Matt Weidner – Fighting With The American People

Posts Tagged ‘bankruptcy’

An article in today’s Wall Street Journal poses just that question and suggests that for many people the risks and consequences of walking away from their mortgage outweigh the benefits of staying in their home and continuing to make payments, especially when the house is underwater.  The full text of the article can be found here.

There are very real and potential negative consequences for homeowners but given the fact that according to First American CoreLogic, a real-estate information company, 5.3 million U.S. households have mortgage balances at least 20% higher than their homes’ value, and 2.2 million of those households are at least 50% under water, the continued liability of the home is greater than the liability associated with just walking away.  The problem of underwater mortgages is concentrated in Arizona, California, Florida, Michigan and Nevada.

The problem is only going to continue to get worse as lenders are increasingly difficult to work with and the number of modifications that lenders enter into with homeowners remains extremely low.  While the number of modifications is extremely low, I am not aware of any program or circumstance where lenders are reducing the principal of the loans an action that would be necessary to convince homeowners to continue making payments on an underwater home.

Banks should be actively working with homeowners to pursue deed in lieu and short sale alternatives, but the reactions from virtually all lenders I am familiar with is just painfully slow or totally non-existent.

If you are considering walking away, contact Matt Weidner at www.matweidnerlaw.com

An article in today’s Wall Street Journal illustrates one increasingly common solution for homeowners who are in foreclosure or trapped in a home where they owe more than it is worth—just walk away from the home and rent a comparable (or better) home elsewhere.

There are indeed very real consequences to adopting such a strategy, but the bottom line for many homeowners is that these consequences (bad credit, a deficincy judgment, tax liability, etc.) far outweight the relief they feel after walking away from a home and situation that has troubled them for years.

Such a strategy is not without consequences and consumers should consult with an attorney, but many find that the benefits far outweigh the negative consequences in the long run.  Although there may be a social/moral stigma attached to walking away, the article also describes potential long term larger good that can come from consumers shedding this debt….the increased disposable income will be spent in other areas of the economy thereby helping other sectors improve.

Contact Matt Weidner at www.mattweidnerlaw.com

Thousands of homeowners struggle to keep current with their mortgage obligations and foreclosures continue to be filed against them in record numbers.  In response, the Obama administration announced the HAMP mortgage modification guidelines which provided directions lenders were required to follow in determine who was eligible for modification.

The problem with the HAMP modification program is the guidelines are too restrictive and not enough homeowners are able to qualify for the program.  A related problem is lenders and servicers are totally unprepared to effectively process the applications for modification in the first place. A fact which is admitted in a report recently issued by the Government Accountability Office.  (No word on how to get lenders/servicers to be more effective or efficient in this area so the nightmare continues.)

HAFA- The Home Affordable Foreclosure Alternatives Program

This new program provides alternatives to homeowners who do not qualify for a HAMP modification and offers financial incentives to lenders who offer this new alternative to homeowners.  A lender must first determine that a homeowner does not qualify for a HAMP modification, then the lender may offer the homeowner one of the HAFA alternatives like a deed in lieu (where the lender allows the homeowner to deed the property back to them) or a short sale (where the lender agrees to accept less than what is owed on the property.) Both alternatives require the lender to release the borrower from any further liablity on the note.  The program has an effective Date of April 10, 2010, but lenders may elect to apply the program guidelines earlier. Key components of the program are:

• Complements HAMP by providing alternatives for borrowers who are HAMP eligible.
• Utilizes borrower financial and hardship information collected in conjunction with
  HAMP, eliminating the need for additional eligibility analysis.
• Allows the borrower to receive pre-approved short sale terms prior to the property listing.
• Prohibits the servicer from requiring, as  a condition of approving the short sale, a
  reduction in the real estate commission agreed upon in the listing agreement.
• Requires that borrowers be fully released from future liability for the debt.
• Uses standard processes, documents and timeframes.
  Provides financial incentives to borrowers, servicers and investors.

In order to qualify for this new program, the loan/borrower must meet the following criteria:

• The property is the borrower’s principal residence;
• The mortgage loan is a first lien mortgage originated on or before January 1, 2009;
• The mortgage is delinquent or default is reasonably foreseeable;
• The current unpaid principal balance is equal to or less than $729,7501

; and

• The borrower’s total monthly mortgage payment (as defined in Supplemental Directive09-01) exceeds 31 percent of the borrower’s gross income.

Servicers must consider possible HAMP eligible borrowers for HAFA within 30 calendar days of the date the borrower:

• Does not qualify for a Trial Period Plan;
• Does not successfully complete a Trial Period Plan
• Is delinquent on a HAMP modification by missing at least two consecutive payments; or
• Requests a short sale or DIL.

This new program offers additional alternatives for homeowners but taking advantage of the program and determining who fits within its guidelines will take some time to figure out. For more information on HAMP/HAFA, contact Matt Weidner at www.mattweidnerlaw.com

As foreclosures in Pinellas County continue to increase, there is news that the Obama administration plans to announce a new campaign to pressure lenders to modifiy mortgages for borrowers.  This will come as welcome news to the many homeowners struggling to obtain a mortgage modification from their lender but who have hit a brick wall.

The Lucky 2000

Last month, an oversight panel created by Congress reported that fewer than 2,000 of the 500,000 loan modifications then in progress had bdecome permanent under the Making Homes Affordable Program.  The same report expects thousands of permanent modifications out of the more than 650,000 trial modifications that will then be in progress, but I frankly doubt we will seee that many.  That’s a dismal percentage when you consider that the federal government has poured $75 billion into the mortgage modification program.

For the full text of an article that appears in today’s New York Times, click here.

If you’re one of the thousands of homeowners in Pinellas or Hillsborough County struggling with attempts to obtain a mortgage modification or in foreclosure trouble, contact Matt Weidner at www.mattweidnerlaw.com

The Florida Legislature recently found that homeowners who are in default on their mortgages, in foreclosure, or at risk of losing their homes due to nonpayment of taxes may be vulnerable to fraud, deception, and unfair dealings with foreclosure-rescue consultants or equity purchasers.

In response, the Legislature passed Chapter 501.1377, The Foreclosure Rescue Fraud Prevention Act, (the full text can be found here) the intent of which is to provide a homeowner with information necessary to make an informed decision regarding the sale or transfer of his or her home to an equity purchaser. It is the further the intent of the law to require that foreclosure-related rescue services agreements be expressed in writing in order to safeguard homeowners against deceit and financial hardship; to ensure, foster, and encourage fair dealing in the sale and purchase of homes in foreclosure or default; to prohibit representations that tend to mislead; to prohibit or restrict unfair contract terms.

Under the law an “Equity purchaser” means a person who acquires a legal, equitable, or beneficial ownership interest in any residential real property as a result of a foreclosure-rescue transaction.

A “Foreclosure-rescue consultant” is a person who directly or indirectly makes a solicitation, representation, or offer to a homeowner to provide or perform, in return for payment of money or other valuable consideration, foreclosure-related rescue services.

And “Foreclosure-related rescue services” means any good or service related to, or promising assistance in connection with Stopping, avoiding, or delaying foreclosure proceedings concerning residential real property; or Curing or otherwise addressing a default or failure to timely pay with respect to a residential mortgage loan obligation.

Finally, “Foreclosure-rescue transaction” means a transaction by which residential real property in foreclosure is conveyed to an equity purchaser and the homeowner maintains a legal or equitable interest in the residential real property conveyed, including, without limitation, a lease option interest, an option to acquire the property, an interest as beneficiary or trustee to a land trust, or other interest in the property conveyed.

It is important for realtors, title agents, attorneys and especially homeowners to understand the new law and its broad application to just about any interaction between a homeowner and any party who provides any service to that homeowner.  For questions about the law or to determine whether the law applies to your conduct or any other party, you are encouraged to visit the website of the Florida Attorney General here.

Today’s St. Petersburg Times quotes an article that I first wrote about yesterday which suggests that more than 46% of homes in the Tampa bay have mortgages on them that total more than the value of the homes.  While the article, and the study in the Wall Street Journal do not report exactly how they came up with the value of the homes, I rather suspect the value of the homes is overstated and that as a result, ther are ore than 50% of homes that are underwater.

For decades Americans worked hard to pay their bills and protect their credit.  Certainly part of the motivation for this behavior was good old fashioned value and morality, but a big motivation for many people was so that the consumer  could continue to access credit to buy all the things that are required to be a good American consumer.  With the consumer credit market across the country very much locked up and consumer’s buying and borrowing habits changed, this motivation may no longer be as important.

As reported earlier, lenders are faced with very few options when a consumer fails to pay their mortgage and the reality is if your credit is already tanked, the consequences for walking away from a mortgage may be acceptable when compared to the alternative of slaving away making payments to creditors that your income can no longer support. Make no mistake, this is not advice or a suggestion to stop paying bills, it’s merely a practical reflection of a judgment many consumers are already making!

For more information visit my website at www.mattweidnerlaw.com