Archives for September 2012

Mortgage Foreclosure attorneys in New Jersey will be busy as mortgage foreclosures are up and climbing

Bloomberg News reports that New Jersey has now passed Nevada and is #2 behind only Florida in the number of loans in serious default. (Bloomberg, Sept. 18, 2012 “New Jersey Housing Suffers as Defaults Exceed Nevada: Mortgages).  As we have reported, a lot of existing foreclosures were put on hold until the courts sorted out new requirements to protect against “robo-signing”.  We hear that atop the large number of pending cases,  a flood of new cases expected to be filed in the next few months. Right now, Bloomberg reports, there are 60,000 pending open foreclosures, with borrowers who have not made a payment in the past 934 days, according to Lender Processing Services Inc.

This is going to be good news for mortgage foreclosure attorneys, both those who file these suits and those who defend. Those who want to keep their homes will need the help of experienced counsel. We still believe many mortgage lenders are going to have problems if challenged in meeting their burden of proving that the plaintiff in foreclosure actually holds the mortgage with the right to sue. Other defenses may be available.

As we have reported elsewhere, the loan modification process has been disorganized and uneven. But for those who want to keep their homes, a Chapter 13 Bankruptcy may provide help in a variety of ways. (see our other blog posts on this). Mortgage lenders, if acting rationally, would be making deals. But few who have dealt with process have good things to report about how it is being handled. Many have horror stories.

In the meantime, we can expect the long delays (about 3 years) from start to finish of a foreclosure will keep many defaulting homeowners in their homes, giving them a much-needed break and opportunity to settle other debts. Clearly, the foreclosure system is not helping lenders.

According to Bloomberg, the “shadow inventory” of foreclosed properties is still increasing in the Northeast. They report that the hidden supply of homes dwarfs the “visible inventory” of homes for sale.

By all accounts, this mess is not getting better. We have suggested some of the reasons for the logjam in other blog posts. But eventually it will all get resolved. It just shouldn’t take so long. This situation is not helping our economy.

For more information, please see our other blog posts. Steven Neuner is available to assist borrowers with defending foreclosures or seeking other solutions.

Foreclosure Advice

Short sales and modifications- the system is not working, still…

I read with fascination this New York Times article detailing a horror story where a mortgage loan servicer approved a short sale and after the closing reneged, sending back the agreed upon sale proceeds. http://www.nytimes.com/2012/09/16/business/a-florida-condo-sale-and-a-markets-dysfunction-fair-game.html?_r=1 I wish I could report that this is an isolated incident. In fact, what I have seen and what I am hearing is that mortgage servicers who deal with loan modifications and short sales are too often disorganized, dysfunctional or worse. Example: a mortgage modification with substantial principal reduction is sent to borrowers who then sign all the papers and send them back via overnight mail, with proof of delivery. They go to bankruptcy court and get court approval, on notice to the lender. The lender claims they never got the papers. They send letters making spurious claims that conditions are not met. They send threatening default letters, even though payments are being made. Even when the papers are all re-signed and re-sent using THEIR FedEx envelope, they claim they never got the papers.

Anyone who does much of this work has similar stories.

Why this happens is anyone’s guess. The suggestion is that the loan modification process ought to be taken out of the hands of the lenders or servicers, and put in the hands of a single agency that applies consistent standards. The agency is already in place: the bankruptcy courts. The authority can be limited to existing mortgages in default, so that new mortgage lending is not affected.

The New Jersey Bankruptcy Court already has a voluntary Loss Mitigation process in place, where all the documents are uploaded to an independent web portal, so there is never any claim or question about what was sent and received or when because it is all there for all the participants to see. And the process requires a designated single contact person with authority.

All we need to do is give the Court the authority to restructure the mortgage in Chapter 13. This is not that different from the court’s existing work. The lender/investors would see more income. More borrowers would be able and willing to save their homes. Less foreclosed or unsold inventory. Who are the losers? Servicers whose contracts pay them per loan, even for those in default. And all those companies and professionals who do foreclosures.

Until we have a rational, efficient and predictable system to deal with defaults on securitized loans, the current mess will continue.

By the way, as an historical aside, we had something similar in the late 1980’s with massive Savings and Loan closures. The solution there was to give their assets to the Resolution Trust Corporation which by all accounts did an efficient job of liquidation and recovery.

Overview of Short Sales

Student Loan debt is the looming new crisis- but some options are open to dealing with collectors

Student Loans are now bigger than credit card debt, and cannot be discharged in bankruptcy (except for the really destitute and hopeless; very hard to show). And the government has access to information and collection methods not available to other creditors. As a result, the New York Times reports, debt collectors are pursuing these types of collection accounts and making much higher collection percentages. http://www.nytimes.com/2012/09/09/business/once-a-student-now-dogged-by-collection-agencies.html?_r=1

In many cases, this situation is putting an enormous strain on some unfortunate borrowers.

But, as the article points out, there are some programs to help. These include income based payment programs and discharges for those in public service. http://studentaid.ed.gov/repay-loans/forgiveness-cancellation. The first step for anyone is to get, keep and save all your student loan applications and documents.

And even though a personal bankruptcy will not discharge all student loan debt, it can help. In some cases, a Chapter 13 can be used to funnel payment to these debts.

As I have written before on these pages, the whole student loan situation is a ticking time bomb…

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