Foreclosure increase + jobless recovery = Trouble

You may have noticed a couple pieces of bad news circulating in the media the last few days.

One is that foreclosures have continued to climb, according to the quarterly statistics put out by RealityTrac.  Why the increase?  Apparently banks have been delaying a lot of foreclosures as they’ve tried to implement the federal foreclosure program.  Another likely reason is that a growing number of adjustable rate mortgages (ARMs) are starting to kick in and make it impossible for those homeowners to keep up with mortgage payments.

And yet another reason is the increasing rate of unemployment.  Not only are people losing their jobs, but the alleged economic “recovery” is not doing a great job of creating new jobs.

The co-existence of these two trends is, of course, very troubling.  The greater the rate of foreclosures, the bigger a toll it will take on the economy.  And that of course likely means more bad news on the employment front in the near future.

What’s the solution?  A moratorium on foreclosures for those who have lost their jobs has been suggested by James H. Carr, the Chief Operation Officer for the National Community Reinvestment Coalition.  “We do need to think more carefully about a bridge so people aren’t being kicked out of their homes as they are looking for employment,” Carr said in a recent Washington Post article.

Whether this is likely to happen is another matter.  According to the same article, the Mortgage Bankers Association says the mortgage industry is meeting over the next month to discuss solutions.  Though of course the mortgage industry at this point has a much better reputation for creating problems than solving them.

In the meantime, if you’re a New Yorker facing bankruptcy, foreclosure or other financial struggle due to job loss, or you’re worried about losing your job and want to understand your bankruptcy and non-bankruptcy options, please feel free to contact me for a free initial consultation where you can get all of your questions answered.

Go to www.nybankruptcy.net to learn more about Rosenberg Musso & Weiner LLP and/or to set up a free consultation.

Brooklyn Judge gives New York homeowners a fighting chance against foreclosure

For New York homeowners facing foreclosure, they may feel like the deck is stacked against them.  The economy is in the tank.  Credit has dried up.  Trying to call your mortgage company and negotiate a loan modification feels like an exercise in futility.  And mortgage companies are probably profiting off the delays in the foreclosure process anyway.

But it turns out there is a real hero out there whose name is not BAPCPA Man.  In fact, he works right in Brooklyn.

The Honorable Arthur M. Schack, a Brooklyn bankruptcy judge, has been turning the tables on banks and mortgage companies when it comes to foreclosures, according to the New York Times (“A ‘Little Judge’ Who Rejects Foreclosures, Brooklyn Style“).

The article goes on to describe how Judge Schack simply makes a point of “taking a magnifying glass to the mortgage industry” and actually looking through all of the mortgage documents.  Turns out there are tons of mistakes by mortgage companies in their documentation.  In one instance:

a Deutsche Bank representative signed an affidavit claiming to be the vice president of two different banks. His office was in Kansas City, Mo., but the signature was notarized in Texas. And the bank did not even own the mortgage when it began to foreclose on the homeowner.

To date, Judge Schack had overturned 46 of 102 foreclosure motions before him on the basis that if a bank can’t prove ownership, then it shouldn’t have the right to foreclose.  The article quotes Schack as saying:

“If you are going to take away someone’s house, everything should be legal and correct,” he said. “I’m a strange guy — I don’t want to put a family on the street unless it’s legitimate.”

At a time of great cynicism, it’s inspirational to see someone adding humanity back into the economic formula.  I strongly encourage you to read the whole article.  The article even notes that perhaps Judge Schack’s approach could evolve into a national model.  That is, in lieu of any legislation to protect homeowners, judges start stepping in more to do what’s needed.

Stay tuned for more developments on this front.

In the meanwhile, if you’re facing foreclosure in New York or contemplating bankruptcy filing, please feel free to get in touch for a free initial consultation.

Can I keep my home if I file for bankruptcy in New York?

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.

Foreclosure mediation and other new ways to encourage loan modification

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.