Following the maxim that drastic times call for tepid measures, the banking industry continues to pay "lip service" to loan modifications while doing little. On Dec. 15, the Congressional Oversight Committee admitted the government's HAMP loan modification program has failed to help enough homeowners to stem the tide of foreclosures. The vast majority of loan modification requests fail, in part, experts believe, because banks have balked at offering a reduction in mortgage principal, the most effective way to halt costly foreclosures. Trying to revive HAMP, the administration in December announced new regulations designed to push banks into offering more reductions in principal than they have in the past. Fannie Mae and Freddie Mac immediately proclaimed, however, that they remain opposed to making this option available to struggling homeowners. Protecting the interests of the banking industry over the consumer, the Federal Reserve also blocked new foreclosure regulations that would have reined in foreclosure abuses. Although the economic collapse of 2008 has caused the tide to rush in on everyone, there has been no bailout for the "little guy." Left to fend for themselves, increasing numbers of homeowners are turning to a little-known provision in the federal bankruptcy law, which permits the discharge of a second or even third mortgage in its entirety in a Chapter 13 bankruptcy. The American Bankruptcy Institute recently reported that Chapter 13 bankruptcies have risen by 9 percent in 2010 compared to last year.
Flying under the media radar, the right to discharge a second mortgage in a Chapter 13 bankruptcy provides a glimmer of hope to homeowners stuck with a foreclosure because they own a home they can't afford and can't sell. With one in 10 Americans out of work, while others have suffered a pay cut as a condition of keeping their jobs, the amount of disposable income available to pay a mortgage is not what it used to be. Getting rid of a 2nd mortgage payment can sometimes make the difference between keeping a home and losing it to a foreclosure. How then does a homeowner qualify? Quite simply, when a home is worth less than the balance of a first mortgage, federal bankruptcy law -- at least in most states -- permits a homeowner to treat a second mortgage like an unsecured credit card and discharge it in a Chapter 13 bankruptcy.
Housing prices dipped for the third straight month in October, and hope for a recovery in 2011 has started to fade. According to Corelogic, an industry researcher, 11.8 million homes, or more than one out of five mortgages in the United States are "underwater" -- i.e. the total mortgage debt exceeds the value of the home. The U.S. Department of the Treasury estimates eight to 13 million foreclosures will occur from December 2010 through 2012 unless something intervenes. Ironically, the HAMP requirement that a homeowner generally be at least 60 days behind on a mortgage in order to qualify has led to foreclosures on homes where the mortgage payment had been up to date. In fact, a recent National Consumer Law Center's survey of 96 foreclosure attorneys in the US found that mortgage servicers began foreclosure proceedings against 2,500 of their clients even though a loan modification request was pending. Loan servicers do make more in fees from the foreclosure process than from the loan modification process, so this is not surprising.
Bankruptcy is a business decision, no less for a homeowner than it was for General Motors when it filed a Chapter 11 bankruptcy. This economy has sent clients to my door that I seldom used to see -- attorneys, physical therapists, nurses, college professors, and scores of people dependent on the real estate market for their livelihood. A bankruptcy is usually preceded by a loss of income, a divorce or medical issues, sometimes all three. Bankruptcy is not on anyone's list of fun things to do, and clients only consider it when the alternative, like a foreclosure, is worse. Many have tried to do a short sale or loan modification to no avail and have found that the bank would rather foreclose. In New Hampshire, a homeowner will be responsible for a mortgage deficiency for 20 years. These problems will persist until the powers that be decide to offer more than half-measures to address the foreclosure crisis.
For those facing the loss of their home and wondering whether a Chapter 13 bankruptcy may help get rid of a second mortgage, the following information may be helpful:
(1) It is disingenuous of banks to lull homeowners into a false sense of security by scheduling a foreclosure auction when a loan mod request is pending. If this happens to you, don't be too trusting when your bank tells you not to worry about the foreclosure because they'll continue the auction if there's no answer by the auction date. What they are really saying is if you are denied, the foreclosure will happen. One client told me that Bank of America won't even consider continuing a foreclosure auction due to a loan mod request until it was 72 hours before the auction date. I regularly receive panicked calls from homeowners denied a loan mod just before the auction occurs. While a Chapter 13 stops a foreclosure automatically, given how busy most bankruptcy lawyers are these days, finding one who has time to do a court filing at the last minute may be difficult.
(2) If you decide to see if you can get rid of a second mortgage, ask a broker to give you an opinion in writing of what your house is worth. Brokers will usually do this as a courtesy, figuring if you ever do decide to sell your house, you'll go through them. Make sure you ask for the potential sales price rather than a list price, which may be somewhat inflated. If the estimate is less than the balance of your first mortgage, then removing it in a Chapter 13 bankruptcy is possible.
(3) Even if you can get rid of a second mortgage, however, a Chapter 13 is not for everyone. Removing a second mortgage only works if you have enough income to complete the plan successfully. If the real problem is that you don't have enough monthly cash flow to pay your first mortgage and other expenses, Chapter 13 won't solve that problem.
(4) Chapter 13 will permit strapped homeowners to discharge most or all of their credit card debt. It usually won't discharge certain debt like taxes and student loans.
(5) Before making a decision, you want to be sure you can keep all property. Most states have exemptions sufficient to permit a homeowner to keep a house, vehicles, and other assets, however, some states are more generous than others.
The above is not intended as legal advice for your particular situation. Questions should be addressed to attorneys admitted to practice within your state. Richard Gaudreau is a lawyer admitted to practice in New Hampshire and Massachusetts and may be reached by email at: richard@attorneygaudreau.com or by phone at: 603-893-4300.
BR: Its gotta come form the top — time to stop coddling criminals whether they be muggers, bankers or laeyers.
Greg0658 Says:
January 11th, 2011 at 10:40 am
like the double-pyramid diamond of cash flow – it is also a representation of IQs
SCTTD Says:
January 11th, 2011 at 10:52 am
Failure to impose the law blindly to all parties equally will cause the total loss of faith in the system that we are spending trillions to “save”.
obsvr-1 Says:
January 11th, 2011 at 11:35 am
just a minor phonetic modification: change lawyer to liar and voila! all is well … I jest of course, when a lawyer commits perjury the punishment should be harsher then when a common citizen does as the lawyers are bound by their profession to up hold the law (or are they ?).
When the gatekeepers fail us, we are doomed to exist in the cesspool of the plutocracy, hopefully the disinfectant power from the light of disclosure and truth will cleanse the system.
About That Perjury, Judge . . . « Dylan Ratigan Says:
January 11th, 2011 at 12:34 pm
[...] PERMALINK [...]
MakingtheDrop Says:
January 11th, 2011 at 12:56 pm
Can’t play musical chairs when the dj is bought and paid for (or dead). The music just keeps playing…
Hang the blessed dj… http://www.youtube.com/watch?v=9AlH2oYedfk
EvilEsq Says:
January 11th, 2011 at 1:17 pm
Good article. Thanks for saying what the New York Times is afraid to.
Members of the US’s judicial system (attorneys and judges) have become our de facto aristocracy. The legal industry is the only self-regulated industry remaining in the US.
How many attorneys were prosecuted after the Enron scandal? Exactly ZERO yet attorneys were deeply involved in the Enron’s governance as well as structuring and documenting all of the transactions the firm entered into.
It’s not just judges that turn a blind eye to attorney misconduct, bar associations receive over 120,000 complaints regarding attorney misconduct annually. Fewer than 4.3% of attorneys who are complained about are disciplined. Most of the complaints that are prosecuted are for crimes that took place unrelated to the attorney’s legal practice or for an attorney’s misappropriation (read theft) of funds. Fewer than 1% of complaints by consumers of legal services are ever prosecuted.
Why? Lawyers and law firms are the largest source of funding for state and national political campaigns. In aggregate they give more to politicians than all corporations combined with the vast majority of the funding going to Democrats. Politicians are therefore loath to attempt to regulate the judicial system or the legal industry.
America’s judicial system is supposed to be our last line to defend our rights, property and liberties. It should be sacrosanct but has been totally corrupted to the advantage of judges, attorneys and their politician brethren… most of whom are attorneys.
dsawy Says:
January 11th, 2011 at 3:34 pm
I would think that in cases where a) the foreclosure is a judicial proceeding and b) where lawyers have submitted false affidavits, that they’re guilty of fraud upon the court, not merely perjury. Officers of the court are held to higher standards than non-officers, ie, they are responsible for the ability of the court to deliver justice. Where officers of the court commit fraud, the litigants are denied a fair hearing and due process of the law.
As I understand it, if fraud upon the court is proven, then any decision handed down as a result of that fraud can be vacated.
Mike in Nola Says:
January 11th, 2011 at 3:49 pm
I don’t know how it is in other states, even in TX, but I know in LA judges have a duty to report to the disciplinary committee lawyers who violate ethical or professional standards. Nothing like a letter from the Disciplinary Counsel to ruin your day.
FrancoisT Says:
January 11th, 2011 at 4:03 pm
I shall beat the drum on this as many times as needed: Our legal system has been perverted from providing a REASONABLE shake at equal justice to a machine honed to protect the interests of the powerful while shielding them from accountability and repressing very harshly, the “little people” that is, most of us who are not very well connected politically or by virtue of significant wealth.
Read “The New Jim Crow” and “With Liberty And Justice For Some” (to be published in March 2011)
So, seeing judges slapping lawyers on the wrist for offenses that would send us to the brig for a long time cannot possibly be surprising…and that is the real tragedy.
ELS Says:
January 12th, 2011 at 10:56 am
I guess. Remember, though, that any criminal charges require the DA to prove intent. So, you snag all the folks making slave wages (“Did you know that you were signing things w/o reading them?” “Yes.”) You might snag their managers who probably don’t make much more money (“Did you know your people were signing so many declarations that there was no way they could actually be reading the underlying files?” “Yes.”). Will you be able to convict anyone above that? Probably not. Everyone that was not in a position to literally see how things were set up has plausible deniability. As for the lawyers, it will also be very hard to obtain a conviction unless they actually saw the person signing off w/o looking at the file. When you need the dec, you send a letter or e-mail to the client along the lines of “I’ve drafted your declaration. Please review this closely. If it is not accurate, please call me or mark up the draft and send it back so I can correct it. If it is correct, please sign it and return it.” If the client signs w/o changing, where is the provable intent on the part of the lawyer?
Part of the reason many highly suspected cases of perjury don’t get convicted in all kinds of civil cases is because they are not easy to prove and obtain convictions on. The other part of the reason is simple resource allocation. Every perjury conviction is a purse snatcher that may not get prosecuted instead. It is your basic guns vs. butter question.
There are, however, things the Courts could do to prevent this in the first place: strictly apply the rules of evidence. Some lackey at the bank doesn’t have personal knowledge, but in his / her declaration says they read the file and the files says “XYZ.” If those notes from the file aren’t attached, that declaration is double hearsay – it’s inadmissible. In all honesty, many lawyers are lazy or don’t quite understand the rules and the Courts would come to a standstill if the rules of evidence were super-strictly applied outside of trial. There is a certain credibility component when one chooses to be lenient about the rules in order to get the cases moving. In my observation, the banks have lost that credibility and the judges I see have started applying the rules of evidence much more strictly when they are before the Courts.
Leave a Reply
You must be logged in to post a comment.
Source:http://removeripoffreports.net/
Major earthquake strikes southwestern Pakistan – This Just In <b>...</b>
[Updated at 4:47 p.m. ET] An earthquake with a preliminary magnitude of 7.2 struck Wednesday morning in a remote area of southwestern Pakistan, the U.S. Geological Survey reported. The earthquake occurred at 1:23 a.m. (3:23 p.m. ...
Brad Friedman and Desi Doyen: Green <b>News</b> Report: January 18, 2011 <b>...</b>
IN 'GREEN NEWS EXTRA' (see links below): Scientists warn of a future "superstorm" in CA; Obama to discuss clean energy with Chinese premier's visit?; "Managed retreat" for California coastal town; ABC Reports On Fossil-Fueled Climate ...
Casting <b>News</b>: Anne Hathaway to Guest on 'Glee,' Marissa Jaret <b>...</b>
Anne Hathaway must've made a good impression on 'Glee' creator Ryan Murphy at the Golden Globes this weekend, because he's already confirmed she will.
No comments:
Post a Comment