Wednesday, June 16, 2010

Lenders going after money lost in foreclosures and short sales

Click here for article

More and more lenders are pursuing borrowers for money lost in foreclosures and short sales. The money lossed in foreclosure or short sale is called a "deficiency" - the difference between what was owed on the mortgage loan(s) and the proceeds from the foreclosure or short sale. Some states, including Washington State, have laws that limit a home owner's liability for a deficiency. Other states allow the lender to pursue the homeowner for a deficiency, without limitation. In most cases, the deficiency and subsequent liability for the deficiency stems from subordinate liens (e.g., second mortgage, home equity loans, etc.) that are not paid off from the proceeds of the sale. The only recourse for these subordinate creditors is to attempt to collect the unpaid debt from the borrower. If the borrower does not pay, then the creditor may sue. If a lawsuit is initiated, the only recourse for the borrower is to file for bankruptcy. A bankruptcy filing would stop the lawsuit and allow the borrower to eliminate the personal liability for the deficiency. For the unforunate homeowner who faces a deficiency judgment, bankruptcy is often the last and only line of defense.

Friday, June 11, 2010

Home Affordable Modification Program (HAMP)

Too many homeowners are unfamiliar with the Home Affordable Modification Program (HAMP). Even those who know about HAMP do not understand their rights. In a nutshell, HAMP is a mortgage loan modification program created by the federal government (i.e., the Treasury Department) that allows qualified borrowers to modify payments on their first mortgage. It is often referred to as the "Obama Loan Modification Program."

There are 5 criteria for determining eligibility:
1) Home must be borrower's primary residence
2) The amount owed on 1st mortgage must not exceed $729,750
3) You must demonstrate that the current payments are a hardship (e.g., loss of income, inceased expenses, missed payments)
4) Current mortgage was obtained before January 1, 2009
5) Payment on 1st mortgage (including principle, interest, taxes, insurance) is more than 31% of your current gross income.

Anyone meeting these criteria should contact their mortgage loan servicer and request an Initial Package required to be submitted by the borrower to determine eligibility for HAMP. During the HAMP evaluation process the home cannot be referred to foreclosure or be sold at a foreclosure sale if the foreclosure process has already been initiated. However, the foreclosure process can resume if the borrower is determined to be ineligible for HAMP, misses a trial payment, or fails to respond to the servicer's requests for information.

Borrower's in active bankruptcy cases must be considered for HAMP if the borrower, borrower's counsel or bankruptcy trustee submits a request to the servicer. Borrowers who are in a trial period plan and subsequently file for bankruptcy may not be denied a HAMP modification on the basis of the bankruptcy filing.

For more information on HAMP click here AND here.

Wednesday, June 9, 2010

Unemployment Benefits Lapse

Across the country, 343,400 people will prematurely exhaust their benefits this week because Congress failed to reauthorize domestic aid programs before they lapsed on June 1. However, Congress is working on a bill that could extend those benefits as early as next week.

Click here for article.

Recession Takes a Slice Out of Retirement Savings

Click here for article.

Last year nearly 20% of Americans over the age of 45 yrs used retirement funds to pay their living expenses. As sources of income go, retirement savings should be a last resort. Why? First, early retirement funds are taxed at a higher rate than if you take the funds after the age of retirement. Second, funds in a retirement account are protected from creditors in bankruptcy and under most state laws. Once the retirement funds are transferred out of the retirement account, they are more susceptible to garnishment, liens, etc. by creditors. Finally, retirement is a nest egg that you rely on when you stop working. Dipping into retirement savings may require one to work longer than one's health may allow. If at all possible, use retirement funds as a source of income only as a last resort.

Monday, May 10, 2010

Mortgage Delinquencies Show First Quarterly Drop Since 2006: TransUnion

Click here for HuffPost article.

According to a sampling of consumer credit reports by TransUnion, mortgage defaults decreased in the first quarter of 2010. This was the first quarterly decrease in mortgage rate default since 2006. While this may be welcome news, the current rate of default 6.77% is still high compared to historicle rate of 1.5 to 2%. Still, the fact that it is trending down is a welcome sign that the housing market may be turning around.

Friday, May 7, 2010

Signs of Economic Recovery, but Unemployment Still a Big Issue

In April the U.S. saw its biggest monthly jobs gain in 4 years, but the unemployment rate actually rose from 9.7% to 9.9%. How is this possible? Well, apparently the increasing number of job seekers caused the increased unemployment numbers. In other words, because an additional 805,000 job seekers - perhaps feeling better about their job prospects - resumed their search for work, this caused the unemployment numbers to climb.

Click here for Huffington Post article.

Does this data give mixed signals about the economicy recovery? Perhaps. But there is no doubt that the additional 290,000 jobs added last month is a strong sign that businesses are confident about their earnings prospects. And as history has shown, confidence can go a long way in helping the economic recovery.

Thursday, May 6, 2010

Is judicial modification of mortgages still on the table?

Last year, the U.S. House of Representative passed a measure that would allow bankruptcy judges to reduce the principle amount on mortgage loans for homes that were "underwater" - e.g., the house is worth less than what is owed. Unfortunately, the measure was defeated in the Senate so it never became law. Well, this article from the Huffington Post indicates that a similar measure is still being considered by lawmakers. The measure under consideration would have the same effect as the measure that failed last year but would be modified slightly. It would still allow qualified homeowner's to "cramdown" their mortgages in bankruptcy so that the principle mortgage is equal to the value of the house. Similar provisions exist in bankruptcy for car loans, but not for home loans. The new "cramdown" measure is being considered as an addition to the financial reform bill being debated in Congress.

Click here for article.

Wednesday, May 5, 2010

Disorganization at Banks Causing Mistaken Foreclosures

This article is a must read for any homeowner in foreclosure. It's extremely important that people in foreclosure communicate with their loan servicer and the trustee for the loan servicer. And as this article points out, qualifying for a special forbearance that temporarily reduces mortgage payments does not necessarily prevent a foreclosure sale.

Wednesday, April 28, 2010

Europe's Debt Crisis

The S&P credit rating agency announced today that Spain's credit rating has been downgraded from AA+ to AA. The announcement comes on the heels of Greece and Portugal's credit downgrade.

The announcement is further evidence that Europe, and the European Union (EU) in particular, need a financial overhaul. But it is also a reminder that while the U.S. economy is recovering (albeit slowly) the world economy may not have hit rock bottom yet.

This article also reminds us that whole countries, not just individuals, are judged on a credit rating system. So the next time you feel bad about your sub-par credit score, think about Spain, Greece, and Portugal. They will survive and so will you.

Tuesday, April 27, 2010

Learning How to Fight the Collector

I think most everyone who has ever had to deal with agressive creditors can appreciate the stories in this article. Unless, of course, you own or work for a collection agency. There are links to self-help websites in here for invoking debtor rights under the Fair Debt Collections Practices Act (FDCPA).

Monday, April 26, 2010

How foreclosure and bankruptcy impacts your credit score

As a bankruptcy attorney, I'm often asked about the effect of bankruptcy on credit scores. Most people who come see me already have poor credit, so a bankruptcy is not going to make things any worse. But i've never actually seen an actual credit score number linked with bankruptcy (or foreclosure) until now.

Click here for article.

Keep credit score in proper perspective. It should be the least of your concerns if you are in danger of losing your home or are being sued by your creditors. And keep in mind that while a bankruptcy (or foreclosure) may have an immediate negative impact on your credit score, it will eliminate debt and in the long run this will help you rebuild your credit.

Friday, April 23, 2010

Debt-relief scams

Companies promising to help debt-ridden consumers turn out to be financial predators. Undercover government investigation reveals insidious scam.

Click here for article.