California Bankruptcy Attorney Blog

Our Temecula loan modification lawyers were interested to see a new report predicting that foreclosures won't slow in 2009. The Los Angeles Times reported Aug. 25 that the credit reporting agency TransUnion believes defaults will continue to rise in California into the middle of 2010. The report echoed previous predictions that the housing downturn would continue nationwide, but with a regional spin. In fact, TransUnion identified a five-county area of Southern California, and specifically the Inland Empire, as regions especially hard hit right now, although it predicted that they, too, would even out.

The percentage of mortgages delinquent by at least 60 days was 9.7% in California and 10.7% in Southern California as of June 30, the article said. TransUnion predicted that they both would reach 14% at the end of 2009, creating new records. However, that was as bad as the agency expected the California real estate market to get. Part of the problem is the large backlog of loans in trouble, TransUnion said, which must be dealt with before the market can recover. The Times added that another factor is California grim economic situation, with an unemployment rate 1.5% above the nation's and more underwater homeowners because of deeply depressed housing prices.

As Rancho Cucamonga loan modification attorneys, we wish we could disagree. Everyone could benefit from a recovered housing market, because that would help the recovery of the economy as a whole. But with lenders seemingly doing as little as possible to stop foreclosures, even in the subprime-loan-riddled Inland Empire, we don't expect to see California bounce back in the next few months. As TransUnion noted, lenders have a huge number of troubled loans they haven't yet addressed -- often despite pleas from borrowers trying to save their homes. If the agency is right that these loans must be dealt with before the market can recover, it may take quite a while to see positive changes.

Continue reading "Credit Agency Report Says Foreclosures Expected to Continue Rising in California " »

As Riverside County consumer bankruptcy attorneys, we were disturbed to read an Aug. 23 Associated Press article suggesting that more and more senior citizens are forced to file for bankruptcy. According to the AP, older people are being affected by the same bad economy as everyone else -- but because they have fixed incomes, they often have less ability to recover. Seniors who expected to live off retirement accounts have seen the value of those accounts plummet, and many lost a second resource when the housing market crashed, taking away equity in their homes. When an emergency strikes, the article said, many seniors with modest incomes turn to credit cards and rack up unsustainable debts.

In fact, the AP said, a study by think tank Demos found that credit card debt has risen 26% since 2005 among seniors 65 and older. In that study, participants reported an average debt of $4,000 for medical expenses alone. And according to the AARP, Americans age 55 and older are now the largest age group to file for bankruptcy protection, with 23% of all bankruptcy filings in 2007. For people ages 75 to 84, bankruptcy more than quadruples. A debt counselor interviewed for the article said she regularly sees women in their 70s and 80s at her counseling center in South Dakota, attending counseling sessions required before they may file for individual bankruptcy. Many had medical bills they couldn't pay with their limited incomes, the article said.

It's dismaying to us as Placentia personal bankruptcy lawyers to see older people forced into bankruptcy by circumstances that are largely out of their control. Retired and older people, especially those with health problems, are missing two of the most important tools available to people trying to get out of debt: time and a flexible income. We routinely counsel our debt settlement clients to consider increasing their incomes and decreasing expenses. Those options are just not available for many seniors, who have trouble getting jobs even if they can work. Furthermore, debt-settlement and Chapter 13 bankruptcy payment plans and rebuilding credit can take years -- years that older people may not have. These circumstances set older people up to spend their golden years struggling with debt.

Continue reading "Economy and Housing Crash Drives Increasing Debt and Bankruptcy Problems Among Retirees " »

A judge has ruled that federal legislation does not allow Countrywide Financial to void its contracts with investors, the New York Times reported Aug. 19. The ruling means that investors in mortgage-backed securities may go forward with their lawsuit against Countrywide. That lawsuit seeks to enforce contracts saying Countrywide will buy back loans from the investors if it modifies those loans. The ruling was closely watched because its precedent may affect investors in mortgage-backed securities at other lenders, which are under intense political pressure to modify loans.

The current lawsuit was sparked after Countrywide, formerly one of the nation's leading subprime lenders, settled a predatory lending lawsuit brought by state attorneys general around the U.S. In that settlement, it agreed to modify thousands of loans made under unfair or suspicious circumstances. Investors sued to ensure that the buy-back provision would be honored, but Countrywide argued that the suit was automatically voided by the Helping Families Save Their Homes Act of 2009. That law gave lenders like Countrywide "safe harbor" from investor lawsuits stemming from the modifications. Nonetheless, federal Judge Richard Holwell in New York ruled that federal law did not apply, and that investors should have a chance to prove their case in state court.

A spokesperson for Bank of America, which bought Countrywide in 2008, pointed out that the ruling did not invalidate the safe harbor argument entirely; it just moved the proceedings to state court. However, as Carson loan modification lawyers, we believe this ruling could be bad for homeowners seeking loan modifications. The safe harbor law was intended to encourage lenders to allow loan modifications, despite pressure from investors concerned that modifications would hurt their investments. If that provision is evaded or invalidated, lenders could face a flood of lawsuits similar to this one. And that would provide a powerful incentive to lenders to do even less than the little they already do to help struggling homeowners change their loans.

Continue reading "Countrywide Loses Legal Battle to Escape Obligations to Investors in Securitized Mortgages" »

Housing advocates say the bank formerly known as IndyMac is one of the worst mortgage lenders for borrowers seeking loan modifications, CNNMoney reported Aug. 18. OneWest Bank, as it is now known, was formed from the remains of the failed IndyMac, which was taken over by the FDIC in July of 2008 and later sold to investors. Federal regulators offered the new owners a more advantageous deal than other banks enjoy: Continue the FDIC's efforts to modify loans and the agency would cover all of the losses in OneWest's mortgage portfolio. Despite that deal, however, borrowers and the counselors who work with them say OneWest is unresponsive, disorganized and even rude -- more so than lenders without a federal backup.

As our Riverside loan modification attorneys have written here many times, loan modifications are difficult to get at every lender, requiring perseverance and a high tolerance for bureaucracy. The housing counselors in the CNNMoney article acknowledged that fact, but said OneWest is still among the worst lenders. A representative from the Northwest Side Housing Center in Chicago said OneWest repeatedly sends automated offers of loan modifications to borrowers, only to deny them each time the borrower sends in paperwork. A spokeswoman for another organization said her group has to call multiple times to pressure OneWest into action on homeowners' loan modification requests.

And homeowner Sharon Clark of South Carolina said she was offered a loan modification in April, denied in June -- then asked for more information and denied again. After CNNMoney contacted the bank to ask about her loan, she said they offered her a different loan workout, but sent her the exact same paperwork yet again. She plans to complete it, she said, but her hopes are not high.

Our Escondido loan modification lawyers have read several articles recently complaining about similar behavior from lenders who took "bailout" money. We believe that banks should honor their promises and display basic competence regardless of whether they took federal funds -- but in OneWest's case, the funding is explicitly tied to loan modification efforts. The FDIC said it believes OneWest is complying, but if these descriptions are typical, it is clearly not displaying good faith in its dealings with borrowers. Given that IndyMac was one of the largest issuers of risky Alt-A loans, in which borrowers were not asked to document their incomes, we do not believe these half measures are good enough to keep qualified borrowers in their homes and stop the damage to the real estate market.

Continue reading "Despite Federal Guarantee, Former IndyMac Bank Still Reportedly Among Least Helpful Banks Offering Loan Modifications" »

Bankers, economists and regulators studying the housing crisis believe unemployment is now the primary cause of foreclosure, the Washington Post reported Aug. 17. A housing counseling group, NeighborWorks, told the newspaper that 65% of borrowers they helped this year have cited unemployment or a pay cut as a reason for seeking help, up from 40% last year -- and fewer are citing subprime loans. Meanwhile, the Mortgage Bankers Association said prime loans became the primary source of foreclosures in the first three months of this year, eclipsing subprime loans. Meanwhile, unemployment is at 9.4%, the Post said, more than double the rate when the housing market began in 2007.

The shift to unemployment-driven foreclosures will make the housing crisis harder to address, the paper said. When borrowers get into trouble because of a subprime loan, they can often get out of trouble with a relatively simple loan modification that adjusts their interest rates back down. But with unemployment, that won't work because borrowers simply don't have the income. The problem is exacerbated by the bad job market, which makes it harder for workers to find new jobs and less likely that they will earn as much money when they do. Many banks offer a two- or three-month loan forbearance or lowered payments, the Post said, but that's frequently not long enough. And because banks add the missed payments to the total when payments resume, it can actually increase homeowners' bills.

The Post illustrated the problem with the story of Deepak Malla, a 42-year-old information technology worker who lost his job last year. He made a 20% down payment on a conventional loan when he bought his house, and had no trouble making payments until his layoff. He found a new job, but it came with a pay cut of more than 25%-- and his mortgage lender refused to modify his loan to reflect his new financial means, despite a six-month effort. Malla also tried refinancing but was unable because falling home prices took away his equity. Instead, his lender recommended a short sale. However, when the Post contacted it for comment, the lender said Malla does qualify for a loan modification, despite repeated previous rejections.

As San Clemente loan modification lawyers, we have seen the effects of rising unemployment in our own work with homeowners. In many cases, people who were laid off are able to get unemployment -- but unemployment benefits pay nowhere near enough to cover the high monthly payments common in the Southern California housing market. Without a source of income, many homeowners drain their savings and investments to give them time to fight for a loan modification -- only to encounter repeated rejections, like Malla. Our Redlands loan modification attorneys fight for homeowners in this position, filing lawsuits whenever necessary to make lenders live up to their own promises and stop unfair foreclosures.

Continue reading "Economists Say Unemployment Has Overtaken Subprime Loans as Chief Cause of Foreclosures" »

The first of the new rules for credit card companies under the 2009 CARD Act take effect Aug. 20 -- and consumer advocates say interest rates have been hiked dramatically to compensate, ABC News reported Aug. 18. Credit card companies downplayed the change, denying that it was driving credit card rate increases or saying it was just one of many factors, including a bad economy that's causing a record number of defaults and consumer bankruptcies. Consumer advocate Samir Kothari, co-founder of BillShrink.com, disagreed, pointing out that it makes economic sense to find new revenue sources when you expect to lose an old one.

Regardless, the article said, interest rates grew dramatically in the first seven months of 2009. In fact, a study found that some cards have raised their interest rates for purchases and balance transfers by as much as 50%. The rate hikes apply to all borrowers, regardless of whether they've missed payments or have a history of irresponsible behavior. Opposition to these practices was part of what drove the CARD Act, most of whose provisions take effect next February. Among the rules that start Aug. 20, however, is one requiring the cards to send out bills 21 days before they're due, up from 14 days, which is expected to reduce late fees caused by delays in the mail. Another new rule triples the amount of advance notice cardholders get before a rate hike, bringing it to a total of 45 days.

As Orange debt settlement attorneys, we applaud efforts to increase the spotty regulatory oversight of the credit card industry. The new rules taking effect Aug. 20 will help many cardholders avoid going even deeper into debt, which will ultimately help them avoid defaulting on their card payments or going into bankruptcy. However, we believe more could and should be done to check the worst excesses of the card industry. As we have written here before, cardholders with no history of lateness or over-the-limit spending have recently found their credit ratings hurt by credit card companies' belt-tightening, including lowered credit limits and penalties for shopping at the same stores as less responsible cardholders. These practices ultimately hurt the cards as well as the cardholders by putting them in financial stress that encourages bankruptcy or debt settlement.

Continue reading "Credit Card Rates Hiked Yet Again Before CARD Act Consumer Protections Take Effect " »

Despite federal rules that explicitly say it's not necessary, homeowners continue to report being instructed to miss mortgage payments before they are offered a loan modification, McClatchy DC reported Aug. 16. The story came after the Obama Administration began its "name and shame" campaign to encourage mortgage lenders to increase their efforts to make loan modifications under the Making Home Affordable plan. The campaign was launched after the Treasury Department met with lenders participating in the program, finding that just 9% of eligible mortgages had been modified despite estimates that 2 to 4 million homeowners are eligible. In response, the newspaper said, it received a flood of anecdotes from homeowners who say they've been promised loan modifications they never received and given the runaround by lenders -- including advice to harm their credit by stopping mortgage payments before they're eligible for help.

The article told the story of Riverside homeowner Cynthia Steigner, 51, who bought a house eight years ago with a conventional fixed-rate, 30-year mortgage. After she lost her job, she contacted her lender -- the defunct IndyMac bank, which is now OneWest Bank -- and was told she must be four months behind before it would consider a loan modification. She did what they asked, but still didn't get a loan modification and ended up filing for personal bankruptcy. After she was through the process, OneWest contacted her on its own initiative to offer a loan modification.

She completed the paperwork and sent a payment to start her new payment plan -- but the bank said her payment had to be with a cashier's check rather than a bank draft. When she re-sent the payment as requested, OneWest said the offer had expired and refused the loan modification. OneWest foreclosed on her home but pulled it out of auction when McClatchy called. Its outside spokeswoman said the deal was denied because Steigner didn't returned signed paperwork, but her attorney flatly denied this and provided copies of the signed paperwork and the receipt from shipping it. The bank said her case was under review.

After reading numerous stories like this and helping hundreds of California homeowners in similar situations, our Bellflower loan modification attorneys have concluded that lenders are not really interested in providing loan modifications. Despite the high cost of foreclosures and the depressed resale market, they continue to stonewall borrowers who apply in good faith; deny loan modifications for eligible borrowers; and advise them to stop paying their mortgages before they're willing to even consider helping. This last problem is particularly insidious because it encourages borrowers to destroy their own credit, substantially reducing their chances of becoming homeowners again in the near future. This is not just an irresponsible and cruel way to treat customers who rely on their honesty; it also causes real damage to borrowers' finances and personal lives.

Continue reading "Mortgage Lenders Still Require Homeowners to Stop Paying Before Offering Loan Modifications" »

Our Riverside County bankruptcy attorneys noted late last month that consumer bankruptcies were likely to hit their highest number since the 2005 bankruptcy reform law took effect. Now, an Aug. 4 article from Bloomberg News confirms it: According to numbers from the National Bankruptcy Research Center, July 2009 consumer bankruptcy filings did indeed hit their highest level since October of 2005. The American Bankruptcy Institute, a group of consumer bankruptcy attorneys, judges, accountants and bankers, said filings rose 8.7 percent in July over June's numbers and a staggering 38% over July 2008.

Bankruptcy lawyers quoted in the article agreed that the bad economy is to blame for the sharp rise in bankruptcy filings. High rates of unemployment and foreclosure, along with the tightening of consumer credit rules, have driven bankruptcy rates steadily higher throughout 2009. This is particularly noteworthy for our Murrieta bankruptcy lawyers because the obstacles to declaring bankruptcy increased with the 2005 reform law. The reforms included mandatory credit counseling for all filers, regardless of their circumstances, before they may file. After that is completed, filers must take a "means test" dictating whether they may file a Chapter 13 (reorganization) or Chapter 7 (liquidation) bankruptcy.

The result, as we have noted in the past, has been to shuttle those who do file for bankruptcy into Chapter 13, which is lengthier and more profitable for creditors than Chapter 7. In fact, our Orange bankruptcy attorneys believe the reforms discouraged bankruptcy filing, which makes it all the more remarkable that bankruptcies are increasing so drastically anyway. In our practice, we see clients every day who are dealing with devastating financial blows dealt by the bad economy, including job losses, a sharp drop in home values and arbitrary changes to their credit card limits and interest rates. Under those circumstances, an increase in bankruptcy filings nationwide may be inevitable.

Continue reading "Consumer Bankruptcy Filings Hit Post-Reform Peak in July of 2009 " »

Wells Fargo & Co. will increase salaries for its CEO and three other top executives, the Associated Press reported Aug. 6. The salary increases are not in salary, but in company stock, which cannot be issued until the bank repays the money it was lent by the federal government under last fall's Troubled Assets Relief Plan. The pay increases mean Wells Fargo CEO John Stumpf now will receive $4.7 million in stock along with a $900,000 salary; other executives will receive $2.2 million to $3.3 million in stock along with salaries of $600,000 to $700,000. Wells Fargo said it had to raise the compensation to bring it in line with compensation at other banks.

The pay increases are a politically sticky issue for Wells Fargo because it received $25 billion in federal funds last year through TARP. Wells Fargo was one of the banks that said it didn't need the TARP money, but was required to accept it by the federal government, to avoid a consumer panic. However, the bank has since bought a rival, Wachovia, which it said was responsible for its inability to pay the money back in June. Wells Fargo and Wachovia are also among the worst of the mortgage lenders recently accused of dragging their feet at making mortgage loan modifications. According to a Treasury Department report issued the same week, Wells Fargo has modified just 6% of loans eligible for a modification under the Making Home Affordable plan; Wachovia has modified just 2%.

As Corona loan modification attorneys, we cannot help but notice that Wells Fargo -- and other banks with similar executive compensation -- frequently denies loan modifications and fights other pro-consumer measures because they would reduce profits. While banks are free to pay their employees however they like, within legal limits, drastically overpaying executives also reduces profits, and with less benefit to the housing market or even the business itself. A loan modification may cost several tens or hundreds of thousands of dollars, but a foreclosure will also cost the bank money -- and keep housing prices depressed, hurting the bank's business and everyone else's. Our Vista loan modification lawyers believe the priorities implied by these compensation decisions are ultimately bad for the bank, the economy and of course, mortgage borrowers.

Continue reading "Wells Fargo Bank Increases Salaries for Four Top Executives After Taking Bailout" »

An analysis released Aug. 4 by Deutsche Bank AG suggests that 48% of U.S. homeowners will owe more than their homes are worth by 2011, Bloomberg News reported Aug. 5. The prediction would mean that the current rate of underwater homeowners, 26%, would nearly double in the next 18 months, for a total of 25 million homes affected. Housing markets that saw particularly big bubbles during the housing boom would be worst hit, the report said, with underwater rates at 90% in markets including Modesto, Merced, Las Vegas, Fort Lauderdale, Fl. and Miami.

The analysis also predicted that the downward trend in home prices is far from over, with nationwide values predicted to hit bottom in the first quarter of 2011. That's a problem for everyone, a related LA Times blog post pointed out, because it will depress the housing market, consumer spending and thus the economy generally. Foreclosures would rise among people with catastrophic financial problems like unemployment, of course -- but another worry is that severe negative equity would encourage rational homeowners to simply stop making payments on their inflated mortgages. In response, the Times blogger predicted, lawmakers are likely to push for more government measures, especially a return to the mortgage cramdown proposal that would allow bankruptcy judges to reduce the principal owed on a primary home loan for borrowers in a Chapter 13 bankruptcy.

As Highland loan modification lawyers, we hope this report is wrong -- but we know there are good reasons to be pessimistic. Foreclosures have slowed in 2009, but experts believe that's at least in part because of government foreclosure moratoria, the difficulty of selling foreclosed properties and banks gambling that the economy will improve. Our Chino loan modification attorneys hope it does too -- but if the government decides to step in, we believe legislation allowing bankruptcy cramdowns would be a good solution. While homeowners must file for bankruptcy to get a cramdown -- a drastic step that's not appropriate for everybody -- we believe the mere existence of cramdowns as an option would help inspire some banks to pursue meaningful, sustainable loan workouts with at-risk borrowers.

Continue reading "Deutsche Bank Report Predicts That 48 Percent of Homeowners Will Be Upside Down in 2011" »

In response to rising frustration over months-long delays for short sales of homes, the Treasury Department will soon announce a plan to encourage such sales, USA Today reported Aug. 5. In a short sale, homeowners sell the home for less than they owe and the bank either forgives the remaining debt or allows the seller to pay it off. The department has not yet formally announced its plan, but the newspaper said it would provide standardized documentation to make the sale more efficient and give lenders and homeowners financial incentives to participate. Specifically, the plan would provide up to $1,000 to second-lien holders to relinquish their liens and up to $1,500 in moving expenses to sellers.

The plan is a response to growing reports of delays by banks that hold up -- and in many cases, break -- deals between buyers and sellers. According to Lawrence Yun, chief economist with the National Association of Realtors, the delay between when a deal is struck and the bank approves that deal is now six weeks to six months, which is more than double what it was 18 months ago. As a result, only about 23% of short-sale deals actually go through, a survey of real estate agents found. That's a missed opportunity for everyone involved -- including banks, who can save as much as 30% of the cost of foreclosure by allowing a short sale instead. It also hurts the housing market and the economy as a whole by pushing borrowers into foreclosure, keeping home prices depressed.

Nonetheless, the article said, lenders continue to delay action on short sales for weeks, lose paperwork and leave phone calls unanswered. An extreme case was that of former homeowner Jorge DeMattos of Florida, who said he had eight separate offers for his home before the bank approved it. DeMattos, 45, started trying to short-sell his home two years ago after he was laid off and lost nearly half his income. DeMattos said the first short-sale offer was rejected as too low, despite being above market value; and the final offer, which was accepted, was $24,000 lower than the first. He said buyers kept backing out of the deals because his bank, Chase, wouldn't give them a definite answer for months.

As Fontana loan modification lawyers, we're not surprised. We work regularly with homeowners who tried everything they could think of on their own to get the bank's attention before calling us. In many cases, homeowners who tried a short sale or a loan modification have stories similar to the ones in this article or worse -- incorrect denials, paperwork lost multiple times, endless transfers from department to department. Even though, as this article points out, short sales and many loan modifications are cheaper than foreclosure, lenders clearly don't seem to think so. Our Ontario loan modification attorneys have concluded that lenders simply don't want to modify loans or allow short sales -- but have an interest in continuing to allow borrowers to believe they will.

Continue reading "Federal Government to Announce New Rules to Encourage Approval of Short Sales" »

Our Los Angeles County loan modification lawyers were pleased to see an Associated Press article Aug. 5 about an unusual ally for homeowners struggling with mortgage problems: a Catholic priest. According to the article, the Rev. John Lasseigne got involved in loan modifications after discovering widespread mortgage problems among his flock, a largely blue-collar and Latino population in the San Fernando Valley town of Pacoima. Lasseigne said he was stunned when he realized the extent of the foreclosure crisis, which came to his attention after multiple families in his flock faced losing their homes.

Now, Lasseigne -- a law school graduate -- organizes financial workshops, counsels homeowners and advocates for them with help from nonprofit organizations. He also meets directly with banks to negotiate loan modifications, frequently for people he says were entrapped by companies who took advantage of their limited English and lack of financial sophistication. One homeowner he helped was Juana Rodriguez, who followed bad advice to borrow $272,000, including a down payment, on a townhouse. She had an adjustable-rate mortgage whose interest reached 10.56% just before she lost her job. With help from Lasseigne and others, she was able to change the loan to a 30-year mortgage at 5% fixed interest, and now helps counsel others with similar problems. Lasseigne's work also includes lobbying for stronger laws against predatory lending.

We are delighted to see that an organization with moral authority is advocating on behalf of struggling homeowners, especially those who were misled into loans they couldn't afford. As we have recently written on this blog, the housing downturn is revealing a lot of ugly practices by mortgage industry professionals willing to exploit minorities and immigrants without the financial savvy and English skills necessary to understand their loans. That includes negotiating loans in Spanish but offering loan documents in English; offering a loan at a much higher interest rate than the borrower could qualify for; and targeting minorities with expensive and "exotic" loans. Our Chino loan modification attorneys use evidence of these predatory lending practices as leverage to get clients a fair and sustainable loan workout.

Continue reading "Catholic Priest Helps Pacoima Families Stop Foreclosure and Win Loan Modifications" »

An analysis shows that mortgage loan servicers face multiple lawsuits alleging predatory lending and collection practices, the Associated Press reported Aug. 5. The AP analysis focused on the 38 servicers participating in Making Home Affordable, the federal plan giving servicers financial incentives to approve loan modifications. Most the servicers had been sued for charging illegal fees; forcing homeowners to buy unnecessary insurance; illegal collection practices; misleading customers about the federal program; and foreclosing on homeowners with pending loan modification applications. Some servicers have promised in legal settlements to stop unfair practices, then were sued again multiple times for the same practices.

Loan servicers are go-betweens who process mortgage payments submitted by homeowners on behalf of banks or investors (in securitized mortgages). Before the housing boom, their profits came mostly from a percentage of the loans they serviced. But during the boom, servicers discovered that they could make more money servicing high-risk subprime and exotic loans, because these riskier borrowers generated more late fees, foreclosure fees and negotiation fees. Those same fees are the reason that foreclosure is now more profitable than loan modification for servicers, which critics say is one reason why loan modifications have been so hard for homeowners to obtain.

That was the reason for the federal government to offer financial incentives to servicers under Making Home Affordable. However, the AP reported, some of those servicers are taking federal money while continuing unfair practices that have resulted in multiple lawsuits. Most recently, servicers have been sued for foreclosing despite assuring homeowners that a loan modification was pending, or for misleading borrowers about eligibility for the program. But for years, many servicers have faced lawsuits alleging they charged homeowners unnecessary and illegal fees, including fees for unnecessary services. They have also faced lawsuits under the Fair Debt Collection Practices Act and other laws that protect consumers from illegal and harassing debt collectors.

As Norwalk predatory lending lawyers, we have known for quite a while that loan servicers are not on our clients' side. The loan servicing industry is not tightly regulated, which means the companies have no watchdog making sure they avoid unfair and illegal practices. That means borrowers hurt by these practices have no one to turn to for help but an Rialto predatory lending attorney like us. By that time, homeowners may already have gone into foreclosure or paid thousands of dollars unnecessarily.

Continue reading "Mortgage Servicers Face Lawsuits for Illegal Collection Practices and Loan Modification Delays" »

A study says more than a fifth of people pursuing a consumer bankruptcy filed to try to save their homes, HousingWire reported Aug. 5. The Consumer Credit Counseling Service of Greater Atlanta came up with that number by surveying people going through mandatory credit counseling in April, May and June. This credit counseling is required for all consumers seeking to file for Chapter 7 or Chapter 13 bankruptcy. In June, CCCS of Greater Atlanta, a nonprofit that handles this credit counseling, found that 21.6% of bankruptcy filers cited foreclosure prevention as a reason for pursuing a bankruptcy.

According to an article in the Atlanta Journal-Constitution, experts believe lenders' reluctance to modify loans is driving many people into bankruptcy. A consumer bankruptcy attorney told the newspaper that mortgage lenders frequently refuse to help customers who aren't in default -- but they also won't help people who are substantially behind in payments, believing they are a lost cause. The president of CCCS of Greater Atlanta, Susan Boas, said mortgage servicers have also been slow to respond, in part because they're overwhelmed by people who want loan modifications. But because the foreclosure process often continues while homeowners fight for loan workouts, she said, homeowners may file for bankruptcy just to get some "breathing room."

As Riverside bankruptcy lawyers, we'd like to caution potential clients that a bankruptcy filing does not automatically result in a loan modification or reduction of their loans. Bankruptcy judges may not change the principal owed on a loan for a first home, though Congress may reconsider changing that this fall through "cramdown" legislation. However, a Chapter 13 bankruptcy -- the kind our Temecula bankruptcy attorneys typically recommend for homeowners -- can stop foreclosure immediately because bankruptcy filing grants an automatic stay against all collection attempts. And in the long term, bankruptcy can help troubled homeowners by allowing them to clear other debts, freeing up money for mortgage payments. It also allows past-due payments to be part of a payment plan, giving homeowners several years to make them up.

Continue reading "Study of Consumer Bankruptcies Shows One in Five Filed to Avoid Foreclosure on Homes" »

Only a fraction of eligible homeowners have been able to modify their loans under the federal foreclosure prevention plan, the Los Angeles Times reported August 5. A report by the Treasury Department shows that just 9% of an estimated 4 million homeowners have succeeded in modifying their loans through the program. The report came a week after Obama Administration officials met with major mortgage lenders to express displeasure about this very problem, along with bureaucratic delays and outright refusals that have prompted many homeowners to hire San Bernardino loan modification lawyers for help. After that meeting, lenders pledged to bring the overall number of loans modified through the program up to 500,000 by November 1.

The individual banks that hold the most U.S. mortgages had records even worse than the overall industry's. According to the Times, Wells Fargo & Co. had modified just 6% of the eligible loans it holds and Bank of America Corp. had modified just 4%. However, other major players, including GMAC and JP Morgan Chase, had loan modification percentages closer to 20%. Banks contended that they have modified more loans outside the federal program, and that the government was slow with details, forcing them to delay getting their programs started. Nonetheless, critics said the government needs to force, rather than merely incentivize, lenders to perform more modifications. Some suggested allowing bankruptcy judges to reduce principal of homeowners in Chapter 13 bankruptcy -- a practice known as "cramdowns."

Our Fontana loan modification attorneys agree. More and more anecdotal evidence, including stories from our clients and numerous articles linked from this blog, suggests that banks and loan servicers are not trying very hard to modify loans. Over and over, we've heard stories of borrowers forced to re-send paperwork several times; hung up on or endlessly transferred; incorrectly denied; or offered meaningless loan workouts that actually increase their payments. Lenders may be legitimately overwhelmed by the number of calls they receive from distressed homeowners, but by now, they should have systems and extra staff in place to handle it professionally. As Moreno Valley loan modification lawyers, we suspect the problem actually has something to do with the fact that modifying loans means losing profit, or at least appearing to lose profit.

Continue reading "Treasury Department Report Shows Mortgage Lenders Have Modified Only Nine Percent of Eligible Loans" »