Judge Bashes Bank in Foreclosure Case

A Florida state-court judge, in a rare ruling, said a major national bank perpetrated a "fraud" in a foreclosure lawsuit, raising questions about how banks are attempting to claim homes from borrowers in default.
The ruling, made last month in Pasco County, Fla., comes amid increased scrutiny of foreclosures by the prosecutors and judges in regions hurt by the recession. Judges have said in hearings they are increasingly concerned that banks are attempting to seize properties they don't own.

The Florida case began in December 2007 when U.S. Bank N.A. sued a homeowner, Ernest E. Harpster, after he defaulted on a $190,000 loan he received in January of that year.

The Law Offices of David J. Stern, which represented the bank, prepared a document called an "assignment of mortgage" showing that the bank received ownership of the mortgage in December 2007. The document was dated December 2007.
But after investigating the matter, Circuit Court Judge Lynn Tepper ruled that the document couldn't have been prepared until 2008. Thus, she ruled, the bank couldn't prove it owned the mortgage at the time the suit was filed.
The document filed by the plaintiff, Judge Tepper wrote last month, "did not exist at the time of the filing of this action…was subsequently created and…fraudulently backdated, in a purposeful, intentional effort to mislead." She dismissed the case.
Forrest McSurdy, a lawyer at the David Stern firm that handled the U.S. Bank case, said the mistake was due to "carelessness." The mortgage document was initially prepared and signed in 2007 but wasn't notarized until months later, he said. After discovering similar problems in other foreclosure cases, he said, the firm voluntarily withdrew the suits and later re-filed them using appropriate documents.
"Judges get in a whirl about technicalities because the courts are overwhelmed," he said. "The merits of the cases are the same: people aren't paying their mortgages."
Steve Dale, a spokesman for U.S. Bank, said the company played a passive role in the matter because it represents investors who own a mortgage-securities trust that includes the Harpster loan. He said a division of Wells Fargo & Co., which collected payments from Mr. Harpster, initiated the foreclosure on behalf of the investors.
Wells Fargo said in a statement it "does not condone, accept, nor instruct counsel to take actions such as those taken in this case." The company said it was "troubled" by the "conclusions the Court found as to the actions of this foreclosure attorney. We will review these circumstances closely and take appropriate action as necessary."
Since the housing crisis began several years ago, judges across the U.S. have found that documents submitted by banks to support foreclosure claims were wrong. Mistakes by banks and their representatives have also led to an ongoing federal criminal probe in Florida.
Some of the problems stem from the difficulty banks face in proving they own the loans, thanks to the complexity of the mortgage market.
The Florida ruling against U.S. Bank was also a critique of law firms that handle foreclosure cases on behalf of banks, dubbed "foreclosure mills."
Lawyers operating foreclosure mills often are paid based on the volume of cases they complete. Some receive $1,000 per case, court records show. Firms compete for business in part based on how quickly they can foreclose. The David Stern firm had about 900 employees as of last year, court records show.
"The pure volume of foreclosures has a tendency perhaps to encourage sloppiness, boilerplate paperwork or a lack of thoroughness" by attorneys for banks, said Judge Tepper of Florida, in an interview. The deluge of foreclosures makes the process "fraught with potential for fraud," she said.
At an unrelated hearing in a separate matter last week, Anthony Rondolino, a state-court judge in St. Petersburg, Fla., said that an affidavit submitted by the David Stern law firm on behalf of GMAC Mortgage LLC in a foreclosure case wasn't necessarily sufficient to establish that GMAC was the owner of the mortgage.
"I don't have any confidence that any of the documents the Court's receiving on these mass foreclosures are valid," the judge said at the hearing.
A spokesman for GMAC declined to comment and a lawyer at the David Stern firm declined to comment.

White House should rethink loan write-downs: watchdog

White House should rethink loan write-downs: watchdog

April 20, 2010



WASHINGTON (Reuters) - The Obama administration should consider forcing lenders to make principal reductions for struggling homeowners who owe more than their home is worth, the watchdog overseeing the $700 billion bank bailout said in a report released on Tuesday.
Late last month, the White House announced a significant expansion to its efforts to help homeowners by providing subsidies for lenders who write down principal for so-called "underwater" borrowers. Those programs are voluntary.
"Treasury should consider changes to better maximize its effectiveness," said Neil Barofsky, the Special Inspector General for the Troubled Asset Relief Program, or SIGTARP.
Barofsky said the voluntary nature of the Home Affordable Modification Program (HAMP) principal reduction plan sets up situations where some borrowers benefit, while others who may be just as deserving, do not.
"Giving (mortgage) servicers the discretion to implement principal reduction introduces a questionable inconsistency into the HAMP program and stands in stark contrast to the mandatory nature of the other significant mortgage modification triggers," Barofsky wrote.
The report also urged the administration to consider extending the amount of time unemployed homeowners are forgiven from making mortgage payments as the maximum six months now allowed may not be long enough.
"Although no program will assist all unemployed borrowers, Treasury should strive for a program that will at least assist the typical unemployed borrower," the report said, noting the average duration of reported unemployment is more than 31 weeks in the latest recession, the longest stretch since records began in 1948.
RISING TIDE OF FORECLOSURES
Weakness in the housing market and high unemployment continue to weigh on the U.S. economic recovery, though consumer confidence itself is growing.
The Obama administration introduced the $75 billion homeowner assistance program in early 2009, which includes $50 billion allocated from the bailout funds.
After receiving substantial criticism from Barofsky and others, the administration announced in March a major expansion of the program, which has used just a fraction of that money.
Those changes included the principal write-down incentives, and subsidies for lenders to provide forbearance for up to six months for unemployed borrowers.
Barofsky noted that nearly 2.8 million foreclosures were initiated in 2009 and that figure is likely to climb for 2010. In the first quarter, there were more than 932,000 foreclosure filings, an annualized pace of more than 3.7 million foreclosures.
"Unfortunately, HAMP has made very little progress in stemming this onslaught," Barofsky said.
As of the end of March, the HAMP program has 1,008,873 total active modifications, including 227,922 modifications that have been made permanent, according to the Treasury Department. That's up from 1,003,902 total modifications and 168,708 permanent modifications through February.
Barofsky also said the program changes and the lack of clear guidelines associated with those changes may end up leaving the government susceptible to increased fraud.
"Criminals feed on borrower confusion, and frequent changes to the program provide opportunities for experienced criminal elements to prey on desperate homeowners who have not been educated as to the risks of fraud," the report said.

Fannie Mae wants to help some troubled borrowers get back into home market

Fannie Mae wants to help some troubled borrowers get back into home market

Saturday, April 24, 2010

Here's some good news for people who had to give the deed on their house back to the bank because of financial problems, or who have done a short sale to avoid foreclosure: You may not have to wait the typical four or five years to re-qualify for financing to buy another home.
Instead, it could be as little as two years. In a bulletin to lenders April 14, mortgage giant Fannie Mae said it is relaxing rules that prevented loan applicants who have participated in short sales or deeds in lieu of foreclosure from obtaining a new mortgage for extended periods of time. The new rules are scheduled to take effect July 1.
Homeowners who have done short sales -- such as under the Obama administration's new Home Affordable Foreclosure Alternatives program -- will also be able to qualify for a mortgage in as little as two years. Although Fannie Mae officials declined to discuss the reasoning behind the changes, the bulletin to lenders said the company hopes to encourage troubled borrowers to work out solutions that avoid the heavy costs of foreclosure.
Fannie's new standards come with some noteworthy fine print, however. To qualify for a new loan in the minimum two years, most borrowers will need to come up with down payments of at least 20 percent. If they can scrape together only 10 percent for a down payment, the wait will revert to the four-year minimum. And if their down payments are less than 10 percent, the wait could be even longer.
On the other hand, if borrowers can demonstrate that their mortgage problems were directly attributable to "extenuating circumstances" -- such as loss of employment, medical expenses or divorce -- they might be able to qualify for new loans with minimum down payments of 10 percent in just two years.
Freddie Mac, Fannie's rival in the conventional secondary mortgage market, has slightly different policies on mandatory waiting periods after short sales or deeds in lieu of foreclosure. For borrowers who cannot demonstrate that extenuating circumstances caused their financial problems, Freddie Mac will not approve new mortgages in less than four years. For people who lost their houses to foreclosure because of their financial mismanagement, Freddie's mandatory waiting period remains at five years.
On the other hand, when there are documented extenuating circumstances, the wait at Freddie Mac drops to two years after short sales or deeds in lieu and to three years after foreclosure.
Housing and consumer counseling advocates welcomed Fannie's relaxation of rules that had penalized borrowers who lost their houses after layoffs, illness and other unforeseen events.
"This is a positive move," said Marietta Rodriguez, director of homeownership and lending for NeighborWorks America, a national nonprofit network created by Congress to assist with homeowner financial counseling and community development.
"We all know that there are many people who through no fault of their own have to sell," she said, but they were blocked from buying a house again for four years or longer, even though they had rebuilt their credit, had qualifying incomes and were fully capable of handling a mortgage responsibly.
The main potential complication in Fannie's new approach, said Rodriguez, is in its credit-rehabilitation requirements. To qualify for a new mortgage, Fannie expects borrowers to reestablish their credit sufficiently to get passing grades from the company's automated underwriting system, which considers credit bureau data, among other factors.
But according to Fannie's bulletin to lenders, it will not consider applicants with "nontraditional" credit or "thin files," where there is not enough history on file with the national credit bureaus to generate a risk score.
Rodriguez worries that many homeowners who have lost their houses during periods of high unemployment and stricter underwriting requirements by banks won't have sufficiently "traditional" credit histories -- home-equity lines, revolving credit card accounts, personal loans and the like -- to pass Fannie's test. After the years of recession, their main credit data may instead be their rent payment histories and telephone and utility bill payments, none of which show up in the national credit bureaus' files.
Fannie Mae's revised standards may well provide an early second chance at homeownership for thousands of borrowers who assumed they would need to wait much longer than two years. But for those who don't have traditional credit profiles and sufficient down payments, that second chance is likely to be deferred.

Timeline of celebrity foreclosures

Timeline of celebrity foreclosures


We can’t ignore it any longer: celebrities are taking the foreclosure hit, too. The latest celebrity is former heavyweight boxing champion Evander Holyfield. A legal notice that appeared in a local newspaper shows his Fayette County, GAestate is under foreclosure. The 104-room, 54,000-square-foot home worth an estimated $10 million and is to be auctioned by a bank on July 1.
Below is a veritable who’s who of celebrities facing foreclosure. Who’s next?




2008:
06/18/08: Shaq wants to help foreclosure victims
06/23/08: Dallas Cowboys’ ‘Pacman’ Jones and former NBA star Vin Baker in foreclosure trouble
06/26/08: Ernestine Anderson in foreclosure trouble
07/10/08: Evander Holyfield Ducks Foreclosure Punch
08/15/08: Trump Rescuing Ed McMahon’s Home
08/20/08: Record Producer Damon Dash Faces Foreclosure
11/24/08: Wyclef Jean Faces Foreclosure on Miami Beach Canal-Front Home Remodel
12/09/08: American Idol star Fantasia Facing Foreclosure
2009:
04/15/09: Former major league baseball player Lenny Dykstra facing foreclosure
05/12/09: Victoria Gotti’s Growing Up Gotti house in foreclosure
06/04/09: Victoria Gotti Cuts Deal with Feds to Avoid Foreclosure
06/12/09: Stephen Baldwin Losing Nyack Home for Foreclosure
08/11/09: Atlanta Real Housewives’ Lisa Wu Hartwell Loses Home to Foreclosure
09/14/09: LaToya Jackson’s Las Vegas Condo in Foreclosure
10/14/09: Toni Braxton Faces Foreclosure
11/12/09: Nicolas Cage Loses His New Orleans Homes to Foreclosure
11/30/09: Latrell Sprewell Faces Foreclosure on his Purchase, NY home
12/23/09: Sinbad Could Lose Home to Foreclosure
2010:
01/21/10: Detroit Lions Lineman Luther Elliss to Lose Home to Foreclosure
01/26/10: Nicolas Cage’s Foreclosed Las Vegas Home Sells for Half the Price He Paid
02/19/10: Ex-NY Giant Plaxico Burress Gets Foreclosure Notice
02/23/10: Las Vegas Entertainer Wayne Newton Faces Foreclosure
03/16/10: Former Boxer Thomas Hearns at Risk of Foreclosure
03/19/10: Octomom Could Face Eviction Due to Foreclosure
04/15/10: Octomom gets Six-Month Reprieve from Foreclosure
04/16/10: Dustin Diamond Facing Foreclosure Again

Eight Signs Of A Real Estate Rebound

Eight Signs Of A Real Estate Rebound


04.23.10


Is the housing market on the verge of recovering? Is it recovering already? If you're not sure whether you believe the economists and pundits who think they can see the future, here are some tools that will help you make up your own mind.
Pending Home Sales
According to the National Association of Realtors, pending home sales, or the number of homes that are under contract and in the process of selling, rose by 8.2% in February (the most recent month for which data are available). The index is also an encouraging 17.3% over what it was a year ago.
Pending home sales are considered a leading indicator, meaning that they can forecast the direction the economy is headed. Leading indicators cannot truly predict the future, though, so they should be taken with a grain of salt.
The increase in pending home sales could be less indicative of a genuine improvement in the housing market, however, and more indicative of the pending expiration of the home buyer tax credit, which requires homes to be under contract by April 30.
Housing Starts
Housing starts are an important leading indicator of not just the housing market, but the economy as a whole, because people are more likely to start new residential construction projects when things are looking good. Housing starts don't look promising right now--the U.S. Census Bureau reported that privately owned housing starts in February were 5.9% below January and 0.2% above February 2009.
New- and Existing-Home Sales
New-home sales reached a record low in February with 308,000 sales, according to the National Association of Home Builders (NAHB). In 2005 1,283,000 new homes were sold per month on average. The good news is that new home sales increased by 20.8% in the West, one of the regions hardest hit by the housing crisis.
More good news comes from statistics on existing-home sales. About 5 million existing homes were sold in February, up from about 4.7 million a year ago.
Home Inventory
Home inventory is another leading economic indicator. A greater supply of homes for sale indicates weak market conditions. The NAHB also reported that as of February 2010, there were 236,000 new homes, or 9.2 months' supply, on the market, the worst number since May 2009. There was also 8.6 months' supply of existing homes on the market, the worst number since August 2009. However, these numbers are better than those from a year ago, when the supply was 11.1 months for new homes and 9.7 months for existing homes.
Housing Affordability
The National Association of Realtors reports that in February 2010, the median price of an existing home in the United States was $164,300 and the average mortgage rate was 4.99%. With median family income at $60,498, a family's housing payment would only be 14.2% of its income, well below the 25% cap many financial experts recommend for keeping the monthly budget under control.

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Compare these figures to 2007 averages, when a house cost $217,900, mortgage rates were 6.52% and median incomes were about the same at $61,173. While falling home prices aren't good, improved home affordability could help the recovery by putting home ownership within reach for more families, especially the first-time buyers, who have historically helped end housing slumps.
However, credit is still difficult to obtain, and unlike investors, most families can't buy homes without a mortgage. What's more, despite how far prices have fallen, there are still plenty of people in high-cost-of-living cities who can't afford to buy anything.
Mortgage Applications
The Mortgage Bankers Association (MBA) issues its Weekly Mortgage Applications Survey that reports on the number of people applying to borrow money to buy a house. For the week ending April 9, mortgage applications declined by 9.6% over the previous week. The four-week moving average, which is helpful in smoothing out the ups and downs of the weekly figures, was down 6.2%. The MBA stated that an increase in mortgage insurance premiums for FHA loans, which are attractive to buyers because of their low down payment requirements, may have contributed to this decline.
Mortgage Interest Rates
For the week ending April 9, the MBA reported that the average contract rate on a 30-year fixed-rate mortgage was 5.17%. Mortgage rates have been at historic lows for months, wavering between 5% and 6%. Low mortgage rates help entice buyers, but they can't fix a bad housing market on their own. The Consumer Confidence Index, a survey of how optimistic or pessimistic people feel about the economy, has been up and down in 2010, and consumers still feel pessimistic about the job market. The thousands of Americans who are unemployed couldn't get a mortgage even if rates were 1%.
Real Estate Mutual Funds
According to Morningstar, real estate mutual funds returned 9.4% in the first quarter of 2010, one of the highest return of any mutual fund category. Over the last year, they have also led all mutual funds with a gain of 105.3%. Shares of Vanguard's REIT ETF (VNQ), which invests in a wide range of real estate companies, gained 10% in the first quarter of 2010 and over 69% in the last year. These returns show investor confidence in the overall real estate market.
REITs are not limited to investing in the residential housing market, however; VNQ's largest holdings, for example, include Simon Property Group, which owns numerous shopping malls; Vornado Realty Trust, the owner of many office and retail buildings; and Public Storage, a well-known storage unit rental company.
Mixed Signals
Major housing market indicators currently provide mixed signals about how the housing market is doing. High unemployment rates, the continued difficulty of obtaining credit and the pending expiration of the home buyer tax credit make it hard to tell where the housing market is headed at the moment. Keep an eye on these indicators and wait for clear and consistent signals to emerge before you consider the housing market to truly be recovering.

Congress May Allow Private Student Loans to Be Shed in Bankruptcy

Congress May Allow Private Student Loans to Be Shed in Bankruptcy

April 22, 2010 

Private student loans have long been one of the scariest debts that a person could take on. Unlike, say, a mortgage loan or a credit card balance, private student loans cannot be discharged in bankruptcy except in extreme circumstances.
Two bills recently introduced in Congress aim to change that. Senators Dick Durbin (D-IL), Sheldon Whitehouse (D-RI) and Al Franken (D-MN) introduced a bill in the Senate that would rework the bankruptcy code, while Representatives Steve Cohen (D-TN) and Danny Davis (D-IL) introduced a similar bill in the House. While there are some differences between the measures, each aims to have the courts treat private student loans like most other types of debt. However, both bills would continue to except private student loans offered by state agencies from bankruptcy proceedings, according to Mark Kantrowitz, who tracks the student loan industry for FinAid.com.
A hearing on the bill is scheduled for this morning in the House.

BofA Could Cover Unemployed Borrower Mortgages for 9 Months

BofA Could Cover Unemployed Borrower Mortgages for 9 Months

April 19th, 2010

Bank of America (BAC: 18.39 0.00%) is considering a special program for unemployed borrowers that would offer as many as nine months of no mortgage payments while they hunt for a new job.
A spokesperson for BofA told HousingWire that the program is still pending regulatory approval. Whether or not the payments are forgiven or just deferred has not been solidified yet, but according to the spokesperson, a likely option would be to capitalize the past due payments into the new permanent modification.
If the borrower finds employment during the nine-month period, BofA would structure a loan modification using its own programs or the Home Affordable Modification Program (HAMP).
BofA completed almost 32,900 HAMP permanent modifications through March, up from 20,666 in February. BofA was the first to commit to the HAMP second-lien program from the Treasury and the first to offer principal write-downs as part of the servicing process.
If the borrower cannot find a job after nine months, the borrower would enter into a previously agreed upon deed-in-lieu of foreclosure arrangement. BofA would offer a minimum $2,000 “cash-for-keys” check to the homeowner.
“Sustained recessionary impacts and their effect on the unemployed, in particular, demand we consider creative solutions above and beyond what is currently available to put these customers in the best possible position to sustain homeownership,” the BofA spokesperson told HousingWire.
The savings bank Flagstar put in a new unemployment insurance programearlier in the month that would cover mortgage payments if the borrower lost his or her job. Genworth Financial (GNW: 18.34 0.00%) is providing insurance to the program that comes at no charge to the borrower.
This month, 15m people held no job, and the overall unemployment rate stayed at 9.7% in March – the same as February, according to the US Department of Labor

Households Facing Foreclosure Rose in 4th Quarter

Households Facing Foreclosure Rose in 4th Quarter

The ranks of those facing foreclosure swelled by a quarter-million households in the fourth quarter, new government data shows.
Households that are at least 90 days delinquent on their mortgage payment now number at least 1.6 million, according to a report Thursday issued by the Office of the Comptroller of the Currency and the Office of Thrift Supervision.
Though more people are in worse trouble, the good news is that fewer households are entering delinquency. The number of people who were only one payment behind actually dropped in the quarter by 16,000.
One reason for the ballooning number of seriously delinquent borrowers is that foreclosure, for better or worse, is becoming an increasingly lengthy process. Many delinquent borrowers are in trial modifications, which keeps the final stages of foreclosure at bay.
The number of foreclosures completed in the fourth quarter rose 9 percent, to 128,859. Another 38,000 owners disposed of their house in a short sale, where the lender agrees to accept less than it is owed.
Starting this month, the Treasury Department is promoting new rules to facilitate short sales. Borrowers who are trying to sell their house in a short sale can also put off the endgame for many months.
Both lenders and the Treasury are under pressure to save many of the homeowners now in foreclosure limbo. Bank of America, the country’s biggest bank, announced this week that it would forgive principal balances over a period of years on an initial 45,000 troubled loans.
Lenders began offering principal forgiveness last year on loans they held in their own portfolios. In the fourth quarter, however, this process abruptly reversed itself. The number of modifications that included principal reduction fell by half.
The Treasury is expected to announce soon adjustments to its mortgage modification plan that will do more to promote principal forgiveness. On Thursday, it detailed smaller changes to improve the program. Loan servicers are now required to pre-emptively reach out to borrowers who have missed two payments and solicit them for a modification.
The quarterly regulators’ report is one of the broadest surveys of loan performance, covering 34 million first-lien loans. It shows about 4.6 million borrowers qualify as distressed, ranging from only one payment behind to those within days of being evicted by the sheriff.
Since the report only covers about two-thirds of American mortgage loans — and the higher quality loans at that — the actual number of the distressed is about seven million households.

Inspector general says changes to Making Home Affordable may impede help

Inspector general says changes to Making Home Affordable may impede help

Wednesday, April 21, 2010



Proposed changes to the government's marquee foreclosure-prevention initiative may impede efforts to help troubled homeowners and could lead to more fraud in the program, a federal watchdog concluded in a report released Tuesday.
The Making Home Affordable program was intended to reach as many as 4 million struggling borrowers when it was launched a year ago, but it has permanently modified only 230,000 loans. That prompted the Obama administration to announce changes to the program last month as it aims to help unemployed borrowers and homeowners who are "underwater," owing more than their homes are worth.
When the changes are adopted later this year, lenders will be required to slash the mortgage payments of unemployed borrowers for three to six months. For the first time, the government will offer financial incentives to lenders that reduce the loan balances of underwater borrowers.
But the goals of these changes are ill-defined, and their guidelines are unclear, which could lead to increased fraud, according to the quarterly report by Neil Barofsky, the special inspector general for the federal Troubled Assets Relief Program.
Although the government has said it does not expect to spend more than $50 billion on these adjustments, it has not provided a breakdown of costs for each new initiative; nor has it specified how many borrowers it hopes to reach or fully formulated its ideas, the report said.
"Criminals feed on borrower confusion, and frequent changes to the programs provide opportunities for experienced criminal elements to prey on desperate homeowners," Barofsky wrote.
The report singles out the larger government payouts soon to be offered to borrowers and lenders who participate in short sales, in which lenders allow struggling borrowers to sell their homes for less than what they owe on them.
These short sales are vulnerable to "flopping," a scheme that typically involves industry insiders who appraise a home at a deflated value, arrange its sale to a straw purchaser and then quickly resell the property at market value, pocketing the profit.
Deterring such activity requires adopting a uniform appraisal system similar to the one in place at the Federal Housing Administration, the report said. Without that, the program is likely to attract crooks, especially since firms will soon to be able to collect $1,500 for allowing a short sale, instead of the current $1,000, the report concluded.
In a letter to Barofsky, a Treasury Department official said the administration plans to roll out a public-service campaign to raise awareness of mortgage fraud. The government will also provide fraud warnings as it makes changes, Herbert M. Allison Jr., assistant Treasury secretary for financial stability, wrote in the letter.
Other recommendations in Barofsky's report include having the administration consider extending the three-to-six-month window for mortgage assistance to jobless homeowners, given that 43 percent of the unemployed have been out of work for 27 weeks.
As for underwater borrowers, the report praised the administration for encouraging lenders to cut their loan balances, something it had been reluctant to do in the past for fear that such a move would encourage borrowers to stop paying their loans.
But the success of that plan hinges on lenders' willingness to participate; the report recommended that the administration reconsider the voluntary nature of the program.
Lenders will be asked -- but not required -- to reduce the principal owed on a loan if the amount exceeds the value of the home by 15 percent or more. The reduced amount would be set aside and forgiven by the lender over three years if the borrower keeps up with monthly payments.

Freddie Mac offers help to flooded out homeowners

Freddie Mac offers help to flooded out homeowners

Wednesday, April 21, 2010



McCLEAN, Va. -- Freddie Mac said Wednesday it will work with homeowners affected by recent floods to provide mortgage relief.
Freddie Mac will work with banks to help homeowners in Rhode Island, Massachusetts, New Jersey and West Virginia whose homes were damaged or destroyed and are located in federally declared major disaster areas.
The help could include reduced or suspended mortgage payments for up to 12 months for borrowers of Freddie Mac-owned mortgages.
Other options include:
- Waiving assessments of penalties or late fees against borrowers with disaster-damaged homes.
- Not reporting forbearance - when payments are suspended or reduced - or delinquencies caused by the disaster to credit bureaus.
- Suspending foreclosure and eviction proceedings for up to 12 months.
Each case must be individually assessed.

Judges’ Frustration Grows With Mortgage Servicers

Judges’ Frustration Grows With Mortgage Servicers

PHOENIX — Bobbi Giguere had no luck in securing a loan modification from her mortgage servicer, Wells Fargo. For months, she had sent the bank the financial documents it requested to process her modification. But each time she called to check on the request, she was told to send her paperwork again.
“I submitted the paperwork three times, and nothing happened,” said Mrs. Giguere, 41, who has a high school education and worked as restaurant manager before losing her job.
On Thursday, something happened. She questioned a Wells Fargo official about the bank’s lack of response — under oath.
The spectacle of a high-ranking banking executive being grilled by an ordinary homeowner was the result of an unusual decision by Judge Randolph J. Haines of the United States Bankruptcy Court to summon a senior executive from Wells Fargo to appear in Mrs. Giguere’s bankruptcy case.
At the hearing, Judge Haines made it clear that he was acting out of concerns about Wells Fargo’s mortgage modification practices generally.
“This is certainly not an isolated case,” he said. “The kind of story I hear from this debtor is one that I and other bankruptcy judges around the country are hearing over and over and over again.”
With consumers complaining about the difficulty of getting any response from their mortgage servicers, the effectiveness of the Obama administration’s plan to provide homeowner relief is being threatened. As they wait for an answer on whether they might qualify, homeowners are succumbing to foreclosure and bankruptcy proceedings and winding up in courts — at times in front of judges who are also frustrated.
Ms. Giguere filed for bankruptcy protection as she was trying to keep her three-bedroom house in a Phoenix suburb, where she lives with her 15-year-old son. Representing the bank at her hearing on Thursday was Joseph Ohayon, senior vice president of Wells Fargo Home Mortgage Servicing.
Under preliminary questioning by one of the bank’s lawyers, Mr. Ohayon stated that Mrs. Giguere had repeatedly failed to provide a financial worksheet, a critical document in processing a loan modification.
Under cross-examination by Mrs. Giguere (who had a little assistance from Judge Haines), the bank’s defense withered. From her files, Mrs. Giguere produced a letter from Wells Fargo describing the paperwork that she needed to file for a loan modification. In the witness chair, Mr. Ohayon read the letter.
“Mrs. Giguere is right,” Mr. Ohayon concluded. “The letter did not ask for a financial worksheet.”

Using Bankruptcy to Remove a Judgment Lien

Using Bankruptcy to Remove a Judgment Lien


In bankruptcy judgment or liens against you may be removed entirely if you can qualify for a Chapter 7 petition. When the unemployment rate rises, more people are having a difficult time paying their bills. Creditors become more aggressive in their tactics when trying to collect a debt. They may initiate a lawsuit against you in order to get the money they are owed. If you fail to respond to a lawsuit within a specific period of time, the creditor may be able to obtain a judgment against you. They can take the judgment and have your wages garnished or place a lien on any property that you own.

A discharge in bankruptcy voids the underlying judgment, but the discharge does not automatically remove a judgment lien from your property. If you qualify, your might be able to file a motion to avoid or cancel the line under Section 522(f) of the Bankruptcy Code.

Under Section 522(f), you can remove most types of judgment liens if the lien impairs an exemption that you would be entitled to claim under the law. Although bankruptcy is a federal law, it is largely state law that determines what property you can an cannot keep when a debtor files for bankruptcy.

If you have a judgment lien against your home and want to learn more about how to remove it in bankruptcy, please feel free to contact us.

Getting a Judgment Removed Through Bankruptcy

Bankruptcy is a legal proceeding governed by federal laws. However, state laws dictate the amount allowed for a homestead exemption.  Section 522(f) under the federal bankruptcy code allows the homeowner to remove a judgment if the lien impairs the debtor’s ability to claim the maximum amount allowed under the homestead exemption.

Which Debts Can Be Discharged?

Consumers may choose to file a Chapter 7 bankruptcy, which will eliminate all of their unsecured debts. The bankruptcy laws were changed in 2005 for individuals who wish to file under Chapter 7 protection. Certain requirements must be met before a debtor can qualify for this option. If the debtor’s monthly income is less than the average median income in the state where they reside, they can file for Chapter 7. Petitioners who do not meet this requirement will have to file for Chapter 13, which is a reorganization of their debts. Judgments and liens that can be legally removed through Chapter 7 include:

• Federal Tax Liens—These can be removed if the IRS has not filed a lien against your property and the taxes were due at least three years prior to filing. You must have received an assessment notice 240 days before filing your bankruptcy petition.
• Credit Card Debts—If a credit card company has obtained a judgment against you, this can be totally eliminated through bankruptcy. Some lenders can object to the discharge of debt through an adversary proceeding, but this rarely happens.
• Civil Lawsuits—Nearly all civil judgments can be discharged unless they were due to driving under the influence (DUI).
• Unsecured Loans—Any loan that is not secured by collateral, such as a vehicle or property can be wiped out under Chapter 7.

What Does the Bankruptcy Court Consider a Priority Debt?

The Federal Bankruptcy Court will examine your monthly income and weigh this amount against your currently monthly obligations. Certain debts take a priority over others and cannot be discharged through bankruptcy. If you have a judgment or lien against you for any of the following, it cannot be eliminated by the bankruptcy court:

• Monthly child support obligations
• Spousal support payments
• Certain fines, penalties and court costs
• Restitution owed to a victim of a DUI personal injury lawsuit
• Student loans, unless paying these back imposes an undue hardship
• Income taxes that are less than three years old

Bankruptcy will also prevent judgment being filed against you. If the creditor files a lien after the bankruptcy, you may be able to have your case reopened to get this discharged.

Consulting With a Bankruptcy Attorney

When you meet with a bankruptcy attorney prior to filing, you will be asked to list all of the creditors that you owe money to. If you want to discharge a lien or judgment, make sure that your lawyer specifically lists the name of the creditor on the bankruptcy petition. Failing to do so will result in the judgment not being eliminated.

Walk Away From Your Mortgage!

Walk Away From Your Mortgage

John Courson, president and C.E.O. of the Mortgage Bankers Association, recently told The Wall Street Journal that homeowners who default on their mortgages should think about the “message” they will send to “their family and their kids and their friends.” Courson was implying that homeowners — record numbers of whom continue to default — have a responsibility to make good. He wasn’t referring to the people who have no choice, who can’t afford their payments. He was speaking about the rising number of folks who are voluntarily choosing not to pay.
Such voluntary defaults are a new phenomenon. Time was, Americans would do anything to pay their mortgage — forgo a new car or a vacation, even put a younger family member to work. But the housing collapse left 10.7 million families owing more than their homes are worth. So some of them are making a calculated decision to hang onto their money and let their homes go. Is this irresponsible?
Businesses — in particular Wall Street banks — make such calculations routinely.Morgan Stanley recently decided to stop making payments on five San Francisco office buildings. A Morgan Stanley fund purchased the buildings at the height of the boom, and their value has plunged. Nobody has said Morgan Stanley is immoral — perhaps because no one assumed it was moral to begin with. But the average American, as if sprung from some Franklinesque mythology, is supposed to honor his debts, or so says the mortgage industry as well as government officials. FormerTreasury Secretary Henry M. Paulson Jr. declared that “any homeowner who can afford his mortgage payment but chooses to walk away from an underwater property is simply a speculator — and one who is not honoring his obligation.” (Paulson presumably was not so censorious of speculation during his 32-year career atGoldman Sachs.)
The moral suasion has continued under President Obama, who has urged that homeowners follow the “responsible” course. Indeed, HUD-approved housing counselors are supposed to counsel people against foreclosure. In many cases, this means counseling people to throw away money. Brent White, a University of Arizona law professor, notes that a family who bought a three-bedroom home in Salinas, Calif., at the market top in 2006, with no down payment (then a common-enough occurrence), could theoretically have to wait 60 years to recover their equity. On the other hand, if they walked, they could rent a similar house for a pittance of their monthly mortgage.
There are two reasons why so-called strategic defaults have been considered antisocial and perhaps amoral. One is that foreclosures depress the neighborhood and drive down prices. But in a market society, since when are people responsible for the economic effects of their actions? Every oil speculator helps to drive up gasoline prices. Every hedge fund that speculated against a bank by purchasing credit-default swaps on its bonds signaled skepticism about the bank’s creditworthiness and helped to make it more costly for the bank to borrow, and thus to issue loans. We are all economic pinballs, insensibly colliding for better or worse.
The other reason is that default (supposedly) debases the character of the borrower. Once, perhaps, when bankers held onto mortgages for 30 years, they occupied a moral high ground. These days, lenders typically unload mortgages within days (or minutes). And not just in mortgage finance, but in virtually every realm of our transaction-obsessed society, the message is that enduring relationships count for less than the value put on assets for sale.
Think of private-equity firms that close a factory — essentially deciding that the company is worth more dead than alive. Or the New York Yankees and their World Series M.V.P. Hideki Matsui, who parted company as soon as the cheering stopped. Or money-losing hedge-fund managers: rather than try to earn back their investors’ lost capital, they start new funds so they can rake in fresh incentives. Sam Zell, a billionaire, let the Tribune Company, which he had previously acquired, file for bankruptcy. Indeed, the owners of any company that defaults on bonds and chooses to let the company fail rather than invest more capital in it are practicing “strategic default.” Banks signal their complicity with this ethos when they send new credit cards to people who failed to stay current on old ones.
Mortgage holders do sign a promissory note, which is a promise to pay. But the contract explicitly details the penalty for nonpayment — surrender of the property. The borrower isn’t escaping the consequences; he is suffering them.
In some states, lenders also have recourse to the borrowers’ unmortgaged assets, like their car and savings accounts. A study by the Federal Reserve Bank of Richmond found that defaults are lower in such states, apparently because lenders threaten the borrowers with judgments against their assets. But actual lawsuits are rare.
And given that nearly a quarter of mortgages are underwater, and that 10 percent of mortgages are delinquent, White, of the University of Arizona, is surprised that more people haven’t walked. He thinks the desire to avoid shame is a factor, as are overblown fears of harm to credit ratings. Probably, homeowners also labor under a delusion that their homes will quickly return to value. White has argued that the government should stop perpetuating default “scare stories” and, indeed, should encourage borrowers to default when it’s in their economic interest. This would correct a prevailing imbalance: homeowners operate under a “powerful moral constraint” while lenders are busily trying to maximize profits. More important, it might get the system unstuck. If lenders feared an avalanche of strategic defaults, they would have an incentive to renegotiate loan terms. In theory, this could produce a wave of loan modifications — the very goal the Treasury has been pursuing to end the crisis.
No one says defaulting on a contract is pretty or that, in a perfectly functioning society, defaults would be the rule. But to put the onus for restraint on ordinary homeowners seems rather strange. If the Mortgage Bankers Association is against defaults, its members, presumably the experts in such matters, might take better care not to lend people more than their homes are worth.

Foreclosures Rise in Military, Army Wife Goes to Battle

Apr 19th 2010 

While her husband serves his country, military spouse Nicole Rosen is fighting her own war to keep their home. The family moved to Washington State from Oklahoma in 2005 for Staff Sgt. John Rosen's military duty and purchased a home at a high interest rate. Soon after, Nicole quit her job after her now-4-year-old son was diagnosed with kidney disease. With the steep drop in income, the family fell behind on its mortgage payments. Now Rosen manages a tax office part-time, takes care of her two young sons, and fights to keep the family's Tacoma, Wash., house out of foreclosure.

In July 2009, after multiple requests for loan modifications, the family found out their home was slated to be sold at a trustee sale a mere 10 days before the scheduled auction. Frightened and outraged, the Army wife decided to fight.

Like the Rosens, an increasing number of U.S. military families are unable to meet their mortgage obligations, according to recent findings from RealtyTrac, an online marketplace for foreclosed properties that identifies a 10-percent foreclosure rate spike in military ZIP codes. 
Before receiving notice of her property's sale, Rosen said she repeatedly sent loan modification requests to her mortgage lender, IndyMac Bank (now, OneWest Bank). Yet she received no response. When she finally reached an IndyMac employee via telephone, she was told that her loan modification "was being worked on." But a few weeks later, the Rosens were hit with news that they had only 10 days to vacate their property before the house was put up for sale by the Regional Trustee Services Corporation.

"I was not properly notified regarding the sale, and I immediately fought back," Rosen says, referring to her decision to get the sale stopped herself, since the Rosens couldn't afford to hire a lawyer. Calls and e-mails to IndyMac/OneWest Bank for comment were not returned.

Rosen requested foreclosure relief under the Servicemembers Civil Relief Act(SCRA), intended to reduce the financial burdens of military personnel during a period of active duty; however, her request was summarily denied.

In such situations, individuals can turn to The U.S. Department of Veterans Affairs, which offers a counseling program that the general public does not have access to, says Eli Tene, foreclosure expert and president of iShort Sale. Other than that, Tene says, military families have the same options as the rest of the U.S. population: loan modifications and short sales. "When a property goes to liquidation, lenders are taking the same position with the military as with the general public," Tene adds.

The Rosens' case was no exception. Even the involvement of elected Washington State officials -- a regulatory agency in Olympia, Wash., and the attorney general -- did in the foreclosure process with IndyMac.

So the Army wife took the only way out: She filed an emergency petition for bankruptcy. "I only needed the paper saying I had filed. I received that paper and then faxed it to the trustee. That immediately bought me another 30 days," Rosen says.

She then did her law homework, and went to court to present her case to a judge at the Pierce County Superior Court. She received an injunction for 90 days, during which her house was scheduled to be sold two or three more times.

At the end of the 90 days, Rosen went back to court and presented her case to a different judge. She won an injunction and a trial date for this coming July. "I have been to court on three different occasions and, as of yet, none of the defendants [IndyMac and Regional Trustee Services Coporation] have shown," Rosen says.

The Rosens stopped paying their mortgage in January and are currently $50,000 underwater. If the July court date provides no relief, the family may be out of luck.

Nicole Rosen admits it's tempting simply to walk away. "I'm so far behind now that the bank won't accept any payments unless it's a large amount," Rosen says. "Plus, why throw good money after bad? If I am unable to work out a modification with the bank, then a payment here and there would not do any good."

Fighting Foreclosure - Three Main Defenses

Fighting Foreclosure - Three Main Defenses

When homeowners begin to consider working with an attorney to defend their foreclosure in court, they often feel overwhelmed by the amount of nonsense and bureaucracy they are forced to deal with. But whether they are defending a bank's lawsuit against them, or initiating their own to stop an auction under a power of sale clause, there are three main categories of defense that borrowers can consider.

The first type of defense against a foreclosure by a mortgage company involves challenging the validity of the loan documents themselves. If the original mortgage or deed of trust was not drafted or executed legitimately, homeowners may be able to have the entire transaction rescinded, depending on the laws involved. In other cases, borrowers may question whether the lender suing them actually owns the note -- if not, there is no real valid contract between the two parties. Also, if there is a defect in the paperwork or illegal clauses, the mortgage may not be valid. Banks often violate state and federal law when creating mortgage, and it may be worth the time for borrowers to consult with an attorney about these issues.

Second, homeowners fighting foreclosure in court may rely on defenses that raise the issue of misconduct by the mortgage lender. Misconduct and predatory lending do not have concrete definitions, but a loan may be considered predatory based on numerous characteristics of it. If the borrowers were approved with no income verification or were given an interest rate that the bank knew the owners would not be able to pay, there may be a defense against foreclosure based on misconduct. Also, if the appraisal was inflated and the bank knowingly accepted the unreasonably high value, and gave the owners a loan based on the value of the home instead of what they could actually afford, it may be a case of predatory lending.

The final category of legal defense against foreclosure involves cases where the lender does not follow the required procedures before the sheriff sale. Every state and county has different rules that the bank's attorneys or the trustee must follow in order to foreclose on a house and have it sold at a public auction. Courts take for granted that the bank meets all of these requirements adequately, but homeowners may raise as a defense the failure to follow all the guidelines. In fact, lenders routinely violate the local laws and regulations, and the attorneys do not care to follow them because they know the banks own the courts anyway, for the most part. But procedural violations can be raised as a defense against foreclosure.

By focusing on these three types of legal defenses, homeowners may be able to drill down further and really specify the issues that affect their mortgage. Even if they just raise the defenses to force the bank to negotiate a loan modification or give them more time to sell or move out, education about lending laws is never a waste. As well, homeowners may decide to mount a full defense or hire a knowledgeable lawyer to help them.

April 16, 2010

Fighting Foreclosures

From the start, the central concern about President Obama’s antiforeclosure effort has been that it would postpone foreclosures but ultimately not prevent enough to ease the economic strain from mass defaults. That concern seems increasingly justified.
In the first quarter of 2010, there were 930,000 foreclosure filings — an increase of 7 percent from the previous quarter and 16 percent from the first three months of 2009, according to recent data from RealtyTrac, an online marketer of foreclosed properties. The surge seems to indicate that homes that were in the foreclosure pipeline are now being lost for good.
The administration’s figures are not encouraging either. The Treasury reported recently that as of March, nearly 228,000 troubled loans qualified under the Obama plan for long-term payment reductions; another 108,000 long-term modifications were pending. That’s up from February, but still far behind the need. Currently, some six million borrowers are more than 60 days delinquent.
Three oversight groups have issued reports in the past month criticizing the administration’s effort and predicting that it would fall far short of its goal of helping four million borrowers by the end of 2012.
And on Tuesday, officials from JPMorgan Chase and Wells Fargo told a Congressional panel that they were not inclined to fully embrace the administration’s latest foreclosure-prevention plan. Announced in late March, it calls for lenders to modify troubled mortgages by cutting the loan principal, which restores some equity to borrowers while lowering the payment. The bankers were unpersuasive. They generally objected to large-scale principal reductions, even though the administration’s plan applies relatively narrowly to borrowers who are deeply indebted and meet various other criteria.
The testimony was more proof that relying on lenders to voluntarily rework troubled loans is not working.
The hearing investigated a specific obstacle to widespread modifications: Investors, including pension funds and mutual funds, often hold the first mortgages. Banks often hold home-equity loans and other second mortgages. Investors reasonably believe that second liens should be reduced before the primary mortgage is modified, but banks balk at that because it would prompt write-offs they don’t want.
Some investors, notably the powerhouse group BlackRock, have called for a special bankruptcy process to resolve the standoff. The court would seek to reduce bankrupt borrowers’ total debt to affordable levels, starting with unsecured debt like credit cards, then undersecured debt, like second mortgages, and then, if necessary, the primary mortgage debt.
We have long called for using bankruptcy court to help resolve the foreclosure crisis. A big advantage of bankruptcy over government-subsidized modifications is that bankruptcy is a difficult process that does not entice anyone to purposely default in order to get better repayment terms.
Banks have argued for the status quo, in which bankruptcy judges are not allowed to modify the terms of primary mortgages, and they have prevailed in Congress and, apparently, within the administration. The result is an ongoing foreclosure crisis. It is time to revive the fight to open the courthouse door to bankrupt homeowners.

President signs into law two-month extension of COBRA premium subsidy

President signs into law two-month extension of COBRA premium subsidy


4/16/10 


Late on April 15, Congress passed H.R. 4851, the Continuing Extension Act of 2010, and it was signed into law by the President the same day (P.L. 111-157). The Act extends the eligibility period for the COBRA continuation premium subsidy for two months. Under prior law, the eligibility period had ended on Mar. 31, 2010. Under the Act, the eligibility period for the subsidy is retroactively extended for two months and will end on May 31, 2010. The Act also carries extended COBRA election procedures for certain involuntarily terminated workers and new notice requirements for plan administrators. See Weekly Alert - 04/22/2010 for details.
The Act also extends a number of other programs, such as unemployment insurance, and includes a Sense of the Senate that a Value Added Tax would be a massive tax increase that "will cripple families on fixed income and only further push back America's economic recovery," and that "the Senate opposes a Value Added Tax."

Defaults Rise in Loan Modification Program

Defaults Rise in Loan Modification Program

April 14, 2010

The number of homeowners who defaulted on their mortgages even after securing cheaper terms through the government’s modification program nearly doubled in March, continuing a trend that could undermine the entire program.
Data released Wednesday by the Treasury Department and theHousing and Urban Development Department showed that 2,879 modified loans had been ended since the program’s inception in the fall, up from 1,499 in February and 1,005 in January.
The Treasury Department said it could not explain the growing number of what it called cancellations, almost all of which were apparently prompted by the borrower’s being unable to make the new payment. A scant number — 37 — were because the loan had been paid off, presumably because the borrower sold the house.
About seven million households are behind on their mortgage payments.
The Obama administration’s modification program has been widely criticized for doing little to help them. The program received another bad review on Wednesday with the release of a report from the Congressional Oversight Panel.
The Treasury’s stated goal is for the modification program to help as many as four million households, the oversight report said, “but only some of these offers will result in temporary modifications, and only some of those modifications will convert to final, five-year status.”
The report continued: “Even among borrowers who receive five-year modifications, some will eventually fall behind on their payments and once again face foreclosure. In the final reckoning, the goal itself seems small in comparison to the magnitude of the problem.”
The Treasury took issue with the report and said the pace of modifications was picking up. The number of active permanent modifications in March was 227,922, an increase of 35 percent from those in February. An additional 108,212 permanent modifications are awaiting borrower approval.
Shaun Donovan, secretary of Housing and Urban Development, said in an interview that those were the important numbers to focus on.
“One percent of these loans defaulting is a tiny fraction,” Mr. Donovan said. “Given how stressed these borrowers are, even in the best situation, there will be redefaults. But I don’t think there is any evidence that would cause us to worry at this point.”
Julia R. Gordon, senior policy counsel for the Center for Responsible Lending in Washington, said she expected the number of post-modification defaults to continue to rise.
“It’s definitely alarming to look at those statistics,” she said. “The current model for modifications doesn’t necessarily produce sustainable results.”
While the program is too new to predict its long-term success, the data on previous modification efforts is not encouraging.
Sixty percent of modifications undertaken by banks in late 2008 were in default a year later, according to the latest Mortgage Metrics Report compiled by the Office of Thrift Supervision and the comptroller of the currency.
Many of these private plans either kept the payments the same or increased them. Inevitably, those mortgages suffered the highest failure rate: about two-thirds of the borrowers defaulted again.
Loans for which the payments were decreased by at least 20 percent failed at a slower but still significant rate of about 40 percent.
The government program takes a more aggressive approach, lowering the interest rates for all loans. On many loans, terms are also extended or principal payments put off for years. Treasury data shows that the median savings for borrowers receiving permanent modifications is $512 a month.
Many borrowers remain deeply indebted, however. They owe not only on the house, but on homeowner association fees, home equity loans, car loans, alimony and credit card interest.
Even after modification, $61 out of every $100 earned by the borrower goes to servicing debt, government figures show. For increasing numbers of modification recipients, mortgage relief is apparently not enough to stave off financial collapse.
“If you can help 60 percent, and 40 percent have to fall back, is that worthwhile?” asked John Courson, president of the Mortgage Bankers Association. “Clearly for the 60 percent it was, and the 40 percent weren’t going to make it anyway.”
The Treasury said on Wednesday that it had always anticipated that some homeowners would not sustain a modification, which was one reason the program had been greatly expanded. New elements focus on allowing distressed homeowners to sell their properties for less than they owe and on shaving the principal owed by borrowers.
The notion of cutting principal, however, has already run into some resistance from the big banks, which do not want borrowers to get the idea that their mortgage can be chopped on a whim.