Friday, June 18, 2010

HAMP Modification

"The Making Home Affordable Program is structured to produce modifications that are more likely to test NPV positive, increasing the number of modifications that will be done and keeping more Americans in their homes." If eligibility criteria for HAMP are met, the servicer will adjust the terms of the mortgage to reduce the borrower's payment to HAMP's target front-end debt-to-income (DTI) ratio of 31 percent. Servicers are required to "reduce payment in the precise manner specified" by HAMP (the "Standard Waterfall") starting with reducing the interest rate on the mortgage. Once the modified loan terms are known, the NPV model calculation is run.

Why your bank will NOT Negoitate your Credit Card Balance

Past-due credit card accounts initially remain with the original bank for collection. A bank will turn delinquent accounts over to a collection company that will use phone calls to try to collect this money. The phone collectors work on a contingency compensation program.

Bank collectors typically will not discount credit card debt. The banks believe that reducing credit card balances because of individual hardships will only lead to greater defaults once the "word gets out" that one bank or another is giving their customers a break. Banks have determined as a group that they are better off taking a hard line and getting a few people to pay their entire balance than by making settlement reductions and getting lesser amounts from a greater number of customers. Debt negotiation companies do not have significantly better results because banks will not negotiate with anyone.

Banks cannot keep non-performing credit card accounts on their books for longer than 180 days because of banking regulations and accounting rules. After 180 days the bank will turn their delinquent accounts to a broker in order to sell the bad accounts to investors.

The debt brokers sell better quality defaulted bank debt for 5% to 7% of face value. The investors in aged credit card defaults then hire their own debt collection companies to collect what they can on a contingency basis. Attorneys may buy debt, and some collection attorneys participate in credit card account investment groups. The attorney groups are more aggressive and more likely to file a lawsuit soon after purchasing accounts.

The credit card investors are much more likely to settle debt balances because they pay little for the delinquent accounts. My friend says that his investors are very happy to recover anything more than 20% of the face amount of delinquent credit card debts. Debtors and debto negotiation companies can reach favorable settlements with credit card account investors.

Therefore, debtors should not expect to successfully negotiate credit card balances outside of bankruptcy until the account has been delinquent at least 180 days. If you get notice that the account has been assigned to another owner after 180 days the bank has probably sold the account to an investor. At that point, you have a good chance to settle your debts for a small percentage of the amount due especially if you can offer a cash settlement.

How I Practice

In the TV show M*A*S*H, there is a scene in which Colonel Potter is trying to reach a general who happens to be the head chaplain for the U.S. Army. He calls the general's office and asks for the general. He is surprised to discover that he is speaking to the general himself. Colonel Potter then utters the famous line, "The general answers his own phone. He must be a Unitarian."

I like the story .  I also answer my own phone.

I was reminded of the story last week when a prospective client called and was surprised to reach me immediately. This has happened to me a fair number of times. People calling an attorney often expect to have a receptionist answer the phone.  I usually answer my own phone.


Because people who call me want to talk to me. They don't want to talk to someone else.

The idea is the same throughout my practice. When a client comes to meet with me, they meet with me. When they email me, I respond directly. Although I regularly work with paralegals and other attorneys on certain cases, almost all contact from my firm goes through me.

I manange everything in my practice myseld.


Because it works better for both my clients and me.

It works better for clients because they get direct representation. Clients don't want to be pawned off on support staff all the time. They want contact with their primary attorney. They want to receive counsel directly from him or her.

It works better for me because I get to practice law rather than spending a lot of time supervising.  I know from my days at medium sized law firms that one of the tougher issues is "leverage" -- how many younger attorneys are being supervised by older attorneys and how many staff are being supervised by those attorneys. I would much rather spend my time practicing law than supervising a large staff. I would much rather have a reasonable number of cases and handle those well than try to be a huge bankruptcy mill that practices assembly-line law.

So when you call, don't be surprised if I answer the phone.

FTC Crackdown

The Federal Trade Commission announced several new developments in its crackdown on fraudulent loan modification and foreclosure relief companies. One settlement order bans 16 marketers from the mortgage modification or foreclosure relief business, another requires payment of $11.4 million for violating a previous court order the FTC obtained against the same scammer for fraudulent telemarketing practices, and a new FTC lawsuit charges another online marketing operation with masquerading as a government mortgage assistance program.

The FTC is focusing on companies that charge consumers up-front fees and made false promises that they could get their loans modified or prevent foreclosure.

Some highlights include:

- Impersonation of

- “Federal Loan Modification Law Center,” charging largely upfront fees of as much as $3k but not delivering services

- False claims of being able to obtain mortgage loan modifications for consumers in all or virtually all cases, false “money-back guarantees,” and false statements of affiliation with HOPE NOW

- Misleading “official government agency seals” or logos and links to federal government Web sites

For more detailed information, and copies of the court filings, please see:

FTC Crackdown

The Federal Trade Commission announced several new developments in its crackdown on fraudulent loan modification and foreclosure relief companies. One settlement order bans 16 marketers from the mortgage modification or foreclosure relief business, another requires payment of $11.4 million for violating a previous court order the FTC obtained against the same scammer for fraudulent telemarketing practices, and a new FTC lawsuit charges another online marketing operation with masquerading as a government mortgage assistance program.

The FTC is focusing on companies that charge consumers up-front fees and made false promises that they could get their loans modified or prevent foreclosure.

Some highlights include:

- Impersonation of

- “Federal Loan Modification Law Center,” charging largely upfront fees of as much as $3k but not delivering services

- False claims of being able to obtain mortgage loan modifications for consumers in all or virtually all cases, false “money-back guarantees,” and false statements of affiliation with HOPE NOW

- Misleading “official government agency seals” or logos and links to federal government Web sites

For more detailed information, and copies of the court filings, please see:

Supreme Court Rules on Schwab v. Reilly

The Supreme Court has ruled, 6-3, majority opinion by Clarence Thomas, that the debtor exempts only a dollar interest in property, not the actual property itself and the trustee can sell the property after the objection period has expired.

Bankruptcy—Calculation of Debtor's "Projected Disposable Income"

Hamilton v. Lanning, No. 08-998

A debtor who files for bankruptcy under Chapter 13 must agree to a court-approved repayment plan for making installment payments to creditors. If the bankruptcy trustee objects to the repayment plan, the plan can be confirmed only if it provides that all of the debtor's "projected disposable income" during the applicable period "will be applied to make payments to unsecured creditors under the plan." 11 U.S.C. § 1325(b)(1)(B). Congress has defined a formula for calculating "disposable income" based on the debtor's average monthly income over the six-month period before the bankruptcy petition was filed, id. § 1325(b)(2)(A)(i), but it has not provided a separate definition of "projected disposable income."

The Supreme Court held that when a bankruptcy court calculates a debtor's projected disposable income, it may account for changes in the debtor's income or expenses that are "known or virtually certain" at the time of confirmation. In doing so, the court rejected what has become known as the "mechanical approach," which would require courts to apply the rigid formula in Section 1325(b)(2)(A)(i), and instead adopted the so-called "forward-looking approach," which allows the bankruptcy court to deviate from that formula if there are special circumstances that affect the debtor's income or expenses.

The Court began by explaining that the ordinary usage of the word "projected" allows many factors to be taken into account, and it does not assume that the past will necessarily repeat itself. This understanding is consistent with how the term is used in other federal statutes, some of which expressly recognize that future projections may deviate from historical averages for a variety of reasons. The Court also explained that courts traditionally exercised discretion when projecting future income in the years before Congress codified these practices in the Bankruptcy Code, and that if Congress had intended to overrule longstanding practice, it presumably would have said so expressly. The Court cautioned, however, that—consistent with historical practice—the bankruptcy court's calculation of projected disposable income should depart from the historical average "only in unusual cases," and that it should take into account only "known or virtually certain information" about the debtor's future income or expenses. Slip op. 12.

Justice Scalia dissented, arguing that because the only mention of "disposable income" in Section 1325(b) is as part of the phrase "projected disposable income," the statutory definition of disposable income must also be used as the formula for projected disposable income. Under the Court's interpretation, he explained, the statutory definition is rendered entirely superfluous.

Bankruptcy courts now have greater discretion to determine how much a debtor must commit to repaying unsecured creditors, and a greater number of Chapter 13 repayment plans will likely be confirmed even over the objection of the bankruptcy trustee.

Freddie Announces Relief for Gulf Coast Borrowers Affected By Oil Spill

Mortgage giant Freddie Mac said Thursday that its servicers may grant relief to Gulf Coast borrowers unable to pay their loans because of the BP oil spill’s impact on their incomes.

Freddie Mac’s forbearance policies give servicers the discretion to suspend a borrower’s mortgage payments for up to three months or reduce payments for up to six months. Servicers may recommend extending the forbearance for up to 12 months, based on the borrower’s individual circumstances.

Under the GSE’s procedures for such circumstances, servicers are not allowed to accrue or collect late charges from the borrower during a short-term forbearance or any subsequent repayment plan period as long as the borrower is making payments according to the forbearance agreement.

“Freddie Mac and the nation’s mortgage servicers will work together to advance available mortgage relief to homeowners affected by the Deepwater Horizon oil spill,” said Ingrid Beckles, Freddie Mac’s SVP of default asset management.

Beckles added, “We are instructing our servicers to work with borrowers with Freddie Mac-owned mortgages to extend forbearance of mortgage payments where appropriate to help them stay in their homes as they navigate through this financial hardship.”

Freddie’s not the only one stepping up to offer assistance to victims of the largest environmental disaster in U.S. history.

On Wednesday, Fannie Mae issued an announcement suggesting its servicers immediately suspend or reduce mortgage payments for borrowers in coastal areas of the Gulf, and CitiMortgage is suspending foreclosures and REO evictions in the region until September 17.

Federal Task Force Arrests 485 for Mortgage Fraud

The U.S. Department of Justice on Thursday announced the results of the largest mortgage fraud sweep in history.

Since the nationwide crackdown began in March, Feds have gone after 1,215 criminal defendants, who are allegedly responsible for more than $2.3 billion in losses, and made 485 arrests.
In addition to the arrests made, the Justice Department says to date, the operation has resulted in 191 civil enforcement actions and the recovery of more than $147 million.

The FBI currently has over 3,000 pending mortgage fraud cases, almost double the figure for all of 2008.

GMAC Mortgage Faces Lawsuit for Failing to Properly Service Mortgages

Citing mismanaged loan servicing among other accusations, American Residential Equities, LLC (ARE) has filed suit against GMAC Mortgage Corporation, a big player in the residential mortgage servicing industry.

The suit, filed in the Southern District of Florida, accuses GMAC of failing to properly service a number of mortgages and REO properties owned by Miami-based ARE. As a result of this mismanagement, ARE says it has been working for the past year to arrange an orderly transfer of the servicing responsibilities of its loans away from GMAC.

In addition, ARE says GMAC refused requests to audit its books and records. The suit alleges that GMAC failed to maintain properties, subjecting them to weather damage, vandalism, and government fines. And in other cases, ARE says some properties were over-insured, while timely insurance claims were not filed for others.

ARE also claims in the suit that it was pressured by GMAC into offering preferential treatment and a loan modification to Georgia State Rep. Joe Heckstall’s brother, Cornelius Heckstall.

According to the suit, Rep. Heckstall contacted GMAC on behalf of his brother and requested that his mortgage be modified a second time. ARE contents that GMAC pressured the company to offer this second mortgage modification, despite the fact that he had failed to make payments related to an earlier loan modification with identical terms.

Thursday, June 17, 2010


I'm so excited!  Next week I'm going to Boca!   I will be attending the Florida Foreclosure Defense Attorneys Meeting on Thursday, June 24, 2010 at the Boca Raton Resort and Club and finally getting to put faces with the blogs and groups I read to keep you current!   The Florida Bar program on Residential Mortgages is sold out, so is the Federal (Bankruptcy) Roundtable, but hopefully I can get into one of them while I'm there, otherwise I'm going to check out the awesome SPA. 

High Court Rules on NLRB, Texting and Judicial Takings

The Supreme Court this morning again saved for another day the headline cases of the term, but still issued five opinions that will provide plenty of fodder for legal analysis.

Tops among the five are probably:

• City of Ontario, California v. Quon (pdf), a much-anticipated first look at the privacy of workplace text messages. The Court sidestepped the question whether public employees have an expectation of privacy, but in any event unanimously found that the city's search of a worker's text messages at issue in the case was reasonable under the Fourth Amendment.

• New Process Steel v. National Labor Relations Board (pdf), ruling that a two-member NLRB does not have the legal authority to do the business of the board, which is supposed to have five members.

• Stop the Beach Renourishment, Inc. v. Florida Department of Environmental Protection (pdf), a fractured ruling against Florida homeowners who claimed that a state court ruling on beachfront property rights amounted to an improper taking. There was no majority opinion on the eight-member Court, with Justice John Paul Stevens recused because he owns a beachfront condominium in Ft. Lauderdale.

The justices also finally pushed out the door the oldest case on its docket of argued cases this term: Schwab v. Reilly (pdf), a bankruptcy case. By a 6-3 vote with Justice Clarence Thomas writing for the majority, the Court ruled against the debtor, a chef who wanted to hang onto some of the tools of her trade. There was an unusual lineup of dissenters: Ruth Bader Ginsburg, Chief Justice John Roberts Jr., and Stephen Breyer.

With Schwab now decided, the oldest case on the docket becomes Bilski v. Kappos, the long-awaited business methods patent case. The Court next sits to issue opinions on June 21.

One more ruling from the Court today: Dillon v. United States (pdf), a post-Booker sentencing case.

Check back here and at later for more on today's Supreme Court action.

This article first appeared on The BLT: The Blog of Legal Times.

BP is Sorry- GIVE ME A BREAK !!!!!!

President Barack Obama wrested a $20 billion compensation guarantee and an apology to the nation from British oil giant BP on Wednesday, announcing the company would set up a claims fund for shrimpers, restaurateurs and others whose lives and livelihoods are being wrecked by oil flooding into the Gulf of Mexico. Resolving one particularly thorny dispute, BP will also establish a separate $100 million fund to support oil rig workers idled by Obama's post-spill six-month moratorium on new deep-sea oil drilling.


Should Retired Justices Be Called Back to Supreme Court?

Sen. Patrick Leahy says he is thinking about proposing legislation that would allow a retired U.S. Supreme Court justice to sit in a case when a current justice has recused -- in what would be a major shift in how the Court operates. Leahy, who chairs the Senate Judiciary Committee, said he decided to draft a bill after a recent meeting with Justice John Paul Stevens. Told of the proposal, Sen. Orrin Hatch said his initial reaction would be to oppose it. Concern over tie votes, he said, is overblown.

Shadow Inventory For Nonagency RMBS Could Take Three Years To Clear

Regional variations in the shadow inventories of distressed U.S. mortgages could indicate where home prices may pick up or continue to stabilize and where additional declines may still be in store, according to a recent report published by Standard & Poor's (S&P) Ratings Services.

"We estimate that the entire shadow inventory of distressed properties currently outstanding that back nonagency residential mortgage-backed securities would take nearly three years to clear at the current average national resolution rate," says Standard & Poor's credit analyst Diane Westerback. "Given this backlog, we believe that average home prices could fall again if demand doesn't rise in step with the potential influx of supply."

The original principal balance of the current shadow-inventory overhang - which S&P defines as outstanding properties that are (or were recently) 90 days or more delinquent, in foreclosure or real estate owned (REO), but haven't yet hit the market - amounts to roughly $480 billion, or 30% of the entire nonagency market.

HUD Announces M&M III Contracts, Separates Functions

The U.S. Department of Housing and Urban Development (HUD) has announced it is awarding contracts to 23 companies to serve as asset managers (AMs) and 32 other firms to serve as field service managers (FSMs) under the third generation of its Management and Marketing (M&M) program, known as M&M III. The new contracts are intended to reduce risk, increase sale prices and accelerate the pace of reselling HUD's inventory of foreclosed Federal Housing Administration (FHA) homes.


Under HAFA, all homeowners that do not qualify for a Home Affordable Modification Program (HAMP) loan modification must be considered for participation in the HAFA program before a lender forecloses. Government-sponsored enterprises Fannie Mae and Freddie Mac recently announced their own versions of the program.

B of A Passes 70K HAMP Permanent Mods,

Bank of America says it has completed more than 70,000 permanent modifications under the federal government's Home Affordable Modification Program (HAMP), converting more than 16,000 homeowners from trial to permanent contracts in the past month.

FHFA Orders Delisting Of GSE Stock

The Federal Housing Finance Agency (FHFA) has directed Fannie Mae and Freddie Mac to delist their common and preferred stock from the New York Stock Exchange (NYSE) and any other national securities exchange. Once the delisting is completed, each enterprise’s common and preferred stock is expected to be quoted on the Over-the-Counter Bulletin Board.

"FHFA's determination to direct each company to delist does not constitute any reflection on either enterprise’s current performance or future direction, nor does delisting imply any other findings or determination on the part of FHFA as regulator or conservator," says FHFA Acting Director Edward J. DeMarco. “The determination to direct delisting is related to stock-exchange requirements for maintaining price levels and curing deficiencies."

Each company's common stock price has hovered near the NYSE minimum average closing price requirement of $1 over 30 trading days for most months since the conservatorships were established in September 2008.

Most recently, Fannie Mae’s closing stock price has been below the required $1 average price for the past 30 trading days. Per NYSE rules, a company in that condition must either drop from the exchange or undertake a "cure" to restore the stock price above the $1 mark if it does not meet the NYSE’s minimum price requirements.

The alternatives for putting in place such a cure do not assure maintaining the minimum price level or avoiding loss of shareholder value.

In view of Freddie Mac’s share price being close to the $1 mark and the common situation of both companies operating in conservatorship with support from the Treasury Department, FHFA has determined that Freddie Mac should also initiate an orderly delisting process.

“A voluntary delisting at this time simply makes sense and fits with the goal of a conservatorship to preserve and conserve assets,” says DeMarco.

Each enterprise’s stock will continue to trade, but through a different trading mechanism. The enterprises remain Securities and Exchange Commission registrants and subject to applicable federal securities laws.

SOURCE: Federal Housing Finance Agency

Fannie and Citi Offer Mortgage Relief to BP Oil Spill Victims

Mortgage companies are beginning to step up and offer some relief to homeowners whose livelihood has been impacted by the BP oil spill off the coast of the Gulf of Mexico. Fannie Mae has issued an announcement suggesting its servicers immediately suspend or reduce mortgage payments for borrowers whose properties or income have been affected by the spill. CitiMortgage is suspending foreclosures and REO evictions in coastal areas of the Gulf until September 17.

Fitch Projects Steep Re-Default Rates on HAMP Modifications

The government’s Home Affordable Modification Program (HAMP) has been widely criticized for what many say are substandard results, and a new report from Fitch Ratings indicates that even the small successes it’s made so far may soon be reversed.

The company says that within 12 months, 55 to 65 percent of the prime loans modified under the federal program will likely re-default. For modifications on subprime and Alt-A loans, the projection is even higher – 65 to 75 percent.

What’s worse is that Fitch called its estimates “conservative.”

The agency’s analyst wrote in their report, “Fitch continues to believe that, when properly done, modifications can benefit both homeowners and [residential mortgage] investors. However, modification performance or sustainability continues to be affected by the borrowers’ desire to keep their property, as well as having sufficient cash flow to make the modified payments.”

The ratings agency says it is encouraged by the prospects of the administration’s newest initiative, the principal write-down modification approach, since it attempts to address the borrower’s desire to stay in the home.

However, Fitch’s analysts note that the program, which isn’t expected to be ready for implementation until later this year, limits the principal write-down to no less than 115 percent of current value and also requires the borrower to perform under the terms of the modification for three years to receive the full benefit of the write-down.

According to Fitch’s report, approximately 15 percent of all non-GSE loans held in residential mortgage-backed securities (RMBS) by balance had received at least one modification as of May 2010, including almost 35 percent of RMBS subprime loans.

Thanks DS NEWS

But even modified loans prove to need more restructuring, Fitch says. Its study shows that 15 percent of all modified mortgages in non-GSE securities have received at least one additional modification.

While modifications continue to be the primary strategy to work out problem loans, accounting for just under 70 percent of all loan workouts, the use of alternative methods to foreclosure, such as short sales and short payoffs, has increased materially since mid 2009, Fitch said.

Currently, 50 percent of prime and 35 percent of subprime and Alt-A distressed liquidation sales are not by REO sale, the ratings agency reports.

Mediation Process

This site has a great flow chart on the mediation process.

Circuit Court of Appeals Cases from Last Week

U.S. Supreme Court, June 07, 2010

Hamilton v. Lanning, --- U.S. ---- (2010)(Supreme Court approves "forward looking approach" for computing chapter 13 plans by above-median debtors, i.e. the court may account for changes in the debtor’s income or expenses that are known or virtually certain at the time of confirmation)

9th Circuit Court of Appeals, June 09, 2010

In re Southern Cal. Sunbelt Developers, --- F.3d --- (9th Cir 2010)( 1) bankruptcy court properly concluded that 11 U.S.C. section 303(i) permitted an award of attorney's fees for a section 303 action as a whole, including fees incurred to litigate claims for fees and damages under section 303(i)(1) and (2); 2) section 303(i) permitted an award of punitive damages under section 303(i)(2)(B) in the absence of an award of actual damages under section 303(i)(2)(A); and 3) the bankruptcy court properly held two individual appellants jointly and severally liable for the costs and attorney's fees the debtors incurred in obtaining dismissal of the involuntary petitions. However, the judgment is reversed in part where the bankruptcy court erred by holding the individual appellants liable for the debtors' costs and fees incurred! on the section 303(i) motions themselves)

Thanks to

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Who owns the Note?

By Matt Weidner, Esq.

One of the most important issues in virtually every foreclosure case is trying to identify exactly who owns the note that the Plaintiff is foreclosing on. This issue is almost never clear in the pleadings filed by the Plaintiff despite the fact that this issue is the central issue in the entire case. Remember, the servicer is not the proper party in interest if they are not entitled to profit from the foreclosure judgment.

The plaintiffs and their attorneys make it difficult to find this information, but now we have assistance from
an unlikely source, MERS or Mortgage Electronic Registration System.  A change on the MERS website that was just published today allows any party to search the MERS site by address of MIN number to gain the identity of the owner or investor in the note.

You can check the MERS website here to access this information. This is critically important information in every case, especially when the Plaintiff has identified one party and the MERS site identifies yet another!

Foreclosure Hearings in a Hallway!!!!!!!!!!

This is horrifying tome they are holding foreclosure hearings in a hallway in Broward County.

Analysis: Lenders Aggressively Going after Money Lost in Foreclosures

Over the past year, lenders have become much more aggressive in trying to recoup money lost in foreclosures and other distressed sales, creating more grief for people who thought their real estate headaches were far behind, according to a Washington Post analysis today. Before the housing bust, when the volume of foreclosures was relatively low, lenders rarely chased after deficiencies because borrowers had few remaining assets to claim and doing so involved hassles and costs. But with foreclosures soaring, lenders are more determined to get their money back, especially if they suspect borrowers are skipping out on loan they could afford, an increasingly common practice in areas where home values have tanked. Those who had a second mortgage, such as a home-equity line of credit, in addition to their primary mortgage may find themselves particularly vulnerable, especially if they tapped into the equity line for cash. A handful of states do not allow lenders to pursue deficiencies, nor does a federal program that took effect April 10. Lenders participating in that initiative are paid for approving short sales and as a condition, they cannot go after outstanding debt. In many states, lenders can go after deficiencies, though laws vary widely, said John Rao, an attorney at the National Consumer Law Center. Some states limit how long the banks have to file a claim or collect the debt.

Former Mortgage Executive Charged with Fraud

Lee Farkas, the former head of the now bankrupt mortgage lender Taylor, Bean & Whitaker Mortgage Corp., has been charged in a fraud scheme that led to multibillion-dollar losses and targeted the 2008 federal bank bailout program, Reuters reported yesterday. Farkas was charged with 16 counts including conspiracy, securities fraud and bank fraud, according to an indictment unsealed in U.S. District Court for the Eastern District of Virginia. Prosecutors accused Farkas and unnamed co-conspirators of orchestrating an eight-year scheme that also contributed to the downfall of Colonial Bank, a unit of now-bankrupt Colonial BancGroup, one of the 50 largest banks at the time. The indictment said that Farkas and the co-conspirators tried to misappropriate money from multiple sources, including a lending facility controlled by TBW known as Ocala Funding, which had received funding from Deutsche Bank and BNP Paribas Bank. The alleged scheme also could result in some $3 billion in losses for the Federal Housing Administration and government mortgage guarantor Ginnie Mae, the largest ever for those agencies, said Kenneth Donohue, the Housing and Urban Development Department's inspector general.