Friday, May 6, 2011

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Business Bankruptcies

According to American Bankruptcy Institute data, more than 323,000 businesses filed for bankruptcy from 2004 through 2010, more than 39,000 of them in California. This state's share of all U.S. business bankruptcies has increased from 12.4% in 2007 to 15.7% in 2010, an indication that the recession hit California businesses harder than their counterparts nationwide.

Our office files Ch 7 for business, or sole proprietors in Ch 13.

Taxes Property of The Estate

Too Much Income for Chapter 7

4th Circuit: Calhoun v. U.S. Trustee

No. 09-1646 (4th Cir. May 3, 2011)


Affirmed. The bankruptcy court looked at the totality of the debtors' financial circumstances and determined that based upon the debtors' ability to pay their creditors and other considerations, abuse was present. The Court found no error in the bankruptcy court's decision to dismiss the debtors' Chapter 7 case and the evidence supported the bankruptcy courts finding of abuse pursuant to Section 707(b)(3).

Obma Nominates Fedetal Judges

President Barack Obama on Wednesday named six nominees, including law firm partners, prosecutors and judges, to take the federal bench in New York, California, Florida, Montana and Nebraska.

Obama nominated Katherine B. Forrest and Edgardo Ramos to the Southern District of New York, Judge Yvonne Gonzalez Rogers to the Northern District of California, Judge Robert N. Scola Jr. to the Southern District of Florida, Justice John M. Gerrard to the District of Nebraska and Dana C. Christensen to the District of Montana.

Each nominee will go before the U.S. Senate for confirmation.

Bankruptcy Filings Up

Bankruptcy filings for the 12-month period ending March 31, 2011, rose 2.6 percent when compared to bankruptcy filings for the 12-month period ending March 31, 2010, according to statistics released today by the Administrative Office of the U.S. Courts

GAO Mortgage Foreclosures Report

The Government Accountability Office (GAO) has released a report urging the new Consumer Financial Protection Bureau to make mortgage servicing standards a priority.

FDIC, Federal Reserve, Office of the Comptroller of the Currency, and Office of Thrift Supervision, which culminated in enforcement actions against the nation’s 14 largest mortgages servicers and two third-party vendors, with monetary penalties still pending.


My blog has had 9802 visits since conception.  That seems pretty decent.  

Thank You to all of my visitors.

Squatter Rent estimated $50 billion this year

They are staying in their homes for free about a year and a half on average, buying time to restructure their finances and providing an unexpected support for consumer spending, which makes up about 70 percent of the economy.

Unemployment Up

The national unemployment rate rose to 9.0 percent in April, up from 8.8 percent in March, according to figures released this morning by the U.S. Department of Labor. Employers added 244,000 new jobs to their payrolls last month, but the government agency says the number of unemployed was “little changed” at 13.7 million.

Guns to Get Own Exemption?

From the Bankruptcy Roundtable Digest

CLLA: update: CRS Report Examines Legislation Exempting Firearms in

Posted by: "David P. Goch"

A May 2nd Congressional Research Service report examines HR 1181, the "Protecting Gun Owners in Bankruptcy Act of 2011," and its goal of exempting firearms under the Bankruptcy Code. H.R. 1181, has 23
co-sponsors and has been referred to the House Committee on the Judiciary.

According to the report, the Supreme Court's decisions on the Second Amendment and the right to "keep and bear arms" has raised the question as to whether firearms are protected from the reach of creditors under
federal or state laws.

While a number of states have provisions shielding firearms from creditors' claims, there is no such provision in the Bankruptcy Code. According to the report, there is a great variety in the protection states provide for firearms with most states providing no explicit protection. Of the states that provide explicit protection, the
conditions for providing protection vary. Some states limit the exemption by both the number and value of the firearms; other states specify the type of firearms that can be exempted. In most states that
allow an exemption for firearms, the exemption is not dependent on the way in which the firearm is used; however Ohio, Oklahoma, and Wisconsin, exempt guns for personal use only, and Louisiana requires that the firearm be used for business purposes. Both Montana and Nevada exempt "all arms ... required by law to be kept by any person" in addition to the one gun, selected by the debtor, the report states.

Section 2 of the bill amends Code Section 522(d) adding an exemption for the debtor's aggregate interest, up to a value of $3,000, "in a single, shotgun, or pistol or any combination thereof." The exemption would not
reduce the amount allowed for any other type of exemption under Section 522. Further, the bill also amends Code Section 522(f)(4)(A) to include firearms in the definition of "household goods." This provision would
apply to any number or combination of rifles, shotguns, and pistols as long as the aggregate value was no more than $3,000.

Happy Mother's Day


Foreclosure Case Update

How to Defeat Lack of Prosecution

Barnes v. Ross, 386 So.2d 812 (Fla. 3rd DCA 1980) which held that “Only activity on face of record will automatically preclude dismissal for failure to prosecute, but non-record activity may constitute good cause to avoid such dismissal.”

Thursday, May 5, 2011

1st Cir Again Applies Favorable TILA Rulings to MCCCDA

The U.S. Court of Appeals for the First Circuit recently applied its TILA rulings to Massachusetts law, holding that there was no right to rescind under Massachusetts law where the numerical dates and deadlines in the Notice of Right to Cancel were allegedly inaccurate. The First Circuit also held as untimely Appellants’ request to certify questions construing the Massachusetts Consumer Credit Cost Disclosure Act to the Massachusetts Supreme Judicial Court.

The Appellant-borrowers (“the Borrowers”) obtained a refinance loan from Encore Credit Corp. (“Encore”), which later sold and assigned the loan.

The loan closed a day later than it was originally scheduled, and the loan documents were altered by hand to reflect the date change.

Later, the Borrowers fell behind on their payments. The investor initiated foreclosure proceedings, and rejected the Borrowers’ request torescind the loan. After filing for bankruptcy, the Borrowers sought

rescission under Massachusetts law charging that their mortgage was rescindable, because Encore had allegedly failed to provide the proper closing and rescission dates, and allegedly failed to provide the Borrowers with “high cost home mortgage loan” disclosures under Massachusetts law. Both the bankruptcy court and the United States District Court rejected the Borrowers’ arguments, and the First Circuit affirmed.

Despite the four-year limitations period under the Massachusetts Consumer Credit Cost Disclosure Act, Mass. Gen. Laws ch. 140D, § 10(a) (“MCCCDA”), the Borrowers sought to rescind five years after the closing date, based upon the pending foreclosure. The Borrowers sought to show that the disclosures they received from Encore incorrectly stated the loan closing date, and that the disclosures did not provide the deadline to rescind the loan. To prove that adequate disclosures had been provided in a timely manner, however, the investor submitted copies of the right to cancel forms, which the Borrowers had signed and dated, and which also bore a handwritten date of rescission.

The First Circuit noted that the MCCCDA was patterned on the federal Truth in Lending Act (“TILA”) and that both statutes give consumers the right to rescind a mortgage “until midnight of the third business day following the consummation of the transaction.” Mass. Gen. Laws ch. 140D, § 10(a); 15 U.S.C. § 1635(a). Under the First Circuit’s prior TILA rulings, “technical deficiencies do not matter if the borrower receives a notice that effectively gives him notice as to the final date for rescission and has the three full days to act.” The Court determined that the Borrowers clearly had received adequate notice of their right to cancel under the MCCCDA also.

The Court similarly rejected the Borrowers’ claim that they did not receive state high cost home mortgage loan disclosures. As you may recall, the regulations under the MCCCDA require lenders to print a statement on the loan application above the borrower signature line advising borrowers that the loan being offered may not be the least expensive available and that borrowers should shop around for a better loan. Although the statement was not provided on the Borrowers’ loan application form, it was provided separately at the loan closing. Because the regulations provide that consumers can rescind only within three days of receiving the high cost home loan disclosures, and the Borrowers did not dispute that the warning was provided to them at the time of the loan transaction, Court held that their opportunity to rescind had long expired.

Further, the Court also rejected the Borrowers’ renewed request for certification to the Massachusetts Supreme Judicial Court. The Court noted that the Borrowers had waited until after the bankruptcy court had denied their motion for reconsideration before seeking certification. The Court stated that such an approach “is almost always fatal, unless the court sees strong policy reasons” for certification. The Court also stated that it does not “normally certify cases that depend not on a general rule but on a unique fact configuration” as in this situation.

Finally, the Court held that the Borrowers were not entitled to damages under chapter 93A of the Massachusetts General Laws, because liability for damages hinged on a successful claim for rescission, which was clearly not the case here.

11th Circuit Health Care Fight

11th Circuit- Florida and 25 other states filed their opening brief in the Eleventh Circuit on Wednesday in a dispute over the federal health care overhaul, saying the law's individual mandate clause and its expansion of Medicaid exceeded Congress' constitutional authority.

The case is on appeal from a Florida federal court, which ruled in January that a provision of the Patient Protection and Affordable Care Act that requires all Americans to purchase health insurance or pay a penalty was not protected by the commerce clause of the U.S. Constitution.

Florida AG sues Foreclosure Rescue Companies

The office of Florida Attorney General Pam Bondi has filed a lawsuit against three South Florida companies that allegedly charged up-front fees for loan modification services to homeowners facing foreclosure.

Home Owner Protection Economics Inc., DC Financial Group, Deleverage America Inc. and owners Dennis Fischer and Christopher S. Godfrey purportedly collected thousands of dollars monthly in up-front fees for modification services that were never provided. As a result of Bondi's lawsuit, the Palm Beach County Circuit Court has ordered that the defendants' assets be frozen and that they be forbidden from operating until further order of the court.

An investigation conducted by the attorney general’s economic crimes division indicated that these companies, located in Delray Beach, were allegedly charging up-front fees ranging from $495 to $2,000 for services that were never rendered. Allegedly, the defendants falsely represented to homeowners that they would work with lenders to reduce the homeowners’ debt and prevent foreclosure.

The companies were allegedly soliciting hundreds of homeowners nationwide via telemarketing, direct mail, e-mail, and Internet, print and TV advertising.

Fannie Mae New Short Salre Rules

Fannie Mae is changing the process through which it compensates servicers for short sales and deeds-in-lieu (DILs) of foreclosure.

Currently, the company pays an incentive fee after a servicer closes a case in HomeSaver Solutions Network (HSSN) and after the company receives a request for cash disbursement.

Effective with short sales and DIL transactions closed on or after June 1, Fannie Mae will first review cases for eligibility of incentive fees before making a final determination. Starting with cases closed on or after that date, servicers will no longer have to submit cash-disbursement requests. Instead, Fannie Mae will pay approved incentive fees once per month.

Fannie Mae has also updated its requirements for the way servicers communicate loan modification declinations to borrowers. For all modification declinations issued by the company through HSSN on or after June 15, servicers will have to send an "adverse action notice" to the borrower if the borrower's mortgage is current on the date Fannie Mae advises the servicer of the declination.

New Foreclosure Firm in Florida

Brock & Scott PLLC, a provider of default legal services, has opened a new office in Fort Lauderdale, Fla. The location becomes the North Carolina-based firm's ninth office in the Southeast.

Brock & Scott also practices in South Carolina, Tennessee, Georgia and Virginia. The new Florida team includes attorneys averaging over 10 years of experience in the state.

Wednesday, May 4, 2011

ll App Ct Stops Short of Holding That Banks Are Not Corporations Requiring Registered Agents

An Illinois Appellate Court recently held that a debtor failed to adequately allege that a bank suing as plaintiff was transacting business in the state without a certificate of authority, in violation of the Illinois Business Corporations Act, 805 ILCS 5/13.70, and therefore reversed the lower court's dismissal of the plaintiff bank's collection complaint.

A copy of the opinion can be found at:

Defendant Ebro Foods, Inc. ("Borrower"), executed and delivered to LaSalle Bank, N.A. a loan and security agreement and revolving note. Additional defendants ("Guarantors") executed and delivered to the bank separate continuing unconditional guaranties wherein each guaranteed payment of Borrower's indebtedness. Borrower defaulted on the loan and the bank's successor by merger ("Plaintiff Bank") filed a complaint against Borrower, later dismissed due to Borrower's filing bankruptcy, and against Guarantors based upon their unconditional guaranties.

Guarantors filed a motion to dismiss, arguing among other things that the Plaintiff Bank could not bring suit in Illinois because it lacked a certificate of authority pursuant to Section 13.70 of the Act. At the time the motion to dismiss was filed, the Illinois Secretary of State's Web site indicated that the holding company for the Plaintiff Bank was not in good standing as to its Illinois corporate registration.

In response, the Plaintiff Bank argued that its holding company was not the same as the Plaintiff Bank, and that the Plaintiff Bank - not its holding company -- was the plaintiff in the suit. On a motion to reconsider, the Plaintiff Bank also argued for the first time that "dismissal was improper because it is a national banking association authorized to do business in all 50 states, which includes the ability to sue and be sued," and that the National Bank Act preempts the application of Section 13.70.

The trial court granted Guarantors' motion to dismiss, and denied the Plaintiff Bank's motion to reconsider on grounds of waiver. The Plaintiff Bank appealed, and the Appellate Court reversed, applying an exception to the waiver issue, in order to "ensure a consistent body of law on which national banks doing business in Illinois can rely."

The Appellate Court examined the Plaintiff Bank's "ultimate contention as that the trial court misapplied section 13.70 of the [Illinois Business Corporations] Act in dismissing its claim." As you may know, Section 13.70 of the Act "requires a foreign corporation to obtain a certificate of authority in order to maintain a civil action in any court of the state." See 805 ILCS 5/13.70. However, "there are situations where it does not need such a certificate." "For example, if a foreign corporation is engaged in only occasional transactions in the state, it need not obtain a certificate of authority. Also, if a foreign corporation is conducting interstate commerce, it is not required to obtain a certificate of authority." In addition, "Defendants here bear the burden of proving that [the Plaintiff Bank] was transacting business in the state without a certificate in violation of the Act."

The Court held that Guarantors failed to meet their burden, reasoning that "on a section 2-619 motion to dismiss, Guarantors cannot satisfy this burden merely by showing that [the Plaintiff Bank] is a foreign

corporation without a valid certificate of authority." Rather, Guarantors "must also allege facts showing that [the Plaintiff Bank] was not engaged in conducting interstate commerce." In this case, the "record shows that Guarantors argue only that [the Plaintiff Bank's holding company's] certificate has been revoked" and "therefore, dismissal of [the Plaintiff Bank's] complaint on that basis was error."

Bankruptcy Bands


Foreclosure activity increased sharply in March, a sign that lenders are coming to grips with the documentation problems that led to the robo-signing scandal last fall, reported yesterday. Foreclosures were initiated on more than 217,000 homes in March, a 21 percent increase over February's rate, according to information released today by the HOPE NOW alliance. Nearly 85,000 properties were forfeited through foreclosure sales during the month, a 35 percent increase over February. The increase in foreclosures occurred despite a declining trend in mortgage delinquencies. There were 2.63 million residential mortgages at least 60 days past due in March, a 6 percent decline from February's level of 2.78 million, which in turn represented a similar decline from 2.95 million in January. Meanwhile, the number of at-risk homeowners obtaining private mortgage loan modifications from their lenders also increased significantly in March. There was no updated information provided for loan modifications performed through the government's Home Affordable Modification Program (HAMP); however, private modifications have recently been outpacing HAMP modifications by about a 3-to-1 ratio.

Credit Cards


Banks were more willing to approve credit card applications in the first three months of 2011, according to a new survey from the Federal Reserve, but it was less than clear whether consumers really want them, according to a report yesterday. According to the Federal Reserve's latest survey of senior loan officers—a quarterly poll of U.S. banks regarding their lending practices—credit card issuers were much more likely to approve applicants in the first quarter of this year, as banks are continuing to ramp up the flow of credit after slowing it to a trickle during the economic recession. There were mixed signals when it came to demand, however. The Fed noted that "demand was little changed for credit card loans" in the early months of 2011, ultimately showing a net decrease of about 3 percent. However, when the survey asked about both new credit card accounts and increases in existing credit lines, respondents said demand had gone up substantially (a net 16 percent). Those two results would seem to indicate that while people aren't really looking for new credit cards, they want access to more credit on the plastic they already carry

Interest Rates

U.S. Rep. Barney Frank (D-Mass.) today introduced a bill that would let interest rates be set only by Federal Reserve officials picked by the government, a new attempt to move power away from regional Fed officials chosen by the private sector, The Wall Street Journal reported today. The bill would remove from the 12-member policy-setting Federal Open Market Committee the five members who represent regional Fed banks. Only the seven-member board in Washington, which currently has two vacant seats, would get to vote on interest rates. The congressman said this would make the Fed more democratic and increase "transparency and accountability on the FOMC" by eliminating those officials who are effectively picked by business executives. Analysts said Frank's new proposal could hurt the Fed's independence from Congress. "Setting interest rates...that's a public function. And the Federal regional presidents are picked by private citizens," Frank, the ranking member of the House Financial Services Committee, told CNBC. However, not letting regional Fed presidents have a say in monetary policy would be "tragic," Hoenig said today. The banks allow the public around the country to have an input on the Fed's decisions, he argued.


April consumer bankruptcies decreased 7 percent nationwide from April 2010, according to the American Bankruptcy Institute (ABI).

FDIC Report Highlights Review of Foreclosure Practices
The Special Foreclosure Edition of Supervisory Insights, released today, highlights lessons learned from an interagency horizontal review of the 14 largest residential mortgage servicers. This review resulted in Consent Orders with all entities reviewed. 
To date, FDIC reviews of state nonmember banks have not identified instances of "robo-signing" or other serious deficiencies in mortgage servicing operations. Nevertheless, any bank involved in residential mortgage servicing can benefit from understanding the issues identified in the interagency review. To help institutions minimize their legal and reputational risks, this Special Foreclosure Edition provides examples, derived from the lessons learned, of effective residential mortgage servicing practices.

"The best practices outlined in this publication provide important suggestions for avoiding pitfalls in servicing mortgage loans," said FDIC Chairman Sheila C. Bair. "We encourage all residential mortgage servicers to read the article and consider the best practices as they review their own servicing operations."

Supervisory Insights provides a forum for discussing how bank regulation and policy are put into practice in the field, sharing best practices, and communicating about the emerging issues that bank supervisors face. The journal is available on the FDIC's Web site at Suggestions for future topics and requests for permission to reprint articles should be e-mailed to Requests for print copies should be e-mailed to

PMI Expands LTVs and Credit Scores in Distressed Markets

PMI Mortgage Insurance Co. is seeing signs of strengthening in markets the firm classifies as “distressed,” enough so that the private mortgage insurer is relaxing its requirements for loan-to-value (LTV) ratios and minimum credit scores.

The California-based insurer issued a bulletin last week announcing that it is raising the LTV to 95 percent for both purchase transactions and rate-term refinances in distressed markets, as long as the borrower has at least a 720 credit score.

In addition, PMI has lowered the minimum credit score requirement to 680 for LTVs at or below 90 percent on one-unit properties and condominiums. The LTV max for co‐ops is 85 percent, and the lower credit score minimum of 680 also applies.

The company says it plans to add the entire states of Arizona and Florida to the list, effective July 1. Attached housing remains ineligible for mortgage insurance in the state of Florida.

Foreclosures Trapped by a Lack of Lawyers

Moves by banks to ditch law firms snared in the "robo-signing" mess are spreading delays and confusion to borrowers, while angering judges grappling with thousands of foreclosure cases now trapped in limbo, the Wall Street Journal reported today. The trouble began when U.S. banks and government-owned mortgage giants lost confidence in some law firms that handled a huge volume of foreclosures. After controversy erupted last fall over the shoddy review of loan documents known as robo-signing, banks dropped some law firms. Finding replacement lawyers who can pick up the slack quickly has been a struggle. While the resulting slowdown means that fewer houses are being seized, late fees are piling up for homeowners seeking a loan modifications. Investors who own bonds backed by those mortgages could face higher costs from the snags.

Fannie has approved 16 law firms to handle its cases in the state, up from nine firms last year. Freddie uses 14 law firms in Florida, up from four. At one point David Stern's office handled 20% of all foreclosures in Florida.

The bottom line they will still lose the house because they aren't paying the mortgage.

Monday, May 2, 2011

Shapiro & Fishman

Stern Personal Liability
A federal judge has ruled that former employees of DJSP Enterprises -- a company led by attorney David J. Stern, once known as the foreclosure king of South Florida -- can go after him personally as well as the company for allegedly violating labor laws.

Stern Sues Banks

Strategic Defaulters Plan Ahead

1 out of 45 Households in Bankruptcy

About 54,000 households in the federal court district that includes the Sacramento region declared bankruptcy last year, up 20 percent from 2009.

The rate of bankruptcy filings in the eastern district of California is now about 50 percent higher than the national average.

Most filers asked for Chapter 7 protection, a liquidation which addresses unsecured debt like credit cards. About 10,000 filed for debt restructuring under Chapter 13, which is often done to try to save a home from foreclosure

California Foreclosure Bills Fall Flat with Committees

California legislators have put two bills aimed at addressing the state's foreclosure problem to committee votes. Both failed to pass despite the fact that supporters packed the hearing rooms at the state Capitol, but neither is completely dead. They have both been scheduled for new hearings in the coming week. The Senate bill would have made it unlawful for a lender to move forward with foreclosure while evaluating the borrower for a modification. A second bill in the Assembly would have levied a $20,000 fee on lenders and servicers for every foreclosure initiated.