts sending you letters that you are in default. This will occur at various times – for instance, when you have a late payment or when you pay by cashier's check that is not tied to your checking account or your direct deposit, which the servicer knows will make it difficult to track.
This occurs often to people when there is a change in servicing and may even be a trick to make one last profit by selling your servicing rights to a new servicer who will take one last bite at you. It may come when you are getting close to paying off a loan when the servicer realizes that they are close to losing you, and they make a last attempt to trick you into foreclosure. The servicer will send you a letter with an arrears amount that you have to pay. Even if you pay it, they will still record a notice of default.
Once that Notice of default is recorded, the servicer will use a flurry of paperwork and phone calls to trick you into ignoring the Notice of Trustee's Sale. They may do this while still accepting your payments. Your house may be sold at foreclosure sale without you ever missing a payment.
Shell Game # 2 - the disappearing modification
When a modification is signed and approved, the servicer may simply not tell you where to send your payments. They may post-date a letter with the payment information so you get it after the cutoff date, or they may fail to send you payment stubs. If you try to make a payment, you may find yourself cut off from the online portal, or they won't let you pay on the phone. If you do send them a check, it may go uncashed or be cashed but not credited.
In some situations, you may find out after the fact that your previous servicer sold your servicing rights to a new servicer, and the new servicer has no record of your modification. The new servicer may refuse to honor the modification.
If this happens, the servicer is in breach of contract, and you will either have to find some way to pay them or sue them in court to force them to accept your payments. If that sounds like an odd subject for a preliminary injunction, it isn't. The Court will have seen it before. Just remember to keep these mortgage payments in an account so you have them ready to pay when you win your court case.
Shell Game # 3 – missing payments for a modification
It's always a lie when servicers tell you that you need to miss payments to be eligible for a loan modification. The government programs that subsidize modifications may require you to have hardship, but this doesn't require you to stop paying. That's a lie to trick you into default, mounting arrears, and negative reporting so you can't refinance.
Shell Game # 4 – the MERS Shell Game
The MERS shell game is the game of the imaginary beneficiary that appears on your mortgage and then uses different legal arguments at different times to justify themselves, none of which are based on law or factually true. MERS does not hold a beneficiary interest in your mortgage yet claims standing to sue you in court. MERS does not hold your promissory note but claims the right of a beneficiary to assign your mortgage. MERS claims to be an agent but fails to identify the principle that controls their actions and is accountable for their actions, which agency law requires. MERS claims a "pure legal title," but MERS is only utilized as a fictional beneficiary by servicers of an RMBS where the pure legal title is already held by the trustee of the RMBS. None of this is within the law, yet courts have accepted the fiction, as well as all these many contradictory arguments, and beat down all those that challenged MERS' legality.
Shell Game # 5 - trial payments
There is a practice by mortgage servicers known as a trial payment plan (T.P.P.) which requires you to make three trial payments prior to receiving a modification. The servicer will demand you make these three payments in a kind of limbo, and you will have to pay based on wishful thinking and hope since there will be no terms offered, and you won't know what type of modification you will be offered once you make those three payments. They'll tell you, make the payments, and wait to hear from us. Sometimes, this works; sometimes, there will be tricks.
Among the tricks the servicer may play with these T.P.P.s is when the servicer loses your third trial payment. You'll be told to wait to hear from them, and you will be waiting to hear from them, and there will be a delay of months where they don't say anything to you. By that time, you'll have lost the right to receive the original modification. At that point, they may switch you to another modification review and make you start all over again.
During a T.P.P., the servicer may also switch you to another servicer between the second and third trial payment or even after the third trial payment. The new servicer will somehow have lost your paperwork, so you will have to start the application process all over again. Believing that this is unintentional, you may start the process again, but meanwhile, your default will continue and grow as you move closer to foreclosure.