California Debt Blog

Banks Avoiding Doing Loan Modifications

2009-07-07T18:19:23-07:00

A new study by the Federal Reserve of Boston concludes that lenders are not offering loan modifications, despite the lenders statements to the contrary. Why? Because the lenders aren't making money on them.

The interesting part, I think, is that the senior economist who coauthored the report believes that the government is better off giving hte money to consumers. From the Boston Globe: "One of the study’s coauthors, Boston Fed senior economist Paul S. Willen, said the government would be better off giving the money directly to struggling borrowers to help them with their payments, rather than to lenders that are averse to working out the troubled loans."

So, the government has been spending tons of money trying to get banks to re-write loans. That has been a failure. The money should be going to consumers. Any economist will tell you that makes more sense. Hopefully the government will listen to the advice from the Boston Fed!

California AG Sues Mitchell Roth

2009-07-07T08:39:28-07:00

I can't provide the story via the link since it is a locked story, but here is the story from The Recorder, a legal publication out of San Francisco:

SACRAMENTO — Attorney General Jerry Brown on Monday sued a Southern California lawyer for allegedly bilking desperate homeowners with troubled mortgages out of thousands of dollars.

Mitchell Roth of Sherman Oaks charged at least 2,000 homeowners substantial fees in exchange for false promises that he would help them escape foreclosure and improve their credit, Brown wrote in a complaint filed with Los Angeles County Superior Court.

Also named in the lawsuit (.pdf) is Paul Noe Jr., president of Nevada-based United First, a corporation that allegedly solicited homeowners facing foreclosure and referred them to Roth's law firm.

"Despite taking thousands of dollars in upfront and monthly fees, defendants provided little or no assistance to consumers, often abandoning claims they promised to bring on their behalf," Brown wrote.

Roth's attorney, Leonard Sharenow of Los Angeles, declined to discuss specific accusations in the lawsuit but said that his client's "role was simply an attorney for these individuals who were referred to him. He believes he acted properly and he intends to defend himself."

Alfredo Jarrin, Noe's attorney, said he had not yet seen the complaint and declined to comment.

The suit accuses Noe and Roth of violating various sections of the state Business and Professions Code and foreclosure consultant laws. Brown is seeking $2 million in civil penalties, restitution for United First's clients and an injunction preventing the two men from ever providing foreclosure consulting services.

The suit is just the latest trouble facing Roth, who filed his resignation from the State Bar in May. Just two months earlier, Bar prosecutors had obtained a court order shutting down Roth's three firm offices, citing his hospitalization for severe depression. In January, U.S. District Judge Manuel Real of Los Angeles declared Roth a vexatious litigant and ordered him to refund fees to nine clients.

Since the start of the mortgage meltdown, the State Bar has received almost 1,000 questions and complaints a month about lawyers' work on loan modifications and foreclosures. The Bar also has been fielding up to two dozen mortgage-related calls a day on its ethics hotline for lawyers.

The surge in complaints led the Bar in March to issue an ethics alert, warning lawyers that the mortgage arena is "fraught with danger," especially when working with foreclosure consultants. On June 24, the State Bar's Board Committee on Operations also called an emergency meeting to endorse two pieces of pending legislation that would curb the practice of requiring advance legal fees for loan modification services.

"We want you to know that the State Bar is continuing to work with other regulatory and law enforcement agencies to deal with attorneys involved in loan foreclosure fraud," State Bar President-elect Howard Miller wrote in a June 25 letter to one of the bill's authors, Assemblyman Pedro Nava, D-Santa Barbara. "We recognize that the State Bar must step up to the plate and deal with this issue."

The complaint filed by Brown alleges that United First lured homeowners with numerous helpful-sounding Web sites, including www.stopforeclosure.com and www.bailoutmyhouse.com. The firm then charged clients $1,500 upfront and at least $1,200 a month with assurances that Roth would take legal action to halt the foreclosure process. Agreements with United First required consumers to pay 50 percent of any mortgage settlement to the firm or, if their debts were eliminated, 80 percent of the home's value, Brown said.

One victim, identified only as "P.J." by the attorney general's office, paid Roth and United First nearly $5,000 in 2008 only to lose his home earlier this year. Roth took no action to protect P.J.'s home, Brown said.

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My comments: it is about time. Roth has been on the radar since last year. It took until now for the AG to do something. And the State Bar still has not done anything since Roth voluntarily resigned. In the meantime, legislators like Sen. Calderon and Assemblyman Nava are using this one story to try to ban consumers from getting legal help in dealing with banks.

Bankruptcies Higher In Wage Garnishment States

2009-07-05T19:36:07-07:00

The Associated Press recently studied trends in bankruptcy filings. One thing stood out to them: in states where debt collectors can garnish wages, bankruptcies are sharply higher.

Five states, North Carolina, Pennsylvania, South Carolina, Florida and Texas, prohibit or sharply limit a creditors right to garnish wages. According to the Associated Press, "The nationwide bankruptcy rate is 42 percent higher than the rate in those five states."

There is a simple message here: by allowing debt collectors to go after someone's income, you make it substantially more likely that the debtor will file for bankruptcy. And this helps no one. The debtor does not come out ahead by filing for bankruptcy. The creditor does not get any money from a bankruptcy filing. The court system gets bogged down with more filings.

Maybe it is time for the other 45 states to start looking at North Carolina, Pennsylvania, South Carolina, Florida and Texas to see what they are doing to help avoid bankruptcies.

FAQ: Where can I be sued?

2009-06-29T20:18:51-07:00

I have a credit card debt. The debt collection company is located across the country and told me they are suing me there. Can the debt collector sue me somewhere other than where I live?

A: This question deals with venue. Venue is the legal issue of where a lawsuit can be brought. So, the question is what is the proper venue for a debt collection lawsuit?

Under the Rosenthal Act, or the California Fair Debt Collection Practices Act, proper venue is under Civil Code 1788.15. That section states that a debt collector can sue in the county where the debtor lives at the time of the filing of the lawsuit or in the county where the debt was incurred.

Under the FDCPA, the Fair Debt Collection Practices Act, the debt collector can sue where the debtor lives at the time of the filing of the lawsuit or where the consumer signed the contract. Since most debt collectors do not know where the contract was signed, this only leaves the place where the defendant lives.

This is important because the debt collector may not want to sue you where you live. If they sue you in the wrong county, you have a complaint against the debt collector for violating the FDCPA and the Rosenthal Act.

You should immediately contact an attorney to review the situation if you are sued by a debt collector.

Write your state legislators

2009-06-27T20:06:40-07:00

It is not often that I ask my readers to do something. But, today I am. There are two bills that are going to affect you and no one is even talking about them.

SB 94 and AB 764 are two bills that are going to force attorneys out of helping people with loan modifications. The bills make it a crime to charge a client up front for a modification. Is that the end of the world? Probably not. Is that bad for consumers? Yes.

Why? Because our legislators are convinced that banks are helping people get modifications all on their own and that consumers do not need legal help. Yes, that is their stated reason.

Of course, reality is that banks got us into this mess and the banks do not voluntarily help people. If the banks were voluntarily helping people, then our state legislature and the Federal Government would not have had to pass laws to require modifications be considered.

What can you do? Please email Sen. Calderon and Assemblymember Nava and tell them that this bill is going to hurt consumers. You can also email your own assemblymember and senator. You can find contact information here for the Senate and here for the Assembly.

Slightly Off Topic - A&W Root Beer

2009-06-18T20:35:01-07:00

Why am I writing about A&W Root Beer? Because we are in a recession. And the government isn't doing us much to get out of the recession. So, A&W is trying to do something this weekend. Since most people reading this are looking for information about getting out of debt, one way is to not spend money and A&W is making it so you don't have to.

Today, in my mail, I had an overnight package. It came from A&W. Yes, that A&W. Apparently, A&W knows about my blog, which you can find here! And so they sent me a letter and some "stuff." The stuff first:

1. An A&W 90th Anniversary T-shirt;
2. An A&W 90th Anniversary Mug; and
3. An A&W 90th Anniversary Book.

The t-shirt is brown. I understand brown is the new black. And a free mug? This isn't one of those cheap plastic mugs. This is a good glass mug that is good for drinking a cold root beer! And the book is a real book. Quite cool. For instance, I learned that A&W was started just down the freeway in Lodi, CA.

Back on track: A&W wanted me to spread the word. What word? Three cool things:

1. Friday, June 19 from 2 to 8pm you can get a free A&W Root Beer Float.
2. Saturday, June 20, a national cruise night at participating restaurants. Okay, if I had a classic car that would be sweet!
3. Sunday, June 21 is Fathers Day and you can treat your dad to an A&W Papa Burger for 90 cents.

WOO HOO! I will be getting my root beer float tomorrow!

Watch Your Credit Card Statements Closely

2009-05-28T11:09:00-07:00

Bad news for consumers: credit card companies are closing cards and raising interest rates. The latest is Advanta announcing that they are closing accounts. From the press release: "the Company will shut down all credit card accounts to future use at that time."

In addition, Capital One has announced that it is reviewing all accounts and raising interest rates. Bank of America is also raising interest rates and closing accounts, in addition to cutting credit limits. American Express has been doing this for some time.

Your credit card company is entitled to do this. The credit card agreement states that the company can change the terms with 30 days notice. This includes closing your account, raising your interest rate and lowering your credit limit. Now is the time to shop around for a credit card, but do not voluntarily close your oldest card, as that will affect your FICO score.

Judge's Ruling Blow to MERS

2009-05-26T10:01:00-07:00

Tim O'Reiley of the Las Vegas Business Press wrote "U.S. Bankruptcy Court Judge Linda Riegle has ruled that the Mortgage Electronic Registration System (MERS) could not represent lenders seeking to foreclose on delinquent homeowners already in bankruptcy unless it could produce the actual loan note."

What does this mean? At its most basic, it means that MERS must show that they have the actual loan note if MERS plans on foreclosing. However, the ruling is a trial level court ruling. MERS points out in the article that they have lost this argument before but won on appeal.

The key to this is going to be on appeal. However, at this time, homeowners are still free to ask MERS, or whoever is trying to foreclose, to produce the note. This ruling adds validity to that argument.

NY AG Sues Debt Settlement Firms

2009-05-25T13:59:09-07:00

New York has long been progressive in protecting consumer rights. When Eliot Spitzer was the Attorney General, he went after Wall Street and insurance companies. Now, Andrew Cuomo continues that legacy.

New York's AG has filed lawsuits against two debt settlement companies, Credit Solutions of America and Nationwide Asset Services. The AG contends that these companies make false and misleading promises. In fact, between 1/3 of one percent and one percent of consumers actually get the savings advertised.

Two important parts of the story:

According to AG Cuomo, “These companies claim to be the light at the end of the tunnel, but time after time they have shown that they only add to the burdens of Americans dealing with debt.”
Many consumers have faced continued harassment and lawsuits by their creditors, despite CSA’s promise to intervene on their behalf.

In English, this means that the companies are making things worse for consumers and are not ending the harassment that they claim they will end. Why not? Because not only do creditors not have to work with these companies, in most cases they do not work with any debt settlement company.

Be wary of these tv ads and their slick pitches. Most debt settlement programs do not work!

New Survey Results Show Most Consumers Do Not Understand FDCPA

2009-05-08T19:29:00-07:00

A new KGTV 10News Survey USA Poll shows that most consumers do not know their rights under state and federal debt collection law. The poll showed the following:

Only 25% of respondents were familiar with the FDCPA;
10% of respondents think that consumers have too much protection;
Over 40% of respondents had been contacted by a debt collector in the past 5 years;
Almost 90% of respondents said that the debt collector did not inform them of their rights;
Only a quarter of respondents were treated respectfully by the debt collector;
Almost half of the people said that they were threatened in some way by the collector;
More than three quarters of people were contacted by the collector after telling the collector not to call them.

The results are not surprising.Remember, once a collector is told not to call you, they must stop calling you. And if you are threatened, that is a debt collection violation.

Debt collectors, not all of them, but a large number, do not seem to care about the law. The reasons: it is hard for the government to enforce and few individuals want to enforce their rights. They are usually intimidated and pushed into letting the debt collector run roughshod over them.

The important thing is that consumers need to learn their rights under the FDPCA (Fair Debt Collection Practices Act) and the Rosenthal FDCPA, also called the Rosenthal Act.