Legal Question in Real Estate Law in California

Lenders are under no obligation to "work" with borrowers to prevent the loss of a home. While they are required by law to tell you you have the right to discuss various options for saving your home, including the possibility of a loan modification, they do not have to give you a loan modification or do anything else to help you.

I am sorry to hear about your difficulties, and the loss of your wife - that is made so much worse when being treated so poorly by your mortgage servicer.

First, with respect to the loan modification, I am not aware of any cases yet which have gone through to a published decision in which a lender has been held liable for not working with a borrower to accomplish a loan modification. The difficulty is that the only law which even remotely requires them to work with you does not appear to have what is known as a "private right of action" provision in it. That basically means that even though they may not have complied with the law which may have required them to work with you on a loan modification, there may be no remedy for their having failed to do so. I would suggest that you contact an attorney (or multiple attorneys) in your area who are handling mortgage litigation and see if anyone has had experience pursuing lenders for failing to provide assistance provided for under the various federal laws governing modifications.

Second, with respect to the short-sale, the sale to a real estate agent is probably irrelevant. A short-sale is a voluntary sale and you must have agreed to it or it would not have happened. You may wish to again have a local attorney look at the transaction to make sure that you were not taken advantage of by any of the real estate professionals involved. More likely than not it did not involve any inproprieties, but do have someone look at the transaction to be sure everything was on the up-and-up.

Finally - the question of why the bank wouldn't offer to reduce your loan down to what the home sold for is one that will be haunting us for (I suspect) years after this crisis is over. Why is it that banks will force the sale of home, netting so much less-than what they might have received if they worked with the homeowner? It is a purely business decision. There is no requirement that they offer to you what they offer to the rest of the world in terms of short-sale terms. I personally believe that it is a real legal stretch to find any impropriety on the part of your mortgage servicing company for having sold it for so much less-than you owe (and, and amount you could have afforded to service), but a very skilled litigator might be able to craft an argument that what they have done is wrong. I am (sad to say) not that guy, nor do I really see any validity to such an argument under current law.

I truly wish you the very best. Thank you for your service to our country, and I really wish that more could have been done to assist you in your hour of need. Everyone knows that you didn't join the military to become rich - you did so out of a sense of duty and honor, and it is sad to see you be treated so poorly in your personal life.

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If you shop around and ask enough lawyers for ideas, you might indeed find one that has a workable solution, such as a lawsuit based upon some novel theory. The trouble is, how does a non-lawyer protect himself from shelling out thousands of dollars in lawyer and court fees on a wild goose chase? There are a few lawyers out there who are trying to win suits agains banks for foreclosure victims on theories that the mainstream legal profession considers farfetched, to speak kindly. Although I suppose they do have some remote chance of achieving a breakthrough, for the most part their clients are just going to lose more money.