This was first posted in March 2008. More than two years later, the housing market is still in the pits, and more folks are opting to simply walk away from real estate they can no longer afford. Little has changed. And I dare say, it’s getting worse (although those seeking relection this year might want to disagree). If you own a condo or are in a homeowners association, the 2005 changes to the Bankruptcy Code force you to take some new issues into consideration.
Posts Tagged ‘Mortgages and Foreclosures’
The Advertised Auction of 115 Cottonwood Street
Tuesday, June 1st, 2010
My joyful descent into holiday weekend relaxation mode was interrupted by a Friday afternoon news story that caught my attention. Harmon Law Offices, a Massachusetts law firm, placed an ad in the New Bedford Standard Times announcing a land sale in Fairhaven.
The advertisement stated that the land “…shall not be sold, leased or rented to any person other than of the Caucasian race or to any entity of which any person other than of said race shall be a member, stockholder, officer or director.”
In a statement issued to FOX25, Harmon Law Offices said: “This notice involves a restriction that a previous owner placed on the property. We do not condone the language and do not believe that it would be enforceable. It is industry practice to include in the notice of sale the exact legal description as set forth in the mortgage. We have removed the language for future legal notices.”
As I mentioned on Twitter, and as I’ve been thinking about on the weekend, this news story raises a number of issues. (more…)
That Servicemembers Notice & Your Loan Mod Request
Wednesday, March 17th, 2010
I received a call today from a client what we in the biz refer to as a “Soldiers and Sailor’s Notice.” I had met this caller a few weeks ago – and at that time, was told that the home mortgage and loan were “in review” by the lender and servicer. The caller was confident that a modification would be offered – and it would be one they could live with. I have “I’ll believe it when I see it” view. But today, the caller had this notice – which was found tied to the front door knob by a rubber bank. The caller’s question for me: “what does this mean?” (more…)
Loan Modification Scams
Friday, February 19th, 2010
As more and more people try anything to avoid losing their homes, more and more people are getting scammed.
Here are two links with important information for homeowners contemplating modifications:
This from The Christian Science Monitor:
TransUnion, a credit reporting company, released its own numbers on Tuesday. At the end of the fourth quarter last year, it said, 6.89 percent of all US mortgage payments were at least 60 days past due. That was an all-time high.
Enter unscrupulous loan-modification companies. They advertise on late night-television or radio shows and sound as if they are linked to the Obama program.
“Many of them have the word ‘hope’ in their phone number,” says Jonathan Mintz, commissioner of the Consumer Affairs Department in New York. “But it’s a false hope.”
And here’s a link mentioned in the same article that describes, among other things, 6 Facts You Should Know About Loan Modification Scams.
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When Should You Start Thinking About Doing a Short Sale?
Tuesday, February 9th, 2010
A homeowner decides that they want to sell their property – and get as much as they can from the sale even though it won’t pay the mortgage – by a short sale. But if the home is already in the foreclosure process, is it already too late to start thinking about that. It might be. Today, I’ll tackle the timing of the short sale decision, and why it something that if you’re going to consider it, you need to start thinking about it before you start missing those mortgage payments.
Short Sales & Foreclosure: Perception & Reality
Monday, February 8th, 2010
Many people struggling to pay the mortgages are motivated to consider a short sale. I am often told that it is considered because of their concern that if a short sale is not done, and the property is allowed to foreclosure, they will never be able to own a home again. Today, I want to tackle the perception of that…and present a bit of reality, from my point of view.
Saving the Home: Thinking Beyond “Delay and Pray”
Saturday, January 30th, 2010
The foreclosure numbers don’t lie. According to ForeclosuresMass.com, a total of 478 new foreclosures were filed this week (ending January 29, 2010). Approximately 56 homes slipped into foreclosure every day for the last 60 days. The economy is far from a turn around.
HAMP is not really working – at least in not any meaningful way. Homeowners can expect a “delay and pray” modification or an “extend and pretend.” Taking arrears and putting on the tail end of the note, “delay” (which is a nice way of saying a “balloon” payment), means that for it to be paid off, the value of the property will have to increase (hence, the term “pray”). What seems more accurate is “extend and pretend.” You can extend the terms, such as turning a 30 year note into a 40 year note. Of course, the “pretend” comes into play when you want to “pretend” you want to live in the property, “pretend” that the economy and the housing market will turn around so that you still won’t have to come to the closing table with a checkbook in hand.
HAMP is not the only option available to homeowners trying to avoid foreclosure. There’s HARP, there are short sales and there is the possibility of keeping the home under bankruptcy court protection (either in chapter 13 or 11). While bankruptcy should be one of the last options, I am always surprised at people who quickly dismiss it altogether – especially when it’s the best option available.
Consider this scenario:
‘Extend and Pretend’ Doth Not A Modification Make
Tuesday, July 28th, 2009
Today’s editorial in USA Today chides lenders for playing the “extend and pretend” game with mortgage modifications. The piece is one of the first of what I hope is a larger chorus of supporters of amending the Bankruptcy Code to permit modifications on residences.
There’s just one problem with this game of “extend and pretend.” It’s bad for everyone concerned, including the banks. As the number of houses in foreclosure grows, it damages neighborhoods and pushes down home values.
The best thing Congress could do to aid hard-pressed homeowners is to alter bankruptcy law to allow judges to modify troubled mortgages, as they do with virtually all other debts. This common-sense change would give lenders more incentive to make modifications themselves, rather than lose control to a bankruptcy judge.
It’s time to start pressuring Washington about this again. And this time, we need to be sure that Washington hears from everyone. Start talking.
‘20 Months Too Late’: Let’s Start Rethinking Mortgage Modifications in Chapter 13
Wednesday, June 24th, 2009
I’ve been thinking about yesterday’s blog entry. When I first read the First Circuit decision, I wondered why the case was brought. Here was a homeowner arguing that a mere technical violation of TILA would enable him to rescind a mortgage that he signed 20 months prior. Based on the facts cited by the Court, it seemed a bit disingenuous. But then, as I was thinking about it more, it occurred to me that what did not sit well with me was not what I knew from the court decision. It was what I didn’t know. I knew nothing about the homeowner.
I don’t know if the homeowner knew exactly what he was doing when he was at the closing. I don’t know if the homeowner was honest when he was applying for the loan, but knew that he could not afford the mortgage unless he was able to refinance. I don’t know if he was banking on rates going down, his property value going up, or both.
I don’t know if the mortgage broker lied, if the notary was drunk, or the closing agent fled to Columbia after the closing. I don’t know if the homeowner was warned every step of the way, but heard and saw only what they wanted to.
I don’t know if the homeowner simply misgauged what the future might hold. I don’t know if he was motivated by greed. I don’t know if he was motivated by someone else’s greed, like family member’s, fueled further by his reluctance or his refusal to urge restraint.
I don’t know if his inability to afford the payments is based on what they could have controlled, but for whatever reason, did not. I don’t know if he had the ability, the choice or the wherewithal to do everything he could to avoid heading into the financial minefield he now finds himself in.
I don’t know if it was a father trying to refinance their home because of a child – a new child to be born, an older child to be schooled or a sick child to be healed. I don’t know what was going through his mind. I don’t know what was going through his heart.
I also don’t know if the homeowner himself or his spouse was ill. Assuming they were, I don’t know if he was ill because of something he couldn’t control, or if his quart-of-gin-and-two-pack-a-day lifestyle was finally catching up with him.
I don’t know if the homeowner was employed, was under employed or was unemployed. I don’t know if the homeowner one day went to work only to find the office doors locked or if he came home to find his spouse gone.
I don’t know if the homeowner refinanced to pay for a new roof, new wiring or a new septic system. I don’t know if it was for a man-cave for him or an addition for his ailing mother.
Nor do I know if the homeowner was a scoundrel. I don’t know if he overestimated his income to such a degree that it reflected a hope for a better, brighter and richer future than any rational person would think possible. I don’t know if this is just one more thing he had already assumed he was going to get away with.
Regardless of the one or the combination of any of the above things that I do not know, I do know that the homeowner cannot go to bankruptcy court to modify the loan secured by the mortgage on their principal residence. If you simple replace the words “I don’t know” with “What if you knew that…?” in each of the above situations or with a combination of any, and was able to consider what you did know, it would not change anything because the homeowner still could not modify the loan secured by the mortgage on their principal residence in bankruptcy. But more simply stated: for the homeowner before the First Circuit Court of Appeals seeking to change the terms of a promise he made 20 months prior, I don’t know the reasons why.
Section 1322(b)(2) of the Bankruptcy Code of the United States won’t allow any homeowner in chapter 13 to seek modification of a loan secured by their principal residence regardless of the reason. Congress has determined that the reason for the requested modification is irrelevant. They have determined that no one, no judge, and indeed, not even me or my readers need ask why the modification is needed in chapter 13. From the perspective of Congress (and frankly that of the Mortgage Bankers Association and their ilk), “why” is irrelevant. (Actually, I’m not entirely correct on that point. Lenders can choose to voluntarily modify the mortgages on a debtor’s principal residence. They alone can consider the reasons “why.”)
Our country is embroiled in an economic crisis of historic proportions. It’s bad out there, and for many may get worse. If I’m eventually (i.e., within several months) proven wrong then you can all paint me crazy and I’ll find myself my own “Plan B.” Until then, let’s all help each other find answers to the questions that start with “What if you did know…?” And let’s start a meaningful discussion that may result with an amended Section 1322(b)(2) that will let homeowners prove in our forum of last resort (the Bankruptcy Court) the desperate financial situations they find themselves in, and will let judges consider and weigh the reasons why they should get a second chance to keep their family home. If for no other reason because it defies logic that the same standards be applied to someone who has been dealt a bad hand versus someone who is gaming the system.
Some ‘Provocative’ Questions about ‘Extend and Pretend’
I read this today on HousingWire. Its publisher, Paul Jackson, poses the following “provocative” question about all of those modification plans and programs we keep hearing about (and I often write about):
Or, perhaps it can be said like this: what if consumer confidence statistics are actually being artificially buoyed by the extra cash homeowners (at homeowners ‘on paper’) who are not making mortgage payments, but instead, allocating those resources to things they would not otherwise purchase? (more…)
Tags: Commentary, Economy, HAFA, HAMP, modification, Modifications and Workouts, mortgage, Mortgage and Foreclosure, mortgages, Mortgages and Foreclosures
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