California Bankruptcy Attorney Blog

As Newport Beach commercial loan modification attorneys, we were interested to see a recent article suggesting that the trend of "walking away" from mortgages has now reached the commercial sector of real estate. The Wall Street Journal wrote Aug. 25 about at least three companies that have chosen to default on commercial loans because they believe it makes better business sense than continuing to pay the loans back. The article compares this trend to the debate among residential mortgage holders, where many people have accused walk-aways of failing to meet a moral obligation to repay their lenders, even if it makes good financial sense to abandon the loan. By contrast, the article said, there is less of a stigma for this in the financial world -- in fact, some companies that walked away have even been rewarded financially for what was seen by some as a smart business move.

The article cites at least four commercial property owners that have made strategic financial decisions to stop paying their mortgages and return the keys to the lender. They include Taubman Centers Inc., owner of the Beverly Center in Los Angeles, which walked away from a mortgage on a property in Atlantic City, N.J. Robert Taubman, the company's chief executive, told the Journal that the decision was not made lightly, but the gap between the $52 million value of the property and the $135 million paid was very large. At least one investor, Deutsche Bank's RREEF, reportedly favors companies that get rid of "money pit" properties, as long as their loans do not hold buyers personally responsible for a default. The article said whether a buyer walks away depends to some extent on the lender, noting that at least one borrower blamed its walk-away on its inability to make a deal with the lender. Nonetheless, it said lenders and investors take a financial hit when they are forced to re-sell properties at the bottom of the CRE market.

Our West Covina commercial real estate loan modification lawyers make this argument to lenders whenever we have a client seeking a loan workout in lieu of an outright foreclosure. Unfortunately, not all lenders are listening. As this article suggests, cold logic is likely to lead many CRE investors who bought at the height of the bubble to consider walking away. Those investors are also much less likely to be affected by the "moral obligation" argument being advanced in the residential mortgage debate, simply because commercial real estate is a business transaction for the buyer as well as the seller. Under those circumstances, lenders will probably need to take a hard look at the possible consequences before simply denying a loan workout or extension to commercial investors. Otherwise, they may be stuck with multimillion-dollar properties they cannot sell, or sell for their true value.

Continue reading "Commercial Property Owners Begin Exploring Walking Away to Deal With Debt" »

As Riverside County loan modification attorneys, we were interested to see an article discussing a recent meeting the Treasury Department held about HAMP -- the Home Affordable Modification Program. This is the government-backed loan modification program that has come under fire in many quarters for being ineffective. As the New Republic Online reported Aug. 24, the Treasury Department invited some financial bloggers to meet with officials on various housing finance subjects, including HAMP. At that meeting, the NRO said, some people were surprised to learn that Treasury considered HAMP successful in at least one respect -- in that it slowed the number of foreclosures and stabilized the national housing market. The NRO suggested that this was obvious -- that the intention had always been to "bail out" the banks.

Unlike the NRO, some bloggers reacted with apparent surprise to the idea that individual homeowners were not the intended beneficiaries of HAMP, calling it "cynical" and "cruel" of the government to mislead people about this. The NRO suggested that this was a naïve reaction, saying it had always thought HAMP was "a backdoor bailout for banks" and federal mortgage guarantors Fannie Mae and Freddie Mac. (It appeared to be arguing that this was so because of restrictive rules that applied to refinancing, although the bulk of the article appeared to be about loan modifications, a separate arm of the Home Affordable program.) The article went on to further criticize HAMP for creating "bad incentives" for homeowners, to intentionally fall behind on their mortgage payments in order to qualify for HAMP, only to see their permanent modifications denied at the end of the three-month trial. And so many permanent modifications were denied, the article suggested, because Treasury encouraged banks to start their trial modifications without enough time to fully vet the borrowers.

Our Westminster loan modification lawyers see some merit in the argument that HAMP was intended to help banks rather than borrowers. That has certainly been the effect, and one reason for that effect is that HAMP provides no way at all to enforce the promises lenders make to taxpayers. Stabilizing the housing market was a stated goal for HAMP at the time. So in that sense, if it eased the flood of foreclosures, it has indeed succeeded, even if it did not ultimately save many homes. However, the rest of the NRO's criticisms appear to ignore the role of lenders and loan servicers in HAMP. The government never required borrowers to be behind on their mortgages to participate in HAMP; this was a requirement from some lenders, and it was heavily criticized in the media. Similarly, lenders have control over whether to make the modifications permanent and have attracted a lot of criticism for cases where they declined to make them permanent without any change in the borrower's finances. Finally, the assertion that lenders were rushed into HAMP is simply untrue; many took well over three months to offer any program, and again, were heavily criticized for delaying action so long.

Continue reading "Bloggers Suggest Obama Administration Intended HAMP as a Bailout of Lenders" »

As Ontario loan modification lawyers, we were disappointed to see fresh evidence that the housing crisis is not going away. On the heels of news earlier in the same week that new home sales have dropped came a post on the Washington Post's Political Economy blog about the number of mortgages in default or foreclosure. According to data released Aug. 26 by the Mortgage Bankers Association, one tenth of American mortgage borrowers have missed at least one payment this summer. Nonetheless, the report said, mortgage defaults are down slightly from the first quarter of 2010, leaving observers with mixed news about the state of the housing market.

This quarter, 4.57 percent of mortgages were in any stage of foreclosure. This is a drop from the first quarter's 4.63 percent, but still higher than the 2009 second-quarter number, 4.3 percent. As such, foreclosures can be said to be up overall, but with some evidence of a drop coming. Further potential good news can be seen in drops in seriously delinquent loans and mortgages at least 90 days past due, both of which are typical precursors to a foreclosure. However, a spokesperson said the Association had also seen a rise in new delinquencies lately, suggesting that more trouble may be coming. The end of the federal home-buyer tax credit in April may also be considered a problem, the article suggested. In all, the spokesperson said the slight decrease in new foreclosures would probably not last, but still described the report as "cautiously optimistic."

Our Perris loan modification attorneys are disappointed that the housing market is not getting better, but we wish we were more surprised. It has been clear for a while that any housing recovery is strictly on Wall Street, not in hard-hit areas like the Inland Empire. Near the end of the article, the author notes that unemployment is around 10 percent -- the same percentage of homes that are missing payments. We do not believe this is entirely a coincidence; unemployment is one of the major predictors of trouble paying a mortgage. For borrowers who do not have a steady income and have run out of savings, there may not be much lenders can do. However, for those delinquent borrowers who do have an income, lenders may still be able to offer loan workouts or other changes. In doing so, they could do themselves as well as the borrowers a favor, by staving off yet another foreclosure and financial loss.

Continue reading "Quarterly Mortgage Bankers Report Finds One in 10 Borrowers Missed Payments" »

This month, our Rancho Cucamonga bankruptcy lawyers wrote about the apparent increase in political candidates who are willing to openly discuss their bankruptcies, or even make the bankruptcy experience a part of their pitches to voters. As it turns out, we have another such candidate right here in Southern California -- a challenger running for a state Assembly seat in the high desert, which includes the cities of Palmdale, Victorville and Adelanto. According to an Aug. 23 article in the Redlands Daily Facts, candidate Linda Jones, a Democrat, is under fire in some quarters because she and her husband filed for bankruptcy in February of 2010. The article notes that she lent her campaign $3,000 in March of this year and paid $2,650 in filing fees, even though she owes $5,856 in state and federal taxes for the 2008 tax year. Jones called the comparison misleading, but the article suggested that voters are generally unsympathetic to candidates with tax problems.

Jones ran against incumbent Republican Steve Knight of Palmdale in 2008 and nearly won, suggesting that this race could also be tight. The news of the bankruptcy came from the Flash Report, a conservative blog run by California GOP vice chairman Jon Fleischman. Fleischman criticized Jones for failing to pay off her back taxes before she paid a nearly identical amount to her campaign, and some Inland Empire Republicans echoed that criticism. Jack Pitney, a Claremont-McKenna College political science professor, said voters might be sympathetic about the bankruptcy itself. The region is suffering financially because of high foreclosure and unemployment rates, and some voters may emphasize with a bankruptcy. But if Jones is perceived as dodging her taxes, he said, voters may be less sympathetic. Jones said the comparison was misleading and that she was current on all of her financial obligations.

As Brea bankruptcy attorneys, we'd like to discuss taxes and bankruptcy, something that the article did not explicitly do. Federal law does allow bankruptcy filers to discharge tax debts, but only under certain circumstances. Jones does not meet one of those circumstances -- her tax debt was not incurred at least three years before her bankruptcy. Thus, regardless of what you might think of this bankruptcy, it would be incorrect to accuse Jones of evading her taxes through it. The tax debts and assets are now owned by the bankruptcy estate, a separate legal entity from the Joneses as individuals, and the taxes will be paid when the Chapter 7 liquidation process has taken place. In fact, since Fleischman posted the Joneses' bankruptcy filing online, we can see that the tax debt is the only priority claim -- meaning that the tax debts will be the first debts to be paid off through their bankruptcy. We can only assume that the campaign money came from assets that were exempted from the bankruptcy, as some assets are in every bankruptcy.

Continue reading "Candidate's Bankruptcy Becomes Political Issue in Redlands State Assembly Campaign" »

Our Moreno Valley consumer bankruptcy attorneys follow media reports about bankruptcy, of course. Like other observers, we have repeatedly read that the financial crisis has triggered so many bankruptcies that they have set a record for filings after the 2005 bankruptcy reform law. That's why we were very interested to see an Aug.18 post from the Credit Slips blog, which focuses on bankruptcy, credit and consumer finance from the perspectives of nine academics. This post was written by guest contributor Alan White, an associate professor at Valparaiso University School of Law in Indiana who teaches bankruptcy, consumer law and contracts, among other things. He posed a question no mainstream newspaper has asked: Given all their debts and defaults, why haven't more consumers filed for bankruptcy?

According to the post, U.S. households' mortgage debt grew by 300 percent in the 11 years between 1996 and 2007, while median income grew by only 40 percent. Unsecured debts such as credit cards also increased, but less dramatically -- possibly because some people used home equity loans to pay off credit cards. When the mortgage crisis arrived and credit was suddenly unavailable, a lot of those borrowers defaulted on their obligations. Credit card "charge-offs" are at 10 percent, up from 3 to 5 percent, White wrote; combined foreclosures and 90-day delinquencies was nearly 10 percent in the first quarter, up from less than 2 percent in other eras. Meanwhile, the Treasury Department estimates that 1.6 million people are eligible for the federal loan modification program. Yet this year's bankruptcy numbers are on track for only about 400,000 people to file for Chapter 13 bankruptcy, he notes, saying this raises the question of when they will file for bankruptcy.

As Santa Ana personal bankruptcy lawyers, we suspect there's not just one reason why more individuals and couples are not choosing bankruptcy -- there rarely is. But we can think of several reasons, thanks to our experience working with bankrupt people. The sad truth is that Chapter 13 bankruptcy does not help everyone who is trying to keep a home. For one thing, a Chapter 13 bankruptcy will not allow a judge to reduce the principal owed, or "cram down" the loan, on a first home. This makes Chapter 13 less likely to help underwater homeowners. Second, debtors must have a steady income in order to make their payments under Chapter 13, and unemployment is increasingly the driving force in mortgage defaults. Such people might still go into bankruptcy, but the lack of steady income may put them in Chapter 7 instead. Finally, many people feel so strongly that bankruptcy is a moral or personal failing that they are delaying a seemingly inevitable bankruptcy with harmful financial moves like draining their bankruptcy-exempt retirement accounts.

Continue reading "Law Professor Asks Why More Bankruptcies Have Not Been Filed During Housing Crisis" »

As Rialto unfair debt collection lawyers, we were pleased to see a consumer-friendly ruling from a federal appeals court saying that the Fair Debt Collection Practices Act applies to some communications by loan servicers. The decision in Gburek v. Litton Loan Servicing LP (PDF) came from the Seventh U.S. Circuit Court of Appeals, which hears appeals of lower court rulings in the Midwest. Camille Gburek sued her mortgage servicer, Litton Loan Servicing, for hiring a third party, Titanium Solutions, to communicate with her about her mortgage debt. She alleged that Litton violated the FDCPA by telling Titanium about her debt; by contacting her despite knowing she was represented by an attorney; and by using deceptive means (hiring Titanium) to obtain her personal information.

Gburek, a northern Illinois resident, was in default on her mortgage when Litton contacted her to discuss it. This initial letter asked her for a variety of financial information and invited her to contact the company to discuss alternatives to foreclosure. The bottom of that letter contained a standard disclaimer that the letter was an attempt to collect on a debt and that Litton was a debt collector. A few days later, Gburek received a letter from Titanium, a company that facilitates communications between homeowners in default and loan servicers. That letter also asked Gburek to send a lot of financial information to Litton, but it contained language specifically saying Titanium is not a debt collector and cannot accept payments.

Gburek sued. In trial court, Litton moved to dismiss the case, saying the two letters were not covered by the FDCPA because they were not sent "in connection with the collection of any debt" as the law requires. The trial court granted that motion, saying the FDCPA did not apply because the letters did not explicitly demand payment of a debt. Gburek appealed.

On appeal, the Seventh Circuit disagreed. The issue was whether the letters to Gburek were made in connection with the collection of her debts. There's no hard and fast rule for testing this, the court wrote, but past Seventh Circuit cases showed that a demand for payment is not necessary for a communication to be considered an attempt to collect a debt. Other factors to consider include the relationship between the parties and the purpose and context of the communication. Applying these, the court found that both Litton's letter and Titanium's were communications from debt collectors, as were the communications between the two companies. In all three cases, content and context make it clear that the communications were attempts to further debt collection. In this case, the court noted, Gburek was seeking only to survive a motion to dismiss, which is a relatively low bar. The decision does not make a judgment on the underlying FDCPA claims.

As Chino abusive debt collection attorneys, we appreciate the court's ruling on this matter. Although the case does not directly affect our clients here in California, because we fall under a different federal appeals court's jurisdiction, it does set a precedent that our own courts may look to if the issue comes up here. Unfortunately, that is a distinct possibility in California, where unemployment and real estate prices have conspired to keep mortgage defaults high. Illegal debt collection attempts are not uncommon in better times, but with the economic downturn, they have also been increasing. As a result, we would be disappointed but not surprised to see aggressive, illegal debt collection tactics in the mortgage arena as well. This ruling helps show that these tactics are just as illegal from loan servicers as they are from conventional collection agencies.

Continue reading "Federal Appeals Court Rules Fair Debt Collection Practices Act Covers Mortgage Letter" »

As Upland consumer bankruptcy attorneys, we follow bankruptcy filing news. So we weren't surprised to see an Aug. 18 item on MSN Money confirming what other news sources have already reported: Bankruptcies have reached their highest point in five years. The new data comes from the Administrative Office of the U.S. Courts, which was reporting on bankruptcy filings for the 12 months ending June 30. During that time, overall filings rose by 20 percent, with a total of 1.57 million cases filed, jumping from the 1.3 million seen in the previous year. According to the article, this is the highest rate of bankruptcy filings seen since 2005, when a new bankruptcy law drove a record number of filings.

The 2005 Bankruptcy Abuse Prevention Act put up more barriers for consumers seeking to file for bankruptcy. As a result, many people rushed to file before the law officially took affect that year, spiking bankruptcy filings. Directly afterward, filings dropped below pre-reform levels. But the article said the bad economy over the past two years has pushed them back up. Filings for the most common individual bankruptcies, Chapter 7 and Chapter 13, rose by 21 percent, or 1.51 million. Of those two bankruptcy types, Chapter 7 -- which is more difficult to qualify for under the new law --was up by 25 percent, while Chapter 13 was up by 10 percent. Business bankruptcies also saw a gain, but a much less dramatic one, with an eight percent increase totaling 59,608 filings. The article suggested that the economic recovery "has yet to find much traction."

You don't need to be an Orange County individual bankruptcy lawyer to know that. Observers of the financial news have predicted record-high bankruptcies for months, thanks to the recession, high unemployment and high rates of foreclosure. News reports have been touting good news for the economy for a while, but that news tends to focus on what Wall Street is doing. Because we work directly with individuals and couples far from the financial industry, we can see that any Wall Street recovery is not translating into a recovery for ordinary people. We hope that this is just a matter of time, and that unemployment and foreclosures will start to drop again, driving down bankruptcies. But in the meantime, individuals with substantial amounts of debt and other pressing financial problems should probably not assume that good news from the financial industry will be good news for them in the short term.

Continue reading "Court System Confirms That Personal Bankruptcies Have Reached Five-Year Peak" »

As Riverside loan modification attorneys, we were pleased to see reports of a recent study that shatters some of the myths about foreclosures in California. As the Ventura County Star reported Aug. 17, the nonprofit Center for Responsible Lending put out a study showing that most foreclosed Californians were not people who bought more house than they could afford. Rather, the study said, the average value of the home when the loan was made was just under $400,000, and the average square footage was a modest 1,494. More commonly, the study said, people who were foreclosed on were more likely to have gotten high-interest loans, often subprime or Alt-A loans. Those people were disproportionately minorities, the study noted, which led to a disproportionately high rate of foreclosures among Latino and African-American borrowers.

The study is based on foreclosures of 877,173 homes in California between September of 2006 and November of 2009. In addition to the data on original price and size, the study noted that three-quarters were priced below median home values in their areas, and that 50.3 percent of foreclosures stemmed from refinancing rather than original loans. It also included a great deal of data about how subprime and expensive loans related to race. In 2006, it said, 53.7 percent of African-Americans and 46.5 percent of Hispanic borrowers received high-rate mortgages, while only 17.7 percent of non-Latino white borrowers did. This was true across all sizes of mortgage, it said, suggesting that income and size of home were not factors. As a result, the study said, 48.7 percent of the people foreclosed on were Latinos, even though they are 36.6 percent of the state's population and received 29.9 percent of loans. Figures were not given for other racial groups. Foreclosures were concentrated inland, in the San Joaquin and Sacramento valleys and the Inland Empire.

Our Rancho Cucamonga loan modification lawyers have known part of these conclusions for months. Several studies, including the Federal Reserve Board study cited in the article, have shown that subprime loans are more likely to lead to defaults, even after looking at factors like housing price changes and credit score. At least one other study, and several lawsuits, suggests in turn that subprime loans were far more likely to be offered to minorities during the "housing boom"; at least one "reverse redlining" lawsuit has been file alleging that a bank specifically targeted African Americans for such loans. This data does not prove that lenders made decisions purely on racial grounds -- we would prefer to see data on the borrowers' incomes and credit -- but it provides strong evidence suggesting it. If it's true, it is not just shameful, but also illegal.

Continue reading "Study of California Mortgage Defaults Finds Most Not Caused by Over-Borrowing" »

Commercial real estate prices saw their steepest drop in nearly a year this past June, a new report says. As Redlands commercial real estate loan modification attorneys, we were interested to see an Aug. 19 report from Bloomberg News, about the newest numbers from Moody's/REAL Commercial Property Price Index. That index dropped by four percent between May and June of 2010, the article said, the biggest drop since July of 2009. The Moody's index is calculated according to changes in commercial property sale values on a monthly basis, then combined and reported once per quarter. This report applies to the second quarter of 2010. In that quarter, it said, prices are down 0.9 percent from the beginning of the year.

Among types of commercial properties, the biggest drop came from retail spaces, such as malls and shopping centers. The index for those spaces dropped almost 11 percent in the second quarter. Industrial properties dropped by 2.9 percent. On the other hand, apartment buildings and office buildings saw a 4 percent gain. All of these properties are affected to some extent by the recession, the article suggested. Some observers had hoped that better results in the earlier part of 2010 were signs of an economic recovery, but the article said any recovery may now be faltering. Retail sales and consumer confidence were low this month, the article noted. One analyst quoted in the article said buyers may have been optimistic earlier this year because of better-than-expected retail sales, but this is now slowing down.

As Los Angeles County commercial real estate loan modification lawyers, we are disappointed to see that investors may have been overconfident. Because we work frequently with individuals and companies in financial distress, we are well aware that the economy has not rebounded as vigorously as anyone would like. A down economy is bad news for commercial real estate owners because without commercial activity, borrowers face a double-edged sword. On one side, depressed property values have put many loans underwater -- especially loans that were originated when property values were high, during what is now being called the commercial real estate bubble. Being underwater means the owner cannot refinance. On the other side, a bad economy also means fewer tenants, renters or guests filling those commercial spaces and pumping money into the business. As a result, some owners can't pay back loans or refinance, sticking them with immediate payment demands they simply cannot meet.

Continue reading "Report Says Prices for Commercial Real Estate Dropped Substantially in June" »

As Fontana personal bankruptcy attorneys, we have been interested to note several recent articles about Congressional candidates around the country who are openly discussing past bankruptcies. In Arkansas, Republican Rick Crawford is running for the House of Representatives, in part on a platform of fiscal restraint that he says he learned from a 1994 bankruptcy. In Vermont, another Republican running for the House, Paul Beaudry, says he wants to apply the lessons he learned from a 1997 bankruptcy to the fiscal problems facing national government today. And a third Republican in Florida, Florida House incumbent Peter Nehr, says his 2009 bankruptcy filing should not affect his ability to do a good job for people in his Tampa-area district. Opponents in all three cases are arguing that the bankruptcies make them poor financial decision-makers, but the candidates openly disagree.

Crawford, the Arkansas candidate, filed for bankruptcy in 1994. News reports don't give the background of this decision, but they have noted that he owed more than $12,000, including $4,200 in medical bills and $7,500 in credit card debt. He has told the media that he thinks his experience going through a Chapter 7 bankruptcy could help to avoid a similar problem on a national level. This was echoed by Vermont talk radio host Paul Beaudry, who declared bankruptcy in 1997 after leaving active duty in the Army, which dropped his income by more than 50%. He told the Bennington Banner that he learned from the mistakes he made 13 years ago and believes the federal government is making the same mistakes. Nehr, the Florida Congressman, has a slightly different story. He owned a flag shop for 18 years, but closed it last year and filed for bankruptcy. The situation was complicated by his divorce this April. He didn't comment on how this might affect his financial choices for the state, but noted that he currently lives just fine on his $30,000 salary as a state legislator.

Our Seal Beach consumer bankruptcy lawyers gathered all of these stories because we believe they teach an important lesson: bankruptcy is not necessarily something to be ashamed of. Some of these candidates have said they are not proud of having been in bankruptcy or that they made mistakes earlier in life, but they are talking openly about their bankruptcies and using them as a way to discuss broader fiscal responsibility issues. By contrast, we are sorry to say that many of our clients are ashamed to come to us for help with a bankruptcy, even when they know intellectually that this is their best financial choice. In fact, many bankruptcy filers wait far too long to make that choice because they are ashamed, even though this can mean running through assets that they could have kept if they had filed earlier. We strongly believe that filing for bankruptcy doesn't have to be a failure -- sometimes, it's the smartest way to deal with overwhelming debts.

Continue reading "Political Candidates Increasingly Candid About Their Past Experiences With Bankruptcy" »

As San Bernardino unfair debt collection attorneys, we were pleased to see an article highlighting the problem of debt collectors adding false information to victims' credit reports. On Aug. 8, the Washington Post reported that the practice, nicknamed "debt tagging," has become increasingly common as the economy has worsened and made it hard for people to pay their debts. Rather than go after people who genuinely owe debts, however, the newspaper said "debt taggers" go after people who happen to have the same name or same phone number, even though this is illegal under the Fair Debt Collection Practices Act and Fair Credit Reporting Act, as well as numerous state laws. To fix the problem and stop the harassment, consumers must spend hours on the phone or even sue the debt collector. The Federal Trade Commission, which enforces federal debt collection laws, also recently won a $1 million judgment against a collection agency called Credit Bureau Collection Services for "debt tagging."

The article starts with the story of Michael L. Hughes, who ignored months of phone calls that he thought were a scam until he took the trouble to listen to one. Then, he discovered that they were actually collection calls -- to collect on a debt owed by Michael B. Hughes, a different person. The credit report for Michael L. Hughes incorrectly showed the debt belonging to Michael B. Hughes, but the debt collectors didn't care -- they just wanted money. It wasn't until Hughes hired an identity theft repair company that he cleared his credit report. Another victim of mistaken identity sued the debt collector harassing him, only to have the harassment start up by a different collection agency. The original creditor has responsibility for making sure the information on the debt is accurate, the article noted, but as debts are sold and re-sold, information decreases or gets confused.

Our Garden Grove debt collection harassment lawyers believe that's true, but we would add that debt collectors don't really care whether the information is accurate or not. Like all businesses, they are in business to make money, and some of them have found that it's just as lucrative to harass the wrong people as it is to harass the right people. They can do this because very few Americans understand their legal rights well. We all have the right under the FDCPA to challenge debt collectors to prove that the debt is valid, but many people don't realize this, or choose not to try because they believe it's hopeless. In fact, if you can prove the debt is not yours, you can stop the harassment -- or, if the debt collector won't stop calling, take them to court. You can also take collection agencies to court for a variety of other legal violations, including harassment, threats, profanity and providing information on the debt to the wrong people.

Continue reading "Washington Post Reports on Inaccurate Credit Reporting by Debt Collectors" »

A recent article about protest marches on Chase banks throughout California caught the eyes of our Ontario loan modification lawyers. As Watsonville's Register-Pajaronian reported Aug. 12, protestors in that city and many others, including Los Angeles, marched on the banks to call attention to what they saw as the banks' willingness to take public money and do business in a way that harms families and communities. The marchers were upset about the continuing wave of foreclosures facing Californians, despite efforts to promote loan modifications and short sales instead. They also criticized the bank for taking "bailout" money in September of 2008, yet failing to pay millions in property taxes on properties they acquired during the bailout.

The march was tied to a report released Aug. 10 by the Alliance of Californians for Community Empowerment. That report said Chase and other banks were paying too little in taxes because the properties they have acquired during the financial crisis have not been reassessed, costing local California government entities millions of dollars. In April, the assessor-recorder for San Francisco, Phil Ting, made similar allegations, saying his city was owed $1 million by financial companies. The California Tax Reform Association has put that figure at $11.8 million for San Francisco and $50 million for the state as a whole. The Chase protesters said this was unacceptable for a bank that had taken taxpayer money in the bailout. They also cited mistakes or abuses by Chase in loan modification efforts by individual homeowners. A Chase spokesperson said borrowers don't have trouble getting loan modifications if they meet federal standards.

As Norco loan modification attorneys, we know from experience that this is not true. Throughout the housing crisis, we have heard firsthand, and read many articles, about lenders who repeatedly lose paperwork, ignore calls, give their borrowers contradictory information and make other very basic business mistakes. These are not mistakes that are targeted at people who don't meet HAMP standards -- they are indiscriminate mistakes, and many of them happened to people already enrolled in HAMP. As we've written here many times before, we've come to believe that lenders do this because they simply don't want to make loan modifications. Rather than admit it and accept the negative PR, some have chosen to string along borrowers, giving them false hopes for a loan modification the lender never intends to grant. The protesters have every right to be disturbed that a lender would do this while simultaneously accepting government money.

Continue reading "Protesters Call on Chase to End Foreclosures and Pay Allegedly Overdue Property Taxes" »

As Pomona loan modification lawyers, we were surprised and impressed by a recent article from the Los Angeles Times. The piece, dated August 5, discusses the fight by 23-year-old Zeenat Ali to help her parents avoid foreclosure on their Diamond Bar home. Ali is not an attorney and has no special legal background, but the article says she has won several victories in the family's struggle with Deutsche Bank, the holder of the mortgage. She has won procedural fights on the foreclosure itself, and is also suing the bank, alleging that it marketed the family's refinancing loan deceptively and later reneged on an offer to modify that loan. The Alis may still lose their home, the article said, but Zeenat Ali has successfully delayed the foreclosure and impressed observers with her untrained legal skills.

Her parents, Shahida and Ather Ali, had lived in the home for 24 years and raised three children there. When they came from Pakistan, they were an engineer and a doctor, but in 2005, they decided to open an adult day-care business. To do that, they took out a loan for $800,000 from the Small Business Administration, using the home as collateral. Then they refinanced the house with an option-adjustable-rate mortgage for $250,000. They kept their payments low at first to put money into the business, but that increased the loan balance, just in time for high-interest payments to start. The home was foreclosed in December and they stopped paying the loan four months ago.

In her lawsuit, Zeenat Ali argues that the refinance loan was marketed deceptively. But a large part of the suit deals with how Deutsche Bank handled the foreclosure. She alleges that the Alis' mortgage servicer rejected a $30,000 check from her parents in November, saying they had to apply for a loan modification first. So the Alis filled out the loan modification paperwork within a week and sent it back with the check. In the meantime, she alleges, Deutsche Bank was in the process of foreclosing on the house, without notifying the family as required by law. A bankruptcy attorney told the newspaper that even if the Alis win this claim, they may not collect much money and may still lose their home. Zeenat Ali successfully fought attempts by Deutsche Bank to move the lawsuit into federal court -- impressing legal observers -- but because foreclosure is still a real possibility, she has now hired a lawyer to help.

Our Orange loan modification attorneys wish the Alis well in their lawsuit and foreclosure. If the rejected $30,000 payment -- a substantial number -- was enough to keep them out of foreclosure, Ali may be able to successfully argue that the bank should never have foreclosed to begin with. However, under the Truth in Lending Act or a claim for common-law negligence, the actual damages -- that is, the financial loss to the family -- may be calculated according to the equity they had in their home. In this case, that could be little or nothing, because the home is worth less than their loan debt. "Statutory damages" awarded under the TILA have a maximum of $2,000 -- which is unlikely to make up for the loss of a home of nearly 25 years. This case exposes a flaw in consumer protection laws that gives lenders minimal consequences for abusing their borrowers.

Continue reading "Diamond Bar Medical Student Fights to Save Parents' Home From Foreclosure" »

After three straight months of declining bankruptcy filings, the Wall Street Journal reported August 5 that July saw a fairly big increase. As Ontario personal bankruptcy attorneys, we're sorry to see more families suffering financial problems, but we're not surprised to see a reversal. According to the article, July saw an increase in consumer bankruptcy filings of 9% compared to July of 2009, and also 9% compared to June. The source of the numbers, the American Bankruptcy Institute, says there have been 908,000 filings so far this year, up from about 802,000 at the same point last year. The ABI says filings are on track to top 1. 6 million this year, which would set a new record. Last year, there were 1.4 million consumer bankruptcy filings, which itself was a record high for filings since Congress passed the bankruptcy reform law in 2005.

As with all of the high-filing months in 2010, observers said July's numbers suggested problems with the 2005 reform act. That law was intended to reduce bankruptcies by making it harder to file for Chapter 7 bankruptcy and requiring certain extra steps, such as credit counseling. Instead, bankruptcy filings have risen as the economy has declined, the article noted. A law professor noted in the article that people living on the edge or with high debts typically can't borrow anymore during a recession, as lenders tighten their credit standards. Interestingly, an accompanying blog post noted, one major trouble spot appears to be the Atlanta suburbs, which contained six of the top 10 counties for number of filings. Others were Riverside and San Bernardino Counties here in California, as well as Clark County, Nevada (Las Vegas) and Shelby County in Tennessee.

As Corona individual bankruptcy lawyers, we wouldn't be surprised to find out that those six Georgia counties have unemployment and housing problems similar to those faced by Californians in the Inland Empire. As we have noted many times before, bankruptcy filings tend to cluster in areas where there are other economic problems, including high rates of unemployment, severe drops in real estate value and a high number of foreclosures. All of these apply to Riverside and San Bernardino Counties at the moment, unfortunately, although observers seem optimistic about a real estate recovery. In suburban Atlanta, the blog post notes, delinquency rates are higher than the national average on mortgages, bank cards and auto loans. The article also notes that other areas of the South had below-average bankruptcy rates, leading one professor to suggest that their weaker connection to the financial industry has helped them bounce back faster.

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As San Bernardino commercial real estate loan modification attorneys, we were interested to see an article on a new wave of foreclosure that could come directly from the federal government. According to an August 3 article from the Wall Street Journal, The Federal Reserve Bank of New York is on the verge of deciding how to handle its "toxic" real estate portfolio, acquired when it took over assets from failed investment firm Bear Stearns in 2008. That $29 billion portfolio includes 50 commercial real estate loans and 9,000 residential loans, which are collectively worth about $5 billion, the article said. The Fed has already foreclosed on one commercial property, a mall in Oklahoma that is now up for sale, as well as homes in four states.

The New York Fed and its nationwide parent, the Federal Reserve Bank, don't generally make direct-to-consumer loans. According to the article, being thrust into that business by the Bear Stearns bailout puts the Fed in a tricky position, with conflicts between its role as a steward of the economy on the one hand and its need to dispose of the assets responsibly. Politics could also affect its work. The commercial loans lost 35% of their value in the two years before March of 2010, the article said -- but the Fed wants to avoid selling those assets at discount prices because it might hurt the economy. Buyers have been found for only $1 billion of the loans, and in a down market, the Fed could be stuck with properties it can't sell. It may also hesitate to modify commercial real estate loans that are joint ventures, because restructuring could take away its control.

In a way, our Irvine commercial real estate loan modification lawyers are gratified to see the Fed struggling with the same issues facing lenders and private investors in commercial real estate. Understanding those issues at one government agency could help guide better public policy from other agencies. But restrictions on modifying loans are bad news for everyone involved. If the Fed can't sell its properties, foreclosing doesn't make much sense. But if it also can't restructure some of those loans, it may have no other realistic choice but to foreclose. This is bad for the Fed and, by extension, taxpayers because it weighs us down with liabilities. Of course, it is also bad for the property owners who are foreclosed on, who lose their investments and their properties. And it's also likely to disrupt things at the businesses using those properties -- retailers, offices, hotels, multi-family housing and more.

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