Newspapers across our nation have been full of articles detailing bank foreclosure practices that have been abusive.  It now looks like the federal government will attempt to respond to this foreclosure abuse.  The Wall Street Journal has reported that federal regulators will review millions of foreclosure cases to determine whether some consumers should be compensated for mistakes made by banks (click here read the entire article).

The Journal reports that this review process could be unveiled in the next few weeks.  The Office of the comptroller of the Currency estimates that 4.5 million borrowers coul be eligible for review.

The federal government will be setting up a website and a toll free number giving the details of the process.

What bothers me is that the reviews will be conducted “by third party companies that were hired earlier his year by 14 banks that signed consent order in April with the OCC and the Federal Reserve.  The regulators had to sign off on the selection of these companies”  (See page C1 Wall Street Journal, October 4, 2011).

It seems to be like the government has agreed to allow a fox to be in charge of guarding the hen house.  I doubt we will see many people recover anything.  I bet there will be a few token cases where awards will be granted so that the foxes can claim to the government that they are doing their job.

Important points of the article are:

1.  Money awards will be determined on a case-by-case basis.

2.  There will be a deadline for borrowers to request reviews.

3.  Very few borrowers are expected to have their foreclosures overturned and their homes returned to them.

4.  Banks could be held liable for miscalculating mortgage payments.

5.  Banks could be held liable for impermissible fees and penalties.

6.  Banks could be held liable for forcing expensive insurance coverage into the mortgage payment and pushing consumers into foreclosure

7.  Banks could be held liable for starting foreclosure proceedings while they were receiving payments as part of trial loan modifications.

8.  Banks may be liable for foreclosing on people who provided all of the necessary documentation for loan modifications but still got foreclosed.

I think the proper place for these issues to be resolved is in a court of law and not some review process that will be run by “third party” companies.

Three years, Congress had the opportunity to pass a bill that would have allowed bankruptcy judges to modify mortgages.  Had this bill passed, the entire foreclosure meltdown would have been avoided.

1. What is Chapter 13?

2. What is Chapter 7?

3. How much does it cost to file?

4.  Stop Garnishment

5.  Stop Foreclosure

When a house gets foreclosed, many consumers fear that they will still owe money to the lender after the foreclosure of their home.  In Georgia, it is usually only the second mortgage companies that pursue a deficiency after a house is foreclosed.  However, the Wall Street Journal reports that many banks are now pursing deficiency judgments on the first mortgages as well (click here to read the full article).

In the article, the Journal details how mortgage companies are becoming more aggressive in Florida in pursuing these deficiency judgments after foreclosure sales.

I doubt that we will see first mortgage holders start pursuing deficiency judgments in Georgia.  Click here to read a blog post I wrote about confirmation of foreclosure in Georgia.  In my twelve years as a bankruptcy attorney, I’ve seen it happen only one time.  In almost every single case, it is complete waste of time for a mortgage company to chase a consumer who just lost their home in a foreclosure sale.

However, I have seen an increase in cases where a credit union refuses to foreclose on the house.  Instead, they sue the consumer on the note.  When they are successful in their lawsuit, the credit union will then be able to garnish twenty five percent of the consumer’s net income.

When I saw a consumer go through this type of situation, I advised him to continue living in the house while his wages were being garnished.  In his case, getting garnished was much cheaper than the mortgage payment.  Also, the amount he was being garnished for was much cheaper than renting an apartment.  In his case, the credit union was incredibly stupid by choosing to garnish his wages instead of just foreclosing on the house.

If we see first mortgage holders start to pursue deficiency judgments in Georgia after a foreclosure is completed, I doubt it will last long.  In almost every case, the consumer will file for bankruptcy and wipe out the mortgage company.  Legal fees for pursing a deficiency judgment against a consumer are expensive.  Thus, any mortgage company who chooses to pursue a deficiency judgment will most likely be throwing good money after bad.

1. What is Chapter 13?

2. What is Chapter 7?

3. How much does it cost to file?

4.  Stop Garnishment

5.  Stop Foreclosure

Bloomberg news has reported that U.S. Bankcorp and Wells Fargo have lost a major foreclosure case in the Supreme Court of Massachusetts (click here to see the full article).  This ruling upholds a decision from a lower court that declared that two foreclosures in Massachusetts were not valid because the banks did not prove they owned the mortgage.

In the conclusion of the decision, the Court states, “….we agree with the judge that the plaintiffs did not demonstrate that they were holders of the Ibanez and LaRace mortgages at the time that they foreclosed these properties, and therefore failed to demonstrate that they foreclosed these properties, and therefore failed to demonstrate that they acquired fee simple title to these properties by purchasing them at foreclosure sale.”

The next step for these banks will be to get their paperwork in order and start the foreclosing process again.  The debtors in these cases are not going the get a free house.

As a Georgia bankruptcy attorney, I fear that some Georgia consumers are going to read about these types of court rulings in some newspaper and fail to take proper action to prevent the foreclosure of their home because of misconceptions.  While its true that banks across the nation are being investigated for their sloppy paperwork in relation to the sale of mortgages, this does not change the fact a legal foreclosure can quickly take place in Georgia.

In a conducting a nonjudicial foreclosure, all the banks have to do in Georgia is advertise the property in question for four consecutive weeks before the foreclosure in the legal organ of the Georgia county in which the property is located.  On the first Tuesday of the following month, the foreclosure sale takes place.

However, Chapter 13 is a great option for Georgia consumers to save their home.  The foreclosure stops when the bankruptcy case is filed.  In a Chapter 13 bankruptcy, a debtor can pay back the arrears on the mortgage over a period of up to 60 months.  In addition, unsecured debt like credit card bills and medical debt can be eliminated.

Any consumer in Northwest Georgia that is facing foreclosure should take advantage of a free consultation and call me at 706-295-0030 to schedule an appointment so that I can review the entire situation with you.  Ignoring the problem won’t make it go away.  Procrastination may cost you dearly.  Take action and call me today.

Other Posts:

1.  Can I eliminate my unsecured second mortgage in a Chapter 13?

2.  How much does it cost to file?

3.  How does a Chapter 13 work?

Second mortgage debt on a vacation home or rental property can be a tricky situation for debtors.  If your vacation home or rental property gets foreclosed, your second mortgage holder can file a 1099c with the IRS and the debt will be counted as income.  For some people, this could result in a huge tax bill.  However, if you file bankruptcy before the property is foreclosed, you cannot be taxed in a 1099c situation.

I’ve met with clients from Dallas, Douglasville, Hiram, Cartersville, Calhoun, Rome and Dalton who have had vacation homes or rental properties that they need to unload.  Many of these bankruptcy clients bought these homes thinking that they could always sell them if their income ever dropped.  Unfortunately, with the national meltdown in real estate prices, selling the property has become impossible in many situations.

Lets say you own a vacation condo in Florida with $300,000.00 owed on the first mortgage and $100,000.00 owed on the second mortgage.  Lets assume the house is sold at foreclosure for $300,000.00.  When your second mortgage company files the 1099(c) with the IRS, you will be tax on the full $100,000.00 as income.  This can make your tax bill to the IRS go through the roof.  However, if you file for bankruptcy before the foreclosure takes place, this event will not be taxable.  If you sit around and wait to file bankruptcy after the 1099(c) has already been filed, you may end up with tax debt that cannot be eliminated in your bankruptcy.

It is extremely important for owners of second homes to understand that the Mortgage Forgiveness Debt Relief Act and Debt Cancellation applies only to your principal residence.  The IRS states, “The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on the principal residence.  Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.”

Any person who is facing foreclosure should take advantage of a free consultation with a bankruptcy attorney and explore all options and consequences of the foreclosure of their property.

Related Posts:

1.  Bankruptcy and the taxation of foreclosure by the IRS

2.  Can I Wipe Out My Second Mortgage in a Chapter 13 /a>?

3.  When Will My House be foreclosed in Georgia?

4.  Should I file bankruptcy if I’m  letting the house get foreclosed?

The Atlanta Journal and Constitution recently reported that Bank of America will temporarily stop foreclosures so that it has time to make sure all of their documents are in order (Click here to read the AJC article).  This past Friday, I received a call from a Chatsworth GA bankruptcy client who is wondering if this means their foreclosure scheduled for the first Tuesday of November 2010 will be stopped.  I told them to call their mortgage company and the attorneys who are conducting the foreclosures and ask for something in writing that their specific foreclosure has been stopped.

In the past, I’ve had potential bankruptcy clients call me the day before foreclosure and ask to file bankruptcy because the mortgage company just called them and told them they are going ahead with taking their house.  You can file a bankruptcy right before the foreclosure but I won’t do it.  Some attorneys don’t mind filing at the last second but I hate it.  I like to spend at least two hours with my clients at every sign appointment.  My goal is to make sure that you feel comfortable swearing under penalty of perjury that every single document in your petition is correct.  Don’t wait until the last minute!  Other Georgia bankruptcy attorneys may disagree with me, but I think careful review of the documents is difficult to accomplish when you are under the pressure of filing at the last second.

Even if Bank of America does in fact stop your foreclosure this month, it does not mean you are out of the woods.  All it means is that they are taking more time to make sure that they are perfectly and accurately conducting the process of taking your home.  It might make sense to go ahead and file Chapter 13 so that any arrears can but put into the plan and any medical or credit card debt can be eliminated.  Wiping out unsecured debt can make paying your future mortgage payments a lot easier.

1. What is Chapter 13?

2. What is Chapter 7?

3. How much does it cost to file?

4.  How do I Stop a Garnishment in Georgia?

5.  How do I Stop a Foreclosure in Georgia?

The Wall Street Journal recently reported an update on mortgage aid from the federal government (see WSJ article).  The article reports that the Obama administration “will launch its most ambitious effort at reducing mortgage balances for homeowners who owe more than their homes are worth.”

Federal government officials estimate that between 500,000 and 1.5 million loans could be modified through the program.  Personally, I am not optimistic.  My guess is that the system is going to be overwhelmed and few of the people that need the help will actually receive it.  The WSJ reports that “the same knots that tied up prior initiatives could do so again. ”

A summary of how this program will work is that the banks are going to agree to write down the underwater loans and then pass them off to the federal government.  It is important to note that the banks are not going to be forced to negotiate.  As a result, I think we will continue to see a rise in foreclosures.

Its too bad the bill that would have allowed consumers to write down their first mortgages in bankruptcy court did not pass.  The foreclosure meltdown could have been avoided.

The problem is that the banks that services the loans do not own the mortgages.  As a consequence, they don’t really have the authority to agree to any modification without approval of the companies that own the bonds that are backed by the mortgages.  A further complication is that the bondholders could potentially sue the company that sold them the bonds in the first place if there is a decrease in the interest rate or principal payments.  Bankruptcy Court would have the best place to cut through this Gordian Knot.  If judges were given the authority by Congress to modify the loans, no mortgage service company or bond company would be liable for the modifications.  With the current foreclosure meltdown, no one is winning.  Someone loses their home.  The banks get stuck with house that they can’t sell because the market is so bad.  Bondholders get nothing from an empty house.  House values drop as a result of the foreclosure and the entire neighborhood suffers.

The article goes on to point out that this new program does not deal with second mortgages.  Most Georgia clients I see that are about to lose their house to foreclosure also have a second mortgage.  The good news is that in some Chapter 13 bankruptcy cases, we can wipe the second mortgage.  I’ve posted a link to a blog I wrote on this topic below.

Other Posts:

1.  How Can I Wipe Out My Second Mortgage In A Chapter 13 in Georgia?

2.  After Foreclosure in Georgia, When Will the Second Mortgage Holder Sue?

3.  When Do I Have to Move Out of The House If I Am Letting It Go in Bankruptcy?

4.  Should I Quit Making My Mortgage Payments To Get a Loan Modification?

The Wall Street Journal recently reported on a mortgage company regulation bill that is working its way through Congress (Click here to read the article).  The Journal reports that mortgage companies are lobbying Congress to “soften a series of provisions that reshape how most Americans obtain home loans.”

The bill proposes:

1.  To require lenders to hold 5 percent of the loans they originate that are sold to investors as securities;

2.  To give borrowers greater protection when the mortgage process breaks down; and

3.  To force mortgage companies to charge all origination fees upfront or reflect them in the mortgage interest rate but not both.

I think we will most likely see some type of mortgage reform come out of Congress before the November elections.  In response to the mortgage meltdown of 2009, Congress is going to pass laws forcing mortgage companies to take a much closer look at potential home buyers before they are given any mortgage loans.  The Journal reports that the current proposed legislation “would require lenders to ensure that borrowers can repay their loans and to prove that any refinancing provides a ‘net tangible benefit’ to the borrower.”

The end result is going to be that obtaining a mortgage in the future will be much more difficult than it has been in recent times.  Because of these new stringent requirements, some people who are considering surrendering their house in a foreclosure may want to think twice before letting the house go.

Houses can be saved from foreclosure by filing a Chapter 13 bankruptcy.  A Chapter 13 can eliminate credit card debt, medical debt and any other type of unsecured debt.  Furthermore, any mortgage payments that have been missed can be put in a Chapter 13 plan.  In some cases, Chapter 13 can make it easier to pay future mortgage payments because you no longer have to worry about credit card payments or medical payments.

One of the cruel side effects of the new legislation is that some people who have owned homes in the past will never be able to buy another one in the near future.  Self employed applicants who have extreme income fluctuations throughout the year will have a difficult time complying with the new standards.

Any person in Georgia who is considering surrendering their house in foreclosure should first meet with a local bankruptcy attorney.  It cannot hurt to explore all of your options.

Other Posts:

1.  Can I Wipe Out a Second Mortgage in Chapter 13?

2.  Will I be taxed on my house after foreclosure?

3.  Should I file Bankruptcy or Short Sale My House?

The foreclosure crisis was supposed to end with help from the federal government. Consumer Bankruptcy News reports in the May 6, 2010 issue that the response of the federal government to the mortgage crisis is too slow.  The article reports that is has “been more than one year since President Obama announced the establishment of the Making Home Affordable initiative that included the Home Affordable Modification Plan.”  The plan was supposed to help between 7 and 9 million families restructure their mortgages and save their homes from foreclosure by the mortgage companies.  The article goes on to report that “the actual number of homeowners who have received final, five-year loan modifications through the program administered by the U.S. Department of the Treasury stands at 168,708.

The Congressional Oversight Panel’s April 2010 report entitled, Evaluating Progress of Tarp Foreclosure Mitigation Programs, “finds that Treasury is still struggling to get its foreclosure programs off the ground even as the crisis continues unabated.”  The report also states that in 2009, 2.8 million homeowners received a foreclosure notice,and one in four homeowners with a mortgage currently has negative equity. While housing prices have begun to stabilize in many regions, home values in several metropolitan areas continue to fall sharply.”

I have personally witnessed in my Dallas, Rome, Cartersville and Dalton Georgia office locations that consumers are not getting the promised federal help they need to stop the foreclosure of their homes.  While I have seen a few loan modifications approved even after my clients have filed Chapter 13, most loan modification applications have been denied.  I have been shocked how many mortgage companies are aggressively pursuing foreclosure in this dreadful market.

The good news is that Chapter 13 stops foreclosure   In a Chapter 13 bankruptcy, we can eliminate credit card debt and medical debt.  As a result, most consumers find it much easier to make their future mortgage payments when they no longer have worry about their past due credit card debts and medical debts.

I have recently noticed a significant increase in the foreclosure of homes in the Rome, GA area.  Mortgage companies seem to have gotten more aggressive about starting the foreclosure process in Georgia.  While there have been many headlines in the newspapers about government action that has been taken to stem the tide of foreclosures, I am just not seeing any positive results.

I recently met with a client in my Rome office who was completely baffled that the mortgage had initiated foreclosure against them.  About six months ago, my client called their mortgage company and explained to them that they were have financial difficulty and requested a loan modification in an attempt to prevent foreclosure   My clients were told by their mortgage company to make only half payments while they were being considered for the loan modification.  They thought they were safe from foreclosure   Six months later, they were denied a loan modification and received a demand letter for all missed payments.  The foreclosure process was started against them.  My clients were outraged because they did exactly what they were told by the mortgage company.  My clients thought that since they were making the half payments on time, they were current.  If you are not approved for a loan modification, the mortgage company has the right to demand every missed payment as defined by their written contract with you.

With respect to foreclosures, the attitude of mortgage companies seems to have drastically changed within the last few months.  In early 2009, I was amazed at how the mortgage companies were bending over backwards to avoid foreclosure   I had clients who were 18 months behind on their mortgage payments before a foreclosure action was taken against them.  I even saw a few cases where the client was over two years behind on the mortgage and no foreclosure action was stared.  In contrast, this past month, I’ve seen quite a few clients who were only five payments behind and yet foreclosure was started.

The good news is that Chapter 13 stops foreclosures.  Meeting with a bankruptcy attorney does not cost you anything.  Call me today at 706-295-0030 for your free consultation.

If you want to know if your house is being advertised for foreclosure, look in the classified section of the legal organ for your county.  You can also check online at www.gerogiapublicnotice.com.

If you are in a Chapter 13 case in the Northern District of Georgia, you can dismiss your case at any time.  Your attorney will file a document with the court called a voluntary dismissal.

Personally, I think it is a terrible idea in most cases to voluntarily dismiss a Chapter 13 bankruptcy.  First, you might be banned from refiling a case for a period of six months if you voluntarily dismiss your Chapter 13 after a Motion for Relief has been filed.  Here is an example of a nightmare scenario.  A person living in Dalton, Georgia has a house and misses six mortgage payments while the case is active.  This person then decides to quit their Chapter 13   Unfortunately, the mortgage company files a Motion for Relief exactly one second before the voluntary dismissal is entered.  Mortgage company then proceeds to begin foreclosure proceedings in Dalton, Georgia.  This person then decides to refile a Chapter 13 to save the Dalton house from foreclosure   Under Section 109(g) of the Bankruptcy Code, this person cannot refile their Chapter 13 bankruptcy case for a period of 180 days from the date of the voluntary dismissal.  In other words, goodbye house.

Another reason to stay with your Chapter 13 is that if you dismiss your case, any creditor that was garnishing your wages is free to restart the garnishment as soon as your case is dismissed.  If you throw in a Section 109(g) limitation on your ability to refile and you could be in for a painful six months.

Also, if you dismiss your Chapter 13, your car creditor is free to come and repossess your vehicle as soon as your case is dismissed.  All of your bankruptcy protection ends as soon as your case is dismissed.

Any person who is wishing to voluntarily dismiss their Chapter 13 should meet with an attorney and have her go over every single aspect of their case so that there are no unpleasant surprises.

In contrast to Chapter 13, a person in a Chapter 7 bankruptcy cannot quit the case without permission from the Bankruptcy Court.