Bankruptcy Law News

William Chhun et al. : v. : Mortgage Electronic Registration Systems - The Court's Opinion

gail@bklaw.me (Personal Injury/Federal Workers Comp Laywer) — Fri, 21 Feb 2014 21:37:00 +0000

William Chhun et al. : v. : Mortgage Electronic Registration Systems

Please click here to read the full decision.

William Chhun et al. : v. : Mortgage Electronic Registration Systems - A Victory

gail@bklaw.me (Personal Injury/Federal Workers Comp Laywer) — Fri, 21 Feb 2014 21:31:00 +0000

On February 4, 2014, the Rhode Island Supreme Court issued a decision that gave homeowners hope that the Court is sympathetic to their fight against the banks and servicers. In William Chhun et al. : v. : Mortgage Electronic Registration Systems, : Inc., et al. , the suit survived a motion to dismiss and the court found that the homeowners’ allegations were probable. Specifically, Justice Golberg wrote: “homeowners in Rhode Island have standing to challenge the assignment of mortgages on their homes to the extent necessary to contest the foreclosing entity’s authority to foreclose.” The homeowners are left to prove their allegations in discovery and at trial.

This can be seen as a major victory in the State of Rhode Island that will allow the majority of homeowners to hold the banks and servicers accountable for practicing illegal foreclosure activities. This ruling provides hope and demonstrates that the Rhode Island Supreme Court is on the side of the homeowners when combatting illegal home foreclosure. The public should be reminded that each ruling issued changes the landscape of foreclosure law and should be looked to nationally as an example. In each decision, the Rhode Island Supreme Court is redefining Rhode Island mortgage and foreclosure law. All of the professionals who have tackled this issue should be seen as crusaders for the homeowner’s rights.

FEDERAL COURT HOLDS THAT HOMEOWNER CAN ATTACK POST-TRUST CLOSING ASSIGNMENT; REJECTS “LACK OF STANDING TO CHALLENGE AN ASSIGNMENT YOU ARE NOT A PARTY TO” ARGUMENT

gail@bklaw.me (Personal Injury/Federal Workers Comp Laywer) — Mon, 06 Jan 2014 23:43:00 +0000

FEDERAL COURT HOLDS THAT HOMEOWNER CAN ATTACK POST-TRUST CLOSING ASSIGNMENT; REJECTS “LACK OF STANDING TO CHALLENGE AN ASSIGNMENT YOU ARE NOT A PARTY TO” ARGUMENT

The United States District Court for the District of Rhode Island released its opinion last month in the matter of Cosajay v. Mortgage Electronic Registration Systems, Inc., 2013 WL 5912569 (D. Rhode Island, Nov. 5, 2013) which permits a homeowner to challenge a post-trust closing assignment in defending a foreclosure action. The Defendants’ “lack of standing because you are not a party to the assignment” argument was soundly rejected as an “absurd position” which would “unduly insulate assignments” and deprive homeowners of their legally protected right to have a foreclosure proceed legally and correctly.

The homeowner challenged a MERS assignment to a securitized mortgage loan trust which had occurred outside of the time specified by the securitized trust for such an assignment. The challenged MERS assignment was on March 12, 2008; however, the trust had closed on April 30, 2007, and thus no 2008 assignment was possible. The homeowner sought a declaration that the assignment was invalid, that the Defendants did not hold her mortgage and note, and that the Defendants lacked standing to foreclose or to enforce the note.

The Magistrate recommended that the case be dismissed because the homeowner lacked standing as she was not a party to the challenged assignments. The court rejected the Magistrate’s Report and Recommendation, and thoroughly and repeatedly rejected the Defendants’ “lack of standing to challenge the assignment” argument citing to holdings from the United States Court of Appeals for the First Circuit which held that there is “no principled basis for employing standing doctrine as a sword to deprive mortgagors of legal protection conferred upon them under state law”, and that the Defendants’ argument as to an alleged lack of standing by the homeowner to challenge the assignment was “extreme and incongruous”.

Bravo to the Hon. John J. McConnell, Jr. for this opinion, which is another in the recent line of cases permitting such challenges including the Glaski decision from California; the Erobobo decision from New York; and the In Re Saldivar decision from the Texas Bankruptcy Court, which follow the reasoning of the earlier Horace decision from Alabama and the Hendricks decision from Michigan (where Mr. Barnes represented the homeowner (Hendricks) with the court granting summary judgment to the homeowner when it was shown that there was no compliance with the mortgage loan transfer provisions of the PSA). A Federal court has cited Hendricks in another case, stating that its logic is plausible.

It has taken six long years of work across the US, but the courts are finally coming to the realization that the one-theme mantra of the banks and servicers of “we have the note, thus we win” no longer carries the day, and that the banks and servicers now have a lot more to allege and prove before they can be permitted to seek the drastic remedy of foreclosure.

NEW LEGAL ISSUES COMING UP IN TRIAL AND APPELLATE COURTS

gail@bklaw.me (Personal Injury/Federal Workers Comp Laywer) — Fri, 27 Dec 2013 23:41:00 +0000

NEW LEGAL ISSUES COMING UP IN TRIAL AND APPELLATE COURTS

With the release of the US Bank admissions per our post of November 6, 2013; the issuance of the opinions from the Supreme Courts of Oregon and Montana holding that MERS is not the “beneficiary”; and recent opinions from various jurisdictions which are now, finally, holding that securitization-related issues are relevant in a foreclosure, a host of new legal issues are about to be litigated in the trial and appellate courts throughout the country. It has taken six (6) years and coast-to-coast work to get courts to realize that securitization of a mortgage loan raises issues as to standing, real party in interest, and the alleged authority to foreclose, and that the simplistic mantra of the “banks” and servicers of “we have the note, thus we win” is no longer to be blindly accepted.

One issue which we and others are litigating relates to mortgage loans originated by Option One, which changed its name to Sand Canyon Corporation and thereafter ceased all mortgage loan operations. Pursuant to the sworn testimony of the former President of Sand Canyon, it stopped owning mortgage loans as of 2008. However, even after this cessation of any involvement with servicing or ownership of mortgage loans, we see “Assignments” from Option One or Sand Canyon to a securitization trustee bank or other third party long after 2008.

The United States District Court for the District of New Hampshire concluded, with the admission of the President of Sand Canyon, that the homeowner’s challenge to the foreclosure based on a 2011 alleged transfer from Sand Canyon to Wells Fargo was not an “attack on the assignment” which certain jurisdictions have precluded on the alleged basis that the borrower is not a party to the assignment, but is a situation where no assignment occurred because it could not have as a matter of admitted fact, as Sand Canyon could not assign something it did not have. The case is Drouin v. American Home Mortgage Servicing, Inc. and Wells Fargo, etc., No. 11-cv-596-JL.

The Option One/Sand Canyon situation is not unique: there are many originating “lenders” which allegedly “assigned” mortgages or Deeds of Trust long after they went out of business or filed for Bankruptcy, with no evidence of post-closing assignment authority or that the Bankruptcy court having jurisdiction over a bankrupt lender ever granted permission for the alleged transfer of the loan (which is an asset of the Bankruptcy estate) out of the estate. Such a transfer without proof of authority to do so implicates bankruptcy fraud (which is a serious crime punishable under United States criminal statutes), and fraud on the court in a foreclosure case where such an alleged assignment is relied upon by the foreclosing party.

As we stated in our post of November 6, the admission of US Bank that a borrower is a party to any MBS transaction and that the loan is governed by the trust documents means that the borrower is, in fact, a party to any assignment of that borrower’s loan, and should thus be permitted to seek discovery as to any alleged assignment and all issues related to the securitization of the loan. We have put this issue out in many of our cases, and will be arguing this position at both the trial and appellate levels beginning early 2014.

US BANK ADMITS, IN WRITING FROM THEIR CORPORATE OFFICE, THAT THE BORROWER IS A PARTY TO AN MBS TRANSACTION; THAT SECURITIZATION TRUSTEES ARE NOT INVOLVED IN THE FORECLOSURE PROCESS; HAVE NO ADVANCE KNOWLEDGE OF WHEN A LOAN HAS DEFAULTED; THAT THE “TRUE BENEFICIAL OWNERS” OF A SECURITIZED MORTGAGE ARE THE INVESTORS IN THE MBS; AND THAT THE GOAL OF A SERVICER IS TO “MAXIMIZE THE RETURN TO INVESTORS”

gail@bklaw.me (Personal Injury/Federal Workers Comp Laywer) — Wed, 13 Nov 2013 23:44:00 +0000

US BANK ADMITS, IN WRITING FROM THEIR CORPORATE OFFICE, THAT THE BORROWER IS A PARTY TO AN MBS TRANSACTION; THAT SECURITIZATION TRUSTEES ARE NOT INVOLVED IN THE FORECLOSURE PROCESS; THAT THE “TRUE BENEFICIAL OWNERS” OF A SECURITIZED MORTGAGE ARE THE INVESTORS IN THE MBS

We have been provided with a copy of U.S. Bank Global Corporate Trust Services’ “Role of the Corporate Trustee” brochure which makes certain incredible admissions, several of which squarely disprove and nullify the holdings of various courts around the country which have taken the position that the borrower “is not a party to” the securitization and is thus not entitled to discovery or challenges to the mortgage loan transfer process. The brochure accompanied a letter from US Bank to one of our clients which states: “Your account is governed by your loan documents and the Trust’s governing documents”, which admission clearly demonstrates that the borrower’s loan is directly related to documents governing whatever securitized mortgage loan trust the loan has allegedly been transferred to. This brochure proves that Courts which have held to the contrary are wrong on the facts.

The first heading of the brochure is styled “Distinct Party Roles”. The first sentence of this heading states: “Parties involved in a MBS transaction include the borrower, the originator, the servicer and the trustee, each with their own distinct roles, responsibilities and limitations.” MBS is defined at the beginning of the brochure as the sale of “Mortgage Backed Securities in the capital markets”. The fourth page of the brochure also identifies the “Parties to a Mortgage Backed Securities Transaction”, with the first being the “Borrower”, followed by the Investment Bank/Sponsor, the Investor, the Originator, the Servicer, the Trust (referred to “generally as a special purpose entity, such as a Real Estate Mortgage Investment Conduit (REMIC)”), and the Trustee (stating that “the trustee does not have an economic or beneficial interest in the loans”).

The second page sets forth that U.S. Bank, as Trustee, “does not have any discretion or authority in the foreclosure process.” If this is true, how can U.S. Bank as Trustee be the Plaintiff in judicial foreclosures or the foreclosing party in non-judicial foreclosures if it has “no authority in the foreclosure process”?

The second page also states: “All trustees for MBS transactions, including U.S. Bank, have no advance knowledge of when a mortgage loan has defaulted.” Really? So when, for example, MERS assigns, in 2011, a loan to a 2004 Trust where the loan has been in default since 2008, no MBS “trustee” bank (and note that it says “All” trustees) do not know that a loan coming into the trust is in default? The trust just blindly accepts loans which may or may not be in default without any advanced due diligence? Right. Sure. Of course. LOL.

However, that may be true, because the trustee banks do not want to know, for then they can take advantage of the numerous insurances, credit default swaps, reserve pools, etc. set up to pay the trust when loans are in default, as discussed below.

The same page states that “Any action taken by the servicer must maximize the return on the investment made by the ‘beneficial owners of the trust’ — the investors.” The fourth page of the brochure states that the investors are “the true beneficial owners of the mortgages”, and the third page of the brochure states “Whether the servicer pursues a foreclosure or considers a modification of the loan, the goal is still to maximize the return to investors” (who, again, are the true beneficial owners of the mortgage loans).

This is a critical admission in terms of what happens when a loan is securitized. The borrower initiated a mortgage loan with a regulated mortgage banking institution, which is subject to mortgage banking rules, regulations, and conditions, with the obligation evidenced by the loan documents being one of simple loaning of money and repayment, period. Once a loan is sold off into a securitization, the homeowner is no longer dealing with a regulated mortgage banking institution, but with an unregulated private equity investor which is under no obligation to act in the best interest to maintain the loan relationship, but to “maximize the return”. This, as we know, almost always involves foreclosure and denial of a loan mod, as a foreclosure (a) results in the acquisition of a tangible asset (the property); and (b) permits the trust to take advantage of reserve pools, credit default swaps, first loss reserves, and other insurances to reap even more monies in connection with the claimed “default” (with no right of setoff as to the value of the property against any such insurance claims), and in a situation where the same risk was permitted to be underwritten many times over, as there was no corresponding legislation or regulation which precluded a MBS insurer (such as AIG, MGIC, etc.) from writing a policy on the same risk more than once.

As those of you know who have had Bloomberg reports done on securitized loans, the screens show loans which have been placed into many tranches (we saw one where the same loan was collateralized in 41 separate tranches, each of which corresponded to a different class of MBS), and with each class of MBS having its own insurance, the “trust” could make 41 separate insurance claims AND foreclose on the house as well! Talk about “maximizing return for the investor”! What has happened is that the securitization parties have unilaterally changed the entire nature of the mortgage loan contract without any prior notice to or approval from the borrower.

There is no language in any Note or Mortgage document (DOT, Security Deed, or Mortgage) by which the borrower is put on notice that the entire nature of the mortgage loan contract and the other contracting party may be unilaterally changed from a loan with a regulated mortgage lender to an “investment” contract with a private equity investor. This, in our business, is called “fraud by omission” for purposes of inducing someone to sign a contract, with material nondisclosure of matters which the borrower had to have to make the proper decision as to whether to sign the contract or not.

U.S. Bank has now confirmed, in writing from its own corporate offices in St. Paul, Minnesota, so much of what we have been arguing for years. This brochure should be filed in every securitization case for discovery purposes and opposing summary judgments or motions to dismiss where the securitized trustee “bank” takes the position that “the borrower is not part of the securitization and thus has no standing to question it.” U. S. Bank has confirmed that the borrower is in fact a party to an MBS transaction, period, and that the mortgage loan is in fact governed, in part, by “the Trust’s governing documents”, which are thus absolutely relevant for discovery purposes.

gail@bklaw.me (Personal Injury/Federal Workers Comp Laywer) — Thu, 10 Oct 2013 05:35:00 +0000

Happy Birthday Shawna - please stay 17 forever. :)

OCWEN LOAN SERVICING ADMITS IN WRITING: WE DO NOT KNOW WHO OWNS YOUR LOAN

gail@bklaw.me (Personal Injury/Federal Workers Comp Laywer) — Tue, 08 Oct 2013 22:47:00 +0000

OCWEN LOAN SERVICING ADMITS IN WRITING: WE DO NOT KNOW WHO OWNS YOUR LOAN

Several of our clients have recently received letters from Ocwen Loan Servicing in response to inquiries as to who owns the homeowner’s loan. The response from Ocwen is a form letter, which states: “There is no single investor of the loan. The loan is one of many in a securitized investment trust (with name of the trust). Ocwen is the servicer of the loan, and not necessarily the owner of the loan. Although the ownership of the loan may change, the ownership has no bearing on the servicing of the loan.”

Look at that series of admissions very carefully. We know that Ocwen is a servicer, and is never an “owner” of a loan. A servicer is (allegedly) working to service the loan on behalf of some owner. Who is that owner? Ocwen does not know, and admits that the ownership may change.

Servicing rights are conveyed by a servicing contract. Who is Ocwen working for? It does not say. What rights have been conferred upon Ocwen by whoever owns the loan? Ocwen does not say. What amount is the owner claiming is owed and under what facts? Ocwen does not say.

Ocwen does admit that the loan was securitized. This admission implicates all of the securitization issues, including authority of the servicer, whether the loan was properly transferred to the trust, whether there were any paydowns or payoffs of the note through insurances, credit default swaps, reserve pools, etc. depending on the current state of the law in whatever jurisdiction a foreclosure is pending. As you know, some states have case law which permits inquiry into the issues; some do not; and some are undecided.

This letter alone warrants intensive discovery in any foreclosure case in view of the admissions of Ocwen, which admissions generate a wealth of issues of fact for discovery and trial as well.

Rhode Island foreclosure cases

gail@bklaw.me (Personal Injury/Federal Workers Comp Laywer) — Wed, 03 Jul 2013 22:38:00 +0000

Rhode Island foreclosure cases face additional uncertainty after the U.S. Court of Appeals for the First Circuit overturned a trial judge’s decision halting foreclosures while the parties attempted to find a resolution through mediation. The appellate court, with retired U.S. Supreme Court Justice David Souter writing the decision, concluded that banks should have been given a hearing on the likelihood of success before the court effectively granted an injunction and that the amount of time and money spent on mediation should have been capped.

Banks stick to short sales in $25B settlement relief

gail@bklaw.me (Personal Injury/Federal Workers Comp Laywer) — Fri, 22 Feb 2013 23:10:00 +0000

Banks stick to short sales in $25B settlement relief

When 49 state attorneys and the five banks -- JP Morgan Chase, Bank of America, Ally/GMAC, Wells Fargo and Citibank -- settled their dispute in February of 2012, the banks agreed to stop improper foreclosure practices and provide $25 billion in relief for homeowners in the form of principal reductions, refinances and short sales (where a lender agrees to accept a purchase offer for less than is owed on the mortgage, releasing the homeowner from the loan). According to the terms of the settlement, at least 60 percent of the borrower relief is to be spent on principal reductions.

Nearly $10.6 billion in mortgage relief has made its way to homeowners as part of the $25 billion national settlement reached earlier this year, according to a progress report from the Office of Mortgage Settlement Oversight.

So what is the problem? So far, the bulk of that money -- more than 85 percent -- has gone to pre-foreclosure (short) sales, which the banks were already doing before the settlement. In fact, according to data firm RealtyTrac, short sales were already on the rise before the settlement took effect in March. In the first quarter of 2012, short sales were up 25 percent year-over-year.

Of the $10.6 billion paid out so far, about $8.7 billion has gone to short sales. Only about $1 billion combined has gone toward mortgage modifications that reduce loan balances and refinances.

Of the five banks, JPMorgan Chase has spent the most money on first-mortgage principal reduction at $367 million, followed by Wells Fargo with $216.9 million, Ally at $111.3 million and Citibank with $54.3 million.

As for Bank of America: The company hasn't spent a dime on first-mortgage modifications that reduce loan balances for borrowers or on refinancing mortgages. Instead, they have spent $4.8 billion -- the most of the five banks -- on short sales.

According to the report, Bank of America has made nearly $2 billion in trial offers for first-mortgage modifications, but we'll have to wait for the follow-up report to come out next year to see where those numbers finally land.

In California, one of the hardest-hit states during the foreclosure crisis, the banks promised to spend $12 billion alone on principal reduction by 2015, but so far have spent only $335 million -- just 2.7 percent of the relief promised.

On the other hand, short sales completed in California total $3.9 billion of relief.

"The California piece of the settlement emphasized principal reduction because that is what is needed to stabilize families and neighborhoods in California, and yet the banks initial performance shows that meeting Californians' needs is not their priority," said Kevin Stein of the California Reinvestment Coalition.

The banks have spent nearly $10.6 billion in just a few months, but largely on relief efforts that further their own interests. By focusing their efforts on short sales, the banks skip the arduous foreclosure process -- they no longer have to manage, maintain and market a home -- and instead make their money right away.

While more short sales mean fewer foreclosures dragging down the real estate market, the focus on pre-foreclosure sales also means more homeowners are losing their homes and damaging their credit -- not exactly the intent of the settlement.

FHFA Announces New Standard Short Sale Guidelines for Fannie Mae and Freddie Mac

gail@bklaw.me (Personal Injury/Federal Workers Comp Laywer) — Tue, 05 Feb 2013 02:28:00 +0000

FHFA Announces New Standard Short Sale Guidelines for Fannie Mae and Freddie Mac

Programs Aligned to Expedite Assistance to Borrowers
Washington, DC – The Federal Housing Finance Agency (FHFA) today announced that Fannie Mae and Freddie Mac are issuing new, clear guidelines to their mortgage servicers that will align and consolidate existing short sales programs into one standard short sale program. The streamlined program rules will enable lenders and servicers to quickly and easily qualify eligible borrowers for a short sale.
The new guidelines, which go into effect Nov. 1, 2012, will permit a homeowner with a Fannie Mae or Freddie Mac mortgage to sell their home in a short sale even if they are current on their mortgage if they have an eligible hardship. Servicers will be able to expedite processing a short sale for borrowers with hardships such as death of a borrower or co-borrower, divorce, disability, or relocation for a job without any additional approval from Fannie Mae or Freddie Mac.
“These new guidelines demonstrate FHFA’s and Fannie Mae’s and Freddie Mac’s commitment to enhancing and streamlining processes to avoid foreclosure and stabilize communities,” said FHFA Acting Director Edward J. DeMarco. “The new standard short sale program will also provide relief to those underwater borrowers who need to relocate more than 50 miles for a job.”
The new guidelines:

Offer a streamlined short sale approach for borrowers most in need: To move short sales forward expeditiously for those borrowers who have missed several mortgage payments, have low credit scores, and serious financial hardships the documentation required to demonstrate need has been reduced or eliminated.
Enable servicers to quickly and easily qualify certain borrowers who are current on their mortgages for short sales: Common reasons for borrower hardship are death, divorce, disability, and distant employment transfer or relocation. With the program changes, servicers will be permitted to process short sales for borrowers with these hardships without any additional approval from Fannie Mae or Freddie Mac, even if the borrowers are current on their mortgage payments. Borrowers will now qualify for a short sale if they need to relocate more than 50 miles from their home for a job transfer or new employment opportunity.

Fannie Mae and Freddie Mac will waive the right to pursue deficiency judgments in exchange for a financial contribution when a borrower has sufficient income or assets to make cash contributions or sign promissory notes: Servicers will evaluate borrowers for additional capacity to cover the shortfall between the outstanding loan balance and the property sales price as part of approving the short sale.

Offer special treatment for military personnel with Permanent Change of Station (PCS) orders: Service members who are being relocated will be automatically eligible for short sales, even if they are current on their existing mortgages, and will be under no obligation to contribute funds to cover the shortfall between the outstanding loan balance and the sales price on their homes.
Consolidate existing short sales programs into a single uniform program: Servicers will have more clear and consistent guidelines making it easier to process and execute short sales.
Provide servicers and borrowers clarity on processing a short sale when a foreclosure sale is pending: The new guidance will clarify when a borrower must submit their application and a sales offer to be considered for a short sale, so that last- minute communications and negotiations are handled in a uniform and fair manner.
Fannie Mae and Freddie Mac will offer up to $6,000 to second lien holders to expedite a short sale. Previously, second lien holders could slow down the short sale process by negotiating for higher amounts.
This alignment comes as part of a broader FHFA effort, the Servicing Alignment Initiative, to streamline Fannie Mae and Freddie Mac programs for short sales and other foreclosure alternatives to assist struggling homeowners. FHFA announced guidelines in June that establish strict timelines for servicers considering short sales. Servicers are required to review and respond to short sales within 30 days of receipt of a short sale offer; they must provide weekly status updates to the borrower if the offer is still under review after 30 days, and they must make and communicate final decisions to the borrower within 60 days of receipt of the offer and complete borrower response package. These borrowers will not be eligible for a new mortgage backed by Fannie Mae or Freddie Mac for at least two years after a short sale.
FHFA encourages homeowners to reach out early to their lender or servicer if they face any hardship affecting their ability to pay their mortgage.

gail@bklaw.me (Personal Injury/Federal Workers Comp Laywer) — Mon, 21 Jan 2013 13:01:00 +0000

Bay State Personal Bankruptcy Filings Drop 18 Percent In 2012

Chapter 13 Filings Also Decrease From Last Year

PROVIDED BY The Warren Group

Personal bankruptcy filings in Massachusetts decreased more than 18 percent in 2012 from a year earlier, according to a new report from The Warren Group, publisher of Banker & Tradesman.

There were 11,964 Chapter 7 bankruptcies filed in Massachusetts last year, down from 14,716 filed in 2011. Chapter 7 of the U.S. bankruptcy code is the most common option for individuals seeking debt relief, and accounted for more than 74 percent of Massachusetts' bankruptcy filings last year.

"The drop in bankruptcy filings is an encouraging sign; it indicates that consumers are more optimistic about their ability to pay off debt and clean up their financial situations," said The Warren Group CEO Timothy M. Warren Jr. "If the housing market - and overall economy - continues to improve, we are sure to see even better results in 2013."

People filing under Chapter 7 bankruptcy can eliminate most debt after non-exempt assets are used to pay off creditors. In contrast, Chapter 13 requires debtors to arrange for a three- or five-year debt-repayment plan.

Filings under Chapter 13 of the U.S. bankruptcy code dropped 17 percent to 3,991 in 2012, down from 4,813 in 2011.

Chapter 11 filings, which are used for business bankruptcies and restructuring, also declined in 2012. Filings decreased 29 percent to 152, down from 215 in 2011.

A total of 16,107 filers statewide sought protection under Chapter 7, Chapter 13 and Chapter 11 of the U.S. bankruptcy code in 2012, down from 19,744 in 2011.

Bankruptcy Definitions:
Chapter 7 bankruptcy, sometimes called a straight bankruptcy, is a liquidation proceeding. The debtor turns over all non-exempt property to the bankruptcy trustee who then converts it to cash for distribution to the creditors. The debtor receives a discharge of all dischargeable debts usually within four months. In the vast majority of cases the debtor has no assets that he would lose, so Chapter 7 will give that person a relatively quick "fresh start."
Chapter 13 bankruptcy is also known as a reorganization bankruptcy. Chapter 13 bankruptcy is filed by individuals who want to pay off their debts over a period of three to five years. This type of bankruptcy appeals to individuals who have non-exempt property that they want to keep. It is also only an option for individuals who have predictable income and whose income is sufficient to pay their reasonable expenses with some amount left over to pay off their debts.
Chapter 11 bankruptcy is typically used for business bankruptcies and restructuring. It is not commonly used by individual consumers since it is far more complex and expensive to pursue. It allows businesses to reorganize themselves, giving them an opportunity to restructure debt and get out from under certain burdensome leases and contracts. Typically a business is allowed to continue to operate while it is in Chapter 11, although it does so under the supervision of the Bankruptcy Court and its appointees.

BofA enhances short sale incentive up to $30,000

gail@bklaw.me (Personal Injury/Federal Workers Comp Laywer) — Thu, 17 Jan 2013 02:26:00 +0000

BofA enhances short sale incentive up to $30,000

Did you get a “Golden Ticket” from Bank of America?

The nation’s largest mortgage servicer has officially released its Enhanced Relocation Assistance program in California, six months after it deemed a pilot run of the program in Florida a success.

Bank of America sent letters and overnight packages to some lucky homeowners last week, a windfall equivalent to receiving a mythical ticket to Willy Wonka’s Chocolate Factory. A client of Dream Big Real Estate received a notice that they qualify for the program, which will provide them up to $30,000 after they complete a short sale on their home.

“Bank of America is reviewing all current, in-process preapproved-price short sale agreements to determine who is eligible for this limited-time offer,” according to a statement from Bank of America. “Eligible homeowners actively participating in a preapproved-price short sale program (such as HAFA or Bank of America’s proprietary program) will receive a letter if they qualify for the additional relocation assistance.”

Here are some program details:

The enhanced program is only available for preapproved-price short sale programs, which are initiated without an offer from a buyer. Officials said it may be extended to other programs in the future.

The amount of the relocation incentive is based on the appraised value of the home. Payments made to the homeowner at the close of a short sale range from $2,500 to $30,000.

The incentive can be used to help pay off junior liens, including credit cards judgments, utility liens and tax liens.

The short sale must be initiated in 2012 and close by Sept. 26, 2013.

Homeowners will receive a 1099 form from Bank of America for the unpaid balance and the relocation incentive, and it should be included when they complete their next tax return. (Consult with your CPA or tax attorney to determine if you have a tax liability after a short sale.)

Unlike other high-dollar relocation-incentive programs, Bank of America’s enhanced program allows homeowners to raise their hands and volunteer. Want to know if you qualify for the Enhanced Relocation Assistance? Call our office today at 951-778-9700 and we’ll do the research for you.

OTHER BANK PROGRAMS

Bank of America isn’t the only institution offering relocation incentives after a short sale. Below are a few other programs:

HAFA PROGRAM: More than 20,000 short sales have been completed through the federal Home Affordable Foreclosure Alternatives program, which provides a $3,000 relocation incentive for the homeowner.

The U.S. Treasury version of the program this week increased the amount allowed to satisfy junior liens to $8,500, making the program a better alternative for California homeowners, who are more likely to have high-balance home-equity loans.

Many banks participate in this program, though not all homeowners fit the mold.

WACHOVIA: Wachovia Mortgage has been providing relocation incentives of $2,500 to $10,000 in a short sale for more than a year. The lender is well-known for its speedy response and no-nonsense negotiations.

CHASE BANK: This lender offers relocation incentives up to $45,000. Not all Chase loans qualify for the incentive — To find out if you have one of these loans, call us today at 951-778-9700.

CITIMORTGAGE: Citi says its average short sale incentive offer is $12,000 in cases where Citi owns the loan. The incentives are based on a variety of factors, including level of distress of the homeowner and loan characteristics.

WELLS FARGO: Wells also completed a trial program in Florida last year that offered $10,000 to $20,000 to a homeowner who completes a short sale or deed-in-lieu. The incentive is only available on first trust deeds that Wells itself owns, the lender said.

This is not a comprehensive list, but these are good examples of the programs available to homeowners who are in danger of losing a home to foreclosure.

Despite what you may have heard, banks prefer short sales over foreclosure or even loan modifications. Why? It’s all about the numbers.

Short sales net banks 12 percent to 25 percent more than they would gain from a foreclosure because of the time and expense to take back, repair, maintain, market and resell a property. And as many as half of loan modifications redefault within the first year, later turning into foreclosures and short sales.

Thus short sales continue to increase, especially in Southern California, as lenders streamline processes and create attractive offers to help distressed homeowners. A short sale allows a homeowner to avoid a financially devastating foreclosure, limit damage to their credit, and re-enter the housing market much more quickly as an able buyer — before home values again shoot through the roof.

More importantly, a short sale allows a homeowner to exit their house on their own terms, with dignity intact.

Want to know if you qualify for any of these programs? Call us today at 508-699-2500 Ext 11.

Fannie, Freddie Short Sales Hit Record High

gail@bklaw.me (Personal Injury/Federal Workers Comp Laywer) — Fri, 11 Jan 2013 22:57:00 +0000

A record number of Fannie Mae and Freddie Mac short sales were signed off on by loan servicers in the third quarter of 2012, according to a report from the mortgage giants' regulator, the Federal Housing Finance Agency (FHFA).

Short sales and deeds-in-lieu of foreclosure totaled 37,966 for the three months ending Sept. 30, 2012, up 4 percent from the previous quarter and 23 percent from a year ago. Fannie and Freddie implemented accelerated timelines in June 2012 for reviewing and approving short-sale transactions.

Fannie and Freddie short sales and deeds-in-lieu

Right-click graph to enlarge. Source: Federal Housing Finance Agency.

The mortgage giants' inventories of "real estate owned" (REO) homes also continued to decline, as Fannie and Freddie got rid of homes faster than they acquired them through foreclosures.

During the first nine months of the year, Fannie and Freddie acquired 197,507 homes through foreclosure, and sold 218,321 REOs and foreclosed homes.

Fannie and Freddie REO inventories (thousands of homes)

Right-click graph to enlarge. Source: Federal Housing Finance Agency.

All told, Fannie and Freddie had 158,138 homes in their REO inventories as of Sept. 30, 2012, down 13 percent from a year ago and a drop of nearly 36 percent from a Sept. 30, 2010, peak of 241,684.

Fannie and Freddie were placed under government control, or conservatorship, in September 2008. Since then, loan servicers working on their behalf have approved 2.1 million home retention actions, including 1.26 million permanent loan modifications.

During the same period, Fannie and Freddie acquired more than 1.1 million homes through foreclosure, and signed off on 413,436 short sales and deeds-in-lieu of foreclosure.

There have been about 4 million completed foreclosures nationwide since September 2008, according to data aggregator CoreLogic.

Of the 62,561 loan modifications completed in the third quarter, about 45 percent of borrowers saw their monthly payments decrease by more than 30 percent. More than a third of loan mods included principal forbearance. Less than 15 percent of loans modified in fourth-quarter 2011 had missed two or more payments as of Sept. 30, 2012, nine months after modification, the report said.

Since the beginning of the Obama administration's Home Affordable Modification Program (HAMP) in April 2009, just over 1 million borrowers have been offered a trial loan modification, and more than half had been granted a permanent modification. Of those, 21.2 percent had defaulted as of the third quarter. The vast majority of the remainder, 428,946 borrowers, were in active permanent modifications as of the third quarter.

Since October 2009, Fannie and Freddie have offered 564,822 non-HAMP permanent loan modifications. Non-HAMP modifications made up two-thirds of all permanent loan mods in the third quarter, the report said.

The share of mortgage loans 30-59 days delinquent rose slightly to 2.08 percent of all loans serviced in the third quarter, but the share of seriously delinquent loans fell slightly to 3.39 percent. Seriously delinquent loans are those that are 90 days or more delinquent or in the process of foreclosure. More than half of seriously delinquent borrowers had missed more than a year of mortgage payments as of the end of the third quarter, the report said.

Nearly 3 in 10 of these deeply delinquent borrowers are located in Florida.

Will Mortgage Rates Go Up Again Soon?

gail@bklaw.me (Personal Injury/Federal Workers Comp Laywer) — Sat, 05 Jan 2013 16:48:00 +0000

Will Mortgage Rates Go Up Again Soon?

Mortgage interest rates are expected to rise this year, and the increase will likely curb refinancings and affect move-up home buyers.

The Mortgage Bankers Association projects the 30-year fixed rate to increase to an average of 4.1 percent in 2013 and 4.5 percent in 2014, up from 3.7 percent last quarter. The group's December forecast has the dollar value of refis dropping to $818 billion this year and $350 billion next year, from approximately $1.2 trillion in 2012.

Neither higher interest rates nor fewer refis are expected to have a significant impact on housing starts or home sales, however. "Interest rates are so low right now that a modest increase wouldn't have much effect on sales," according to Walter Molony of the National Association of REALTORS®.

What would be a game changer, he adds, is a loosening of credit standards — especially considering that so many borrowers still cannot qualify for financing. "A return to normal standards would boost sales 10 percent to 15 percent," Molony estimates.

Source: "Mortgage Rates About to Lift?" Investor's Business Daily (Jan. 4, 2013)

Rates Ring in the New Year Near Record Lows

gail@bklaw.me (Personal Injury/Federal Workers Comp Laywer) — Sat, 05 Jan 2013 16:46:00 +0000

Rates Ring in the New Year Near Record Lows

Fixed-rate mortgages are averaging near record lows, keeping home buyer affordability high, Freddie Mac reports in its weekly mortgage market survey.

"Mortgage rates started the year near record lows, which should continue to aid the ongoing housing recovery,” says Frank Nothaft, Freddie Mac’s chief economist.

Freddie Mac reports the following national averages with mortgage rates for the week ending Jan. 3:

30-year fixed-rate mortgages: averaged 3.34 percent, with an average 0.7 point, dropping from last week’s 3.35 percent average. The record low for 30-year mortgages is 3.31 percent, which was set in November. A year ago, 30-year rates averaged 3.91 percent.
15-year fixed-rate mortgages: averaged 2.64 percent, with an average 0.7 point, dropping from last week’s 2.65 percent average. The record low for 15-year mortgages is 2.63 percent, also set in November. Last year at this time, 15-year rates averaged 3.23 percent.
5-year adjustable-rate mortgages: averaged 2.71 percent, with an average 0.6 point, rising from last week’s 2.70 percent average. Last year at this time, 5-year ARMs averaged 2.86 percent.
1-year ARMs: averaged 2.57 percent, with an average 0.4 point, rising from last week’s 2.56 percent average. A year ago, 1-year ARMs averaged 2.80 percent.

Source: Freddie Mac

How to Start the Bankruptcy Process

gail@bklaw.me (Personal Injury/Federal Workers Comp Laywer) — Sat, 05 Jan 2013 15:35:00 +0000

How to Start the Bankruptcy Process

Initiation And Consultation

Take the Initiative

You have hit rock bottom. You cannot meet your monthly payment obligations and you are falling behind on your bills. You are starting to receive harassing phone calls threatening legal action. Even worse, you are in foreclosure, there is a lien on your bank account and/or your wages are being garnished. It is extremely important that you do not sit idle and bury your head in the sand.

I know it can be very difficult, but the first step is realizing that you have a financial problem that you cannot fix. It takes courage, but you must take action. Hopefully this is done early before things get out of control or before you liquidate exempt assets in an attempt to stay above water.

It is important that you consult with a bankruptcy lawyer before making any drastic financial decisions.

The Selection Process

So, while this is an extremely difficult time in your life and you don’t know where to turn, choosing the right bankruptcy lawyer could make all the difference. Make sure you do your research, read their blog and meet for a free consultation. Hire the lawyer you feel most comfortable with who respects you and your situation and treats you with the dignity that you deserve.

The Consultation

The initial consultation is perhaps the most important part of the bankruptcy process. It is the jumping off point to future financial freedom. So, if a lawyer does not offer an initial, free consultation, do not hire that lawyer. This initial consultation is an important meeting where you get to interview the lawyer and the lawyer gets to interview you. Invaluable information is passed back and forth at the initial consultation.

It is important to come prepared. Most lawyers will advise you on what needs to be brought to the initial consultation. Some will have you complete a pre-consultation intake form to provide them with necessary information. At a minimum, you should bring the following documents with you to the initial consultation:

Copies of your previous two (2) filed Income Tax Returns;
Copies of your pay advices (or proof of income) for the previous month;
Copies of your monthly bills (utility bills, credit card statements, mortgage statements, etc.);
Copies of bank statements for the previous two months; and
Any other relevant documentation.

You should always come organized and as prepared as possible.

It is important to be completely honest, cooperative and share everything. Remember that the attorney/client privilege applies to the initial consultation so all communications with your potential lawyer will be protected. Speak freely and disclose everything as one tiny detail omitted could impact the outcome of your case.

As the debtor, you play an active role in your bankruptcy case and just as you rely on your lawyer, your lawyer relies on you to communicate all information in a truthful and forthcoming manner.

It is also important that you ask questions and get as much information as you can. You should leave the initial consultation with a solid understanding of the bankruptcy process and whether you will be filing Chapter 7 or Chapter 13.

Finally, you should leave the consultation with a clear picture of what your bankruptcy filing will cost you. Some lawyers still bill by the hour and this creates confusion and uncertainty. Most bankruptcy lawyers today utilize flat billing fees where you are billed a set fee for your entire case. This is a clean, concise and easily understood billing model.

Remember, initiate and take action before it is too late and make the most of your consultation as it is the first affirmative step to getting out of debt and achieving future financial freedom.

Mortgage Debt Tax Relief Extended

gail@bklaw.me (Personal Injury/Federal Workers Comp Laywer) — Fri, 04 Jan 2013 16:49:00 +0000

Mortgage Debt Tax Relief Extended

A tax break for forgiven mortgage debt that was set to expire Dec. 31 was extended by lawmakers when they dodged the “fiscal cliff” this week.

The tax break, which has been extended to the end of 2013, allows home owners facing short sales, reduced loan principals, or foreclosures to avoid paying taxes on any debt still owed to the bank. Otherwise, the debt would have been taxed by the IRS as income.

The tax break first took effect in 2007.

Home owners had rushed to complete short sales before the end of the year out of fear that the tax break would not be extended.

In Florida, short sales have sold on average for about $103,000 less than what the home owner owed. As such, a typical home seller in that state in, say, the 25 percent tax bracket who completed a short sale in 2013 would have been faced with a $25,725 tax bill if the extension had expired.

How Does the Fiscal Cliff Bill Affect You?

gail@bklaw.me (Personal Injury/Federal Workers Comp Laywer) — Wed, 02 Jan 2013 16:54:00 +0000

How Does the Fiscal Cliff Bill Affect You?

On Jan. 1 both the Senate and House passed H.R. 8 legislation to avert the “fiscal cliff.” The bill was signed into law by President Barack Obama on Jan. 2.

Below is a summary of real estate related provisions in the bill:

Real Estate Tax Extenders

Mortgage Cancellation Relief is extended for one year to Jan. 1, 2014
Deduction for Mortgage Insurance Premiums for filers making below $110,000 is extended through 2013 and made retroactive to cover 2012
15-year straight-line cost recovery for qualified leasehold improvements on commercial properties is extended through 2013 and made retroactive to cover 2012
10 percent tax credit (up to $500) for homeowners for energy improvements to existing homes is extended through 2013 and made retroactive to cover 2012

Permanent Repeal of Pease Limitations for 99% of Taxpayers

Under the agreement so called “Pease Limitations” that reduce the value of itemized deductions are permanently repealed for most taxpayers but will be reinstituted for high income filers. These limitations will only apply to individuals earning more than $250,000 and joint filers earning above $300,000. These thresholds have been increased and are indexed for inflation and will rise over time. Under the formula, the amount of adjusted gross income above the threshold is multiplied by three percent. That amount is then used to reduce the total value of the filer’s itemized deductions. The total amount of reduction cannot exceed 80 percent of the filer’s itemized deductions.

These limits were first enacted in 1990 (named for the Ohio Congressman Don Pease who came up with the idea) and continued throughout the Clinton years. They were gradually phased out as a result of the 2001 tax cuts and were completely eliminated in 2010-2012. Had we gone over the fiscal cliff, Pease limitations would have been reinstituted on all filers starting at $174,450 of adjusted gross income.

Capital Gains

Capital Gains rate stays at 15 percent for those in the top rate of $400,000 (individual) and $450,000 (joint) return. After that, any gains above those amounts will be taxed at 20 percent. The $250,000/$500,000 exclusion for sale of principal residence remains in place.

Estate Tax

The first $5 million dollars in individual estates and $10 million for family estates are now exempted from the estate tax. After that the rate will be 40 percent, up from 35 percent. The exemption amounts are indexed for inflation.

Can Filing Bankruptcy get me Fired From my Job?

gail@bklaw.me (Personal Injury/Federal Workers Comp Laywer) — Thu, 06 Dec 2012 15:48:00 +0000

Can Filing Bankruptcy get me Fired From my Job?

As financial recovery for this country still seems a long way off, the job market is still very tight. Many people feel very grateful for their jobs and realize that their employment may end at any time. This is not surprising since the unemployment rates have more than doubled since 2000 and poverty levels are set to reach their highest point since the 1960's. More and more people are worried about the possibility of losing their jobs if they file bankruptcy.

They ask the Question: "Can I get fired for filing bankruptcy?" The answer to this question is a reserved, “No.”

First , there is a good chance your employer will never find out about your bankruptcy filing. Unless you owe money to your boss (which makes him/her a creditor), notice of your bankruptcy filing will not be mailed to your employer.

Your employer would have to take certain affirmative steps to find out that you filed bankruptcy. The most common way to do this would be to “pull” a credit report on you. Of course, this would not only disclose a bankruptcy filing, but all other negative history as well.

Second, your employment status is protected by Federal law.

According to Section 525 of the Bankruptcy Code, no governmental unit or private employer may

“…terminate the employment of, or discriminate with respect to employment against, an individual who is or has been a debtor under this title…”

Simply put , you cannot be fired from your job because you filed bankruptcy.

Employment in the Financial Industry

More often than not , the bankruptcy concern arises from employees working in the financial industry. This could include banks, brokerages or other financial institutions that deal with transacting client money. Section 525 still applies to these types of business and you cannot be fired if the sole reason is the bankruptcy filing.

Unfortunately, a bankruptcy filing can be held against you during the hiring process or when being considered for a promotion. Potential employers typically run background checks and a poor credit history could be misinterpreted as irresponsibility.

On the positive note, a government employer cannot refuse to hire someone because of a prior bankruptcy filing. So while there is a stigma attached to bankruptcy, we know that bad things often do happen to good people. Hard working people are sometimes forced to file bankruptcy and there is nothing wrong with that. As bankruptcy promises a fresh financial start to the debtor, there is built in protection to prevent employment discrimination against bankruptcy debtors.

Dont Let Your Bank Accounts Be Wiped Clean

gail@bklaw.me (Personal Injury/Federal Workers Comp Laywer) — Thu, 15 Nov 2012 15:16:00 +0000

Under common law, a bank may set off the balance of an obligation owed to it by its depositor (e.g., a loan) against a general deposit made by the depositor (e.g., the balance of a checking or savings account) which has been accepted by the bank in good faith and in the ordinary course of business. This is true because, technically, sums on deposit in a checking or savings account are debts owed by the bank to its depositor, which the bank is required to pay to the depositor or to the order of the depositor upon demand (that is, the presentment of a check or withdrawal request). In addition to this common law right, most account agreements and many loan documents contain specific provisions providing for the right of setoff by the bank, and may even grant contract rights that are more extensive rights than those available under the common law.

The right of setoff may be exercised without prior notice, so long as the conditions permitting setoff are met. These conditions include:

(1) both debts must be due (e.g., the loan has matured and there is money in the account);

(2) the parties on both debts must be identical (that is, the borrower has to be the same party as the depositor, and the bank must be the same party as the lender); and

(3) the sums on deposit must constitute a general deposit (e.g., the account is not an escrow account and does not contain exempt funds).

Lenders do need to be careful in order to safeguard against liability to the depositor for wrongful setoff and to third parties if an error is made with respect to identity of parties. The right of setoff can be a valuable tool for lenders, but can be disastrous for a debtor. One moment your deposit could be safely sitting in you bank account and the next moment it could be gone.

The After fall of McNeal and Lien Stripping of Your Second Mortgage

gail@bklaw.me (Personal Injury/Federal Workers Comp Laywer) — Wed, 31 Oct 2012 14:50:00 +0000

Nearly five months after McNeal was decided by the Eleventh Circuit, a challenge has arisen within the Eastern District of New York, which has historically been fertile ground for bankruptcy law. In Wachovia Mortgage v. Smoot, the court rejected a debtor’s attempt to strip off a wholly unsecured junior mortgage in a Chapter 7 proceeding, and in doing so reinforced the majority of courts from which McNeal departed.

For lenders and creditors not familiar with the Eastern District of New York, the result in Smoot is especially significant, as the same court in 2009 had allowed a Chapter 7 debtor to avoid its wholly unsecured claim. This unpublished decision in In re Lavelle had been one of the only other opinions in the nation to allow lien stripping in Chapter 7 proceedings before McNeal.

Smoot’s analysis is directly in line with the pre-McNeal decision within the Eleventh Circuit, exemplified by Judge Jennemann’s opinion in In re Hoffman, which held that Congress did not intend to provide Chapter 7 debtors the right to avoid an allowed secured claim, even if that claim were not secured by any value in the collateral.

Perhaps as important as the rejection of McNeal’s lien-stripping allowance was the strong distinction thatSmoot made between lien modifications in Chapter 7 and 13 cases. As discussed in the “Chapter 20” post below, the Eleventh Circuit has allowed Chapter 13 debtors to strip off wholly unsecured junior mortgages since the 2000 decision of In re Tanner. The Second Circuit followed suit in 2001, in the case of In re Pond. Because debtors have been successful stripping off in Chapter 13 cases, many have attempted to adoptTanner, Pond and their progney to support Chapter 7 stripping.

The court in Smoot correctly held that this argument overlooked the “unique statutory predicate of Chapter 13” – specifically, that Pond & Tanner rely upon § 1322(b)(2) to strip off the wholly unsecured junior mortgage. This is important because there is no analogue to the anti-modification language in § 1322(b)(2) under Chapter 7. Thus, a debtor cannot rely upon a permissive lien strip in a Chapter 13 to support a strip in a Chapter 7, as the debtor had in Lavelle.

Although McNeal did not directly rely upon Lavelle or Chapter 13 case law, Smoot serves to further isolateMcNeal’s position in the consumer creditor landscape. Further, Smoot provides clear and succinct guidance to subsequent courts who are faced with a Chapter 7 debtor attempting to invoke Chapter 13 jurisprudence to strip a lien.

Ultimately, Smoot is good news for lenders and other creditors, even outside the Eastern District of New York, as it illustrates once more the majority position that even wholly unsecured junior liens should survive the Chapter 7 liquidation.

Can’t Afford Your Car Payment? File Bankruptcy.

gail@bklaw.me (Personal Injury/Federal Workers Comp Laywer) — Mon, 20 Aug 2012 14:28:00 +0000

Can’t Afford Your Car Payment? File Bankruptcy.

Many people believe that bankruptcy is a legal process used to deal only with excessive credit card debt. Of course, bankruptcy can be a very good option if you have unreasonable credit card debt, however , this assumption is incorrect.

You can actually owe $0 in credit card debt and still use the bankruptcy process to improve your financial situation .

While certain debts are not dischargeable in bankruptcy (student loans , child support, etc.), car loans are. This can be extremely helpful if you are stuck with a burdensome car loan that you can no longer afford.

If you are thinking "This Car Payment is Killing Me!”, bankruptcy may be your answer.

For example, if you have purchased a car and due to bad credit and other financial constraints, you were given with a high interest rate car loan your payment may be simply unaffordable and too burdensome. In addition if you now owe more on your can than it is worth, the car will no longer have any financial value to you and be solely a burden.

How Bankruptcy can Help

Certain debts are not dischargeable in bankruptcy. A car loan is not one of them. A car loan is dischargeable in bankruptcy.

Assuming the loan was not obtained fraudulently and no other discharge defense is available, a car loan can be wiped out in bankruptcy. Of course, since the bank maintains a lien on the vehicle, the car does have to be “surrendered” as a part of the process . While this can be a temporary inconvenience, with proper planning most people are able to find a replacement vehicle without a problem.

The bankruptcy allows you to get out of the burdensome, high payment car loan and replace it with a less burdensome one, or none at all.

Voluntary Surrender

You may ask , “If I can ’t afford my car , why not just stop paying , surrender the vehicle and avoid bankruptcy.” Some are forced to go this route out of sheer necessity, but this could eventually force you into bankruptcy as well .

Once the car is surrendered, the car will be sold and you will most likely owe the difference between the sale price and the balance of the loan . Inevitably, additional fees will be tacked on as well . You now owe a large, lump sum and failure to pay typically results in collection activity or worse, legal action .

Filing bankruptcy on your terms is the cleaner option and prevents intrusive remedies such lawsuits to collect the deficiency and wage garnishment that could result from a repossession or voluntary surrender.

If you are struggling with an unreasonable car loan and a payment that you can ’t afford, do not rule out bankruptcy as an option . Consult with an experienced bankruptcy lawyer and discuss all of your options. Relief from a burdensome car loan could free up disposable income and open the door to financial freedom for you and your family.

More on McNeal - Will this Decision Survive?

gail@bklaw.me (Personal Injury/Federal Workers Comp Laywer) — Sun, 15 Jul 2012 14:55:00 +0000

A Chapter 7 Bankruptcy Debtor can strip a second mortgage in a Chapter 7 bankruptcy if they live in a jurisdiction under the 11th Circuit Federal Court of Appeals. Approximately two weeks ago, the 11th Circuit issued an opinion in In Re McNeal, Case No. 11-11352 (11th Cir., May 11, 2012) wherein it held quite simply that a Chapter 7 Debtor could strip a second mortgage during the Chapter 7 case. This is huge because everyone and I mean everyone did not believe this to be the case after the Supreme Court’s decision in the Dewsnup v. Timm case.

The McNeal case is rather surprising for several reasons. First, the 11th Circuit is not noted as being the most Debtor friendly Circuit in the Country; however, that seems to be changing as the Court issued several Debtor friendly decisions this year in FDCPA cases. Second, everyone thought that this issue was dead after the Supreme Court issued the Dewsnup opinion. As a matter of fact, many Bankruptcy Courts within the 11th Circuit issued opinions stating exactly that. Third, the 11th Circuit's opinion was based upon a 1989 case, Matter of Folendore, and the Court explained that the Dewsnup case did not abrogate or overrule their precedent in Matter of Folendore, and therefore, Matter of Folendore was still good law. The Question still remains as to whether this decision survive and spread to other Circuits.

The real issue will be to see where this case goes next. Obviously, this issue is going to continue to heat up. There are several appeals pending right now in New York, Utah and Illinois. It may be five years before the cases get to the Supreme Court, but until then, many Floridians will be busy stripping liens.

The implications are this decision are huge. In a Chapter 13 bankruptcy, a debtor can strip a second mortgage lien, there is no doubt about that. But, in order to truly get the benefits of the bankruptcy, you must wait to get your discharge, and that could take from three to five years. Now in the Middle District of Florida, if a person is eligible, they can file a Chapter 7 bankruptcy and be completely done in 6 months. Many will want to take advantage of this scenario. It may be the deciding factor that makes retaining a families home financially viable. Chapter 7 bankruptcy is cheaper and quicker. A debtor doesn’t have to worry about filing a plan of reorganization that will have them under scrutiny for the next 5 years, etc, etc, etc. The benefits clearly outweigh the negatives on this issue.

Stripping Second Mortgages in a Chapter 7 Bankruptcy

gail@bklaw.me (Personal Injury/Federal Workers Comp Laywer) — Sun, 20 May 2012 14:04:00 +0000

For many years, it has been well settled law that a Debtor who owns real estate with more than one mortgage can file a Motion with the Bankruptcy Court to eliminate, or “strip,” the second mortgage or equity line from that property. More specifically, “[t]o the extent that a lien secures a claim against a debtor that is not an allowed secured claim, such lien is void.” 11 U.S.C. § 506(d). The caveat to this rule, however, it is that the law was just as well settled that only those consumers in a Chapter 13 case could take advantage of 506(d). Up until recently, a Debtor who filed a Chapter 7 bankruptcy case and wanted to discharge all unsecured debt was not allowed to strip a second lien. The reason for this rule was that, in a Chapter 13 case, the Trustee retains an interest in the property for the bankruptcy estate. Conversely, in a Chapter 7 case, presuming the Trustee abandons any exempt asset, there is no interest in the property by the estate and section 506(a) does not apply. As a result, the court cannot bifurcate the debt into secured and unsecured debt, and without this bifurcation there is no unsecured debt to discharge. Additionally, a Chapter 7 discharge does not extend to an in rem claim against property; the discharge is limited to a discharge of personal liability. Dewsnup v. Timm, 502 U.S. 410 (1992).

However, the rule that lien strips cannot take place has changed in the Middle District of Florida. In Re: McNeal, Case: 11-11352, Lorraine McNeal v. GMAC Mtg. held that, at least in the 11th Circuit, even though a Debtor still cannot cramdown the value of an investment property as clearly noted in Dewsnup, a Debtor can strip a junior lien from a primary residence. The Court reasoned that because the United States Supreme Court in Dewsnup disallowed only a “strip down” of a partially secured mortgage lien and did not address a “strip off” of a wholly unsecured lien, it is not “clearly on point” and as such, the issue was not intended to be addressed by that Court.

The court essentially held that, where the Supreme Court only discussed a cramdown in a Chapter 7 case under 506, entirely stripping a junior lien was not addressed. As such, the 11th Circuit Court reasoned, there is no restriction on lien stripping. Under this ruling, a Debtor cannot reduce the principal owed to a Creditor, but that Debtor can completely eliminate it. If this holds up, though, it could be very helpful to many Debtors who meet all of the criteria for a Chapter 7, but find themselves in a Chapter 13 for no other reason then to file a Motion to Avoid a Lien. If you believe you may be a candidate to strip off your second lien and have a significant amount of unsecured debt, you should consult with a local bankruptcy attorney who can advise you of your rights.

RI: MERS’s Standing to Foreclose Upheld

gail@bklaw.me (Personal Injury/Federal Workers Comp Laywer) — Fri, 24 Feb 2012 04:25:00 +0000

RI: MERS’s Standing to Foreclose Upheld

by Jeffrey H. Gladstone and David J. Pellegrino

Rhode Island is the most recent state in a long line of jurisdictions to rule that Mortgage Electronic Registration Systems, Inc. (MERS) has standing to foreclose. The Rhode Island court further ruled that MERS, as mortgagee, may exercise the statutory power of sale in its own name.

The name of the case is Bucci v. MERS, C.A. No. PC 09-3888, which was filed in the Providence County Superior Court. The facts of the underlying action are typical of many foreclosure scenarios occurring across the country. A loan was originated and the borrower executed a promissory note made payable to the lender. Contemporaneously, as security for the repayment of the promissory note, the borrower granted a mortgage on the residential property to MERS. The mortgage was granted by the borrower/mortgagor to MERS as nominee for the lender; granting all the rights and privileges of a mortgagee to MERS, including the statutory power of sale.

As with many nonjudicial jurisdictions, Rhode Island’s legislature enacted a statutory process allowing a mortgagee to foreclose on its mortgage following a borrower’s default. Rhode Island Gen. Laws § 34-11-22 codifies the statutory power of sale, which many, if not all, MERS-originated mortgages incorporate by reference.

The borrower eventually defaulted on its repayment obligations under the terms of the promissory note. The loan was accelerated and the borrower failed to cure. Then, nonjudicial foreclosure proceedings were commenced whereby, pursuant to Rhode Island’s statutory scheme, a notice of foreclosure was sent to the mortgagor and foreclosure notices were published in the statutorily prescribed form and manner.

In this case, prior to the scheduled foreclosure date, the borrower filed a complaint seeking injunctive relief to enjoin the foreclosure sale. The complaint alleged, among other things, that: the Rhode Island statutory scheme does not allow MERS to exercise the statutory power of sale in the mortgage because Rhode Island does not recognize a “nominee mortgagee,” MERS, because it is not the lender, does not have standing to foreclose; and MERS is precluded from foreclosing because it is not the owner of the promissory note. The court granted the initial request for relief pending a substantive hearing on the issues. Five days later, a preliminary injunction hearing was held and, pursuant to Rule 65(a)(2) of the R.I. Rules of Civil Procedure, the court consolidated the preliminary injunction hearing with the trial on the merits.

Following the full hearing, on August 25, 2009, the court issued its decision denying borrower’s requests for relief. In so ruling, the court “specifically [held] that MERS, in the case at bar, has standing to and may foreclose the mortgage granted to it by the Plaintiffs utilizing the Statutory Power of Sale referenced therein.”

After a brief description of MERS’s functions, the court first considered MERS’s contractual right to foreclose pursuant to the mortgage document. Citing directly to the mortgage, the court noted that the borrower granted “the Statutory Power of Sale to MERS, as nominee for Lender, its successors and assigns.” The court went on to quote the mortgage, which stated that: “if necessary to comply with law or custom, MERS (as nominee for Lender and Lender’s successors and assigns) has the right to exercise any or all of those interests, including, but not limited to, the right to foreclose and sell the Property” (emphasis in decision). In addition, the court, rejecting certain of the borrower’s other contentions, found that the “fact that paragraph twenty-two of the mortgage states that the Lender ‘may invoke the STATUTORY POWER OF SALE’ does not negate the previous language in the Mortgage directly granting MERS, as mortgagee in a nominee capacity, the right to invoke the Statutory Power of Sale.” Accordingly, MERS has the contractual right to exercise the statutory power of sale because it is the named mortgagee and nominee of the lender, and its successors, and assigns; and MERS was acting on behalf of the beneficial owner of the promissory note.

Next, the court tackled the borrower’s assertion that MERS does not have the statutory authority to foreclose. First, the court determined that there is no express statutory prohibition impacting MERS’s ability to foreclose. Next, citing to the statutory power of sale, the court determined that because the “mortgagee or his, her or its executors, administrators, successors or assigns” can exercise the power of sale, so too can MERS as the mortgagee. Simply put, the court found that MERS “is the mortgagee because the mortgage executed by the [borrower] so states.” “The fact that MERS acts in a nominee capacity for the lender ... does not diminish MERS’s role as the mortgagee nor is there created a new legal term ‘nominee mortgagee.’” Therefore, not only is there “[n]othing in the Rhode Island statutes prohibit[ing] MERS, as mortgagee in a nominee capacity, from foreclosing under the Statutory Power of Sale,” MERS “may invoke the Statutory Power of Sale as the mortgagee.”

In the clearest language, the court’s decision addressed the challenges to MERS authority to foreclose under Rhode Island law. As a result, the multitude of pending cases seeking to enjoin Rhode Island foreclosures by attacking MERS standing will most likely be resolved in a perfunctory and consistent manner in favor of MERS.