Mortgage Modification Law – Bankruptcy Law

7-12-10

Wrap-around deed of trust and lease-option transactions are back. Buyers are having trouble getting financing. This reduces the number of sales. With fewer buyers prices drop. The solution in many cases is for buyers and sellers to do assumptions of existing financing, to do wrap-around deeds of trust transactions, or to enter into lease-option transactions.

I am available to help buyers, sellers, and agents put these deals together and get them closed – with full disclosure.

Assumptions and wrap-around deals should be allowed as a quick way to add liquidity to the market.

I am available to make presentations at real estate offices regarding wrap-around and lease-option transactions. Call me at 425-771-1110.

You can modify your residential loan if you have a financial hardship and if you can prove you have the financial ability to keep up your payments on your modified loan. Another factor is whether the lender will lose more money by foreclosing than by modifying. Modification of second mortgages and modification of credit cards are handled differently; principal reductions are available.

Bankruptcy is not something one should undertake lightly. However, it is your right under the Constitution, and if you or your family is losing your home or having your wages or bank accounts garnished, you may consider protecting yourself by filing for bankruptcy. Bankruptcy can also help get a better modification.

I will be attending the Fluoride Action Network convention on water fluoridation July 23-26 and will be speaking there. If you have or know someone with dental fluorosis, mottled teeth, only caused by water fluoridation, I would like to talk with them about being a plaintiff in a class action suit.

Hear Dr. Joseph Mercola and Dr. Paul Connett discuss the absurdity of drinking water fluoridation.

Nuclear Power is Not Green or Carbon-Free.

Sincerely,

James Robert Deal, Attorney

jamesdeal Mortgage Modification

Are you Judgment Proof?

Surprisingly, the best approach for some people who are deeply in debt is to take no action at all.

If you’re living simply (that is, with little income and property) and look forward to a similar life in the future, you may be judgment proof. This means that anyone who sues you and obtains a court judgment won’t be able to collect-simply because you don’t have anything they can legally take. (As a famous song of the 1970s said, “Freedom’s just another word for nothing left to lose.”)

Except in highly unusual situations (for example, if you are a tax protester or willfully refuse to pay child support), you can’t be thrown in jail for failing to pay your debts.

Normally, creditors cannot take your property or income without first suing you and obtaining a court judgment (except for taxing authorities and student loan collectors).

Even if the creditor is armed with a court judgment, the law prevents creditors (except the IRS, of course) from taking property that is exempt under your state’s general exemption laws, including food, clothing, personal effects, and furnishings. And creditors won’t go after your nonexempt property unless it is worth enough to cover the creditor’s costs of seizure and sale.

Before taking property, creditors usually try to go after your wages and other income. But a creditor can take only 25% of your net wages to satisfy a court judgment, unless it is for child support or alimony. Often, you can keep more than 75% of your wages if you can demonstrate that you need the extra amount to support yourself and your family.

Income from a pension or another retirement benefit is usually treated like wages. Creditors cannot touch public benefits such as welfare, unemployment insurance, disability insurance, SSI, or Social Security.

Thanks to Stephen Elias, Attorney at Law

jamesdeal Bankruptcy, Garnishment, Judgment Proof

New guidelines effective June 1, 2010, clarify many modification issues.

First, lenders may but are not required to reduce principal balances in a modification down to 115% of the principal balance owing.  

Second, lenders may not foreclose on a borrower who is in the process of modification until after the borrower is declined and other options have been considered.

Third, a borrower in bankruptcy may proceed with a modification.

Fourth, unemployed borrowers can have up to six months of reduced payments will seeking new employment.

There are many other points these guidelines clarify. Read them here or here.

Read Supplemental Directive 10-02 here, which prohibits foreclosure during the 30-day period following a modification turn down and requires that borrowers in bankruptcy be considered for modification.

jamesrobertdeal Bankruptcy, Foreclosure, Principal Reduction Bankruptcy, Foreclosure, Principal Reduction, Unemployed

Lenders are starting to require income verification before putting borrowers into trial payments.

Lenders are tightening modification requirements and turning down more applicants.

Lenders are refusing to grant principal write-downs.

Generally speaking, it is getting harder for borrowers to push their modifications through.

Read with Martin Andelman has to say about the situation.

jamesdeal Mortgage Modification

jamesdeal Federal Trade Commission, Modification is the Practice of Law, Mortgage Modification

The Federal Trade Commission is up to no good. The FTC proposes to enact a regulation which will prohibit third-party modification providers, including attorneys, from charging advance fees.

See: http://www.ftc.gov/opa/2010/02/mars.shtm for a summary of the proposed regulation.

See http://edocket.access.gpo.gov/2010/2010-4651.htm for the full text of the proposed regulation.

California passed a law forbidding all up-front fees on mortgage modifications, including fees paid to attorneys. For the full text of the California law, see http://www.leginfo.ca.gov/pub/09-10/bill/sen/sb_0051-0100/sb_94_bill_20091011_chaptered.html.

There is no other area of law practice where clients are prohibited from paying their lawyers in advance.

What has happened in California is that attorneys have stopped providing modification services in most cases. The way attorneys have sidestepped the law is to file suit against each lender they are negotiating with. The California law does not prohibit advance fees when litigation is involved. This raises the cost substantially.

Most of the clients who hire me to work on modifying their loans have tried doing it themselves. They realize that this is complex legal work and that they need help.

The reason why the mortgage modification scandal arose, with people paying advance fees and not getting good service, was that the fees where in most cases paid to non-attorneys. In 2008 and 2009 loan officers and real estate agents were closing no deals. So they got involved in mortgage modification. Some non-attorney modification companies claimed to have attorneys on staff or available to review the work or to negotiate with lenders. In many cases this was not true.

A real estate agent can negotiate a purchase and sale agreement. A loan officer can put together a mortgage. But renegotiating a mortgage after it is in place is far different. Mortgage modification is the practice of law. It involves studing the laws pertaining to modification and interpreting them. It involves advising clients regarding whether they should file bankruptcy and under what chapter they should file. It involves counseling clients about deficiency judgments. It involves advising clients regarding how to handle second mortgages, credit card debts, and car loans.

Non-attorney modifiers spend a lot of their time saying, “Well I can’t answer that question. You need to talk with an attorney.” The entire field bristles with legal issues, so why are real estate agents and loan officers trying to do the work? Lawyers should be the ones doing the modifications.

Attorneys have been negotiating mortgage modifications for centuries. They have been referred to previously as “workouts.” To prohibit attorneys from charging advance fees is the same as prohibiting attorneys from doing workouts.

Another irony is that the California law and this new FTC regulation would only apply only to owner-occupied one to four unit owner-occupied residences. If you own a rental home or four-plex or an apartment building or a sky scraper, you can hire an attorney and pay him an advance fee to negotiate a workout. But if you live in your one to four unit property, you cannot pay an attorney advance fees to modify your loan.

The practical impact of such a law will be that people who need legal services will not be able to obtain them. And that is because they will not be able to convince the lawyer to do the work without paying him in advance.

Why are attorneys and why am I unwilling to work for clients who do not pay me in advance? Clients who do not pay in advance are not committed to me. I am committed to them, but they are not committed to me. I am required by my ethical standards and my bar association to be committed to the client, but the client is not governed by any regulatory body that obligates them to pay me. Many clients who need mortgage modification are on the verge of bankruptcy. Sometimes I advise them to file bankruptcy. When they file bankruptcy, they are discharged from their debts, including their debt to me. Even if they do not file bankruptcy they might still refuse to pay for work done well. I am not interested in chasing clients who fail to pay. It is usually a waste of time and money.

Further, lenders generally do their best to circumvent attorneys. They call and write directly to clients. They act as if the attorney does not exist. Many lenders actively discourage clients from working with “third-party providers.” Chase has such a discouragement on its recorded hold message. I have had situations where I was not paid in advance, where the lender granted modification to the client, and where the client accepted the modification and did not tell me what had happend. And the clients conveniently forgot to pay me.

If clients pay me in advance I feel a great responsibility to work hard for them. If they do not pay me in advance, I do not know whether they will be loyal to me at all. Not being paid in advance affects my willingness to work hard for my clients.

As an attorney I am subject to regulation by the Washington Bar Association. If I fail to do my job conscientiously, I can be disciplined. It is not necessary for the California legislature or the FTC to be passing laws that prohibit me from collecting fair fees from clients. 

I work my heart out for my clients. I am not interested in working my heart out for clients and not getting paid.

jamesdeal Bankruptcy, California, Federal Trade Commission, Modification is the Practice of Law, Mortgage Modification

Quoting from Martin Andelman:

In the next 2-3 years, it is estimated that there will be an additional 14 million foreclosures in this country.  That will make the total roughly 20 million homes lost in this catastrophic recession.

But it won’t stop there. Foreclosures breed foreclosures.  And 20 million foreclosures just means that millions more homeowners will find themselves seriously underwater… owing quite a bit more than their house is worth… and they’ll walk away… just like 18% are doing now.  And that will mean even more foreclosures after that.  And that will mean everyone’s property values continue to fall, which will bring even more foreclosures.

Both President Bush and President Obama have tried to put plans in place to stop the flood of foreclosures… BOTH HAVE FAILED.  Why?  Isn’t it obvious?

The banks cannot be trusted to act in anyone’s interest but their own.  The government has given them hundreds of billions of dollars, after they bankrupted themselves.  And yet, they act as if it’s business as usual.

This year alone, the major banks in this country are paying out $91 BILLION in BONUSES to their executives!

The only answer is to allow judges to modify mortgages for homeowners in bankruptcy court.  Here are a few facts that will show you why this is so important:

1. President Obama’s Making Home Affordable program was designed to work with “a carrot and a stick”.  The “carrot” is the money banks receive when they modify a loan, and the “stick” was supposed to be allowing judges to modify the loans.  Without the “stick,” the plan cannot work.

2. Banks don’t modify their behavior for the same reason I wouldn’t modify my driving habits if there weren’t Highway Patrol officers out there to give me a ticket or take me to jail if I drive 100 miles per hour.  No stick.

3. Allowing judges to modify mortgages in bankruptcy court WILL NOT increase borrowing costs in the future, which is what the banking lobby is saying and wants you to believe.  The amendment only allows judges to modify mortgages that are already in existence when the bill is signed.  It will have NO EFFECT on borrowing in the future whatsoever.  NONE.

4. If we allow judges to modify mortgages on primary residences, chances are they’ll never get the chance… because the banks will modify them… like they’re supposed to.

5. Judges can already modify every other type of loan in bankruptcy court, just not mortgages on primary residences.  Allowing them to do so will help stop the foreclosure crisis that is hurting every homeowner in America… AND IT WON’T COST THE TAXPAYERS A DIME!

Our economy cannot begin to recover until we stabilize the housing market.  We’ve tried letting the banks decide… and look where we are today.

The only people opposed to this amendment are the bankers and financial service companies.  We can’t turn our country over to them, can we?

Click the button below NOW, 24/7.  There is literally NO TIME TO SPARE… You don’t even need to know your representative’s name.  All you need to know is your own name, address, phone and zip code.  The letter is already written for you.  Just enter your information and click the button to send.  It’s that simple and takes less than a minute.  OR YOU CAN CALL 877.354.4958 DURING REGULAR BUSINESS HOURS.

Send your representative an e-mail. It is easy. Click here.

JUST MINUTES AGO…

House Rules Committee agreed to allow the bankruptcy modification amendment THAT WOULD ALLOW JUDGES TO MODIFY MORTGAGES to be considered on the House floor as an amendment to the broader financial services reform bill AS EARLY AS THIS AFTERNOON!!

THIS AMENDMENT IS BEING FIERCELY OPPOSED by the BANKS AND FINANCIAL SERVICES communities and we NEED to get people CALLING in IMMEDIATELY.

PLEASE TAKE TIME NOW TO contact your friends, family and business associates… stop whatever your staff is doing to give them time to call in. Put it on your Facebook pages, on your LinkedIn pages, Twitter it… re-tweet it!  PLEASE DO IT RIGHT NOW!

IT’S SUPER EASY TO DO:

Phone toll free at: 877.354.4958

Put in your zip code

When you reach the receptionist:

1. State your name
2. Say that you are a constituent
3. Ask the Representative to vote FOR the Conyers-Turner-Lofgren amendment (#201) to the Financial Services Reform bill.
4. This amendment will cost taxpayers NOTHING and will save millions of homes from foreclosure.  IT MUST BE CONSIDERED…

IF THE LINE IS CLOSED, BECAUSE CLOSES AT 6:00 PM…

Email your Senators (24/7) using the link below, which will lead you to a sample email that you can edit and personalize.  YOU DON’T EVEN NEED TO KNOW YOUR REP’S NAME… CLICK AND GO!

Email Your Congressional Representative Now

James Robert Deal Mortgage Modification

Philip got behind on his mortgage because his employer cut his hours. He and his wife work for the same nursery and earn only minimum wage.

Philip’s loan was fixed for two years at 7.5%. After that it was adjustable with a rate based on the 6-month LIBOR plus a margin of 5.5 points. Although the 6-month LIBOR is currently down below .5%, it has been as high as 7.0% in 2000. The loan had a cap of 13.5%, and the rate could go that high had it not been modified. That is why I say that having an adjustable rate mortgage is itself a hardship, and that is because although it may not be killing you now, it will kill you in the future.

 Take a look at the modification agreement between US Bank and Philip.

James Robert Deal Mortgage Modification

Mortgage companies are more likely to foreclose on homeowners than modify their loans because they make more money off foreclosures, argues a new report by a consumer advocacy group.

While homeowners, lenders and investors typically lose money on a foreclosure, mortgage servicers do not, says report author Diane E. Thompson, of counsel at the National Consumer Law Center. Servicers are the companies that manage the mortgages and collect payments.

“Servicers may even make money on a foreclosure,” she writes. “And, usually, a loan modification will cost the servicer something. A servicer deciding between a foreclosure and a loan modification faces the prospect of near certain loss if the loan is modified and no penalty, but potential profit, if the home is foreclosed.”

Thompson attributes this to a system of perverse incentives created by lawmakers and rulemakers in the market, like credit rating agencies and bond issuers. The private rulemakers typically dictate how a servicer can account for potential losses and profits. They hold enormous sway over securitized mortgages, which are owned by investors. More than two-thirds of mortgages issued since 2005 have been securitized, notes the report, using data from the industry publication Inside Mortgage Finance.

In those cases, the servicer is empowered to handle virtually all aspects of the mortgage, from collecting the monthly payments to initiating foreclosure proceedings. While they’re obligated to do what’s best for the ultimate owners of the mortgage — the investors — servicers have some latitude in deciding what course of action to pursue, be it a foreclosure or loan modification.

When a homeowner is delinquent on a mortgage that’s been securitized, the servicer must front the late payment to the investors. When a home is foreclosed, the servicer is typically first in line to recoup losses. But if a mortgage is modified, the servicer typically loses money that isn’t necessarily recoverable.

“Servicers lose no money from foreclosures because they recover all of their expenses when a loan is foreclosed, before any of the investors get paid. The rules for recovery of expenses in a modification are much less clear and somewhat less generous,” she said.

That’s part of the reason why the Obama administration created a $75 billion program to limit foreclosures. The money is to be distributed to servicers who successfully modify home loans, with the hope that the incentives to modify outweigh the incentives to foreclose.

Thompson’s report outlines eight specific steps to reverse this trend. They include mandating that servicers attempt to modify a loan before initiating foreclosure proceedings and reforming bankruptcy laws so judges can modify distressed mortgages.

Read more at: http://www.huffingtonpost.com/2009/10/21/perverse-incentives-lead_n_328378.html

jamesdeal Mortgage Modification

Tim Geitnner has written the attached letter to the 25 servicers who are participating in HAMP – Home Afffordable Mortgage Program - such as CitiMortgage and Wells Fargo Bank. These servicers receive incentives for doing modifications designed under the Obama Administration’s Making Homes Affordable (MHA) program.
The letter comes after a mid-June cap adjustment on the Treasury’s TARP fund investments to servicers based on actual participation in the modification program. The Treasury reduced the total amount that CitiMortgage can receive and distribute to borrowers for modifications by more than $991m to a total $1.08bn, as a reflection of actual funds usage. Wells Fargo’s total incentive payment amount received more than $462m in reductions to a revised cap of $2.41bn.

The letter illustrates that the government is pressuring lenders to streamline the process. This is encouraging news for those who need modifications.

James Robert Deal Mortgage Modification

Please report to me by e-mail and/or fax any communications you have received from your lenders. When you talk with your lenders, ask for names, phone numbers, fax numbers, e-mail addresses.

If your lender sends you forms to fill out, fill them out and send them to me. Let me review them and send them in on your behalf. If you have already filled out any forms and sent them to your lender, send me copies.

Important: If you have received a Notice of Default or Notice of Trustee Sale, fax, scan, or mail these too me immediately. And call me at 425-771-1110.

If you are behind on your loan, I want you to tell me how much and how many months you are behind.

If you are behind on your loan, I want to know how much you are able to pay on your loan or loans and when you can start paying that amount.

Each month please send me your latest pay stubs, latest bank statements.

If you have not already sent them, then send me your last tax return and W-2s. Lenders sometimes ask to see tax returns, so let’s get them in here so I can provide them immediately when requested.

If you want me to advise you on credit card debt modification, send me copies of all your credit card statements. Yes, credit card debt can be modified too.

James Robert Deal Mortgage Modification

The Obama administration and the banks are badmouthing “third-party modification companies.”The banks will do everything they can to convince you that you do not need representation. They will send forms directly to you without sending courtesy copies to your attorney or your modification company. They may send final settlement proposals directly to you and pretend your attorney or your modification company does not exist. Some lenders bad-mouth “third-party modification companies” in their music-on-hold recordings. Chase says it offers mortgage modification for free and to beware of any company that charges advance fees.

Their purpose is to get you to undermine your relationship with your lawyer or your modification company so they can negotiate directly with you. They know they can cut a better deal dealing directly with you than through your attorney.

Continue reading “Right To Attorney Representation – Mortgage Company Interference” »

James Robert Deal Mortgage Modification

Mortgage Modification Attorney

I practice law in Lynnwood Washington. My law practice is devoted almost exclusively to mortgage workouts. I am also a commercial mortgage broker.

People have a lot of questions about how mortgage modification works, so I have posted this website to try to give the reader as much information as possible.

James Robert Deal Mortgage Modification