There are a number non-profit organizations in Metro-Boston (and state wide) that provide mortgage and foreclosure assistance to homeowners facing foreclosure. Over the last several months, I have personally encountered situations where these (for lack of a better term) foreclosure prevention counselors have actually caused more harm than good (or at least have the potential to). Consumers seeking assistance of these non-profits need to be aware of a few things.

Firstly, they are not lawyers. They cannot provide legal advice. If any of these counselors tell you to do something that involves invoking a legal right – such as filing a bankruptcy petition – then you should seek the advice of an attorney.

I had a client who was told by a foreclosure prevention counselor to “just go down to the court and file bankruptcy so you can get the [automatic] stay” so that a foreclosure auction could be avoided. The problem is the client did not have a credit counseling certificate, and had no clue about the consequences of filing the case without proper preparation. His case was dismissed. In addition, had the counselor been properly trained, the counselor would have known that this individual needed bankruptcy from the get-go, not the services of the non-profit.

Continue reading "A Word of Caution: Foreclosure Prevention Counselors" »

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There are many reports of struggling homeowners “walking away” from their properties. If you own a condominium, shares in a cooperative or a lot or home in a housing association (which I’ll refer to here as “real estate”) and you’re contemplating walking away and bankruptcy, an amendment to the Bankruptcy Code may influence many of your decisions.

Prior to the passage of the 2005 Act, if a bankruptcy debtor wanted to surrender their real estate, they could simply “walk away.” Real estate owners who owed dues or assessments to condo association, homeowners associations or cooperative corporations could simply include those claims in a Chapter 7 discharge or exclude them in a Chapter 13 plan. In addition, owners who did not reside or who had rent paying tenants in the property they intended to surrender were not responsible for post-petition condo fees and assessments. But that has changed.

By the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Section 523(a)(16) (“Exceptions to Discharge”) was amended. Instead of limiting the discharge of fees and assessments only to those debtors who had tenants or who were not residing in the dwellings, Congress limited it to debtors who have a “legal, equitable or possessory ownership interest” in the real estate.

Simply because a homeowner expresses an intention to surrender the home in their bankruptcy case does not mean that they will still not be the “legal, equitable or possessory” owner of the property. Condo owners who move out into a rental and file bankruptcy prior to any foreclosure are going to be responsible for post-petition condo fees and assessments. Whether the debtor lives in the property is no longer a consideration thanks to the 2005 amendments.

Prepetition condo fees and assessments still fall under the discharge. What’s changed is the responsibility for post-petition fees and assessments while the home is still in the debtor’s name. People who are considering bankruptcy protection as well as surrendering their property should be sure to carefully plan the date of their filing and/or their moving out with their attorney. The last thing any financially strapped debtor needs is to be paying rent on a new dwelling and trying to rebuild their financial house, all while paying the condo fees and assessments on a home the bank has not yet taken by foreclosure.

Posted by Bill McLeod at 8:40 AM | Permalink | Comments (0) | TrackBacks (0)

Earlier this week I was talking with a client who let me know that their home was headed into foreclosure. I was a bit surprised to hear this because I had been led to believe that there was no problem making the home mortgage payments, only the other debt (which included other real estate). I was also surprised to learn that this problem had been going on for a few months. And I was even more surprised to learn that the clients had been working with a mortgage broker. But what really surprised me was why I was only learning about this now.

Apparently, the clients had been solicited by a mortgage broker who assured them they need not file bankruptcy. He assured them that they would refinance the house and avoid bankruptcy. He also told them not to discuss this at all with me: their bankruptcy attorney.

For reasons that only they can explain, the clients chose to follow that advice. And unfortunately, they may pay a price for doing so: they risk losing their home, and they have complicated their bankruptcy filing and made it more expensive. I write about his with the hope that this error will serve as a cautionary tale to others in a similar situation.

Mortgage brokers get paid a commission based on the mortgage they obtain. If they do not obtain a mortgage, they do not get paid (although some may charge non-refundable applicable fees). If a mortgage broker is able to get financing, no bankruptcy attorney is going to dissuade a consumer for taking it…unless the mortgage product (or the act of refinancing itself) is going to place the client into an even more precarious financial position. With that said, the only reason why a mortgage broker would be concerned about a client talking with an attorney is if the attorney attempted to talk the consumer out of the mortgage….and the only way I see that happening is if the attorney is doing his or her job by protecting the client.

If you’re trying to refinance and are speaking with mortgage professionals, please do yourself a favor and speak with an attorney. If any of these professionals urge you not to speak with an attorney of your choosing, do not do business with them. There is no harm in speaking to your attorney, but there can be great harm to you and your family if you follow the recommendations of someone whose interest is not the same as yours.

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From the Globe: Massachusetts bankruptcy filings are up 22% from last year.

Massachusetts Democrat Barney Frank presents his case for a housing rescue.

The slowing economy is not keeping gasoline prices from creeping up and up.

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From today's Boston Globe: Brokers at Lehi Mortgage Services Inc. have been accused of fraud by the Massachusetts Attorney General.

Lehi Mortgage "engaged in a widespread practice" of submitting false information about bank accounts and incomes that "it knew or should have known were inflated," the attorney general's suit said.

Again, not a good week for Countrywide. There are reports that the FBI is investigating the mortgage company over possible mortgage fraud.

Sharper Image issued a press release announcing that it will be accepting gift cards once again. WIth some restrictions. More here.

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Countrywide is not having a particularly good week. The New York Times reports that the US Trustee for the Southwest Region has brought suit in Miami against the mortgage company with claims it is abusing the bankruptcy process.

Today's editorial in The New York Times points out that despite a White House-backed mortgage industry group formed to help homeowners, these homeowners are not getting the help they need.

The IRS has decided to rehire private tax collectors.

Locally, the Boston Herald reports that the experts believe that the housing market will continue its decline in 2008.

Posted by Bill McLeod at 11:25 AM | Permalink | Comments (0) | TrackBacks (0)

The United States Trustee has filed suit in the US Bankruptcy Court in Atlanta seeking sanctions against Countrywide Home Loans. From the New York Times:

“Countrywide’s failure to ensure the accuracy of its pleadings and accounts in this case is not an isolated incident,” Donald F. Walton, the trustee for the Atlanta region, wrote in a brief. “In recent years, Countrywide and its representatives have been sanctioned for filing inaccurate pleadings and other similar abuses within the bankruptcy system.”

In addition to a litany of other abuses, it is alleged that Countrywide accepted payments on a mortgage that had already been paid in full (the mortgage company had issued a "satisfaction of mortgage" acknowledgment).

I recall Countrywide commercials where some delightful spokesperson would proclaim: "Countrywide says YES!." According to a statement from Countrywide, they are not commenting on the pending litigation.

News of the suit is also reported in The Sydney Morning Herald.

You may have missed...
Is Countrywide Fabricating Evidence?
The US Trustee v. Countrywide

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Bad news: Check this out at Calculated Risk:

Moodys: 8.8 Million Homeowners Underwater

Mass. foreclosures rise 128% in January

Good News: T.G.I.F. (sorry, that's all I got... enjoy your weekend).

Posted by Bill McLeod at 7:42 AM | Permalink | Comments (0) | TrackBacks (0)

I have a message to all of those folks out there who are hoping that the economy will get better, that their mortgage company will “work” with them, or that the government will do something to help them through the financial quagmire they find themselves in: the sun is not going to come out tomorrow. Perhaps more succinctly said: it ain’t going to happen. I know I sound really negative, but hear me out.

Contrary to what you may read in the news, there are not a lot of mortgage work-outs and rewrites going on. If you do not have equity in your real estate, you’re going to have a tough – if not impossible time trying to refinance. The same applies if you are behind in mortgage payments or if the income is not there to pay the monthly mortgage payments. If you got sucked into an exotic mortgage product with the hope that the value of your real estate was only going to appreciate, then if you think you’re in a precarious position now, it’s only going to get worse.

Property values are depreciating everywhere. If you think I am being melodramatic, read about what’s happening in Arizona, California and Maryland. Then look further.

Property values are starting to go below the mortgage notes secured by the property ….and this hurts even those who did not get into exotic loans. Read more here: here’s a homeowner that bought a home for approximately $400,000 and the value has dropped 20%. Let’s assume that the homeowner put down a $40,000 as a down payment. If the value has dropped 20%, that down payment has evaporated. Poof. All gone (and unfortunately, I have clients in a very similar situation). If the homeowner was in an interest only payment period, then none of those payments were being applied to principal. Without equity, that homeowner has little chance of refinancing.

In addition to all of that the economy is tanking. I am no economist, nor do I pretend to be, but I did grow up during the 70s. I remember the gas lines, the “WIN” buttons and the nightly news updates reporting the price of gold. At that time, it touched just over $800 per ounce. A few years ago, on this very site, I wrote that a rise in the price of gold should be expected. Here’s what I wrote on October 17, 2005:

[W]hat can we Americans expect in the days, months and years to follow? Expect foreclosures to sky-rocket. Expect real estate values to plummet. Expect a slow down in consumer spending. Expect lay offs and business closings. Expect the price of gold, an indicator of inflation, to push past its now 18 year high (a fact which is curiously under reported in the main stream media).

As I write this article, gold is over $900 per ounce. In October 17, 2005, the price of gold closed at $473.80. And we’re no where near the end of this mess.

I’m not the only one touting this fact: Treasury Secretary Henry Paulson is. Watch these videos at Calculated Risk. Mr. Paulson is asked: “Is the worst over?” His answer speaks for itself.

Despite the wishful (and perhaps understandable) thinking of real estate professionals, the real estate market has not hit bottom. The price of gold (and likely silver) is only going to continue to inch its way up to history making highs. If the financial storm has not hit you yet, be thankful but do not assume you are safe and secure on high ground. Think of it this way: the flood waters are still rising, and no one really knows where “safe” high ground really is. All you can do is be aware, pay attention and prepare because when it comes right down to it, “the worst isn't over, the worst is just beginning.”

In other words, the sun is not going to come out tomorrow. Please plan accordingly.

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Many times we hear that it is exotic mortgages with resetting ARMS that are fueling the sub-prime foreclosure melt-down. A new report from the State Foreclosure Prevention Working Group suggests something far more nefarious.

"A significant percentage of subprime adjustable-rate loans are delinquent before they experience payment shock from their first adjustment, reflecting weak underwriting or fraud in the origination of the loan," the report concluded.

More here and here (see link, upper right).

My question is this: they have found the fraud....now when are the indictments coming?

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According to a study released by the Georgetown Law Center, “there would be ‘no or little’ impact on home-mortgage interest rates if Congress moves ahead with pending legislation -- H.R. 3609, The Emergency Home Ownership and Mortgage Equity Protection Act of 2007) and Senate (S.2136, The Helping Families Save Their Homes in Bankruptcy Act of 2007) – designed to ease the U.S. mortgage foreclosure crisis by allowing modifications in bankruptcy proceedings.”

The study was conducted by Adam J. Levitin, Associate Law Professor at the Georgetown University Law Center and Joshua Goodman, Ph.D. in Economics candidate at Columbia University. It is entitled “The Effect of Bankruptcy Strip-Down on Mortgage Interest Rates.” From today’s press release:

There is no empirical evidence that supports a conclusion that permitting either strip-down or other forms of modification of principal home mortgage loans in bankruptcy would have more than a minor impact on mortgage interest rates or on home ownership rates. As there is significant evidence that mortgage interest rate markets are indifferent to bankruptcy modification risk, we conclude that permitting unlimited strip-down would have no or little effect overall on mortgage interest rates

Addressing MBA claims that mortgage interest rates will shoot up if Congress acts to address the mortgage foreclosure crisis, the Levitin/Goodman study concludes: “… statistically there is a zero percent chance that the MBA’s 150 basis point claim is correct. All empirical and market observational data indicates that that MBA’s claim of an effective 150-200 basis point increase from allowing strip-down is groundless. The empirical evidence indicates that there is unlikely to be anything more than a de minimis effect on interest rates as a result of permitting bankruptcy modification.

The Levitin/Goodman study continues: “The Mortgage Bankers Association (MBA) has claimed that permitting modification of mortgages in bankruptcy will result in an effective 200 basis point increase in interest rates on single-family owner-occupied properties… Our research on current mortgage interest rate spreads among different property types disproves the MBA’s claim. …More recent MBA press releases have claimed only an increase of 150 basis points, without explaining the 50 basis point decline from the 200 basis point figure featured in Congressional testimony.

Commenting on the study findings, Levitin said: “The overwhelming thrust of the historical analysis is that the effect of permitting strip-down on mortgage interest rates would be either nonexistent or quite small — nothing near the range suggested by the Mortgage Bankers Association. We explain the lack of market sensitivity to strip-down risk by reference to two sets of consumer bankruptcy data, one from 2001 and one from 2007, both of which suggests that lenders’ losses in strip-down would be extremely limited both in scope and magnitude and often total less than those they would incur in foreclosure.

The study findings indicate that the nature of the pending U.S. House and Senate bills make it even less likely that there will be interest-rate implications if Congress acts: “First, to the extent our findings are used as a guide for predicting the impact of pending legislation, it is important to note that both our current and historical data analysis is of the impact of an unlimited strip-down regime on certain property types. The proposed legislation in the House (H.R. 3609 with the Conyers-Chabot Compromise Amendment) and the Senate (S. 2136) do not propose such an unlimited regime for single-family principal residence mortgages. Instead, both bills would impose a variety of limitations on modification. Both bills would impose eligibility requirements in the form of a strict means test, limiting relief to those homeowners whose income is insufficient, after deducting modest living expenses allowed by the IRS, to cover their mortgage obligations. Both bills would also limit relief to subprime and nontraditional mortgage products. Moreover, for interest rate modifications, both the House and Senate bills set a floor for modifications of the market rate for 30-year conforming mortgages plus a risk-premium. The House bill would further limit relief to mortgages made between January 1, 2007 and its effective date, and has a seven-year sunset provision. Because of these proposed limitations, the pending legislation would likely have an even smaller impact than the unlimited strip-down regime we tested in our study.

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The Mortgage Bankers Association which represents the real estate finance industry is apparently not pleased with a report by the Center for Responsible Lending which urges reforms to the US Bankruptcy Code. According to David Kittle, the Chairman Elect of the MBA:

Policymakers should ignore this report as it is more rhetoric than fact. Bankruptcy reform is not the answer for consumers having trouble making their mortgage payments. It will drive up the cost of credit in the form of higher rates, larger down payments and greater closing costs.

Further, bankruptcy is a logistical and financial nightmare for consumers. Filing for bankruptcy is expensive and approximately two-thirds of all bankruptcy plans fail. Nobody should be holding it out as a better alternative to working with your lender to try to find a mutually agreeable resolution.

But the CRL is responding with a report that shows that voluntary loan modification fall short. You'll find a link to the PDF report, and the statistics here.

As for Kittle’s comments, I have no idea where the uncited reference to “two-thirds of all bankruptcy plans fail.” Where does that factoid come from? There are lots of reasons why bankruptcy cases fail, but there is no magical statistic that I am aware of. That's flat-out misleading. And as for a "nightmare", oh come on now. While none of my clients want to be in bankruptcy, they would rather keep their home and put food on the table, than live with the proposed "resolutions" offered by their lender.

And unfortunately, for Mr. Kittle, the sad news is that for an increasing number of homeowners, filing bankruptcy is the better alternative to working “with your lender.” The fact is, some lenders are unwilling (or for their own reasons unable) to “work” with a homeowner. When there can be no “mutually agreeable resolution”, bankruptcy is the better alternative. And until lenders start getting serious about modifications, and about their lending practices that got the country into this mess, that alternative will only appear better and better.

Posted by Bill McLeod at 5:11 PM | Permalink | Comments (1) | TrackBacks (0)

The Dow has dropped 10 percent since January 1.

Some of the victims of the sub-prime mortgage mess are bigger than a bread box, have more than two legs and are very innocent.

Ohioans are wondering the government is to blame for the sub-prime foreclosure mess. Canadians are wondering if the housing storm will creep over the border. According to one report, forecasts are mixed.

Posted by Bill McLeod at 6:47 PM | Permalink | Comments (0) | TrackBacks (0)

Today’s New York Times is reporting that Countrywide Financial “fabricated documents related to the bankruptcy case of a Pennsylvania homeowner.” Apparently, the documents were letters addressed to the homeowner claiming that $4,700 was owed. Countrywide’s local counsel told the bankruptcy court that the letters were “recreated.”

“These letters are a smoking gun that something is not right in Denmark,” Judge [Thomas P.] Agresti said in a Dec. 20 hearing in Pittsburgh.

Read more here.

For an interesting take on this, please check out Tanta's entry early this morning over at Calculated Risk: "Turns Out Judges Don't Like 'Efficient' Servicers.'"

Posted by Bill McLeod at 11:16 AM | Permalink | Comments (0) | TrackBacks (0)

The foreclosure crisis sweeping the nation is also sending some mortgage companies into financial ruin, leaving many folks caught in the middle. Last week the Federal Trade Commission issued a new publication giving consumers advice on what to do if their mortgage company files bankruptcy.

The PDF of "How to Manage Your Mortgage If Your Lender Closes or Files for Bankruptcy" can be found here. There is also information how to obtain the publication by mail.

Posted by Bill McLeod at 12:45 PM | Permalink | Comments (0) | TrackBacks (0)

It has been reported that the US Trustee has subpoened records from Countrywide Financial, one the largest mortgage lenders - if not the largest. According to CNNMoney.com (and a New York Times report), in two separate bankruptcy cases in Southern Florida, the debtors

objected to Countrywide's claims of what was owed on their home loans. One couple contended that their mortgage payments were current, while Countrywide claimed $2,400 in overdue mortgage payments in that case.

Countrywide has not commented on the litigation. Yet.

Read more here.

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If the Federal Reserve cuts rates, mortgage payments should decline, right? Perhaps not.

Today's Boston Globe also reports on foreclosure rescue scams.

And finally, may Bostonians have noticed the number of new condominium construction projects that have sprung up over the last few years...and the building boom continues. But if you build it, the buyers will not necessarily come. Today's Boston Herald reports that some new condominium projects are finding that it is easier to rent the units rather than sell them.

Posted by Bill McLeod at 12:39 PM | Permalink | Comments (0) | TrackBacks (0)

On October 31, a US District Court judge sitting in the Northern District of Ohio issued a decision involving Deutsche Bank’s attempts to foreclosure on a number of properties in Ohio. The bank claimed that the federal court had jurisdiction because there was diversity of the parties: the parties resided or had a principal place of business in different states, and the amount in controversy exceeds $75,000. The bank is not incorporated nor has a principal place of business in Ohio. The bank was not the original lender, but alleged it held an assignment of the mortgage.

On October 10, the judge ordered the bank to produce a copy of the assignment: “Since the Plaintiff bears the burden of establishing federal diversity jurisdiction as well as standing to bring an action, Plaintiff is ordered by October 17, 2007, to file a copy of these executed Assignments demonstrating Plaintiff was the holder and owner of the Note and Mortgage as of the date the Complaint was filed, or the Court will dismiss the Complaint.”

An assignment was filed on October 10. The document stated that the bank had been assigned the mortgage on August 13, 2007, and purportedly recorded on August 21, 2007.

The complaint was filed on July 27, 2007. In dismissing the foreclosure cases,

This Court acknowledges the right of banks holding valid mortgages, to receive timely payments. And, if they do not receive timely payments, banks have the right to properly file actions on the defaulted notes – seeking foreclosure on the property securing the notes. Yet, this Court possesses the independent obligations to preserve the judicial integrity of the federal court and to jealously guard federal jurisdiction. Neither the fluidity of the secondary mortgage market, nor monetary or economic considerations of the parties, nor the convenience of the litigants supersedes those obligations.

Read the case here, and please be sure you read footnote no. 3 on pages 5-6. It’s priceless.

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Houston-based LTD Financial Services got slapped with $1.3 million in civil penalties to settle FDCPA violation charges.

Washington Mutual issued a press release in response to the action filed by the NY Attorney General. We reported on that action earlier this week.

An astute observation on the passage of BAPCPA: "Be careful what you wish for."

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When I come across something that I think might help readers answer this question, I be sure and post it here.

Read more at MSNBC.

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From today's New York Times:

Borrowers who took out loans in the first six months of 2007 are falling behind on payments faster than homeowners who took out loans last year, according to a report by Friedman, Billings, Ramsey, an investment bank based in Arlington, Va. The data suggested that more Americans could lose their homes and that the housing market’s troubles might persist longer than many analysts have been predicting.

Read more here

Source

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The Washington Post reports that

At the [real estate] loan closing, [Treasury Secretary Henry M. Paulson Jr.] wrote, "the most critical facts, including potential future monthly payments, should be on a single page in clear, easy-to-understand language."

In addition, he said the United States should consider replacing the disparate state rules that govern mortgage brokers with a national system.

Between predatory lending and complicated disclosure, "some of the conduct and practices I have learned about are shameful," Paulson said. "The development of a uniform national licensing, education and monitoring system for all mortgage brokers is worth considering."

Read more here

Source

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Here’s one for the “believe it or not” list: ostriches do not hide their heads in the sand. I know – you’re thinking “get OUT!” I was as shocked as the next person. Apparently, while they do not bury their head, they will sometimes lie on the ground trying to make themselves look inconspicuous. According to The Phrase Finder:

The story also relies on the supposed stupidity of ostriches, and of birds in general. In fact, there's little to support that either as birds have a significantly larger brain to weight ratio than many other species of animal. The notion is that the supposedly dumb ostrich believes that if it can't see its attacker then the attacker can't see it. This was nicely reformed as a joke on Douglas Adams' 'Hitchhiker's Guide to the Galaxy', in which the 'Ravenous Bugblatter Beast of Traal' was described as 'so mind-bogglingly stupid that it assumes that if you can't see it, then it can't see you.'

Birds are not stupid (at least not all of them), and I find it difficult to believe that a bird that merely lies about hoping not to be avoided (such as one might do at a high school or college reunion) is intellectually deficient. So if ostriches don’t hide their heads in the sand, why do people struggling with high house payments often do just the opposite?

Continue reading "A Message For Those With Their Head in the Sand" »

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Attorney General Martha Coakley announced yesterday that a settlement has been reached with five lenders involved in a foreclosure rescue scheme. The lenders involved are First Horizon Home Loans; Option One Mortgage Corp.; Wells Fargo Bank, N.A.; America Brokers Conduit; and Ocwen Loan Servicing, LLC.

More on the settlment can be found here.

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This morning's Worcester Telegram is reporting that from January 1, 2006 through June 30, 2007 a total of 1,370 foreclosure notices were filed by lenders against Worcester homeowners. It also does not appear it will get better anytime soon:

Trouble could continue for the next two years, according to Mr. [Clark Ziegler, executive director of the Massachusetts Housing Partnership]. ARMs on about 200 more Worcester homes are scheduled to reset before the end of this year, he said. About 1,000 more ARMs reset in Worcester next year, followed by 1,000 more in 2009, he said.

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Anyone facing foreclosure, or considering just "walking away" from their home, must read this important announcement from the IRS.

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Today the The Wall Street Journal reports that the bankruptcy of American Home Mortgage Investment Corporation puts thousands of homeowners in “imminent risk” of losing their homes.

From the New York Post: Countrywide reportedly continues its struggle in this mortgage and housing meltdown.

And finally, USA Today reports that there should be no assumptions that the Federal Reserve will cut interest rates.

Dallas Federal Reserve Bank President Richard Fisher said the U.S. economy appears to be weathering troubles in housing and financial markets, but it is uncertain how things will play out.

"Our economy appears to be weathering the storm thus far. The future path of that storm and the appropriate policy course, however, are still to be determined," Fisher said in remarks prepared for delivery to a community forum in Laredo, Texas.

Last summer, I questioned whether we were heading into a Perfect Storm. If you read the news close enough, it would appear that we are. Are you prepared?

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The Boston Herald reports this morning:

The number of Massachusetts people filing for Chapter 13 personal bankruptcy jumped to 2,187 during the first half of 2007, up 85 percent over the previous year and up 78 percent during the same period in 2004, prior to when the U.S. bankruptcy system was overhauled in 2005.

The number of Chapter 7 liquidation filings also more than doubled to 4,251 during the first half of the year, compared to the year-ago period, according to preliminary data from the U.S. Bankruptcy Court’s Massachusetts District.

Read more here

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I am thrilled to hear that Massachusetts Attorney General Martha Coakley has announced the establishment of a Pro Bono Foreclosure Assistance Hotline. The hotline is designed to steer low income Massachusetts residents to professionals who can offer them the help they need. (I am also pleased to let you know that both Roy and I are among the volunteer lawyers).

The numbers are (800) 342-5297 or (617) 603-1700.

Read more here.

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One of the most common client complaints I have heard throughout my career is how long the legal process can take. I can appreciate that. At the same time, what’s worth doing right, is worth doing well. Sometimes, it takes time to do something well. And lately, time is something that has been a luxury with some of the clients I see. Today, I was reminded how important time can be.

I received a call from some homeowners. They are in one of my least favorite mortgage products: 2/28, interest only. Translated: the first two years of their mortgage payments are “interest only.” Then, in 2 months, the principal will be added to their already high interest-only mortgage payment.

Fortunately, they are not behind. Yet. But they will be if time continues to march forward without some intervention. And even more fortunately, they are calling me early enough that we can take our time and explore all reasonable options available. There is no rushing to the Bankruptcy Court to stop an auction. We can take our time, explore the options, and move in the best direction for them.

Not everyone has that option, but the fact is, the only reason why they do not have the option is because they do not, or cannot look at the handwriting on the wall. Privately, colleagues have expressed their view that I tend to have a negative view of the economy. At the risk of continuing to sound like a 'Negative Nancy', today the stock market decided to deal with the summer heat by slipping into the deep end of the pool. Is the end nigh? No. But one cannot ignore that come October $50 billion worth of mortgages will be adjusted to reflect higher interest rates. For real. The handing writing is on the wall for more than the folks who were brave enough to pick up the phone today.

If you see the handwriting on the wall – and perhaps most importantly, if you can muster up the strength to look at what might not be so pleasant to look at on that yonder wall, call someone. Call someone now. It’s only July. There’s two full calendar months before October to plan, prioritize and strategize. That is time. And time is a precious commodity when it comes to saving your home.

October is a time for pumpkins, leaf raking and the World Series. If you are looking to October with a sense of dread, it’s time to do something about it. You can. There is time.

Posted by Bill McLeod at 7:33 PM | Permalink | Comments (0) | TrackBacks (0)

I am just getting back from a much needed respite. I had originally contemplated writing about my attending the Northeast Consumer Forum in Newport, Rhode Island. But after I wrote about it, I thought it was a pretty boring piece. So instead, I’ll simply mention that I happened across this article out of San Diego on the foreclosure crisis.

But before I do, I need to create the mood, and since I am still trying to get back into the swing of things, I cannot manage a more artful segue than to tell you that I am going to create mood and thus, I am going segue.

In the 2001 film Moulin Rouge, Satine, played by Nicole Kidman is a doomed temptress at the French Club which is run by Harold Zidler, played by Jim Broadbent. Satine needs to tempt the Duke to give money to the club to fund a show. But before she can finish singing her first number, she passes out to the horror of the “guests” of the club. As she is carried backstage, concerned people fawn all around. When she awakes, she is coughing up blood, a fact her attendants are all too careful to hide from Harold who desperately needs the Duke’s money, and presumably, the Duke’s happiness, and sees the only way of getting both is through Satine.

Being the trooper that she is, she gets up. She is clearly having difficulty breathing. She doesn’t look like she can stand, and she’s sweating profusely. She assures Harold she’s fine, and Harold who can see only what he wants to see, announces gleefully “e-very-thing’s go-ing so welllll!” It’s painfully funny and sad.

Segue back to this article. Here’s a tid bit:

Now that the dice have come up snake eyes on the housing market, other shoes will probably be dropping soon. Retail sales, which are plummeting at places like Home Depot and Sears, seem likely to decline further as defaulting home buyers cut down on their big-ticket purchases. In June, retail sales excluding gasoline fell 0.9 percent.

If retail sales continue to fall, adding to the declines in construction and real estate employment, unemployment could start to rise. The Norris Group's latest real estate market report presents a feasible scenario in which unemployment in California rises above 8 percent, compared with its current level of 5.2 percent.

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The news on local home foreclosures continues to be grim. According to a report in yesterday’s Boston Globe, more than 1,500 notices of auction of foreclosed properties were filed by lenders. In May 2006, there were only 654.

Posted by Bill McLeod at 5:39 PM | Permalink | Comments (0) | TrackBacks (0)

At a press conference from her office, Massachusetts Attorney General Martha Coakley announced newly imposed regulations barring foreclosure “rescue” schemes. The new rules – which are effective today – bank for-profit lenders from taking ownership to help struggling homeowners avoid foreclosure.

The new rules do not apply to nonprofit housing agencies, or from family members taking ownership. The new rules also will not prevent lenders from offering assistance, such as by relaxing repayment terms.

From the Boston Herald:

Coakley, whose office has been battling companies that offer complex transactions claiming to lessen the financial pressure of mortgages, said the regulations are effective today and valid for 90 days.

The regulations could become permanent after public hearings are held.

Coakley’s office vowed to review and possibly implement other reforms to deal with the foreclosure “crisis” gripping the state.

“These ‘rescuers’ take a bad situation - foreclosure - and make it worse by liquidating any remaining equity in the homes,” Coakley said in a statement.

From Boston.com:

Coakley's action comes at a time when the state Legislature is still weighing whether to pass a law to deal with the subprime lending and the state's foreclosure crisis. Subprime mortgages are targeted to homeowners with poor credit, but the low initial payments that make them attractive increase two years into the loan when the interest rate increases.

Coakley said she would seek comments from the public over the next 28 days for proposals to make it illegal for lenders to inflate a borrower's income on their mortgage application, to make mortgages that borrowers clearly cannot pay; and to provide credit when it is not in the interest of the homebuyer or an existing homeowner who is refinancing a property.

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Minimum payments on Bank of America credit cards: going up.

The Massachusetts foreclosure rate as measured by April filings: going down.

Gasoline prices: going up.

The cost of electricity as we head into the summer season: going down.

Number of people over the age of 45 seeking bankruptcy protection: going up.

Posted by Bill McLeod at 12:15 PM | Permalink | Comments (0) | TrackBacks (0)

Clients have been kind enough to share with me some of the many letters and solicitations they receive from people and companies who have learned of their looming foreclosure. Actually, to be more accurate, clients tell me they are deluged with these letters. Some of these letters offer assistance and provide truthful and accurate information. Others however, are clearly designed to mislead.

Recently a co-called “US agency” (who for now will remain nameless) sent a letter to a client declaring this:

Bankruptcy stops foreclosure but you will lose your home. (Note: Only 11% of bankruptcies are successful.

People facing foreclosure need to do their research and not rely on what one company, or a group of companies tells them. Unless a bankruptcy attorney who they have met with has told them that in no uncertain terms, bankruptcy is not an option, no one should assume that it is not. And companies who make such broad sweeping generalizations that are simply false should be avoided.

Posted by Bill McLeod at 2:03 PM | Permalink | Comments (0) | TrackBacks (0)

Subscribers to our newsletter might remember our recommendation of iamfacingforeclosure.com as a recommend blog to visit often. Casey Serin is a 24 year old "would be real estate mogul" who is learning some difficult lessons about real estate, investing, mortgages, and foreclosures. On his blog, he shares his thoughts and experiences on his journey through this undeniably difficult process.

I have been told more than once that people follow this site for months before they have the courage to call me seeking advice. Today, Mr. Serin says simply: "Something's Gotta Give." A review of the postings of the last several weeks reveal that the pressures he faces are, on some level, taking a toll. But the fact that he shares them with the public and admittedly wants to "help others in trouble" is something readers of this blog need to know.

By the time many people come to see me, they have already been feeling overwhlemed for some time. The financial pressures can lead to depression and isolation. Here, Mr. Serin is providing an exceptional public service: reminding others similarly situated that they are not alone.

Please visit I am facing foreclosure.com.

Posted by Bill McLeod at 2:55 PM | Permalink | Comments (0) | TrackBacks (0)

From Today's Boston Globe: Boston’s Department of Neighborhood Development (DND) announced that the foreclosure rate in Boston has quadrupled since 2005.

The numbers are still much lower than the 1,700 foreclosures in Boston in 1992, when the technology-based economy ran aground and some property values were cut in half. But Mayor Thomas M. Menino said he is concerned about the current figures, fueled by the rising delinquencies of risky subprime mortgages.

‘‘It’s not just a Boston problem. It’s a nationwide problem,’’ he said. ‘‘We need state help. We need federal help.’’

That help may have to come from Washington. In an April 17 decision (Waters v. Wachovia Bank, N.A., et al.) the US Supreme Court held that Wachovia’s mortgage business, whether it was conducted by the bank itself or through the bank’s operating subsidy, is subject to the oversight of the Office of the Comptroller of the Currency pursuant to the National Bank Act (12 USC Section 1, et seq.). It is not subject to the “licensing, reporting and visitorial regimes of the….States.” A bank’s subsidary mortgage company is subject to state regulation only if the parent bank would be if it performed the same function.

Posted by Bill McLeod at 10:15 AM | Permalink | Comments (0) | TrackBacks (0)

From housingwire.com:

As part of a borrowers’ assistance program designed to help WaMu homeowners with subprime mortgage loans stabilize their finances and avoid foreclosure, Washington Mutual (NYSE:WM) announced Wednesday a new program that will allow borrowers to refinance up to $2 billion in subprime loans at discounted interest rates.

Under the program, WaMu subprime borrowers who remain current on their existing loans and anticipate pending payment increases may apply for new discounted fixed-rate loans or other mortgage products available to them, the company said.

Click here for the full article.

For more information, visit Washington Mutual.

Posted by Bill McLeod at 6:27 PM | Permalink | Comments (2) | TrackBacks (0)

Consumer groups have called for Congress to reform the bankruptcy code to save the homes of Americans who are mired in the subprime mortgage foreclosure crisis.

"For most of these families, bankruptcy is the only viable option to save their home," said Henry Sommer, president of [the National Association of Consumer Bankruptcy Attorneys]. "This current exclusion is contrary to sound policy, and operates to disadvantage low-wealth and middle-income borrowers as compared to debtors with the wealth to own more than one home."

Read more here,

And here,

And here.

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You might want to read this from yesterday's New York Times:

...it’s now clear that people who chose renting over buying in the last two years made the right move. In much of the country, including large parts of the Northeast, California, Florida and the Southwest, recent home buyers have faced higher monthly costs than renters and have lost money on their investment in the meantime. It’s almost as if they have thrown money away, an insult once reserved for renters.

Posted by Bill McLeod at 12:46 PM | Permalink | Comments (0) | TrackBacks (0)

From the website of Massachusetts Attorney General Martha Coakley:

Yesterday, Attorney General Martha Coakley's Office reques