October 6, 2011

Bankruptcy & Foreclosure

Posted in Bankruptcy, Forclosure tagged , at 9:23 am by demetriagraves

The other day in the Wall Street Journal there was an article about home owners who have lost their homes through foreclosure only to then be sued by the bank for the balance owed. Unfortunately, I often hear of families that have lost their home to foreclosure and now they are being hounded by the bank, often for very large sums of money over $100,000. If a home sells at auction and the purchase prices is less than what you owe on it, an unpaid balance remains. This is known as a deficiency. In 41 states the banks are allowed to then sue their prior customer for the balance owed.
California is one of the 9 states that has an anti-deficiency statute. This law essentially prohibits the bank from suing you after the home has foreclosed so long as certain criteria exist. In a nut shell, so long as your home was a single family residence or condo, on less than 2.5 acres of land, the home was actually occupied at some point, and the loan on the home was used to actually purchase the home (“purchase money”), then in most cases the bank will not be able to pursue you after the foreclosure sale. However, if not all the criteria are met, then the bank can sue you after the sale.
The most common scenario I see where the bank actually files a lawsuit is when there is a second mortgage or home equity line of credit (HELOC) that was used to pay off other debt or buy a boat, etc. Such loans are clearly not purchase money and the bank can go after that money after the foreclosure sale. Often when the bank files suit in these scenarios the result is an immediate bankruptcy filing. Bankruptcy, and particularly a Chapter 7 bankruptcy, will eliminate any deficiency that may be owing and will further stop any lawsuit that has been filed. Even if the bank has pursued the case all the way to a judgment, the bankruptcy filing will eliminate the debt.

If you have been through a foreclosure and are now receiving collection calls or have even been sued your prior bank, give me a call and we can go over your options. I offer a free 30 minute telephone bankruptcy consultation, where you can get all your questions answered. Sometimes the bank is pursuing you despite the protections provided by California’s anti-deficiency laws and a simple letter will clear up the problem. For others bankruptcy may be the only way to avoid a large judgment and potential garnishment of wages.

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June 9, 2011

Falling Home Prices & Bankruptcy

Posted in Bankruptcy, Forclosure tagged , at 12:52 pm by demetriagraves

Recently new numbers on home values around the country were released that confirmed a “double dip” in housing prices, falling below the 2009 low. This is frustrating news for many people that have been holding on to their home, making their house payment month after month, but are continuing to see the value of their home plummet. Many of the people I meet with in bankruptcy consultations are upside down in their home, some owing hundreds of thousands of dollars more than their home is worth.
The falling house prices have led many to the decision that it simply is not a good financial strategy to stay in their home. There is a lot of emotion tied up into our homes; it is where we raise our families and where memories are made, but if you set aside the emotional part of it, it may not make a lot of sense to stay in a home that is severely upside down in this market.
The question most people are concerned about is if they do decide to walk away from their home what possible liability will they have from the bank? The answer depends on what type of loans you have on the property. If you only have a first mortgage and decide to walk away from the home you will not owe anything additional on that property. When you bought the home the deal was you pay the mortgage and you keep the house; if you don’t pay the mortgage the bank gets the house.
The area where most people run into problems is when they have a second mortgage or a home equity line of credit (HELOC). If you refinanced your home and took out a second mortgage or HELOC and used the cash for something other than purchasing your home you will be held liable for any balance owed after the bank auctions off your house.
Bankruptcy can help. You can surrender your home through a chapter 7 bankruptcy and any potential balance owed will be discharged/eliminated through the bankruptcy process. Once your bankruptcy case is filed it typically takes anywhere from one month to five months for the bank to get permission from the bankruptcy court to move forward with the auction of your house.
Another issue that people deal with when it comes to short sales and foreclosures is the possible tax consequences. Banks can issue a 1099 for any debt that is forgiven. For instance, let’s say the bank forgave $100,000, you could receive a 1099 for $100,000 which you would be taxed on as if you actually earned an additional $100,000 of income that particular year.
By surrendering your home through bankruptcy you would not incur any tax liability. If you are weighing your options on whether to keep your home or walk away, I offer a free 30 minute telephone bankruptcy consultation where we can discuss your situation and how bankruptcy can help.

October 27, 2010

BK to Avoid Foreclosure

Posted in Bankruptcy, Forclosure tagged , at 6:18 pm by demetriagraves

Many clients I work with are facing foreclosure and they don’t know what their options are. Working with an attorney who handles bankruptcy cases can make the difference between keeping your home and losing it to foreclosure. If the foreclosure process has started, you have basically have four options to avoid foreclosure.

 
The first option is to leave voluntarily. This option may avoid an actual foreclosure in certain circummstances but you’re still losing your home. This can be tricky and you need to be aware that if you leave voluntarily the bank can still foreclose on you unless an arrangement is made with the bank before hand. Still, this is a viable option if you’re way under water on your home’s value or if your situation is such that you won’t be able to afford even modified mortgage payments.
 
Your second, and probably the toughest option, is to pay back the amount that is in arrears. In addition to the missed payments there will likely be other charges such as penalties, etc. so the payment will probably be several thousand of dollars. The chances are that if the cash was available you wouldn’t be facing foreclosure, which is why it’s such a tough option.
 
Your next option is to apply for a loan modification. This process can be dicey, complex, and extremely frustrating but the rewards can be substantial if your application gets approved. The problem here is that lenders are under no obligation to modify mortgages, even if you qualify for government programs like HAMP. If your application for a modification is rejected, your lender could move to foreclose quickly so be prepared.
 
Ultimately, your most effective option to avoid foreclosure may be found in filing for bankruptcy with the help of an experienced attorney. This option stops any foreclosure activity that is underway as soon as the bankruptcy petition is filed, a valuable benefit especially if you’re already late in the foreclosure process. If you are facing foreclosure, it’s imperative that you learn the details of all your options as soon as possible. I offer a free confidential initial consultation where you can get all your questions answered and get the right advice to work out which option is best for you.

July 9, 2010

Olsen twins Dad Declares Bankruptcy

Posted in Bankruptcy, Forclosure tagged , at 4:56 pm by demetriagraves

The 24 year-old Olsen Twins may be richer than some small countries with their merchandising deals and fashion line but it seems that they’re not spreading the wealth to their dad. There are recent reports that the twins father, David Olsen, has filed for bankruptcy. David divorced Mary Kate and Ashley’s Mom in 1996 to marry his then-secretary, McKenzie with whom he has two children, Taylor, 14, and Jake, 12. Things don’t seem to be working out for David financially. David Olsen’s California home is in foreclosure to the tune of 2.2 million, and there are numerous reports David has had to file for bankruptcy to settle his debt with the bank.

Hearing about bankruptcy and foreclosure is a common occurrence for regular folks but it seems unusual when there are billionaires in the family. This has lead to all sorts of speculation on why the twins aren’t helping out their father financially.

The billionaire twins have their own company, started in 1993 (when they were 7), through which they put out their merchandise. They currently have a girls’ clothing and makeup line with Walmart along with a juniors’ line at JC Penny plus two higher end women’s fashion lines called Elizabeth and James and The Row.

Meanwhile Dad Olsen has fallen behind on payments for his property and he and his second wife McKenzie will be forced out of their home on soon if they don’t cough up the full amount and their home will be sold off at a public auction. This is not the first time their father has faced financial difficulty. Last year, he reportedly struggled to cover his tax debts. This is apparently because he had several tax liens but he was able to borrow enough money to cover them. It seems like he’s in a much worse financial position now and could lose his home at auction unless he’s able to come up with the over two million dollars owed.

March 24, 2010

Choosing Bankruptcy or Foreclosure? STOP!

Posted in Bankruptcy, Forclosure, Loan Modification tagged , , at 6:44 pm by demetriagraves

If things are getting tight and you think it is a choice between losing the house or declaring bankruptcy, I have news for you. You have other choices and you should avoid bankruptcy if possible! It is widely acknowledged now that less than 5% of people who file for bankruptcy actually avoided the compounded pain of foreclosure.  Avoid getting stuck with both a foreclosure and bankruptcy, try for a loan modification immediately!  If you qualify, it may save you from both these fates.

A home loan modification is the process of restructuring your current mortgage into a mortgage that is more affordable. This means that the terms of the loan change, but the lender remains the same. Modifications to your mortgage generally involve the reduction of your interest rate to make the monthly payments more affordable. In many cases, a loan modification is the only way for homeowners who are unable to refinance to avoid default or foreclosure.

Most know that a foreclosure or a bankruptcy will put their credit in poor standing. Often people tend to think a loan modification would affect them the same way.  Previously a loan modification may have negatively affected your credit, but this is not necessarily true of the current economic times.

In today’s economic crisis the government, and credit companies, are being forced to reevaluate this process.  The government in fact, has encouraged credit bureaus to start using a different code when showing loan modifications in order to give the consumer a break on their credit score.

The government has tried to enforce rules in the last year or so to make it so that a loan modification does not strongly impact your credit in a negative way.  While some credit bureaus or financial institutions may not follow suit as well as the feds would like, the fact remains that a loan modification may not impact your credit as much as it may have in the past.

The reason for this change was so that the government could encourage more people to get loan modifications so they would in turn have a greater chance of keeping their homes…and lives, intact.  So if a loan modification might help it would definitely be worth your time to consider it, regardless of what you have heard about your credit.

Loan modification is not something you want to do just because you want to do it, but it is definitely better for your short and long term goals than a bankruptcy or foreclosure.

In today’s economy, the answer to many people’s financial woes is to get a loan modification.  However, many people feel they may not qualify for the loan modification, or even worse, don’t apply because they believe it will affect them negatively.

Unfortunately there are home loan modification scams, so homeowners need to be aware of this. I recommend using an attorney who is experienced in handling loan modifications. They are used to dealing with many lenders and know exactly what it takes to get your loan modification approved. All major lenders do offer loan modifications. Some of the smaller companies or hard money lenders may not, but generally speaking, the well-known lenders will all offer modifications. Homeowners should begin considering a home loan modification once they’ve fallen into a state of financial hardship.

The truth is that the process of modifying your home mortgage may be stressful. The same could also be said about going into foreclosure or bankruptcy. So this is why you need an experienced attorney to guide you through the process and advise you on your best options. I offer a free confidential initial consultation, where you can get all your questions answered. Please don’t hesitate to contact me as I’m here to help.

February 1, 2010

Loan Modifications are Increasing Canceled Foreclosures

Posted in Forclosure, Loan Modification tagged , at 1:39 am by demetriagraves

I’ve recently come across some information that suggests that Loan Modifications are starting to reduce the number of homes that end up in foreclosure. The amount of California foreclosure cancellations increased 26.5% in December to 13,243, primarily because of loan modifications.  Plus, for the first time the number of canceled foreclosures in California overtook foreclosures reaching real-estate owned (REO) status.

In December 2009, the amount of foreclosures heading back to the banks, REO, dropped 11.9% from the previous month to 12,437. It looks like significant declines in foreclosure discounts by lenders drove the decrease in sales to third parties. Lenders discounted the opening bid on foreclosure auctions on the courthouse steps by nearly 40% for most of 2009, but in December lenders offered only 33.7% discounts.

Given the amount of pressure servicers face to complete more modifications under the Home Affordable Modification Program (HAMP), it should follow that more homeowners should be able to stay in their homes.

Under HAMP, the US Treasury Department provides capped incentives to servicers for the modification of loans on the verge of foreclosure. According to the latest report from the Treasury, there were 30,000 permanent modifications up to November 09. Previously many banks had been focusing on collecting documents. It seems that now more lenders are converting more loan modification trails into permanent modifications.

The timing of the increase California foreclosure cancellations, may be related to a required one-year delay before a foreclosure sale.

These numbers may not mean much to someone who is having difficulty keeping up with their mortgage. The main thing that I would like to emphasize is that there is help available and if you find yourself in a difficult circumstance with your mortgage, please seek some advice, sooner rather than later. There are many options available to you and it looks like many California Homeowners who have been on the verge of foreclosure have been able to take advantage of some of the programs available that can help to keep you in you home.

If you have further questions or would like some advice in this area, please don’t hesitate to contact me. I offer a free confidential initial consultation, where you can find out what you need to know and what your options are. There are many choices available, let me help you work out which option is best for you.

December 3, 2009

Banks Looking Forward to Getting their ARMs Twisted by President Obama

Posted in Forclosure, Loan Modification, Uncategorized tagged , at 7:23 pm by demetriagraves

There’s been a lot of speculation about President Obama’s new plan of additional measures to reduce the increasing number of foreclosure casualties. His improved plan is supposed to be announced in more detail soon. It is expected to include more government subsidies for reducing a borrower’s interest rate, which a lender would have to match with their own money. This could reduce payments by several hundred dollars a month.

While some 650,000 people have had their mortgage payments temporarily adjusted, only a fraction of these, around 1.26% have received permanent modifications after three months. Exactly what kind of pressure Mr. Obama could bring to bear remains unclear.

It seems like it’s been a struggle to receive a permanent modification, there has been pressure on banks to provide temporary modifications but who will receive permanent help will be the real test. Currently borrowers who receive permanent modifications can keep making the lower payment for five years.

By the end of 2008, slightly more than 9 percent of all mortgages in the United States were either delinquent or in foreclosure, according to the Mortgage Bankers Association. The number of loans in foreclosure hit a new record of 2.3 million last year, more than double the volume in 2006, and industry analysts estimate that it will hit at least 3 million in 2009 in the absence of a government rescue.

One of the biggest difficulties in modifying mortgages has been the fact that most loans were bundled into pools, which were then resold as mortgage-backed securities. Mortgage servicers, third-party companies, collect the monthly payments and take action against delinquent borrowers. These companies remain nervous that bondholders will sue them if they make overly generous concessions.

Mr. Obama’s plan risks angering vast numbers of homeowners, both those at risk of losing their homes and the tens of millions more who are current on their payments and bitterly resent the government bailing out those who borrowed more than they could afford.

Even though there are political hazards of bailing out people who made bad decisions, many economists say the government needs to attack foreclosures if it wants to turn around the economy.

The Obama Administration has already taken several steps to make the transition from trial to permanent modification easier and more transparent by:

* Extending the period for trial modifications started on or before September 1st to give homeowners more time to submit required information;
* Streamlining the application process to minimize paperwork and simplify the submission process; meeting regularly with servicers to identify necessary improvement to borrower outreach and responsiveness;
* Developing operational metrics to hold servicers accountable for their performance, which will soon be reported publicly.
More information about the Obama Administration’s mortgage modification program can be found at www.MakingHomeAffordable.gov.

If you live in Southern California I also offer a Free Consultation that can help you make the best financial decisions so that you are fully informed of all the possibilities.

For stats on how the major loan servicers are converting their temporary loan modifications to permanent please refer to http://money.cnn.com/2009/11/28/news/economy/Obama_mortgage_announcement/index.htm

December 1, 2009

Are You ‘Underwater’ on your home?

Posted in Forclosure, Loan Modification tagged , at 7:02 pm by demetriagraves

New data available on the internet indicates that a staggering 23 percent of American home mortgages are “underwater” – that is, the owners owe more money than their property is currently worth.

As with many of the repercussions of the mortgage industry’s collapse, those hardest hit by underwater loans live in the states that were hotbeds of speculative and explosive real estate development during the boom:  California, Florida, Nevada and Arizona.

As job losses mount and Americans are faced with mortgage payments they can no longer afford, many are asking: Should I stay or should I go?

Here’s some troubling numbers, which some experts say could slow the housing sector’s recovery:

  • The total number of households with underwater mortgages comes to nearly 10.7 million, close to one in four homes.
  • Insiders apparently expect home prices to bottom out in 2011, meaning that the number of underwater homes is likely to increase between now and then.
  • As many as 5.3 million homeowners currently have mortgages worth at least 20 percent greater than the value of their home.

What does all this mean?

Underwater mortgages are problematic, but how will they affect the economy and the American people? Here are the main areas to consider:

  • Decreased mobility: People with too-hefty mortgages may find themselves tied to their house because they aren’t able to sell it to pay off their loans. This could mean not being able to move a significant distance away, even for a high-paying job offer.
  • Delayed recovery: Some of the underwater houses are likely to go into foreclosure. Some owners have reportedly already received default notices from their banks. If and when banks foreclose on these properties, more houses will be on the market, adding to the current real estate glut and potentially keeping prices low.
  • Conflicted lenders: Apparently some lenders are reluctant to reduce the principal on mortgage loans for fear that the move would set up expectations for all borrowers and lead to widespread abandonment of payments.

If you are in Southern California, your home is ‘underwater’ and you want to move or are having trouble making payments, please call my office for a free consultation. You do have choices and I want to help you make the best choice possible.

November 19, 2009

Deed for Lease may Help Ease Foreclosure Impact

Posted in Forclosure tagged at 1:30 am by demetriagraves

Fannie Mae has announced a program called “Deed for Lease” or “D4L” for short. This program is designed to help home owners who are facing foreclosure but may not be eligible for a loan modification. Deed for Lease allows a homeowner to turn over the deed to property in return for a guaranteed one-year lease or rental agreement priced at local market rates. This new program is a step up from a less formal initiative that Fannie Mae started last January which allowed foreclosed homeowners to stay in the house on a month-to-month basis.

The policy is aimed at minimizing the disruption caused by foreclosure proceedings, which puts families out on the street when their property is seized by the lender. With Deed for Lease, the family loses ownership, but can stay in the house. Put another way, they can walk away from the loan without walking away from the house, as they must do in a traditional foreclosure. The big advantage of the program comes from the money households save when they swap mortgage and other housing expenses for a rental payment.

What are the limits to D4L?
Here are some of the restrictions on Deed for Lease:

  • The homeowners cannot be eligible for a mortgage modification
  • The new rent payment cannot be more than 31% of the household’s income

This policy aligns with government-sponsored loan modification programs as another measure to keep people in “their” homes and off the streets. For the surrounding community, it also attempts to keep properties occupied. Empty homes have brought blight to many neighborhoods experiencing a high percentage of foreclosures, and this new policy does address that problem.

Is one year enough time on the new lease?
Many experts suggest the one-year lease agreement is too short a timeframe. Families are only guaranteed that twelve-month period in the house, after which the lease goes month-to-month. If the property is bought out of foreclosure during that time, the rights of the new owner could allow eviction of the tenant if they have other plans for the property.

On the positive side, perhaps the foreclosed owners could buy their property back at a reduced price (once they reestablish good credit or if they can come up with the cash). That may be a sweet deal if prices remain flat long enough.

Useful Links:
Fannie Mae Deed for Lease Information
http://www.fanniemae.com/newsreleases/2009/4844.jhtml?p=Media