Today, as I found myself on the phone repeating myself – a lot. It then occurred to me that I could probably explain how our consult process works here on the website. In other words, how do you get from reading this website and digesting the information to getting some face-time with a lawyer (i.e., me).
Here’s how.
When a homeowner refinances their mortgage, the lender must give certain notices under the federal Truth in Lending Act, also referred to as TILA. For a number of good reasons, homeowners must be given a notice that informs them of their rights to rescind their mortgage. But what happens if the notice does not strictly comply with what TILA’s requirements? Does any flaw in the notice permit a homeowner to rescind a mortgage? On June 11, the First Circuit Court of Appeals had an opportunity to answer that question.
The case involved a borrower who had been given a copy of a rescission notice at closing. The notice stated:
You are entering into a transaction that will result in a mortgage/lien/security interest on our home. You have a legal right under federal law to cancel this transaction, without cost, within THREE BUSINESS DAYS from whichever of the following events occurs LAST:
(1) The date of the transaction, which is ______; or
(2) The date you receive your Truth in Lending disclosures; or
(3) The date you received this notice of your right to cancel.
The homeowner also received information on how to cancel the transaction (i.e., how and when notices must be sent).
Under the Federal Reserve Board’s regulations, specifically, Regulation Z, when a homeowner rescinds the mortgage, the homeowner is “not …liable for any amount, including any finance charge” and the lender “shall return any money or property that has been given to anyone in connection with the transaction.” Now if the notices the homeowner receives do not comply with TILA, or if the homeowner never received any notices, the homeowner has up to three years to rescind the mortgage, rather than just the three days. Three years versus three days: that can be particularly advantageous to a homeowner seeking to refinance when interest rates are lower, or if a loan that seemed like a good idea at the time has now revealed that it’s really not a good idea at all.
This homeowner argued that he was able to rescind the loan 20 months after closing because the “date of transaction” line in the notice was left blank. However, the date of the transaction was stamped on the upper right hand corner of the notice (although not precisely in the blank line). But that was not the only issue that worked against this homeowner.
The homeowner attended the closing and admitted receiving the notices at the closing. The only possible issue was that the closing occurred on a Saturday, and it might be difficult to determine exactly when the three days expired (i.e., the following Tuesday, Wednesday or Thursday). But the argument here was not over a few days, it was over a few months. This homeowner was effectively arguing a mere technical violation of the notice that the Court found would impose a penalty on the lender while at the same time allow a windfall on the homeowner. For those reasons, the Court found that there was no way the blanks misled the homeowner as to when his rescission rights expired, and his request to rescind was untimely.
What options does this homeowner have? It’s tough to say. The decision does not discuss the homeowner’s income and expenses or whether there is a possibility that the homeowner can benefit from a bankruptcy filing. But remember, if the home is the principal residence, modifying the loan in a bankruptcy will not be possible.
One of the best things about summer is the local produce you’re likely to find not just in the supermarket, but on road side stands. While I admit I’m a bit biased, when I was a kid, there was no better place to get tomatoes and sweet corn than the small farms on Aquidneck Island. That’s probably going to tick-off the good folks in Little Compton, but hey, I know what I know. I am sure that I can find a place online that would ship them to me, but it’s not the same as pulling over to the side of the road, smelling the air, and reaching into your pocket for a few bills to get some good stuff. Law firms advertise online, as do credit counselors and so-called debt settlement and consolidation firms…and there are hundreds if not thousands of companies and firms offering assistance to people struggling with debt. Is it a good idea for Massachusetts consumers stay “local” when they are looking for resources to help them deal with their debt? This very question came up today when I was talking with a prospective client.
For a variety of reasons, the family is in a lot of debt and exploring options. There’s bankruptcy (and I can help them with that), and there’s credit counseling (which I can offer a recommendation). There’s also debt consolidation and debt settlement, but ironically, there do not seem to be too many local companies that offer such services. Perhaps it is because those services are usually little more than a scam. Perhaps it’ because it’s been tried
The clients were considering the “Consumer Law Group, PA” located in Florida. I like Florida – I have not been there in years – but it’s a pleasant place to be. And while I like oranges, I don’t feel the need to go to Florida to get them.
Fortunately, the client did some research on this outfit on their own. They learned that the “Consumer Law Group, PA” had only been around since November 2007. They found websites where people had some very unfavorable things to say. More than one person, actually. They also learned that in less than two years period, they earned an exceptionally low BBB rating. That was their wake up call. It dawned on them: “why are we not dealing with a local business who can help us?”
While this is arguably yet another reason to stay clear from any outfit claiming to offer debt consolidation or debt settlement services (which again, are a scam), I think it is also important to consider going with someone local. It doesn’t matter if it is an attorney, a credit counselor or a lender who may be trying to help you refinance…. why go with an out of state outfit state? After all, we are talking about your money, your life, your family and your future.
For those reasons, it’s important to get good help from someone who knows what they are doing. And frankly, if these issues are important enough for you and your family, then you should be able to look that professional square in the eye. That’s hard to do when they are a few states away.
In the past, I have written and warned readers here about it. It is simply not all it is cracked up to be. From CBS News/The Early Show:
[C]onsumer advocates warn that a majority of the companies can’t or won’t deliver on their promises to reduce your debt. The National Foundation for Credit Counseling recently explained that, “A settlement company may suggest that you stop paying your creditors and instead begin making deposits into a special third-party account. The settlement company will attempt to negotiate a settlement offer with your creditor once enough money relative to the debt is on deposit. This may take six months or more, although the exact length of time will vary with circumstances. During this time, the balance on your debt can continue to grow if interest and various penalty fees continue to be charged by your creditor. As a result, you may owe more than when you started and your credit may suffer.”
Even worse, there have been many instances where none of this money ever makes it to creditors — the companies simply steal it, Gibbons points out. Plus, a growing number of credit card companies refuse to work with debt settlement groups. Of course, a group probably won’t tell you that until after you’ve paid them.
I am no economist, but there’s something about the President’s mortgage foreclosure rescue plan that just has not been sitting well with me. I have not been able to put my finger on it and do the research to put together a thoughtful article. Fortunately, I can stay focused on my clients and share with you this article from BusinessWeek by Peter Coy and Theo Francis who point out that the plan doesn’t address the danger of negative equity, and that homeowners with negative equity “might just walk away.”
Even for those who want to keep their homes at the moment, reducing monthly payments without addressing negative equity may just postpone the inevitable. “The reality is, people lose jobs, especially in a recession. People get transferred, people have to move at some point,” says Sean O’Toole, founder and CEO of ForeclosureRadar.com, which tracks California foreclosures. “By lowering payments and not principal balance, you’re guaranteeing the extension of this crisis for years to come.”
Last fall I shared my thoughts about Dave Ramsey. The blog article brought in more comments than I usually get. I’ve had my eye on Suze Orman ever since I happened to catch her CNBC show over the holidays. James Scurlock has written an article over at Slate.com that puts Orman in a new light. Here’s an excerpt:
Although study after study has shown that personal bankruptcies are caused primarily by catastrophic events like divorce, job loss, and, above all, medical bills and that most of us are struggling with a gap between our income growth and the soaring cost of necessities like housing, Suze tends toward psychological causes that invariably blame the victim. Who is struggling these days, according to Suze? “People who grew up without much money and later earn a comfortable living sometimes spend too much to make up for what they didn’t get as children. … People who feel entitled to the good life, or are unconsciously copying a mother or father who lived beyond her or his means. … If you feel the need to impress people with what you have rather than with who you are, you are at high risk for credit card abuse.”
There’s more here. It’s a good read, but prepare your stomach for the shock and awe of what this financial guru thinks of people who struggle with debt while at the same time offering financial advice that makes me cringe.
I’ve had some limited exposure to Orman. I a CNBC show where callers ask for her blessing to buy expensive things: a camera, a trip with family, or in the particular show I watched, running stilts. After a quick drive-buy glance at some financial information, the caller then says “I really want these running stilts.” Then, the caller waits for either the blessing to buy it, or the chastisement for not knowing better to think otherwise.
I read the article, and decided to take a few minutes and spend some time on her website. The one thing that caught my eye was the promo for the Valentines Day CNBC show (9PM and Midnight ET, 2/14/2009) titled: “Marriage & Money.”
On this Valentines Day, the financial pluses to being married. Should a man pay down his fiancée’s Student loans? Viewers ask if they can afford a puppy, a trip to the 2010 Olympics.
Let me first start by saying that if you want to adopt a pet and can handle the responsibility, please do so.
With that said, why does the promo not say this: “Should you pay down your fiancée’s Student loans?” I can guess that the show’s demographic is primarily women. But still…even so, why shouldn’t the same question be posed to both parties who are planning a life together regardless of their gender? Perhaps I’ll have to watch the show to find out. And if I watch the show, I’ll probably have more to write about.
The Federal Reserve Bank will sponsor a second workshop aimed at preventing foreclosures by bringing borrowers and lenders together to find alternatives.
The workshop, scheduled for February 14 at the Connecticut Convention Center in Hartford, is modeled after a successful event held at Gillette Stadium in Foxborough in August. More than 2,200 borrowers met face-to-face with lender representatives, and about 35 percent of borrowers received loan modifications or workout offers, according to the Boston Fed.
Remember the Gillette workshop? I remember hearing that people were walking away feeling a bit disgruntled. One client told me that he saw people waiting for hours and never spoke with their lender. I also remember hearing later on that mortgages were not getting modified in any meaningful way.
There’s more about this upcoming event here.
If you’re thinking about going to this event, contact us. We have access to tools that may lead you to a more affordable housing payment, and we might be able to save you the trip to Hartford.
In related news from Bloomberg:
The Federal Reserve will ease terms on residential mortgages acquired in the rescues of Bear Stearns Cos. and American International Group Inc., seeking to stem foreclosures.
The Fed policy is targeting borrowers who are 60 days or more overdue on loan payments and covers modifications of interest rates and payment plans. The program uses the Fed’s authority in the $700 billion Troubled Asset Relief Program and was released today by the House Financial Services Committee.
“It reflects the understandable desire of the Federal Reserve to have some cooperation” with the Obama administration, House Financial Services Committee Chairman Barney Frank told reporters today in Washington. “This is a very big deal.”
So yesterday I received this letter from WaMu:
Dear William McLoud [sic]:
Our customer (my client) informed us of his/her intent to file (chapter 7) bankruptcy. We realize this decision was not an easy one. We would like to resolve this matter and offer an alternative that may minimize the negative impact that filing for bankruptcy can have on your client’s credit and employment opportunities.
As of today, the balance on the (credit card) account referenced above is [$2,500]. However, you may elect to settle the balance for 60%, or [$1,500], and your client will be under no further obligation. Simply alert us of your acceptance and remit the settlement payment.
If your client is unable to pay this amount in full, or if you have any further questions, please contact our Bankruptcy Department…
It’s a question I have been asking myself of late. A Short Sale is when a lender (the mortgagee) agrees to release the mortgage from the property so that it may be sold to a buyer for less than when is owed on the mortgage. I am hearing that many people are exploring short sales as a means of “avoiding foreclosure.” But there are many variables that will make a short sale successful, and unless all of those variables are working in the homeowners favor, the short sale is not a good idea.
We are passing this information along. People who attend are encouraged to let us know how or if they found the help they need.
HOPE NOW Alliance in partnership with NeighborWorks® America, The New England Patriots Charitable Foundation and the Federal Reserve Bank of Boston will host a foreclosure prevention workshop at Gillette Stadium on Tuesday, August 12, from 1:00 PM – 8:00 PM. This event is an opportunity for homeowners who are in financial distress, or concerned about foreclosure, to sit down with their lender face-to-face, and avoid foreclosure if possible.
Borrowers can talk face-to-face with their lender and housing counselors to work out a plan for their mortgage.
Tuesday, August 12, 2008
Gillette Stadium
Fidelity Investments Clubhouse, East
One Patriot Place
Foxboro, MA
Free Parking and Public Transportation: Free transportation is available on the Commuter Rail from both South Station and Providence for borrowers attending the event. Borrowers must show the flyer to qualify for free transportation.
Boston Office:
77 Franklin Street
Boston MA 02110
617-542-2956
View map and directions
TOLL-FREE NUMBER:
1-86-NEW-START
(1-866-397-8278)
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