Wednesday, March 31, 2010

Loan Modification Changes - Will They Help?

I am sure many of you may have heard about the recent changes and expansions announced last week to the guidelines for loan modifications. I have attached a link to the overview below:

Essentially, the government has heard the problems in the process and are trying to push lenders to start doing things right with more formal procedures and time frames. In addition, they want to expand modifications to homeowners in bankruptcy, provide assistance to those temporarily unemployed, provide cash payments to those who short sell or walk away, and provide more protection from unexpected foreclosure occurring during a modification review.

I must emphasize that these are only guidelines for non-GSE servicers to follow (those other than Fannie Mae and Freddie Mac) on HAM modifications only. There is no real enforcement procedure, it is more of a way to tell lenders that they must comply if they want to get the federal incentives. It took the lenders almost a year to implement the original guidelines announced last February 2009, so it is unknown what effect this will have and how long it will take.

The announcement by Bank of America that they will reduce principal on certain loans sounded like a positive thing; however, it was only done to settle certain cases brought by the Attorneys General of several states and will likely only apply to up to 45,000 borrowers who had certain Countrywide predatory loans.

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Bankruptcy Attorney Chris Barsness

Saturday, March 27, 2010

Treasury's New Attempts To Help Foreclosure & Loan Modification Problems

The Treasury announced more attempts to help borrowers in foreclosure or close to foreclosure including payments toward relocation and short sales, as well as additional help for unemployed borrowers.

It remains to be seen whether these changes will help fix the foreclosure and loan modification problems, including problems facing borrowers going through bankruptcy.

For an overview of these changes, you can read more below:

Saturday, March 20, 2010

California Bankruptcy Attorney Uses Chapter 11 to Stop Foreclosure

A bankruptcy filing has the effect of placing a court order stopping foreclosure and eviction. It gives homeowners time to try to work out a solution to their financial problems. Loan modifications are few and far between these days and do not guarantee the bank won't sell the home during the process.

Many people do not realize that Chapter 7 and 13 are not the only alternatives when it comes to filing for bankruptcy. Chapter 11 is a reorganization like chapter 13, but can be used for individuals to accomplish foreclosure relief, debt reorganization, and lien stripping that essentially results in principal mortgage reduction. A homeowner's primary residence 2nd mortgage can only be lien stripped if the home's value is less than what is owed on the 1st mortgage. Rental or investment properties 1st and 2nd mortgages can be lien stripped in certain circumstances in Chapter 11.

Even in Chapter 13, a homeowner can benefit by removing the 2nd mortgage, resulting in more available income.

Consult with a bankruptcy attorney to review your options. Many, including our firm, provide free consultations to see if bankruptcy may be the right option for you.

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Wednesday, March 17, 2010

How to file bankruptcy - consult a bankruptcy attorney

Record numbers of bankruptcy cases are dismissed by the court as they are not being filed properly. Both local and federal rules of bankruptcy procedure require compliance with filing deadlines and format of forms, schedules, and other documents. People want to avoid the costs of hiring an attorney, but they end up wasting the $300 filing fee and time involved by filing improperly only to have the court dismiss the case 14 to 30 days after filing.

If you are trying to rearrange your finances and get back on your feet, an experiences bankruptcy attorney can help you make sure you handle your case properly. Realize that you are eliminating debts and monthly payments, so an investment in your financial future is worth the cost. Most bankruptcy lawyers are willing to work with you to figure out how to pay the costs involved for their advice and representation.

In addition, a bankruptcy lawyer can explain advantages that you may be able to take advantage of, such as eliminating second mortgages on your home, saving your home from foreclosure, and other pieces of advice and counseling.

Tuesday, March 16, 2010

Banks Intentionally Delay Modifications

How can it be that of the millions of homeowners, loan modification companies, and attorneys applying, less than 200,000 homeowners nationwide have gotten loan modifications? The banks report to Obama that people fall through the cracks because of missing documents or failure to follow up; however, anyone who works in this industry or has tried on their own to get a modification knows that can't be the truth. No matter how many times you submit, resubmit, call, or mail things to follow up, you will no doubt be told everything is fine one day, then that you were supposed to send new paystubs the next day and because you didn't, your file is closed and your home will be sold.

It is quite apparent that the banks have no intention to finalize anything more than a small number of modifications to show the president they are trying. If you are an investor holding loans serviced by these banks, I would be outraged by their either intentional dismissal of help or complete and utter disorganization. Some have theorized that the banks want to take over a large number of homes and only slowly release them for sale to artificially boost the home buying market and prices. This potentially rises to the level of anti-trade violations if there is collusion by several banks to do this by artificially fixing markets and prices. When will the justice department get involved to investigate? Probably never because the banks will just keep blaming everything on homeowners not working with them when we all know that isn't the case.

The only thing that makes sense based upon these facts is an intentionally willingness to not modify loans or stop foreclosures. Not only are large banks possibly doing this, but they then refuse to lend any money to small business or new home buyers. I suggest closing any bank accounts with large banks and opening new accounts with small banks or local credit unions and keep your money out of the hands of the greedy corporations.

I once again call on Congress and the Obama administration to push realistic financial reform and pass legislation to allow primary residence 1st mortgages to be reduced to market value in bankruptcy.

Sunday, March 14, 2010

Banks Sue Homeowners Years After Foreclosure

Other states see the same issues regarding lenders coming after foreclosed homeowners years down the road. See the below article for this happening in Nevada.

Bankruptcy may be the best option to avoid worrying about the banks suing a homeowner after a short sale or foreclosure and no one should assume everything is fine when they walk away from a home.

Friday, March 12, 2010

Beware Of Personal Liability After Foreclosure Or Walk Away

Many people do not realize that they may face personal liability for certain debts if they walk away from their home or let it go to foreclosure. In California, if the 1st lender forecloses with a trustee sale, any other lienholders, such as a 2nd or 3rd mortgage or line of credit may be able to come after the borrower personally.

In fact, reports are that servicing companies are increasing their efforts to come after people who have been foreclosed upon for these personal obligations. Homeowners need to take steps to avoid going through more financial distress after a foreclosure. Often a Chapter 7 bankruptcy liquidation makes sense after a foreclosure to get rid of all other debts and personal liability.

See the report out today on CNBC:

Chris Barsness

Wednesday, March 10, 2010

Bankruptcy & Short Sales Better Option Than Modification

The recent announcement by President Obama of incentives to homeowners of $1,500 for selling their home in a short sale is just further evidence that lenders are unwilling or unable to complete realistic loan modifications. The President is realizing that lenders would rather take a short sale loss and move on than deal with modifications.

Many homeowners get emotionally attached to their homes, but they need to be realistic. If you are in a position where you cannot afford the existing payment and are severely behind in payments, it is unlikely a loan modification is going to help. With only 66,000 modifications in 2009 under the Obama HAM program nationwide, it seems unlikely that anything is going to get better.

Once homeowners realize that they may not be able to save their home and realistically think about moving on, they can properly evaluate all possible options. Many homeowners end up losing their homes during a modification review and end up with personal liability on 2nd or 3rd mortgages. Bankruptcy can be a useful tool to resolve some of these issues. It can be used to remove 2nd liens and bring a homeowner current on back owed payments.

The other options are short sales or deeds in lieu of foreclosure. Homeowners should consult with a local real estate or bankruptcy lawyer to be sure they are protecting their finances moving forward.

Chris Barsness