Bankruptcy Expertise from Brooklyn's Bruce Weiner, Esq. of Rosenberg Musso & Weiner LLP serving New York City and Suffolk County
Another great cartoon from BAPCPA Man as he takes on the evil Mortgantua. Really seems to sum up what homeowners must bee feeling if they’re facing foreclosure in New York. To learn more on the topic you can read some of my my previous posts on the topic of foreclosure.
Note: This cartoon is posted with permission from the creators of BAPCPA Man.
Click here to see a larger version of the image.
As bad as the foreclosure problem has been, it’s apparently ready to get worse, according to this article in the New York Times (“Loans that looked easy pose threat to recovery“).
All the adjustable rate mortgages (“ARMs” for short) we’ve been hearing about are getting ready to re-set over the next four years, and that spells trouble for New York homeowners facing financial difficulty. Over 600,000 ARMs are expected to re-set, according to First American CoreLogic.
“This was a loan meant for sophisticated investors, or people who expected their cash flow to increase over time,” said Elena Warshawsky, a residential credit analyst with Barclays Capital, which expects 81 percent of the option ARMs originated in 2007 to default, with many ending in foreclosure.
Of course, this will affect not only people with ARMs facing foreclosure, but everyone facing mortgage problems since the banks will now likely be in a less secure positions themselves not to mention being overwhelmed by all of the foreclosure and loan modification work.
If you’re a New York homeowner facing mortgage problems, foreclosure issues or considering bankruptcy in New York, please feel free to contact me for a free initial consultation to ask questions and get an assessment of your situation. It’s a difficult situation, but there are options for dealing with it. And the best way to make sure you know all of your options is to sit down with an experienced bankruptcy attorney.
The equity in this home may exceed the homestead exemption in New York.
Yes, you can keep your home if you file for bankruptcy in New York. But it’s not a given. And depending on your circumstances, there are a few different ways to do it.
If you file for Chapter 7 bankruptcy in New York, then you can keep your home as long as the remaining equity in your home (i.e., the amount that you have not yet paid back) does not exceed the homestead exemption for New York, which is $50,000 for an individual and $100,000 for a couple. If the remaining equity exceeds the homestead exemption, then a trustee can sell your home to pay off creditors.
If you’re in this situation, then the other option for keeping your home is to file for Chapter 13 bankruptcy in New York. Chapter 13 bankruptcy means you work with your creditors, and with the supervision of the bankruptcy court, to create a repayment plan that usually takes 3 to 5 years. The idea is that under a Chapter 13 repayment plan, you can reduce the amounts you owe to unsecured creditors (though not to your mortgage lender, who is a secured creditor). With reduced payments, ideally you would be able to make the payments on your mortgage and keep your home.
The non-bankruptcy alternative for trying to keep your home is loan modification and its cousin foreclosure mediation. Whether you can negotiate a loan modification with your mortgage lender depends on your circumstances as well as on your mortgage lender. There is some hope that Congress will put increased pressure on banks and other mortgage lenders to encourage them to enter into loan modifications with homeowners rather than move forward with foreclosure. But waiting around for Congress to act may not be an option for you.
If you’re worried about losing your home to bankruptcy in New York, you don’t have to make this decision on your own. The best first step is to meet with a good bankruptcy attorney in New York who has experience and whom you trust to steer you in the right direction.
Please feel free to contact me for a free initial consultation. I’ll answer all of your questions, figure out the best strategy to help you move forward. The key, as always, is preparation and planning.
As New Yorkers and the rest of America brace for more foreclosures, the loan modification option has not helped as much as hoped. As a result, a number of states have been implementing foreclosure mediation programs and other alternative dispute resolution options aimed at nudging more mortgage banks to the negotiating table.
The Center for American Progress has published a terrific report on the topic titled It’s Time We Talk: Mandatory Mediation in the Foreclosure Process. In the report they examine the 9 states that have implemented foreclosure mediation programs and analyze which state programs are effective, which ones are not effective, and why.
Loan modification, as I explained in a previous post, is where you try to avoid foreclosure by negotiating with your mortgage lender. Maybe you can get the monthyl payments or interest rate reduced. Or perhaps the term extended. Or perhaps a range of other options as well.
Why have mortgage lenders not been so proactive with loan modifications? It seems that it would be in their interest. With the epic number of foreclosures, you’d think that they’d rather have a homeowner stay in their home and pay a little less rather than go through the costly hassle of foreclosing (which, according to this Washington Post article, has become a lengthier process) and then having to re-sell a house in the current real estate market.
Maybe their internal incentives aren’t aligned properly. Maybe they’re just overwhelmed with the number of foreclosures and loan modification requests. (Most mortgage lenders now do have “loss mitigation programs” in place.)
For whatever reason, the mortgage lenders have not stepped to the plate as much as hoped, and frankly, as much as our society and economy needs. As a result, states have taken steps to move the process along themselves. The most successful programs, according to the report, are in Pennsylvania and Connecticut, where approximately half of the homeowners who participate in the program have been able to negotiate new loan terms that enable them to keep their homes. Nevada, which suffers from the highest foreclosure rate in the U.S., also just implemented a new program that may be the strongest program of all.
What about New York? Well, New York seems to be moving towards some sort of foreclosure mediation program as well. Mayor Michael Bloomberg has been urging passage of a bill that would help homeowners stay in their homes and avoid foreclosure. (That said, given the current paralysis in Albany, who knows when such relief will actually come?)
We’ll keep our eye on the progress of a foreclosure mediation option in New York. In the meantime, if you’re worried about foreclosure in New York and want to learn more about loan modification. Or if you want a better understanding of all of your New York bankruptcy options, please contact us for a free initial consultation and we’ll help explain everything to you in plain English.
Bruce Weiner in the News BAPCPA Blog