Posted on November 18, 2008 by Neil Garfield
Demand letters are one of your opening tools in putting the parties on notice that you have a claim and you intend to pursue it. AN ATTORNEY’S DEMAND LETTER CARRIES FAR MORE WEIGHT THAN ONE FROM A HOMEOWNER.
Most of the participants in your loan closing have malpractice or errors and omissions insurance policies. You must couch your claim as negligence or malpractice, an error or omission and not as a crime or intentional tort if you want to invoke insurance coverage.
You should also include a provision that they should forward a copy of the letter to their insurance carrier. Most carriers say that if you don’t notify them within thirty (30) days they won’t defend or cover the claim. So you put the receiver of the letter in a bind of either settling with you without insurance (so his premiums won’t go up or his coverage dropped) or letting the insurance company know there is a problem.
The carrier will instantly understand that this is one of thousands of claims that they are going to be hit with, so they will likely try to either intimidate you out of the claim or offer minimal settlements. Depending upon what you have decided as your goal (getting money or getting rid of your mortgage) you might accept the offer or negotiate something higher.
This adds to the war chest you can mount up to pay for more expensive litigation. It also increases the likelihood that an attorney will take your case since there are so many insurance companies involved (including the insurance purchased from AMBAC, AIG, or credit default swaps, over collateralization and cross collateralization).
BEWARE OF THE RELEASE HOWEVER, SINCE THEY WILL TRY TO GET YOU TO RELEASE EVERY CLAIM OR DEFENSE YOU HAVE IN SETTLEMENT. DO NOT SIGN SUCH A DOCUMENT UNLESS YOU INTEND TO STOP THERE. INSIST ON CHANGES TO THE RELEASE DOCUMENT SUCH THAT YOU WILL STILL BE ABLE TO CLAIM THAT THE NOTE AND MORTGAGE ARE VOID, INVALID, NON-NEGOTIABLE, FRAUDULENTLY OBTAINED, ETC. GET COMPETENT LEGAL ADVICE BEFORE YOU SIGN ANYTHING.
PARTIES TO SEND DEMAND LETTERS TO FOR ERRORS AND OMISSIONS AND MALPRACTICE:
1. Appraiser and Appraisal Company
2. Mortgage Broker and Mortgage Brokerage Company
3. Escrow Agent and Escrow Company
4. Title Agent, Title Agency and Title Insurance Company claiming cloud on title
5. Lender who appears on paper as payee on note and as mortgagee on mortgage or beneficiary under Deed of Trust
6. Trustee under deed of trust and add challenge to authority because of successive Trustees named in pooling and services agreement and in the issuance of the mortgage backed securities.
7. Mortgage Servicers — each of them that you know of for misapplication of funds and demand that they show a full accounting for all funds received and all funds disbursed. How do you know the holder of the note received the payment? Who is the holder of the note?