Home Loans - Too Risky? Don't Ask, Don't Tell!

Should Banks be making mortgage loans? We take the answer for granted. Yet, I have been involved in an on-line discussion that started about gold’s value and price, that became about the wisdom of banks making loans for homes. And, if so, the circumstances under which loans are made. Financial and economic modeling does not take into account all of the variables, nor can any model accomplish that feat. My position is that, the contributors to the conversation should have the actual experience to deal with the issues, and even then they will end up with as many opinions as there are participants

The Philosophical debate of home ownership is one that has so many moving parts, IBM's “Jeopardy!” winning super-computer, WATSON, would have difficulty arriving at "an answer".Oh, and that assumes that we can identify all of those factors which should/must be considered. Part of the problem here is that lending for home purchase is tied to our (U.S.) culture and societal expectations. Further, politically, we have tied ourselves to a tax and income structure that counts on home ownership.

How to make successful loans? Easy - (1.) Take only Borrowers with perfect credit and lifetime employment with Life and Disability insurance naming the lender (2.) Variable rate (3.) changing DAILY (4.) at a rate fixed to the Fed Funds rate (5.) Plus whatever margin the institution needs to satisfy stockholders. (Oops! Nothing will satisfy stockholders so let's just call it a reasonable “ROI”-Return on Investment)

The issue is simply Home Ownership for the “99%” or Not! The mutual financial institutions, including credit uions, have an advantage, that they have squandered, as they have no stockholders and pay lower/no taxes. Mutual holding companies allow community banking to survive the onslaught of mega-banks. But as mutuality disappears, we will be left with the Savings & Loan “S&L” model. That worked real well. I ran several failed S&Ls for the State of MD with the FSLIC (now part of FDIC) right next to me. Commercial banks? How about Bank of New England - $32B "failure" in 1990 (translate that to 2012 dollars!). I know it well, because I "worked-out" a small part of the organization, me having moved from MD, where I was President of a new Federal Savings Bank, in January 1989 to run the Berkshire, MA region of BNE.

Lending is RISK. That is what banks are supposed to do: Take Risk! However, it is supposed to be managed. Shareholders, by demanding higher dividends and share prices, force unwarranted risk-taking. The two demands are somewhat diametrically opposed, yet sophisticated models will demonstrate that they follow one another, and lower the risk taking as the Board over-sees the "lending activities". GOOD LUCK!

Spend 10 or 20 years in banks and mortgage companies. thrifts and commercial banks. Then spend 10 years looking at changing regulations, but not just "real" banking, but so-called shadow-banking (Morgan Stanley, Goldman Sachs et al) as well. See what the SEC (Securities & Exchange Commission) has planned, versus what was on the books in 2006. Then look at enforcement or the lack thereof.

My long and drawn out point is that without field experience one cannot "model" the issue of "to lend or not to lend" and how much to charge if the decision is "YES". Then again, we are at the juncture of epistemology, philosophy, and economics. Answering the question of whether there is A God, many Gods, an Intelligent Designer" (ha ha - think about it), or just Chance, would be easier.

The price and value of gold - I guess that debate is over. It's worth something because we say so and because my grandson liked shiny stuff when he was little.

Author's Copyright by Richard I. Isacoff, Esq, September, 2012 rii@isacofflaw.com http://www.isacofflaw.com/

Mortgage Settlement - Not For Everyone

Hooray! We have a Mortgage Settlement - $26B worth but who gets help and where does the rest of the money go? NO ONE KNOWS yet, and no one know who is covered and will get assistance of any kind!

What we do know is that the 5 major servicers, Bank of America, JPMorgan Chase, Ally Financial (the old GMAC), CitiBank/CitiMortgage etc, and Wells Fargo are funding the settlement (there may be others later).

We DO KNOW that if you live in Oklahoma you opted out of the settlement, and if your loan is owned by FannieMae (FNMA) or FreddieMac (FHMC) YOU ARE NOT INCLUDED. Below is a link to the website for the Settlement where you can check to see if your loan is owned by either of these GSEs (Gov't Sponsored Enterprises).

We also know that 1. if your case falls into the included category and you lost your house in what would be deemed an improper foreclosure you may be entitled to $2,000+/-. 2. If your mortgage payments are current but your house is worth less than you owe, you may be eligible for a refinance to a low rate. 3. If you need a modification, you might get a Principal Reduction so you owe less and therefore your payment may be lowered. (No items 2 and 3 ARE NOT reversed - seems like they should be however).

Nothing will be ready for 6-9 months, and most of the programs will be administered through the States' Attorneys General's Offices - the program will be implemented over the next 3 years.

Some perspective on the Settlement amount: 2011 - Bk of Amer earned $17B after loan loss reserves ("net" income $1.4B); JPMorgan "Net" Income $19B; Citi "Net" Income $11B; Wells Fargo $16B. Just these 4 banks had a "Net" Income of $47B for 2011 and that is without stripping reserves for the Settlement that have already been put aside and reduced income.

Last - the official word is "Wait, you will be contacted" or, if you are in the foreclosed category being handled by your State's Attorney General, contact that office through the link provided on the National Mortgage Settlement site.

http://www.nationalmortgagesettlement.com/help

Author's Copyright by Richard I. Isacoff, Esq., February 2012

rii@isacofflaw.com

www.isacofflaw.com

Mortgage Settlement:Sky Clearing or Storm Coming?

Whether CA and NY join is anticlimactic. The quibbling over the amount of the settlement was foolish. $17B or $25B has never been the issue. Of bigger concern is the ultimate trickle-down (how Reaganesque) to the affected homeowners.

The Banks have wanted a "free" pass as to future suits and an indemnification from suits by borrowers who are now out of house and home. I know that there will be the hue and cry of "they only got what they deserved; after all they didn't make their payments - so the paperwork was faulty - they didn't pay!" (I worked at a bank where a fellow SVP called it the "Human Cry" - never knew if it was a clever pun or...). Here, there is a human cry and it's from the families who fell behind for legitimate reasons (loss of job due to federal program cutbacks), tried to get a modification but before they could react their house was gone.

I have worked with nearly 100 variations of that scenario in the past 3 years! And I have handled 50+/- of the situation where the house got to be too expensive and the homeowner stopped paying because the mtge co refused payments after 90 or 120 days delinquent.

For that first group, where there were no assignments, where MERS (Mortgage Electronic Registration System) initially foreclosed, where HAMP was ignored or where a major Lender/Servicer stated to me "We don't have to do modifications because we did not take any Federal ("TARP") money", is the group that should be compensated. With the per household figure being $1,500, that's not even 1st, last and security for an apartment, and in many places barely 1st month's rent.

The Securitization of mortgages into RMBS (Residential Mortgage Backed Securities - where thousands of mortgages were pooled together - See Posting Dated ) made this fiasco possible. In a sense, the banks have had to deal with the losing cards they got in the draw. The suit should have included the rating agencies, the Investment Banks, and all who facilitated a swindle that makes Madoff look like a low level Ponzi scheme.

I cannot point a finger at any one individual, organization, regulator, administration etc and say "You caused this world recession!!" That being the case, the Banks that allowed forged or failed documents to be used, corrupted the Civil side of the legal system by swamping Plaintiffs' lawyers with Wall Street law firms to a point where, even though all procedures were followed the hired guns won.

I ran failed S&Ls in MD and part of the Bank of New England mess in MA - I have chased and caught the thieves and cut the business/person who just got a raw deal some slack. Here we have Corporate Persons, some of which took "assets" at the request or arm twisting of the Fed, Treasury, OCC, or FDIC, being asked to pay a quarter's earnings to make up for a systemic failure. That's the price for being in the game but here everyone has lost. Stockholders, displaced CEOs and other officers, Homeowners, Administration officials etc.

The $25B is just hush money - hush to the whole bloody mess.

Author's Copyright by Richard I Isacoff, Esq, February, 2012

www.isacofflaw.com

rii@isacofflaw.com

PS AN AGREEMENT WAS REACHED JUST AFTER I RELEASED THIS FOR 10AM FRIDAY. HERE IS A LINK TO THE JUSTICE DEPARTMENT'S PRESS RELEASE http://tinyurl.com/73ypvub

Legacy Assets - Not Much Of An Inheritence

The Wall Street Journal in its February 5-6, 2011 edition had an article by David Benoit, entitled "BofA Sets Mortgage Cleanup Unit". The article about Bank of America was in the middle of the "B" section and drew little attention. In fact, there was no follow-up in the WSJ nor was it reported in the rest of the press. Certainly it did not make the nightly news nor the newscasts on the radio.

Okay, what did the title mean? Was BofA establishing a department of custodians/cleaners, or maybe street sweepers? Nothing that community minded. What BofA did was to establish a Business Unit to "monitor the Bank's 1.3 million delinquent loans". In addition, it will deal with foreclosures and INVESTORS wanting their money back for the bad loans in the Mortgage Backed Securities they purchased. The unit is named the "Legacy Asset Servicing" group.

Legacy, as in an inheritance? - well not really. Legacy as in " this is what we got stuck with when we bought Countrywide and made our own bad loans". A bit of math here - 1.3 million loans, averaging $100,000 each totals $130 BILLION of delinquent loans, and here delinquent does not mean 30 days late, but, rather, seriously late - nearing foreclosure.

There are 55,000 employees in this unit. BofA hopes to reduce the number to 35,000. Sounds great for BofA, but the reduction is only from eliminating redundant operations so BofA profits increase. What's another 20,000 unemployed workers matter? Harsh assessment - yes. But, we now have $130 billion in loans (1.3 million loans) where people may have their homes foreclosed.

Because of these loans, BofA's mortgage groups lost nearly $9 billion in 2010 and had to reserve, put in escrow and promise not to spend, another $4.1 billion. If the investors get their way, and force BofA to buy back the bad loans in the MBS the investors bought, it is reported that BofA could lose another $10 billion. What is staggering is that, while stockholders might not be thrilled and some executives might get fired, the $10 billion will be only inconvenient for the Bank. That should give you an idea of the size of the Bank.

What the article does not state, and what is not being reported, is the tens of thousands of homeowners who will be losing their homes. Do some "deserve" it for not paying the bills because of frivolous spending, or because they used the house as an ATM by constantly refinancing until payments were impossible? SURE! But the majority of homeowners facing foreclosure are victims of job loss, illness, mortgage sales people who outright lied and falsified documents (of that I have first hand knowledge), and the general economic collapse.

If this Legacy Asset Servicing group really takes charge of all of these loans, there is at least some hope that through regulatory oversight, private lawsuits, federal legislation (don't count on that one), and the new Consumer Finance Protection agency, there can be an examination of these loans - maybe to stop foreclosures and force modifications. Nowhere in the story is there even the hint of BofA taking steps to help homeowners with modification; to change its own policy of "if we don't have the documents and recognize that we do, you will lose you home".

The investors want their money back. Why should they get it? The level of sophistication of these "investors" equals that of the Chairman of the Federal Reserve. Many of them packaged the loans and some created the Mortgage Backed Security product. Why should they just demand their money and get it. Yes, they have a contract that protects them - HOMEOWNERS DO NOT!!

Bank of America is only the biggest of the entities taking this kind of action. Every "Bank" with a large mortgage portfolio, or those who sold loans into what became Mortgage-Backed Securities are doing the same. The fear is that all of the investors who lost, or may lose, money (it may just be the income stream from the investments) will demand that the Banks who sold these "toxic" loans repurchase them, ridding the potential losses from the securities, thereby protecting the investors. The irony here is that the Investors created the monster that is now threatening to "gobble them up" in losses.

Is there anything wrong with centralizing the work with defaulted loans. NO! It's the right way to process the work. BUT if this is being done to streamline the foreclosure process, and to mollify investors so they get their money back (why can the rest of us buy an investment that has a guaranty that you can never lose money), the entire SYSTEM must be revamped.

Banks, Foreclosures, and Deceit

In his article, in the Tuesday November 15th edition of the New York Times, about foreclosures, David Streitfield discloses the Banking/Mortgage industry’s callousness to the plight of homeowners across the country. Mr. Streitfield writes, referring to Bank of America and JPMorgan Chase "Both have maintained whatever missteps their personnel might have made... No one lost their house who should not have, the banks say". This arrogance is why we cannot fix the mortgage problem. Why did the homeowners end up in foreclosure? Perhaps the Banks and lenders did not follow the LAW about mortgage lending; so by their logic the mortgages should be discharged.

The technicalities that the Banks dismiss are the basis for the protection of property rights. If the foreclosure documents are forged or unverified, the Banks have no way to know if the borrower should have been foreclosed against. This is akin to law enforcement saying that the Miranda warnings given to suspects are not needed because the person would not have been arrested if he/she was not guilty. The same Banks, a mere 2 years ago, argued that they needed federal help to survive, while they really needed help to build profits. Can we hold them to the same standard in dealing with the substance of modifications - that they must grant a modification because the homeowner should have kept his/her house anyway, job loss and bad lending aside?

On the same day, the Times ran another article about the fact that Bank of America, the largest holder of mortgages, has the lowest percentage of Making Home Affordable or HAMP modifications, among the 5 major mortgage servicers/lenders. Maybe there is a mere technicality that will allow some Federal agency to force the mammoth B of A to follow the program in place for modifications, instead of arbitrarily denying such relief just because to paraphrase the Banks, No one will lose their house who doesn't deserve to lose it!

Author's Copyright by Richard I. Isacoff, Esq, November 2010

rii@isacofflaw.com

http://www.isacofflaw.com/

Judicial or Non-Judicial Foreclosure: Do I Keep My House!

All of the news of late has been about the so-called "robo-signers" at mortgage companies dealing in 23 "judicial foreclosure states", and the impact that an unknown number of potentially improper foreclosures will have on our already troubled real estate and financial markets.

But, what exactly is the difference between those 23 "judicial foreclosure states" and the rest of the states?

In a so-called "judicial foreclosure state", before a lender can foreclose on a house, it must get approval from the court – whichever one is responsible for hearing Complaints/Suits to Foreclose in the particular state. In Massachusetts, the court would be either the Land Court, which deals exclusively with real estate issues, or the Superior Court. However, Massachusetts is not one of the 23 states mentioned above.

In a judicial foreclosure state, homeowners have the right to go to court and challenge the foreclosure – to have "their day in court." There are many grounds upon which a foreclosure can be challenged: that the bill has since been paid, that there is a discrepancy between the owner's records of payments and the mortgage company’s, or that notice of the request was never received (except if you are already in court, that’s a hard argument to make). The point is that you get a chance to plead your case to a judge before the foreclosure process can commence.

In a state like the Commonwealth of Massachusetts, if you are in default of the mortgage note terms and owe money to the lender/servicer, a number of steps need to be followed as set out in the Massachusetts General Laws. But there is no mandate that the foreclosing party go to court first. In fact, the law specifically does not require any court action. That was the purpose of what is called a "Statutory Power of Sale" – the lender gets rights from the contracts you sign (mortgage and mortgage note) and the General Laws of Massachusetts.

The problem that is being discussed in the "judicial foreclosure states" is that employees with authority to sign foreclosure documents were doing so stating that they had reviewed all of the required files to begin a foreclosure. But, in actuality, they never did the analysis of those files. They simply signed that they did the review, and the courts were relying on the affidavits of these persons. In those cases, the court has a reason to stop a foreclosure or reverse one that happened (in some instances) if, upon examination, the foreclosure documents are not correct or complete.

For example, if there is a claim that the foreclosing party has ownership of the mortgage note and the mortgage, based on an assignment from one bank to another, but there is no such assignment in the file, then the foreclosing bank/lender may not have the right to do so. There may, in fact, have been an assignment, but if it is not on the record, or at least in the possession of the foreclosing bank/lender, the sale is probably no good.

What is the difference, then, in a non-judicial foreclosure state? NOTHING! The foreclosing bank/lender still must have the same documents showing ownership of the loan, and they must provide the same required notice(s) to a borrower, giving them a chance to pay the loan current and avoid a foreclosure.

As a safeguard in Massachusetts, for example, a lender has to give a minimum of 90 days Notice To Cure a Default, and in some circumstances 150 days. No foreclosure process can take place during that time. After and only after that period can a lender/servicer start to foreclose.

In reality – for purposes of "bad documents," affidavits that are false or meaningless, certifications of ownership and amounts owed that are never reviewed, and most of the other steps of the process – there is no difference in terms of judicial vs. non-judicial foreclosure states.

In essence, we are not dealing with a problem with documents for a court. We are dealing with the equivalent of falsified attestations — in legal terms, perjury or what is called "giving false oath." Or, in simpler terms, lying.

Author's Copyright by Richard I. Isacoff, Esq, October 2010

http://www.isacofflaw.com/

"...and Wining, Winning, Winning" - (re-post)

As a solo practitioner I must acknowledge my work limitations; I cannot compete against the Boston or other big-city law firms employing 20 or more attorneys.

In the Foreclosure Prevention work I have been doing, I have had to bring actions against players like HSBC (and its subsidiaries HFC, Beneficial, Household Finance), America Home Mortgage Servicing Inc ("AHMSI"), Wells Fargo, CitiMortgage, etc. In so doing I lost my ability to do any work other than fighting these lenders, which hire Big Firms, 40th Floor Boston, 50th Floor New York, water-front Rhode Island etc. offices. They have associates, attorneys trying to become partners, being paid to fight anyone who gets in the way of a foreclosure.

The fighting is "civil" - sort of. The filing of a claim brings a ream of paper filled with questions for my client (Interrogatories) meant to elicit the smallest details about the case, and pages of "Request for Production of Documents". These legal tactics are used in reality to flood a small office with paper and consume time. Well I just drowned in the latest flood and there was no one to perform CPR.

Make no mistake - these firms are within their legal rights to protect their clients through any legal means, but are they and their clients acting "morally" or, using the word in the common sense, ethically? In many cases I believe the Lenders/Servicers/Investors are not. They claim not to have any responsibility for the loans they made/service, regardless of how onerous, regardless of "bad faith", "bait and switch", unconscionable, and just plain improper and misleading. What's worse is that by the time the problem hits, most of the laws enacted to protect consumers have run their course - the "Statute of Limitations" has expired - it's too late to argue about the violations.

The Lenders are about taking no losses, granting no relief to someone facing foreclosure, just WINNING! I concur that winning is nice but how about DOING WHAT IS RIGHT?

I have been generally successful in preventing foreclosures and reversing some that have occurred, and in getting modifications. I have been unsuccessful in making a living because I could spend every week, all week, working on foreclosure cases where the BIG FIRMS for the BIG LENDERS know how to kill a case - bury the other "guy" in paper.

The best and most apt summary of what it's like to work against the lenders is from lyrics of one of Don Henley's (formerly of the Eagles) songs:

"Today I made and appearance downtown.
I am an expert witness, because I say I am.

And I said, 'Gentleman....and I use that word loosely...I will testify for you; I'm a gun for hire, I'm a saint, I'm a liar - Because there are no facts, no truth, just data to be manipulated.

I can get you any result you like....what's it worth to ya? Because there is no wrong, there is no right; And I sleep very well at night;

No shame, no solution No remorse, no retribution.

Just people selling t-shirts just opportunity to participate in this pathetic little circus

And winning, winning, winning' "

Author's Copyright by Richard I. Isacoff, Esq, July 2010
rii@isacofflaw.com
http://www.isacofflaw.com/

Keeping Your House

"Making Home Affordable", Loan Modifications, Loss Mitigation, "HAMP", "HARP" "HASP" - all are programs of one type or another to help homeowners from losing their house. They are not working very well as detailed in prior posts. So, WHAT DO YOU DO TO KEEP THE HOUSE?

There is no easy way. Outlined below are steps that should be followed and followed and followed to stop a foreclosure or fend off the possibility of facing a foreclosure.

1. As soon as you believe that you might have a problem making payments, contact the lender's loss mitigation department or the Making Home Affordable ("MHA") department.

2. Get written instructions from the lender/servicer of the steps to follow and documents needed to get a loan modification.

3. Keep in mind that a loan modification ("loan mod") can be a reduction in rate for the balance of the loan, or just a deferral of a few payments. Do not under-sell your problem and if the suggested solution will not work over the long term, ask for a different program.

4. Typically, you will be asked to supply documents including at a minimum: a. Hardship Affidavit (check http://http://www.makinghomeaffordable.gov/ for the form), b. Financial Statement (form lender directs you to retrieve from website), c. one or two years tax returns, d. your two most recent pay stubs, e. proof of homeowners insurance being in-place on the property, f. copy of recent real estate tax bill g. one or two months bank statements. There may be other documents required.

5. PAY ATTENTION. Provide ALL requested/required documents the FIRST TIME you send in your request/plea for a Loan Mod. The biggest reason for denial of help to a homeowner is that no all of the paperwork was sent

6. Make several copies of everything you send to the lender as the first package has a 50/50 chance of being lost

7. Send the package Certified Mail, return receipt requested. You may need proof later that you DID send the documents

8. Begin calling for the status of your Loan Mod 4-5 days after the package was received. Be prepared to spend 45 minutes on the telephone navigating the computer enhanced telephone answering system. DO NOT JUST HANG UP! This is what military folks call "Hurry up and wait". DO IT!

9. Call every 3-4 days, without fail, to check on the progress. Call even if the customer representative says not to call so often. It is your house at stake, not his/hers.

10. If you are told after 10 days that your package was not received, send a new package. Be sure to update the pay stubs. It shouldn't be necessary to re-submit everything, but it is. Just do it!

11. Check the Lender's/servicer's website to see if the is the ability to track your Loan Mod application online.

12. If you have a problem, call the lender as often as is necessary to get your answer - get a live person on the telephone. You might not get the answer you need, but it is a start

13. If it looks like a foreclosure will begin against you, or if one already has, call an attorney who deals with foreclosure prevention. One of the organizations that can help you find a lawyer is the National Association of Consumer Bankruptcy Attorneys at http://www.nacba.org/ ; another is the American Bankruptcy Institute at http://www.abi.org/ (look for the consumer bankruptcy center). Other resources - your local Bar Association. Explain your problem and ask for a referral

14. DO NOT sign up for the "Send us $2,500 and we will fix your problem" companies. Too many of them are scams.

15. DO NOT WAIT UNTIL THE WEEK BEFORE A FORECLOSURE TO START TO TAKE ACTION. You will lose!!

Below are listed the websites for 5 major lenders' Homeowner Assistance programs.

Wells Fargo https://www.wellsfargo.com/mortgage/account/paymenthelp

JPMorgan Chase https://www.chase.com/chf/mortgage/hrm_options

OCWEN https://www.ocwencustomers.com/openFCLSPreventionPlan.action

Bank of America and Countrywide http://homeloanhelp.bankofamerica.com/en/loan-solutions.html

CitiMortgage https://www.citimortgage.com/Mortgage/Home.do?page=homeowner_assistance
Author's Copyright by Richard I. Isacoff, Esq. January 2010

http://www.isacofflaw.com/
rii@isacofflaw.com

Never Mind Who's On First; Where Is First?

In the on-going saga of the Making Home Affordable Program, which spawned HAMP and HARP, no less a giant in news than the New York Times, carried what seems to be directly contradictory information about the program's success/failure.

In the Saturday January 16th edition the Times ran two stories: "JPMorgan Chase Earns $11.7 Billion" by-lined to Eric Dash, and "U.S. Mortgage Plan Aided 7 Percent of Borrowers" by-lined to Sewell Chan. Both stories are well-written and intriguing, but neither can be accurate. The problem is that no one knows the truth.

Eric Dash recites that JPMorgan has been so successful that it has $26.9 billion set aside for employee bonuses. That is attributed in large part to the fact that the "...bank has agreed to temporarily modify 600,000 mortgages. Only about 89,000 of those adjustments have been made permanent." Mr. Sewell, in his news story states that "Mortgage payments have been permanently lowered for more than 66,000 borrowers under the Obama administration's $75 billion program to protect homeowners from foreclosure..." He goes on to write "as of the end of December, they said [Treasury and HUD] more than 853,696 homeowners were actively in the modification program... The figure includes 787,231 trial modifications and 66,465 permanent modifications"

Assuming the number of trial modifications is correct in both stories, that means that all other lenders COMBINED account for only 253,696 modifications - less than 29%. Has JPMorgan really outpaced ALL OTHER LENDERS COMBINED and done 71% of all modifications? And if Treasury and HUD are reporting only 66,465 permanent modifications, how has JPMorgan Chase managed 89,000? That would mean that JPM Chase has done all of the reported HAMP modifications and 23,000+/- of their own!

The reality is that NO ONE KNOWS! Further, the Treasury Department and Housing and Urban Development do not have a clue about what is really happening "in the trenches". Yesterday I received an e-mail from a client who had applied for and been approved for a trial modification. Now, 4 months later, after making all of the required payments, she received a letter from the venerable JPMorgan Chase asking for a "complete Trial Modification Package".

This scenario is playing out in 1/2 of my clients going through HAMP. Who knows what the percentage is nationwide? The program is not bad, it's just that no one is in charge. Washington feels good because "they" can say that "they" have committed $75 billion to help the entire country - 4 million homeowners. It's not working! (And think about the amount of money - $75 billion for all 4 million (and increasing) mortgages in trouble: $26.9 billion for bonuses at JPMorgan Chase Investment Banking.)

HAMP and HARP are disasters - there is no enforcement of the rules set out by Treasury and HUD. There is no monitoring on an institutional basis. All reporting is unaudited. What is worse, there is no one for a borrower seeking help to call.

The lenders/servicers have call centers staffed with people who try to be helpful but just do not have much information. They read from a computer screen to tell borrowers what they need to supply to apply. The call center folks may have an FAQ section to which they can refer. But, if there is a problem such as the one my client has, where she is being asked to start over, there is no one who can help her. The call center people will say that documents have been received and processed but they cannot fix the problem of the new request; nor is there anyone else with whom the borrower can speak. Give up? Do Not! Ask for a supervisor, send in new documents, certified, return requested mail.

Next installment - what to do until the Doctor comes. An outline of how to navigate MHA a/k/a HASP and the off-spring HAMP and HARP

Author's Copyright by Richard I. Isacoff, Esq., January 2010

http://www.isacofflaw.com/
rii@isacofflaw.com

Mortgages, Foreclosure, Morality

It is unfortunate but we must deal with the economics of keeping versus "walking away from" your house.

Housing values have fallen dramatically over the past 18 months, to a level that many homeowners owe more than the house is worth. That is not so bad if the owner can make the payments without struggling. But what happens when a foreclosure looms? The choices seem obvious - 1. Let the house, your home, go to a foreclosure sale, and you move; or 2. Scrape and fight and get money any honest way you can to try to keep that house you call home.

Ah, one might say - you are acting immorally by walking away from the home and the debt. Or, someone might think, "Gee, if I give up my house I will never be able to get another one." Better yet is the argument bringing the kids into the equation "Well, I can't move my kids to a different school or a different neighborhood. I MUST keep my house even if it kills me. I will work 20 hours a day if necessary!"

First, there is nothing immoral about making a contract with a bank or other lender that states "We, the BANK, will lend you money to pay for a house, and YOU promise to pay us back, a little each month. IF YOU DO NOT PAY we will take your house away from you and evict you." That is the deal. The contract, mortgage and note" do not mention heaven, hell, purgatory, or even limbo (if it still exists). It does not state that if you do not pay, and you believe in reincarnation, that you will come back as a rock, or a brick that get put into a house destined for foreclosure.

Let's be realistic: which is worse - 1. Kids having to move to a different house (same school through school choice in Mass. at least) and have to make new friends in the new neighborhood [even that doesn't work if they are past grammar school] or 2. Mom/Dad in a foul mood, bickering and fighting as to who is to blame for the money problems. That "discussion" typically goes something like this:"You were paying the bills. You knew we were getting behind. Why didn't you do something about it?" Responding in a louder voice "ME? You are the one who went to work for that sleazy contractor/sales force/outlet store/whatever. Why aren't you back to work yet. I mean why haven't you gotten a second (or third) job? I told you not to get that mortgage" Now, yelling back, "How dare you talk to me like that. I earned $XXXXX - how was I to know that..." Shrieking, the retort is "Is was your job to know! And you should have seen that the mortgage was no good (or that the house would drop in value or whatever).

That is great for kids to hear and feel - feel the tension in the house; understand that Mom/Dad (one or both) are angry, scared, "in a mood", ignoring those kids except to yell at them. And if there are no kids, but a spouse or companion, the battle rages on, neither party stopping to work out a solution - analyze the options. Just move ahead blindly because he/she MUST keep the house!!

There is no shame in finding out that you cannot pay the increased payments, or the regular payments because hours were cut. Do not try to blame yourself by believing "I should have read the papers more closely - even though I did not understand anything" or convinced that, if you are on lay-off, you will be called back to work and you can catch up then.

The mortgage companies had no problem or regrets in selling loans they knew might not be good. These same banks and lenders do not hesitate to let their own investment properties go to foreclosure if there is no value and it would be "good money after bad". They had no difficulty with their collective consciences when the mortgages were packaged and sold to mutual funds that crashed. They do not feel immoral when they refuse to modify loans so you can keep you house, or when they send you paperwork to complete which you send in which they lose so you send it in again, which they don't ever get etc.

I am not advocating just walking away from the debt/house without a full examination of whether there is a solution that will let you keep your home. But, I am pushing you to "do the numbers". Is it realistic to try to keep the house? Is there any equity in it or will you paying on value that was never there or that disappeared? How about the relationship with your partner, family, your kids?

If there is any shame in any of this housing mess, it would be that families are devastated and torn apart - not by having to move, but by trying to hang on to a dream that is not lost, just postponed.

It is just money - Contact an FHA Home Preservation Counselor or an attorney who deals with these issues regularly so that you can at least have all of the facts BEFORE you make a decision. If you are concerned about the Lender coming after you for any deficiency (difference between what you owed and the foreclosure sale price) there are ways to avoid that, legally. Do not despair - there is help available.

Author's Copyright by Richard I. Isacoff, Esq. , January 2010

http://www.isacofflaw.com/

rii@isacofflaw.com

How Many Clients Does it Take....

"How Many Clients Does It Take To Change A Light Bulb?" is the name of a small but funny (to a lawyer anyway) book by a fellow attorney from the other end of Massachusetts. Val (actually Giovanni) Diviacchi has written this short but all to true statement, not just about clients, but about all of us in reality. The Answer? One! He/she holds the light bulb and expects the world to revolve around him/her!

Looking at the growing number of foreclosures and the ever-increasing unemployment, we do not have the luxury of waiting for the world, the state, the Feds etc., to help us. As was reported in the New York Times last week by Peter S. Goodman, the modification programs, including the so-called Obama Plan, the Making Home Affordable program, are not working. Under MHA only 2,000 out of 700,000 modification in process have become permanent. Considering that there were 2.7 million loans eligible for that one program, the percentage is scary - 7/100ths of 1% (or .0007 for decimal lovers)

If you are facing a foreclosure or might be in the near future because of a job loss or cut-back, illness, marriage, baby, or just bad money management you should act now. First, contact the lenders loss mitigation department or its "troubled borrower" department. Ask what they can do to help. If you were out of work for 3 months and are just that same 3 months behind, you should be able to work out a plan quickly. I say "should" because even easy problems can be made into full blown wars .

If you have received a notice that states that the Lender is or intending to foreclose, CALL A LAWYER who works in one or more of the areas of foreclosure prevention, predatory lending, loan modifications, and bankruptcy. This is not the kind of problem that will go away. Do not think by not picking-up that certified mail that you are safe! THE WORLD WILL NOT REVOLVE AROUND YOU.

The following link is to an interview of me by a local television host, Andrew Cort, DC, JD. It describes how it came to pass that mortgages were bad and foreclosures happen in Mass. at the rate of 125 each day.

Spend the time to watch the video. I may not be pretty, but the words are worth it (Just close your eyes and LISTEN!).

http://www.andrewcort.com/spirit12RichardIsacoff.html

Good News/Bad News - Is There a Difference?

Foreclosures are up 23% from the end of the 3rd quarter last year. Foreclosures are up 5% from the end of the second quarter this year. If the numbers continue, this year will have more foreclosures than any before. THAT'S THE GOOD NEWS!

With all of the money given (loaned) to banks, and with the likes of JPMorgan Chase having a profit for the last quarter of $3,600,000,000 ($3.6 Billion), having doubled the amount of money it has planned on for loan losses, you might think that there would be money for you to borrow to refinance your house (after all your credit is good ), or borrow for your business. WRONG - THINK AGAIN! Banks are bracing for the next wave of losses; commercial real estate mortgage backed securities failing because the loans that make up the securities are defaulting. Additionally, because of the financial crisis we are still in, the "normal" way of making loans will not work.

In the April 13th posting (and several others), the whole issue of securitization was explained. The basics: agree to buy a large number of mortgages so that the value, on paper, of what the security maker controls is huge, like $1 Billion. Rather than holding the loans in any Bank, and risking borrowers not paying the mortgage regularly, sell the loans in a package (pool) to investors on Wall Street; investors like mutual funds, individuals, pensions, and of course the Federal Government. So now the $1 Billion portfolio is owned by thousands of people, plans etc. The security eliminates the risk of loss for all of the banks involved in making the loans, because no bank owns one of the actual mortgages - not one. Investors, not lenders/banks, each own a small portion of the pool. Again, they own a security, that acts like a corporate bond, but not a mortgage.

Because of the recent losses and the enormous rise in foreclosures, no one wants to buy these mortgage-backed securities ("MBS"). If no one will buy them, then they will not be created, because the creator does not want to get stuck with a long-term investment (pooled mortgages). If they are not being created, the banks will not lend; even to good borrowers. THIS IS THE BAD NEWS.

There will be no real recovery until credit is available again. The government's mortgage lenders FannieMae and FreddieMac, FHA, have new and very strict guidelines. If you have a blemish on your credit report, NO LOAN.

Businesses use borrowed money all of the time to keep operations running, to buy new equipment, and to expand. If banks won't lend to them, the business shrinks and dies. More jobs are lost, and not just at that business. if people lose work, then they cannot spend money and other businesses fail. That is the cycle we are in for unemployment. And more unemployment means more defaults on mortgage payments, and that means more foreclosures.

The new Bank regulations that will require banks to keep more money set aside for bad loans, and the fact that only the Federal Government will buy the existing MBS and not new ones, means that Banks will not make loans, except to the very best customers. The noose gets tighter and tighter. The recent run-up of the stock market is not a reflection of consumers’ and "Main Street" types’ (us) confidence. The profits are being made by traders, Wall Street professionals, and companies like JPMorgan Chase.

So, the very kinds of investments, the MBS or pools of mortgages, that allowed the housing boon, has led us to the housing boom - it’s imploded. Breaking the cycle we are in will take time; actually a great deal of it

Stopping Foreclosure When the Lender Says "NO!"

(THIS IS A RE-POSTING FROM AUGUST 12, 2009)

Bankruptcy is a good option if you are facing foreclosure and cannot get the lender to accept reasonable terms for a modification; terms that will allow you to either catch up on back payments over time, or which will put the arrearage at the back of the loan.

The filing of any type of Bankruptcy, which is asking for protection from creditors, will stop ALL actions for money, foreclosures, repossessions etc, against you. BUT, for most consumers, only a Chapter 13 will give you the ability to spread out payments for the arrearage over a period of up to 60 months. So, assuming you are 6 months behind in payments of $1,500 each, and there are $3,00 in legal fees because you are in a foreclosure status, and you have $300 in late fees, and the lender has paid $1,200 in taxes for you because your escrow account (where the lender collects money to pay real estate taxes each month as part of the mortgage) is short because you haven't paid in 6 months - you owe the bank $13,500.

Most of us do not have that amount of pocket change, and if you did, you wouldn't be 6 months behind. Spreading that amount of money over 60 months adds only $225 per month to your expenses. Please understand that there is no misunderstanding about a desperate financial situation, but if the arrearage occurred because of a temporary drop in income, for whatever reason, you can get caught up. Too many people give up once they get that far behind because they know they cannot pay $13,000+/- all at once, and once the foreclosure starts, the lender is not inclined to "make a deal".

The Bankruptcy Laws were established so that people could get a "FRESH START". The whole concept is to give people who get into a financial bind a way out, without losing their home, car, retirement accounts etc. Details of the protections a Bankruptcy gives you are on my website www.isacofflaw.com . Once in a Chapter 13 Bankruptcy, the United States Bankruptcy Court controls what a creditor can do. If you make payments on time, including the $225/month in the above example, the lender can only sit by a wait until you finish the Plan of payments. If you make all of them, your loan is put back into "regular" good payment status.

Also, if you miss a payment due to a temporary problem (broken arm with no sick time available from your job or a seasonal drop in hours so the overtime you have been counting on isn't available) the lender CANNOT just foreclose. It must ask the Bankruptcy Court for permission and there will be a hearing on the request. There, your lawyer (don't try a Chapter 13 Bankruptcy on your own) can explain the situation to the Court and usually work some type of compromise with the lender. The Bankruptcy Court is there to protect Debtors, provided the Debtors do what they promise.

Further, if you have equity in your house of $30,000, and your payments are $1,000 per month, the Court normally will not allow a foreclosure even if you are 2 or 3 months behind. While that is not specified in the Bankruptcy Code, the concept, called "adequate protection", is clearly spelled out. In essence it states that if the lender is not at risk of losing anything by waiting and using some of your equity to guaranty the arrearage will be paid, then the Court WILL NOT allow the lender to foreclose. The lender has no risk in waiting so you get a chance to get caught up again.

The Bankruptcy laws are complex, but the concept is not. If you are behind in your mortgage payments, and the lender wants to foreclose, and the lender will not "make a deal" with you, and you do not have a lump sum to pay all of what you owe from payments not made, a Chapter 13 Bankruptcy filing can be used to save your home. You can find a qualified Bankruptcy attorney by going to the website of the National Association of Consumer Bankruptcy Attorneys www.nacba.org , www.abi.org, or by calling my office for a "no charge" referral.

Author's Copyright by Richard I. Isacoff, Esq, August 2009

www.isacofflaw.com

rii@isacofflaw.com

Foreclosures; Another Shoe is Dropping

Currently, in the City of Pittsfield, MA, there are 190 properties in some stage of foreclosure; 69 are currently in default, 30 are Bank owned, 16 are awaiting a foreclosure sale date, and the rest are in some part of the process (such as sale completed but deed not yet recorded or waiting for the sale with a date set).

For a city the size of Boston, or Atlanta, or even Springfield, MA, that number might not be worthy of note, but in a city of 40,000, to have 190 HOMES in some state of being taken from the homeowner is alarming. What is more concerning is the fact that there is no action on the part of the city to assist those homeowners in trouble. There are no meetings inviting homeowners to learn how to protect their home which is probably their biggest investment; the local community college, which offers courses and seminars in all types of subjects, has no offerings to educate homeowners about how to avoid the common pitfalls that lead to defaults and foreclosure. There isn't even a hotline that is well publicized, that a homeowner in trouble can call to get emergency legal assistance/counseling.

What is most disturbing is that the situation in Pittsfield is not the exception, but the rule. This issue pervades the country and, yet, because we have moved to a new news cycle, gets no attention anymore. The stock market is nearing 10,000 again; the dollar is low so exports are high; oil is over $70/barrel but not too much; gold is over $1,015 per ounce but that is because of the weak dollar; inflation is under control; and the Federal Reserve is continuing to give the banks cheap money to lend. The fact that it isn't being loaned to consumers or small businesses also goes undetected.

We are facing a real housing crisis. As has been commented on and explained in earlier postings, the next wave of adjustable rate increases is about to hit - the so-called Option-Arms, were "prime" borrowers could get a mortgage, and pick a payment for the month. Well, that period of pick as you may is starting to change. Most had that scheme for 3-5 years. The 3 year period is beginning to end (2006-2008) was most of the activity, so we will start to see loans that have to have PRINCIPAL & INTEREST PAID each month for the remainder of the loan term (27 years generally). That will be coupled by a rate increase of 2%-3%, based on the contract (mortgage documents).

So, will the better qualified borrowers start to default and hit the statistics as a "property in foreclosure"? Not all of them but YES, many will! Keep in mind that many of these borrowers no longer have the jobs they did when they got the loan, or hours have been cut, or the second job is gone, or there is no overtime. This will start another decline in home prices and cycle of panic.

Mortgage lending has already slowed to a trickle of what it was. That is not all bad, but when people cannot refinance or buy a new home, even when they have a steady job and decent income, but only a 670 credit score (680 being the line between prime/regular and the evil sub-prime borrower) we have a major problem.

In many areas, local banks and credit unions are trying to fill the void, but the demand is greater than the supply of loans. And, many institutions have new financial requirements to meet per FDIC, OTS, OCC and the rest of the alphabet; the locals have little to lend on anything but the best prime loans.

One hidden factor regarding the recovery of home prices and the market: banks that have foreclosed on homes, many homes, are NOT putting them on the market for sale, hoping for a recovery in pricing and not wanting to flood the market and further depress prices by increasing the supply of "existing" homes beyond the demand.

So much for the good news!

Mortgage Modificiations To Get More Difficult?

Countrywide, now part of Bank of America was one of the major lenders to sub-prime borrowers (that only means a credit score below 680 (or 640 depending on the day). It also packaged and sold the loans it originated, as Mortgage-Backed Securities ("MBS"). It continued to service the loans (collect money and send bills from and to borrowers) and was paid by the owners of the MBS to do so. The owners were just investors - they bought $xxxxx of a bond, not any different than if they bought a corporate or municipal bond.

When the mortgage/housing crisis hit, in large part due to Adjustable Rate Mortgages ("ARM") there was tremendous pressure on the Servicers, of which Countrywide was one, to MODIFY loans so that they were affordable for the borrowers. Some servicers modified loans, which they may or may not have been permitted to do in their contract, called a Pooling and Servicing Agreement ("PSA"), with the "packager"/"owner" of the bond. Countrywide modified loans and then, ignoring its PSA, refused to re-purchase the loans that had been modified by lowering the interest rates or even putting payments at the back of the loan. In simpler terms, Countrywide altered the amount of interest the owners of the MBS would receive.

A federal court ruled that Countrywide's motion to dismiss the lawsuit brought against it by the investors would not succeed. The Court stated that the case was one which should be brought in State Court, the the modifications were not protected by the recent legislation and Congressional acts to force lenders and servicers to modify loans. Basically, the Court said that if there is a contract, Countrywide must observe it - any quarrels with that belong in a state court on a case by case basis. No "get out of jail card" was given to Countrywide.

WHY DO YOU CARE? Because Servicers, if they aren't protected when they make modification from the investors, who expect a certain percentage return, will refuse to modify citing the Court ruling but relying on the contract they made, and arguing that they cannot breach the contract! This means more difficulty getting Servicers, which are not participating in the Federal program to modify loans, now for fear of a lawsuit.

This issue was brought up months ago and detailed in my posts of 10/25/2008 and 11/9/2008 -
http://finance-for-us.blogspot.com/2008/10/foreclosure-crisis-how-to-stop-it.html and http://finance-for-us.blogspot.com/2008/11/who-is-bailout-helping-right-now.html.

This just points out the disconnect, the lack of communications and an efficient coherent policy to deal with the foreclosures. Maybe Congress would act if it the home of a member!!

Author's Copyright by Richard I. Isacoff, Esq, August 2009
http://www.isacofflaw.com/
rii@isacofflaw.com

Mortgage Modification Mandates

As a follow-up to the last post, several important matters:

1. If you have submitted the application for a loan modification under the "Making Home Affordable" program, any foreclosure proceedings must stop. The exception is if you do not meet the basic criteria (see http://www.makinghomeaffordable.gov/)

2. To see if your lender/servicer MUST participate in the program go to http://www.financialstability.gov/impact/contracts_list.htm - if it is listed, it has to deal with the modifications

If the lender or servicer received any TARP funds or "volunteered" to be part of the Home Afforability Modification Program "HAMP" or the Home Affordability Refinance Program "HARP" it should be on one of the lists

3. If a mortgage company or servicers tells you not to send any money until the paperwork is received or not to send money for any other reason, ask for the person's name or employee number. Also, ask how you be certain that you should not send any payment. Even if you are satisfied that you do not have to send a payment "that" month, DO NOT USE THE MONEY for anything else. Set up a separate savings account and put all of the money for the payment(s) in the account. If the MHA modification doesn't work, and the lender has its own program, you WILL be asked if you have the last "X" payments, since the last one mailed.

4. If you get mail offering to help you get a loan modification, and the solicitations asks you to send in any money, even after you have called the company and spoken with a "counselor" DON'T DO IT, unless it is your lender/servicer and you have an agreement. There are hundreds of scams right now - 15% of my clients have paid money to some company that cannot help, except to help themselves.

Two expressions come to mind: "God helps those who help themselves" and "God help those who help themselves". (Interesting what one "s" can do!)

5. If you have questions, call a bankruptcy attorney or a foreclosure attorney in your area. If you don't know who to call, check http://www.naca.org/ or for a lawyer http://www.nacba.org/ OR send me an e-mail

Author's Copyright by Richard I. Isacoff, Esq, August, 2009

http://www.isacofflaw.com/
rii@isacofflaw.com

Making Homes Affordable? It's Not Working!!

In a report released by the "Making Homes Affordable Program", only 9% of those mortgages eligible (estimated) for a modification are in the process. Essentially the lenders, mortgage companies, loan servicers, ARE NOT doing their jobs.

The information through the end of July shows that of an estimated 2.7 million mortgages, all of which are 60 days+ delinquent, only 235,247 (actual) have been offered a modification or are in the process of obtaining one. This does not necessarily mean a change in all terms, but could be nothing more than the lender allowing 3 payments to be moved to the end of the loan term, but as a modification.

The lenders doing the best job are 1. Saxon 2. Aurora (small number of loans) 3. GMAC 4. JP Morgan Chase -all having in process 20% or more of the estimated eligible loans. CitiBank has 15% being worked on. BUT American Home Mortgage Servicing Inc (AHMSI) has done 0%, Wilshire 1%, Wachovia 2%, Select Portfolio 3%, Bank of America 4%, OCWEN 5%, and Wells Fargo and Citizens 6% each.

Who's fault is it - primarily the lenders/servicers. They never got ready for the program and they prefer to try to wait out the bad times, thinking, it seems, that suddenly the housing and finance markets will turn positive.

IT IS CRITICAL TO NOTE that once a borrower has submitted the necessary paperwork for a MHA Loan Modification, and has passed the initial screening (see below) FORECLOSURE PROCESS MUST STOP! - 1. home is your primary residence 2. currently employed or have other regular income 3. default caused by a hardship or there has been a drop in income or increase in expenses 4. your mortgage payment including principal interest, taxes and insurance is more than 31% of your monthly GROSS income, and 4. your loan was current at the start of 2009, you qualify for the full analysis. (Go to http://makinghomeaffordable.gov/modification_eligibility.html

If you meet the basics and have filed for a modification, and you then get a letter stating that the foreclosure process will continue during the evaluation, send a certified return receipt requested letter to the address to which you sent the documents, and state that the law requires them to STOP foreclosure proceedings.

If you are having a problem, call a qualified Bankruptcy attorney in your area (you can find one at www.nacba.org), or, contact your local Bar Association for a referral to an attorney working to stop foreclosures. In Massachusetts for example, you can contact the Massachusetts Fair Housing Center, or any of the local housing authorities for a referral.

The program is a reasonable one. I am having excellent results for my clients, but it requires a great deal of patience. As always, contact my office if you have a problem finding help.

Author's Copyright by Richard I. Isacoff, Esq, August, 2009

rii@isacofflaw.com

http://www.isacofflaw.com/

Buying at Foreclosure May Be Less Than You "Bargained For"

With the rise in foreclosures and the resultant drop in real estate prices, coupled with the lower interest rates available for "qualified" borrowers, an increasing number of people are buying property at foreclosure sales. The idea is to purchase a house at the "distress" sale price, and end up with a bargain.

As in any other business transaction there are issues that must be considered, aside from the matter of having financing/available funds ready at the time of the foreclosure sale. Some can turn what seems like a "great deal" into a nightmare. For instance:

1. There are no guarantees or warranties that accompany the house. You buy what you see - no more, no less. Further, there is no obligation on the part of the foreclosing party or the auctioneer to point out flaws or defects with the property

2. It is imperative to have an attorney or title company (depending on the state where the property is) check the land records to determine if the foreclosing entity has good title through its sale. In essence, can the company legally foreclose?

3. Getting financing BEFORE the auction is critical. You will have to place a rather large deposit in order to be a successful bidder, and that IS NOT refundable because you discover, later, that you cannot obtain a loan. How can this be done? One way is for you to have your local bank view the property with you. You will have to get an appraisal from a company approved by the bank, and have the full title report available. In addition, it would be wise to get a home inspection - obviously this is not possible if the house is occupied.

4. If the house is occupied by the owners or tenants at the time of the sale, once you buy it it is YOUR responsibility to have the tenants or former owners (who have just become tenants) leave the property. This might well mean eviction, a process that can take, without any major fighting,3 months. With arguments and the tenants trying to stretch out the time they have before they have to vacate, you might not get possession for 6 months.

5. Consider an alternative to buying at the foreclosure sale. You can contact the owner, or the realtor who might be trying to sell the house pre-foreclosure, as make your offer. If it is less than the amount owed, typical in most foreclosures, you might suggest that you want to make an offer directly to the lender for a "short sale". This is where the lender takes a loss, but gets rid of the house. Keep in mind that the lender will have to pay at least 15% of the balance owed, just to foreclose - and then it has to pay taxes, maintain the house, market the house for sale etc. This way you can get an inspection, have time to get financing, and not have to evict the owners because they will leave by agreement when you buy the house.

Last - let the buyer beware

Author's Copyright by Richard I. Isacoff, Esq., June 2009

http://www.isacofflaw.com/
rii@isacofflaw.com

Who To Trust - Federal Judges or Wall Street

THIS IS A RE-POSTING OF THE MARCH 18TH ENTRY DUE TO THE RECENT SENATE VOTE

The United States Senate has referred the one bill, S. 61, that could break the log jam of mortgages tied up in "TOXIC ASSETS" to "Committee" for review and reconciliation with the House version. The short version of the bill is that it would give Bankruptcy Court judges the power to modify residential home mortgages. The homeowner/debtor would have to prove that the loan was patently unfair, that the lender/broker/originator used Unfair and Deceptive Trade Practices, or that the borrower never received the proper documentation to know what product he/she was buying. The assignment to the committee will assure that there will be a delay in getting the bill to the full Senate for a vote. Keep in mind that the House of Representatives has already voted favorably on giving the judges the powers needed.

Unfairness? Didn't the borrower read the documents before signing them, and if he/she/they did not understand everything fully was the closing attorney asked for information or clarification? Unfortunately, many of the closings were done without any attorney present - representing the lender or the borrower. Just a notary was there to be certain the all of the right places were signed and that there was proof the the person(s) at the closing were in fact the person(s) borrowing the money. These are called "Witness Only Closings" and were commonplace during the boom years from 2004-early 2008.

Real Example: clients came into my office Monday ready to file a Chapter 13 Bankruptcy to save their home. The documents they brought, although unsigned, told the story of how a $1,326 monthly payment grew to nearly $2,300. They had contacted a broker who had helped them, in an earlier transaction, with a major lender. Because of the prior experience, the borrowers trusted that the closing would be okay. The entire transaction took less than 20 minute for a full mortgage refinance, and that was at a local sandwich and ice cream restaurant. Virtually nothing was explained despite questions from the borrowers.

I can state from doing hundreds of closings that an attorney cannot explain all of the documents, including mortgage, mortgage note, HUD-1 Statement, Truth-in Lending, Good Faith Estimate, and all of the other disclosure required by state and federal laws in an hour; not in 20 minutes less the time to be seated. This closing went so fast that no one even ordered a coffee. What is worse is that the loan was not a common loan.

The borrowers were told that they were getting a loan with a fixed payment for 2 years, and that after two years the rate would change periodically. They were not told that the loan was an "Interest Only" loan for the first five (5) years, so that none of the payments made during that time would be applied to principal - the amount borrowed. Further, they were not told nor were the papers explained to them, that the interest rate could move up as much as three percent (3%) at the end of the first two (2) years. It could not go down regardless of the market. Nor did they comprehend that after the first two (2) year period, the rate would be adjusted every six (6) months.

It was only after receiving the first bill from the lender that they found out that there would be a tax escrow in excess of $300 each month. They thought that the taxes were included in the $1,326 amount. Instead of paying $1,326 they paid $1,626. At the end of the two (2) years, though they had been promises that they could refinance as they were getting this great loan, the payments increased to $1,700+ without the $300 tax escrow. They were now paying $674 per month more than they had been led to believe they would pay.

The loan provisions, Fixed Rate for the first two (2) years and then variable/adjustable for the next twenty-eight (28),, is a common product. The interest only feature is rare for middle, middle class borrowers. Combining the 2/28 fixed/adjustable structure and coupling it with a five (5) year interest only provision, and NOT EXPLAINING it to the borrowers is why we have the mess we do.

The above real-life, in my office example, is the reason that the Judges have to be given the power to modify bad loans. They can eliminate the excuse/reason too often given that "it's not allowed in the contract... yeah, the one the Wall street guys made for us.

Author's Copyright by Richard I. Isacoff, Esq., March, 2009

http://www.isacofflaw.com/
rii@isacofflaw.com

Money For Foreclosure Relief: An Expensive Fiction

An Associated Press story in the New York Times on April 16, 2006 headlines "SIX LENDERS TO GET HOME LOAN AID", specifying in the body of the story that the recipients of the $9.9 billion are JPMorgan Chase, Wells Fargo & Co, GMAC Mortgage (which owns the Ditech entity), CitiMortgage, Select Portfolio Servicing, and Saxon Mortgage.

A FRONT PAGE story in the Wall Street Journal the day before read "BANKS RAMP UP FORECLOSURES". Guess who this article refers to as "ramping up": JPMorgan Chase, Wells Fargo, and FannieMae and FreddieMac. Citigroup stated that it had stopped foreclosures until March 12th at the request of the Obama administration but has gone back to business as usual. If a borrower is a "good candidate" for a modification as determined by CitiGroup, which means that it must own the loan - no securitization - it will wait and see what happens. GMAC too had stopped actions at the Administration's request, is back foreclosing. It stated that 10% of the mortgages in some state of foreclosure may be eligible for a federal program.

It seems that the government is rewarding lenders to foreclose. They are giving additional $$billions to the same companies that are not using the funds to help homeowners, but rather are using the funds to beef-up their balance sheets. It is not even being done under the guise of some Federal program like "HOPE NOW", which has had little impact on solving the problem, but at least gives the aura of respectability. One can at perhaps admire the honesty of these companies which do what they want, with seeming impunity. Select Portfolio and Saxon Mortgage are two of the most difficult entities with which to deal. Wells Fargo, while professing to be helpful is a throw-back to the old joke about banks lending you money when you don't need it - the have taken that addage to heart with mortgage bailouts.

Why is this issue being dealt with here, where the posting have tried to educate and explain? Because this is an education also. The much publicized "homeowner relief plan" was just for PR. If you have a home in danger of foreclosure, DO NOT WAIT for the government to help you. Assume that money is being spent, but more likely than not, to pay for the deficiency balance which remains after a family is evicted from their home which just went through foreclosure, fetching 60%-70% of the outstanding balance of the mortgage. We cannot have the Banks losing any more money, can we?

Your best bet is to contact an attorney who has experience in debt counseling, foreclosure prevention, and depending on your situation, bankruptcy. A competent lawyer can answer your questions about your risk of losing your home and can suggest several courses of action which might bring you a good resolution. At least, you will have someone on your side!

Author's Copyright by Richard I. Isacoff, Esq., April 2009

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