Even if you have been foreclosed on, it is not too late:
http://www.boston.com/business/articles/2010/11/12/legal_twist_forces_foreclosure_redos/
Tuesday, November 16, 2010
Fraudclosure: what we've been working on for a few months now finally hits the press
US foreclosure mess impact could be severe: Panel
http://economictimes.indiatimes.com/news/international-business/US-foreclosure-mess-impact-could-be-severe-Panel/articleshow/6934949.cms
http://articles.orlandosentinel.com/2010-11-15/news/os-foreclosure-problems-ninth-circuit20101115_1_foreclosure-cases-foreclosure-crisis-foreclosure-filings
http://economictimes.indiatimes.com/news/international-business/US-foreclosure-mess-impact-could-be-severe-Panel/articleshow/6934949.cms
Questions could slow foreclosures in Florida
http://articles.orlandosentinel.com/2010-11-15/news/os-foreclosure-problems-ninth-circuit20101115_1_foreclosure-cases-foreclosure-crisis-foreclosure-filings
Wednesday, November 10, 2010
Foreclosure Defense: Burden of Proof in Non-Judicial States
I have been helping a homeowner in Virginia to stave off a foreclosure based on the bank's lack of authority to foreclose. Initially, the homeowner proceeded in the case pro se (without an attorney). After receiving a foreclosure notice, the homeowner filed suit against the bank challenging its right to foreclose. The bank responded that Virginia is a non-judicial foreclosure state, so that the owner cannot question the bank's right to foreclose and thus arbitrarily convert her foreclosure from non-judicial to judicial. As expected, the judge sided with the bank and dismissed the homeowner's case without giving her a fair chance to hold the bank to the burden of proving its authority to foreclose.
When the homeowner came to my office, we got a "second bite at the apple" after the homeowner filed for bankruptcy and challenged the bank's status as a creditor in bankruptcy. During the bankruptcy proceeding, the bank made the same argument: that Virginia is a non-judicial state, that their filings with the county records pertaining to appointment of substitute trustees and other foreclosure-related documents established a prima facie case of their right to foreclose, and that it had to be the end of the story.
In response, we explained to the judge that not all challenges to a bank's right to foreclose are equal. While foreclosure-related filings (even though often blatant and self-serving lies by the bank) may be entitled to some prima facie validity, their validity can successfully be challenged by producing specific evidence contradicting the bank's filings. In other words, although the bank produced a document stating "I, the bank, am the holder of the note and can enforce the debt," we also produced specific documents showing that the bank could not in fact have been the holder of the note (and addressing other deficiencies). The crucial distinction here was that we did not just "allege" that the bank was wrong. We produced specific documents showing that the bank's statement could not have been true, or at least a substantial question existed as to its veracity.
The judge sided with us and noted in his ruling in open court that (paraphrasing) "while documents such as a deed of appointment and similar filings enjoy some degree of prima facie validity, in this case the homeowner has produced sufficient evidence to at least cast serious doubt upon the validity of such documents." The judge then admonished the bank's counsel not to proceed with foreclosure unless the bank's defective filings were rectified.
The moral of the story is that, while it may be impossible in a non-judicial state to challenge a foreclosure by merely questioning (through contrary allegations and mere disagreement) the bank's right to foreclose, it is certainly possible to challenge the bank's right to foreclose by adducing specific documentary evidence sufficiently contradicting the bank's prima facie case. Even if your case is as weak as the bank's, it still may be enough to defeat the initial prima facie validity of the bank's case and have your day in court, as long as you come forth with more than just bare allegations.
If you are interested in specific legal arguments, you can look at this excerpt: http://www.scribd.com/doc/41972339/Burden-of-Proof-in-Non-Judicial-Foreclosure-States
When the homeowner came to my office, we got a "second bite at the apple" after the homeowner filed for bankruptcy and challenged the bank's status as a creditor in bankruptcy. During the bankruptcy proceeding, the bank made the same argument: that Virginia is a non-judicial state, that their filings with the county records pertaining to appointment of substitute trustees and other foreclosure-related documents established a prima facie case of their right to foreclose, and that it had to be the end of the story.
In response, we explained to the judge that not all challenges to a bank's right to foreclose are equal. While foreclosure-related filings (even though often blatant and self-serving lies by the bank) may be entitled to some prima facie validity, their validity can successfully be challenged by producing specific evidence contradicting the bank's filings. In other words, although the bank produced a document stating "I, the bank, am the holder of the note and can enforce the debt," we also produced specific documents showing that the bank could not in fact have been the holder of the note (and addressing other deficiencies). The crucial distinction here was that we did not just "allege" that the bank was wrong. We produced specific documents showing that the bank's statement could not have been true, or at least a substantial question existed as to its veracity.
The judge sided with us and noted in his ruling in open court that (paraphrasing) "while documents such as a deed of appointment and similar filings enjoy some degree of prima facie validity, in this case the homeowner has produced sufficient evidence to at least cast serious doubt upon the validity of such documents." The judge then admonished the bank's counsel not to proceed with foreclosure unless the bank's defective filings were rectified.
The moral of the story is that, while it may be impossible in a non-judicial state to challenge a foreclosure by merely questioning (through contrary allegations and mere disagreement) the bank's right to foreclose, it is certainly possible to challenge the bank's right to foreclose by adducing specific documentary evidence sufficiently contradicting the bank's prima facie case. Even if your case is as weak as the bank's, it still may be enough to defeat the initial prima facie validity of the bank's case and have your day in court, as long as you come forth with more than just bare allegations.
If you are interested in specific legal arguments, you can look at this excerpt: http://www.scribd.com/doc/41972339/Burden-of-Proof-in-Non-Judicial-Foreclosure-States
Monday, November 8, 2010
DC Attorney General issues a statement on foreclosures
DC Attorney General has issued a statement potentially allowing tens of thousands (and possibly hundrends of thousands) of the District's residents to challenge their foreclosures. Most MERS loans, as well as some other loans where the banks failed to record assignments within 30 days of a "transfer" of the note, are likely not in compliance with the District's real property law, and can therefore be challenged during foreclosure proceedings. AG's statement can be viewed at http://newsroom.dc.gov/show.aspx/agency/occ/section/2/release/20673.
The District's law requires that all transfers of a mortgage (loan security instrument) be recorded in the land records within 30 days of transfer. According to the Attorney General, the MERS system does not satisfy this requirement. This may lead to such consequences as the loan having been rendered unsecured, the current alleged noteholder's inability to enforce the loan by way of foreclosure, etc. The exact consequences remain to be seen shortly, as the DC judges start ruling on these issues in the near future. Of course, we already know where DC's Attorney General stands! Bravo!
The District's law requires that all transfers of a mortgage (loan security instrument) be recorded in the land records within 30 days of transfer. According to the Attorney General, the MERS system does not satisfy this requirement. This may lead to such consequences as the loan having been rendered unsecured, the current alleged noteholder's inability to enforce the loan by way of foreclosure, etc. The exact consequences remain to be seen shortly, as the DC judges start ruling on these issues in the near future. Of course, we already know where DC's Attorney General stands! Bravo!
Monday, November 1, 2010
Loan Modifications Are A Joke
Recently, it has come to my attention that loan modifications are a joke. While government-sponsored loan mod programs like HAMP occasionally work for some borrowers with smaller loans held by Fannie and Freddie, most borrowers continue to get the shaft from the banks.
A recent predatory practice is emerging whereby banks will put a borrower on a trial plan to do a loan mod, then collect 3-4 monthly payments in the course of the trial period, and then, 4-6 moths later, will DENY the loan modification.
There are many reasons for this, the most prominent being that it is often more advantageous for a bank to foreclose than to modify. How can that be? Well, most loans originated and crammed down the consumer’s throat during 2001-2008 were actually designed to fail. They were sold my middlemen originators who tricked the homeowner into the biggest (and riskiest!) loan possible while tricking investors into the buying the riskiest financial paper backed by such maxed-out-income loans. Of course, they did not forget to include mortgage insurance, paid either by the lender or the borrower, or both. So now, the middlemen originators and servicers collect on the insurance when you default, then take your property by foreclosure. Isn’t that the greatest scam the eyes have seen?
Anyway, not all is lost for consumers. Since the same infamous 2001-2008 loans were almost impossible to concoct and implement without violating at least some laws (state and federal), there is hope for the tricked homeowners. It’s called a “forced loan modification.” Such a forced loan modification is done by going to the bank’s legal department instead of their useless "loss mitigation" department.
You go to the legal department and put them on notice that your loan was issued with x, y, z violations of state and federal law entitling you to xxx thousands of dollars in damages and possibly the right to rescind (cancel) your loan. Then, you either sue the bank and get your damages or you just settle with them by obtaining a forced loan mod on YOUR terms.
A recent predatory practice is emerging whereby banks will put a borrower on a trial plan to do a loan mod, then collect 3-4 monthly payments in the course of the trial period, and then, 4-6 moths later, will DENY the loan modification.
There are many reasons for this, the most prominent being that it is often more advantageous for a bank to foreclose than to modify. How can that be? Well, most loans originated and crammed down the consumer’s throat during 2001-2008 were actually designed to fail. They were sold my middlemen originators who tricked the homeowner into the biggest (and riskiest!) loan possible while tricking investors into the buying the riskiest financial paper backed by such maxed-out-income loans. Of course, they did not forget to include mortgage insurance, paid either by the lender or the borrower, or both. So now, the middlemen originators and servicers collect on the insurance when you default, then take your property by foreclosure. Isn’t that the greatest scam the eyes have seen?
Anyway, not all is lost for consumers. Since the same infamous 2001-2008 loans were almost impossible to concoct and implement without violating at least some laws (state and federal), there is hope for the tricked homeowners. It’s called a “forced loan modification.” Such a forced loan modification is done by going to the bank’s legal department instead of their useless "loss mitigation" department.
You go to the legal department and put them on notice that your loan was issued with x, y, z violations of state and federal law entitling you to xxx thousands of dollars in damages and possibly the right to rescind (cancel) your loan. Then, you either sue the bank and get your damages or you just settle with them by obtaining a forced loan mod on YOUR terms.
Is HAMP for real?
Home Affordable Modification Program (HAMP) has been around since 2009, but has it resulted in any tangible benefit? If no, why not? Well, the better questions to ask are: is HAMP law? Is it mandatory? Is anyone entitled to a loan modification if they prove that they qualify for one under the HAMP guidelines? The answer is No, No, and No! No one is entitled to a loan modification under the HAMP guidelines. The incentives for the banks to follow the guidelines are so meager, I would call them non-existent. What is more, even if you get a loan modification under HAMP, the "savings" from the modification still need to be paid back at some future time, such as upon the sale of the house, expiration of the loan term, etc. So your payments under HAMP are not really modified. They are deferred! It is like borrowing even more money to stay afloat after an improvident refinance or purchase. And you thought the government (and the bank) would take care of you... In many cases, cutting your losses and filing for bankruptcy sooner rather than later is the most sensible, as well as ethical, approach.
Bankruptcy And Deficiency Judgments
Virginia allows deficiency judgments, as do the majority of the states. What this means is, if you fail to make payments on your house and the bank forecloses, they can still go after you for the "deficiency" – the difference between what you owed for the house and what the house sold for in foreclosure. What's worse, most of the time, the foreclosing bank will sell your delinquent account so some other debt collection company, and now these "vultures," as they are often called, are coming after you.
What do you do? Well, the possibility of a deficiency judgment is just another factor that counsels in favor of bankruptcy in some cases, as bankruptcy will wipe out liability for any potential deficiencies, as well as other unsecured debts. In other cases, you may be better off negotiating a "release" from the bank during the process of foreclosure.
In any event, make sure that this issue is addressed in your particular situation to avoid any extremely unpleasant surprises in the future.
What do you do? Well, the possibility of a deficiency judgment is just another factor that counsels in favor of bankruptcy in some cases, as bankruptcy will wipe out liability for any potential deficiencies, as well as other unsecured debts. In other cases, you may be better off negotiating a "release" from the bank during the process of foreclosure.
In any event, make sure that this issue is addressed in your particular situation to avoid any extremely unpleasant surprises in the future.
Can I Keep My Car If I File For Bankruptcy?
Unfortunately, the asnwer depends on the specific situation in each individual case. What's important is that one needs to know the rules and play by the rules. This is called bankruptcy planning.
First, it depends on whether your car is paid for or whether you are still making payments on it. That is, a preliminary issue is whether there is any "equity" in your car. Thus, the first question you should ask yourself is: how much is my car worth? You can look up your car's value at autos.msn.com/kbb/default.aspx. I like this site better than the official Kelly's Blue Book site because it allows you enter most of the information much faster and let you get values faster.
Once you know your car's value, you need to look to your state's law to see how much car you can exempt. For instance, in Virginia that exemption is $2000.00, while in Florida, it is $1000.00 (with another $1000.00 available for any personal property). Virginia, though, is tougher than most states when it comes to bankruptcy, notwithstanding the above comparison with Florida.
So what do you do if your car is worth more that the state exemption? Well, you would need to see if you can exempt the excess value under some other category of exemptions. For instance, in Virginia you can use your "homestead exemption" (which is generally up to $5,000.00, plus $500.00 for each dependant) to exempt the value of your car in excess of the allowed state exemption of $2,000.00. Of course, you can only do this if you have "room" (unused portion) in your homestead exemption, i.e., you are not using it fully to exempt your house or something else of value.
Another thing to be mindful about here is that there is a special procedure for using your homestead exemption to exempt some other asset, such as a car. You need to draft and record a homestead deed in the appropriate county land records office, and you must do so in a timely manner.
What if you are still making payments on a car? In that case, the bank will probably send you a reaffirmation agreement. The problem with such an agreement is that, if you continue to pay for your car and hit hard times again even after bankruptcy, the bank can go after you not only for the car, but also for any deficiency that is likely to be there after the bank repossesses the car. By contrast, if you don't sign a reaffirmation agreement, as long as you continue to make payments on the car, the bank will probably leave you alone. Notice that I said "probably," because technically the bank in most cases has the right repossess your car based on the mere fact that you have filed for bankruptcy (based on a clause in your purchase contract signed when you bought your car). Thus, it all depends on what risk you are willing to take. Some people do not like to take even a very small (de minimus) risk. From experience, most people are ok with simply making payments on their cars without signing a reaffirmation agreement, but everyone's situation and risk-aversion are different.
In bankruptcy, it is all about knowing the rules, planning accordingly, and playing by the rules.
First, it depends on whether your car is paid for or whether you are still making payments on it. That is, a preliminary issue is whether there is any "equity" in your car. Thus, the first question you should ask yourself is: how much is my car worth? You can look up your car's value at autos.msn.com/kbb/default.aspx. I like this site better than the official Kelly's Blue Book site because it allows you enter most of the information much faster and let you get values faster.
Once you know your car's value, you need to look to your state's law to see how much car you can exempt. For instance, in Virginia that exemption is $2000.00, while in Florida, it is $1000.00 (with another $1000.00 available for any personal property). Virginia, though, is tougher than most states when it comes to bankruptcy, notwithstanding the above comparison with Florida.
So what do you do if your car is worth more that the state exemption? Well, you would need to see if you can exempt the excess value under some other category of exemptions. For instance, in Virginia you can use your "homestead exemption" (which is generally up to $5,000.00, plus $500.00 for each dependant) to exempt the value of your car in excess of the allowed state exemption of $2,000.00. Of course, you can only do this if you have "room" (unused portion) in your homestead exemption, i.e., you are not using it fully to exempt your house or something else of value.
Another thing to be mindful about here is that there is a special procedure for using your homestead exemption to exempt some other asset, such as a car. You need to draft and record a homestead deed in the appropriate county land records office, and you must do so in a timely manner.
What if you are still making payments on a car? In that case, the bank will probably send you a reaffirmation agreement. The problem with such an agreement is that, if you continue to pay for your car and hit hard times again even after bankruptcy, the bank can go after you not only for the car, but also for any deficiency that is likely to be there after the bank repossesses the car. By contrast, if you don't sign a reaffirmation agreement, as long as you continue to make payments on the car, the bank will probably leave you alone. Notice that I said "probably," because technically the bank in most cases has the right repossess your car based on the mere fact that you have filed for bankruptcy (based on a clause in your purchase contract signed when you bought your car). Thus, it all depends on what risk you are willing to take. Some people do not like to take even a very small (de minimus) risk. From experience, most people are ok with simply making payments on their cars without signing a reaffirmation agreement, but everyone's situation and risk-aversion are different.
In bankruptcy, it is all about knowing the rules, planning accordingly, and playing by the rules.
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