“Homeowners Getting Hit a Second Time”

The December 6th Staten Island Advance reports on a new foreclosure tactic, whereby lenders or debt collectors holding
second mortgages freeze bank accounts or garnish pay checks of already
struggling homeowners– a move Staten Island Legal Services Homeowner Defense Project Director calls "a fast and dirty process."

Lawyers for troubled Staten Island homeowners say they are beginning to
see examples of clients who go to the bank to take out money and find
that their accounts have been frozen or wiped out by other banks or
debt collectors — the entities holding second mortgages on houses
already in default on the first and primary mortgage. Some are learning
the lender or debt collector has already gone to court and secured a
judgment to garnish paychecks.

It's a move more in line
with the traditional debt collection industry, which typically targets
credit card debt, and it's dragging the house and what little cash
reserves people often have into the foreclosure battleground. Experts
say it's an end-run by second lien holders around the traditional
foreclosure process, which involves only the first mortgage holder and
provides important legal protections for the homeowner.    

"It's a fast and dirty process," Margaret Becker, lead attorney with
the Homeowner Defense Project of Staten Island Legal Services in St.
George, said of the new trend.    

So far, she said, she's taken on two cases and she's heard similar stories from other attorneys.    

In several emerging tales, homeowners say they learned about the
garnishments only after their bank accounts dropped into the negative
or paychecks diminished. And that is making it even more difficult for
people to pay bills and modify the terms of the first mortgage to save
homes from foreclosure. Homeowners being targeted often include the
most troubled, or people who are behind on payments and whose homes are
worth less than what is owed on the house.    

"It just takes
their money away so they don't have any money to afford a (loan)
modification," Ms. Becker said of those who have been hit with
judgments from second lien holders.
 
She is representing an
Arden Heights woman who was talking to her bank about modifying the
loan on her first mortgage. Then a debt collector, which bought the
second mortgage on the house, won a judgment to garnish 10 percent of
the woman's paycheck. That has jeopardized a good shot at a loan
modification, said Ms. Becker.

Read the rest of the Advance article at SILive.com.

Staten Island Legal Services launched the Homeowner Defense Project in
2006 to address the pressing legal needs of homeowners affected by the
mortgage lending crisis.  We are the only organization in Staten Island
providing free legal assistance to low and middle-income homeowners in
foreclosure.  Our goal is to keep families in their homes and prevent
foreclosures from destabilizing Staten Island neighborhoods.  In
addition to providing legal advice and representation in state and
federal court, we offer assistance with newly required court settlement
conferences, loan negotiations, and applying for refinancing or
relocation assistance.  And we work with other community groups and
housing counselors to help distressed borrowers obtain suitable
workouts of unaffordable mortgages. 

Click here for more information and for Homeowner Defense Project resources.